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8 Steps to Implementing Bundled Payments: Part 2

January 30, 2012
by Jennifer Prestigiacomo
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St. Francis Hospital embarks on surgery bundled payment program to drive value in care

The CMS Innovation Center held an Accelerated Development Learning Session earlier this month on how to develop episode-based care for bundled payment programs. The bundled payments shared savings program is one of two broad voluntary programs under healthcare reform administered through Medicare (the other being the accountable care organization (ACO) shared-savings program). The session provided two very interesting case studies. Earlier this month, I wrote about one case study at Baystate Medical Center. In this blog, I will share with you another case study from St. Francis Hospital and Medical Center, a 617-bed facility in Hartford, Conn.

St. Francis Hospital partnered with the Connecticut Joint Replacement Institute, a 12-surgeon private practice arthroplasty LLC, for its bundled payment program two and a half years ago. The Institute has a consultant agreement with St. Francis Hospital to manage the arthroplasty service line. The bundled payment care episode was defined as involving those patients under 65 with ASA I or II (none or minimal systemic disease), and would cover all inpatient hospital, surgeon, and anesthesia services, including a negotiable warranty for surgical site complications.

St. Francis took the same eight-step framework that Baystate Medical Center took to implement bundled payments. It took a full year to complete this eight-step process.

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

Steven Schutzer, M.D., service line director, Connecticut Joint Replacement Institute, said that some essential elements that led to success in this bundled payment program was that his organization had a CEO/hospital administration and physicians/physician leaders that “got it,” meaning they appreciated the value of healthcare improvement and the changes that occurred in the hospital-physician relationship. Other essential elements in this transition were transparency, savvy legal counsel, robust quality and cost monitoring systems, a mature service line, and adequate case volume.

Defining the episode was the most important step for St. Francis, Schutzer said. “The more detail of the definition, the more front-end work you do, the easier the rest of the process will be,” he added. “The lack of clarity of defining all elements in the bundle can certainly be problematic. If you’re going to bear risk, imperfect risk adjustments can result in financial loss.”

Schutzer said that his team spent a lot of time on the thorny issue of cost overruns, or claims against the bundled package price. They decided to split overruns into two categories: those that would be shared among the participants and those not. The claims were also split into two categories: low claims, which would come off of the top of the package price, and high claims, which would be levied against the claim reserve. St. Francis created two cash reserves: one to cover the high claims, and the other to cover routine business expenses. “If your program is going to be assuming risk, then importance of defining stop loss insurance is also essential,” he said.

To evaluate its bundled payment program, St. Francis developed a continuous process improvement plan. It defined its clinical integration as equal access to its data registry with standard and consistent clinical protocols, shared IT for cost and quality analysis and shared financial risk. St. Francis evaluated two buckets of data: cost and outcomes. The main quality measures analyzed were readmission rates, complications, HCAHPS scores, SCIP measures, Press Gainey scores, LOS, and post-acute discharge. The organization did a complete care redesign and revamp of clinical protocols, adding 22 clinical protocols and best practices and a checklist for the entire patient experience.

For accountability, all participants participated in an in-service that outlined in detail their specific responsibilities, the protocols/best practices, and their own personal financial risks for non compliance, while the patient signed an acknowledgement to follow post-op instructions, report complications, and seek emergency care at the hospital if necessary.

St. Francis conducted an annual utilization review with an evaluation of clinical protocols, monitoring of compliance and feedback for variances, as well as performed a quarterly quality data review, and an annual review of costs of services and opportunities for additional savings.

“I think it’s critically important for your entity to appreciate that implementing a bundled payment program is really not that hard, but it does take time and work,” Schutzer concluded.