Cutting Costs Through Healthcare Price Transparency: Close but No Cigar

By Scott Leggett

Earlier this week, the Trump administration made a dramatic move to improve healthcare price transparency. President Trump signed an executive order directing agencies to draw up rules requiring insurers and hospitals to make public the negotiated prices agreed upon in contract negotiations. Their goal: Give healthcare consumers the kind of pre-purchase pricing information common to most other marketplace transactions.

Among those backing the administration’s efforts were almost 4,000 physicians who independently signed a letter collectively supporting the executive order to compel price disclosure in healthcare.

As reported by the Wall Street Journal, the physicians noted in their letter that they make “caring for patients [their] professional priority.”

In addition to this most recent and most controversial executive action by the administration, Congress has taken up the cause of price transparency with proposed legislation supported by America’s Health Insurance Plans (AHIP) and the ERISA Industry Committee, representing large employers. Opposing are hospitals.

Ironically, in spite of good intentions and great effort, no one — not the hospitals, Congress or the Trump administration — gets the proverbial cigar. All parties have largely overlooked an immediately available, proven approach to provide price transparency to patients prior to receiving treatment.

Too Expensive

Driving this quest by the administration and Congress to harness market forces to drive down healthcare costs is a simple reality: At a total annual cost of more than $3.5 trillion — the equivalent of spending more than $10,000 for every person in the country — healthcare in the U.S. is too expensive.

Consider the experience of private employers, the largest sponsors of healthcare in America, who collectively spend more than $1.2 trillion annually providing healthcare coverage for almost half the U.S. population. For these employers, healthcare costs have increased by 50% in the past decade, a decade encompassing a great recession and historically low rates of inflation. Other estimates show the cost of hospital services have increased by 250% in the 20-year period from 1997-2017. This is against an overall U.S. inflation rate of 55.6% during the same period.

Looking at healthcare costs in another way, Secretary of Health and Human Services (HHS) Alex M. Azar II, in a March 2018 speech, noted: “Federal spending on our major healthcare programs is projected to rise from 5.5% of our economy in 2016 to 8.9% of our entire economy 30 years from now. By themselves, these programs will consume almost all of the income taxes collected by the federal government.”

By any measure, current trends in healthcare costs are unsustainable.

Drawing the Red Line

It was in the same March 2018 speech that Secretary Azar drew a red line around price transparency stating unequivocally, “I believe you ought to have the right to know what a healthcare service will cost — and what it will really cost — before you get that service.”

Azar’s speech followed years of political posturing, hand-wringing, finagling, promising — and even legislating — changes to healthcare. All this activity was largely for naught as the overall cost of healthcare in the U.S. continued its inexorable rise.

As the New York Times reported in March of this year: “Price transparency has been a hallmark of health policy under Mr. Trump. In a country that spends more than $3.5 trillion a year on health care, administration officials say, it is absurd that consumers cannot shop for medical goods and services as they shop for airline tickets and electronic gear.”

As a step toward transparency, via a regulatory decree, beginning in January 2019, the Trump administration, through the Centers for Medicare and Medicaid Services (CMS), required hospitals to post their chargemaster price list on their website. For those not familiar with chargemaster, it is a listing of hospital retail prices by diagnostic related group, or DRG. Each DRG is given a code number theoretically allowing patients who know their DRG to compare prices among hospitals.

In practical terms, where a given diagnosis may comprise multiple hospital, doctor, lab and post-op charges, the chargemaster prices list is virtually useless for patients in calculating the total cost of treatment. Further, hospitals significantly discount off their chargemaster pricing when negotiating contracts with insurance providers or with customers paying cash for healthcare services.

Complex system

In March of this year, foreshadowing the president’s executive order, HHS signaled that it may require hospitals and insurance companies to disclose to the public their negotiated prices. As reported by National Public Radio, “HHS is arguing that the healthcare system, the hospital pricing system, is way too complex and opaque. Consumers don’t know what they’re buying and what they’re paying for it.”

The price transparency push received additional coverage last month when the Wall Street Journal ran a story headlined, “White House Wants Patients to Know Health-Care Prices Up Front.” The story went on to report: “The administration is strongly interested in forcing insurers to publicize the negotiated rates they pay for services, the people said. The requirement could affect insurers providing coverage in the private-employer market, where about 158 million people get their health insurance.”

Reflecting the widespread interest in healthcare cost containment, Senators Lamar Alexander, R-Tenn., and Patty Murry, D-Wash., chair and ranking member respectively of the Committee on Health, Education, Labor and Pensions, recently proposed the Lower Health Care Costs Act of 2019. The proposed bipartisan legislation includes language addressing prescription drugs, surprise hospital bills, vaccines, interoperability and price transparency. Regarding price transparency, the legislation requires hospitals and insurers to provide to patients cost estimates for upcoming treatments within 48 hours of a request.

As reported in Modern Healthcare, ERISA’s James Gelfand noted regarding the pending pricing estimates that “indeed, access to this information should help patients to better navigate the healthcare system.”

Pushback

Forcing the opening of the healthcare pricing kimono and requiring that negotiated rates between hospitals and insurance companies be made public has major implications for the industry as a whole. Armed with competitive pricing information, hospitals and insurers alike would be positioned to demand consideration equal to or better extended to their competitors.

Further, truly transparent pricing would encourage self-insured employers to shop around for the best prices on high-volume healthcare procedures common to their employee population. At present, that kind of competitive information is blocked from disclosure via contractual agreements between the contracting parties.

