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8 Steps to Implementing Bundled Payments

January 20, 2012
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Baystate Medical Center reduced cost per case and improved quality through its bundled payment initiative

In an effort to provide resources for organizations seeking to participate in the bundled payments shared savings program, one of two broad voluntary programs under healthcare reform administered through Medicare (the other being the accountable care organization (ACO) shared-savings program),  the CMS Innovation Center is holding a series of Accelerated Development Learning Sessions (ADLS) on the topic. One held earlier this week on how to develop episode based care for bundled payment programs provided two very interesting case studies, which I’ll lay out in a two-part blog series.

The first case study was Baystate Medical Center, a 700-bed tertiary care referral medical center in Springfield, Mass. Evan Benjamin, M.D., senior vice president, Healthcare Quality, Baystate Health said to improve the value of care, his organization had to understand the quality and cost of an episode of care for a particular condition. The unit of reimbursement had to align with the unit of value. To this end, Benjamin laid out the eight-step framework that Baystate took to implement bundled payments, which took a solid six months of work for his organization to work through.

  1. Convene the right team
  2. Define the episode
  3. Develop measures
  4. Develop model of care
  5. Price the bundle
  6. Develop cost reduction opportunities
  7. Plan the gain-sharing
  8. Develop of continuous process improvement plan

At Baystate, Benjamin said a group of 10 key players, who had a good handle on legal, policy, and clinical issues, were convened  to lead the effort. Baystate did a deep dive into its outpatient and inpatient clinical visits and a thorough analysis of the cost of care and the reimbursements for the arrays of services. “We spent a lot of time on this step, defining the episode, what was in the bundle, what was out of the bundle, to be able to come up with a single aligned payment for what was going to be included,” Benjamin said.

Then Benjamin said organizations should select quality metrics to monitor for the bundled episode, while utilizing mandatory, regulatory, and voluntary-used measures.  He also recommended developing a quality tracking scorecard to record progress. For developing a model of care, Benjamin suggested identifying an expert to lead the initiative to develop care models for the bundled episode, and selecting a champion to drive this care change home. Patient engagement processes need to be detailed, too.
Pricing the bundle requires a detailed financial analysis and review of past history of costs and reimbursements, said Benjamin. Use of financial analysis is then needed to choose a price point for the bundle reimbursement. Part of the financial end of the bundle and part of ongoing process is to identify cost reduction opportunities like standardization opportunities or product substitutions. Benjamin recommends defining the key cost metric indicators that will measure cost reduction progress for the bundled episode.  

The next steps involved planning for the gain-sharing incentives/strategies/methodologies and developing a physician performance scorecard. He said that organizations needed to make sure all incentives comply with STARK laws, Anti-Kickback, and anti-trust laws. Also development of continuous process improvement plans that include Lean, PDSA (plan, do, study, act) methodology is helpful.

Benjamin said that Baystate maintained certain assumptions throughout this initiative to keep focus that included having no expectations for increased reimbursement, for making payments only for acceptable outcomes, and not charging for treatment of preventable complications. Fees were collected using a fee for service model and then the bundle was reconciled retrospectively to generate an episode of care pricing.

Orthopedic Surgery Bundled Payment Pilot
Baystate piloted its initative with a closely-aligned, non-employed orthopedic surgeon group that had a “historical focus on quality, as well as improvement.” In defining the bundle, Benjamin said the team focused on total hip replacements with the organization’s provider-sponsored commercial insurance plan, Health New England.

Benjamin emphasized that this was a collaborative effort among the orthopedic surgeons, Baystate Health, the hospital, the Visting Nurses Association (VNA), and the Health New England, which was then broken down into three workgroups: model of care, payment model, and infrastructure.

Baystate made several clinical care changes to drive the bundled payment initiative. Protocol changes were made with case managers arranging for pre-op classes and screenings to review precautions, what to expect, and pain management options, as well as setting up VNA home health visits and rehab. Patients signed a compact to be more involved in their care and which also laid out what was expected in terms of quality of care in this initiative.

For the initial 30 patients, there was a significant improvement in quality of care, with zero complications, more patients discharged to home, 100 percent SCIP measures, said Benjamin. Costs also lowered by $1,700 per case. “That resulted from two areas, the standardization of inpatient care during the operation itself, as well as improving the discharge to home rate and decreasing some of the post-acute rehab,” he said.




This is a very practical step by step approach to this complex topic.