The Secret Sauce for Orthopedics Bundled Payments Success

Health systems and hospitals bracing anxiously for adoption of orthopedics bundled payments should take a close look at Meriter Hospital's success with the value-based payment model.

Hospitals need time to prepare for the proposed federal Comprehensive Care for Joint Replacement bundled payment model, says the American Hospital Association. But Meriter Hospital says "Bring it on!," citing lower costs and better outcomes from its work in orthopedics bundled payments.

Meriter, a 448-bed acute-care facility located in Madison, WI, is part of West Des Moines, IA-based UnityPoint Health. In 2012, Meriter made its first foray into bundled payments, focusing on knee replacements. In 2014, the hospital expanded bundled payments to hip replacement procedures through a contract with the Centers for Medicare & Medicaid Services Bundled Payments for Care Improvements (BPCI) initiative.

The financial and clinical results of Meriter's work with bundled payments have far exceeded expectations, says Philip Swain, PT, MBA, the hospital's director of orthopedics and rehabilitation. "We were cutting costs, particularly from sending people home rather than to a skilled nursing facility, and I expected that to happen. What I didn't expect is people are getting better care and better outcomes."

Since 2013, Meriter's bundled payment programs for joint replacements have resulted in a 12% reduction in patient length of stay, a 23% decrease in discharges to skilled nursing facilities (SNFs), and a 68% drop in hospital readmissions, according to Wellbe, Inc. The Madison, WI-based company is providing Meriter with online patient engagement tools for joint replacement bundled payments. In addition to serving as "an electronic version of a care navigator," Wellbe's patient engagement capabilities include online preparedness surveys to gauge patient readiness for surgical procedures and collection of clinical outcome data for generating monthly reports, Swain says.

Administrative and Clinical Challenges of Bundled Payments

The partnership with Wellbe has been one of several key administrative investments driving Meriter's positive experience with bundled payments, Swain says. "In order to make bundled payments successful, you need to devote some resources."

Other essential administrative investments Meriter has made to support bundled payments include: hiring a part-time project manager to serve as a liaison with CMS and to coordinate the efforts of physicians and the hospital's financial team, dedicating an internal financial analyst to monitor data, and contracting a consultant to help launch bundled payments, he says. "When we got into bundles, one of the biggest challenges was there was no roadmap. We had to set up accounts. We had to rethink how we were going to process claims. We had to figure out how the Medicare gainsharing was going to work."

Meriter is participating in Model 2 of the BPCI initiative for joint replacement bundled payments, in which expenditures are reconciled against a target price for an episode of care that includes the inpatient stay, post-acute care, and all related services up to 90 days after hospital discharge.

That was not a simple calculation. BPCI has three risk tracks. "We went with the middle one. Our risk wasn't very high, and the middle track didn't affect our reward at the end of the episodes of care," Swain says. Data analytics played a pivotal role in the risk-track decision. In particular, Meriter examined the hospital's past experience with hip and knee replacement procedures based on three metrics: historical cost, historical claims, and historical risk. "If there is an outlier case, the risk track protects you from that," Swain says. "We tried to figure out the frequency with which those outliers occurred."

There also were key clinical factors to address at Meriter to get the bundled payments ball rolling, he says. "The first clinical challenge is engaging your physicians. We had to pull all of our orthopedic surgeons together, both employed and non-employed, and get them to buy into this concept. If you can't get physician buy-in for bundled payments, you have a tough hill to climb in achieving success."

Standardizing supplies, equipment, and "care paths" for joint replacement procedures is another crucial clinical hurdle in bundled payments, Swain says. "It sounds easier than it really is … but we now have single-source contracting for all of our implants, which generates a tremendous cost saving."

Meriter has set up a robust patient engagement program for bundled payments to help boost clinical outcomes. In addition to the patient engagement partnership with Wellbe, the hospital's model for bundled payments dedicates specific members of the nursing staff to work with patients from admission to several weeks after discharge from the hospital. These care navigators help develop a discharge plan and follow up with patients after discharge. "It's all about risk mitigation. We cut down on infections. Our readmission rate has gone down significantly. The care navigators hold the hand of the patient all the way through the episode of care. They serve as a point of contact for patients along the care continuum," he says.

The post-acute care setting has posed the highest clinical hurdle for bundled payments at Meriter, Swain says. "We had a poor understanding of the post-acute world—and a lot of other hospitals do, too. We had to have a new understanding of the post-acute world, especially for SNFs and outpatient rehabilitation."

Bundled payments have revolutionized the hospital's relationship with skilled nursing facilities, he says. "Some of our priorities for bundled payments were not aligned with some of our nursing home partners. We wanted to minimize utilization while getting the best outcomes. We met with the nursing homes. … Most of them understood this is the direction post-acute care is going."

Participation in Medicare bundled payment programs gives health systems and hospitals unprecedented access to SNF data, including costs, claims, readmission rates, and length of stay. Meriter has used that data to evaluate skilled nursing facilities and encourage patients to gravitate to the best performers, Swain says, noting that CMS does not allow acute-care facilities to direct patients to specific SNFs. "If SNFs can demonstrate that they are keeping their costs down while generating good outcomes … we're going to get patients to nursing homes that are high quality at a low price. We can't direct all patients, but we can direct patients who are open to choice. In the next year or two, hospitals are going to be developing essentially narrow networks for post-acute-care. It's got to happen."

Preparing for Mandatory Bundled Payments for Joint Replacement

Meriter's experience with joint replacement bundled payments through Model 2 of BCPI has the hospital well-positioned for the Comprehensive Care for Joint Replacement (CCJR) bundled payment model, Swain says.

CMS is proposing mandatory participation in CCJR at hospitals in 75 geographic areas that have "core urban centers" with populations of at least 50,000 people.

New Payment Model for Joint Replacement Faces Opposition

"There's very little we have to do to prepare for this new model. We are thrilled to have this structure in place," Swain says. He and his Meriter colleagues are confident the hospital is poised for CCJR success. "Bring it on!"

Officials at the Chicago-based American Hospital Association say many other hospitals are not ready for CCJR and need accommodations from CMS. "There are many reasons hospitals need more time to prepare for CCJR," says Joanna Hiatt Kim, vice president of payment policy at AHA. Among them, hospitals need to negotiate new agreements with SNFs and physicians to increase the chances of success with bundled payments.

With the final rules for CCJR expected in November and the program set to start Jan. 1, 2016, time is working against hospitals, Kim says. "Having 60 days to negotiate these new arrangements is very, very tight."

For hospitals set to participate in CCJR, AHA is pressing CMS to waive two fraud and abuse laws: the Physician Self-Referral Law and the Anti-Kickback Statute. "What we have heard from our members is if these requirements are not waived, they will not be successful with the CCJR model," she says.

The Physician Self-Referral Law, also known as the Stark law, which is designed to separate the financial interests of hospitals and referring physicians, is particularly problematic for the level of cooperation required to operate bundled payments effectively, Kim says. "That law absolutely stands in the way."

She says the AHA supports the CCJR model in principle, in part because the initiative has created a "burning platform" to spur change. "For CCJR hospitals, we really have gotten to that point. Medicare has clearly signaled this is the direction we are going to move. The CCJR bundle was a bold move."