In the face of the wave of activity around price transparency, the defenders of the status quo offered many reasons for opaque healthcare pricing. Hospitals argue that the reason healthcare pricing is not more transparent has to do mostly with the fact that healthcare is paid, in large part, through insurance with insurance companies negotiating discounted rates with hospitals based on their volume purchase of services. These discounted rates are closely held by hospitals and insurance companies alike.

The American Hospital Association (AHA) has been notably active in pushing back against healthcare price transparency. As one AHA executive noted in a story reported by National Public Radio, “This isn’t really what consumers need or want,” said [Tom Nickels], the AHA’s executive vice president for government affairs. “What consumers need and want is what are their out-of-pocket costs.”

Speaking on behalf of investor-owned hospitals, Chip Kahn, CEO for the Federation of American Hospitals, made it clear he does not want the hospitals he represents to be responsible for cost estimates.

“Placing the onus on hospitals to provide cost estimates for any service reasonably expected to be provided in conjunction with the specified service is inappropriate as the hospital cannot accurately know exactly what services would be provided in all instances,” Kahn noted as reported by Modern Healthcare.

Still other news stories on the battle over price transparency report that patients alone do not make the selection of their inpatient healthcare provider. Physicians play an important role in selection. In addition, in emergencies, patients often seek out the nearest available care without considering price. Also, patients have been slow to make use of tools facilitating comparison of healthcare pricing.

And so, the argument goes on with almost everyone seemingly ignoring or overlooking an obvious solution.

The Key to Healthcare Price Transparency

Ironically, the current ongoing battle for healthcare price transparency overlooks a well-established tool that guarantees price transparency while substantially reducing healthcare costs for patient and payer alike — meeting or perhaps exceeding all the stated goals of the Trump administration. Widespread implementation of this tool would also meet or exceed the stated objectives of pending Senate legislation.

The tool: healthcare bundled payments. 

Bundling all services for a single episode of care — from pre-op to post-operative care, for example — into a single coordinated package of services priced with a single price point is comprehensive, transparent and value based. For surgical procedures, combining bundled payments with outpatient surgery in an ambulatory surgery center (ASC) can reduce costs even further as services are provided with measurable outcomes equal to or better than inpatient surgical procedures.

Chargemaster vs. Bundles; an Exercise in Comparison

A simple exercise illustrates where we are today with healthcare price transparency.

Making an online visit to the Monterey Peninsula Surgery Center (MPSC) website quickly reveals that for more than 75 surgical procedures, MPSC posts the total cost of the procedure — a single episode of care — on its website.

For example, a total knee replacement (total knee arthroplasty) is priced at $24,569.

By contrast, it is impossible to determine the total cost of a knee replacement by visiting any of the hospital websites in the greater Monterey Bay Area in Central California, or virtually any other hospital website, for that matter. According to healthline.com, the average cost for a total knee replacement in the U.S. is $49,500.

If the objective of price transparency is to give patients advanced information on costs while driving down the overall cost of healthcare, there must be some large-scale example of the benefits of bundled payments in reducing costs.

Earlier this year, Municipalities Colleges Schools Insurance Group (MCSIG) announced that it generated over $7 million in savings through a bundled payment network for surgical procedures.  MCSIG provides a variety of healthcare plans to over 70 school systems and municipalities in California.

According to MCSIG, from January 2015 through December 2018, 485 surgeries were performed on MCSIG members who reside on California’s Central Coast through the Global 1 ASC bundled payment network. Global 1 (G1) is a licensed third-party administrator headquartered in Carlsbad, California.

The total savings to MCSIG during this four-year period was $7,121,250.  The all-inclusive bundled payment includes the physicians and facility fees for the episode of care.

The cases were performed in five ASCs by over 70 surgeons, involving a wide variety of surgeries including total joint replacement, spine surgery, complex joint repair, hysterectomy, gallbladder removal, tonsillectomy, thyroidectomy, hernia repair, mastectomy and breast reconstruction.  The average savings per case was $14,683.

The ASCs, surgeons and G1 were at risk for the cost of complications related to the surgery during the episode of care.  The complication rate, including infections and readmissions, was extremely low, at less than 1%.

MCSIG’s innovative health plan emphasizes wellness and rewards its members (patients) for selecting centers of excellence, including the G1 provider network, through waiving the member’s out-of-pocket expenses, thus extending savings from the payer to the patient through benefit design and price transparency.

Michael Larsen, executive director of MCSIG, commented: “While the cost savings have been tremendous, the consistently amazing outcomes our members have received over the last four years working with G1 are even better. The quality is exceptional, and pricing is near miraculous from what others are charging along the Central Coast.”

Tom Wilson, co-founder of G1, stated, “G1 is uniquely able to leverage the great value ASCs provide to payers and patients through surgical bundled payments.”

The Bundle’s the Thing

While laudable, the efforts by the administration and Congress to drive healthcare price transparency and reduce overall healthcare spending in the U.S. widely miss the mark. While transparency by itself is a good start, it is impossible for consumers to determine healthcare costs based on transparency alone. Truly transparent pricing will arrive when healthcare services are bundled, giving patients a single price point for a single episode of care.

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With over 135 surgery centers and 830 surgeons in the statewide network, the Blue Shield California (BSC)-G1 bundle payment program is going strong with many plans to expand.

Scott Leggett is co-principal, Global 1 and managing director, Convergent SameDay Orthopedic Strategies. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). 

Global 1, a licensed third-party administrator (TPA), is the largest commercially insured bundled payments manager in California and amongst the largest in the nation. G1’s innovative bundled payment structure is designed to deliver cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting. 

The $3.5 Trillion Challenge — A Case for ASC Bundled Payments

 

By Thomas D. Wilson

According to Centers for Medicare and Medicaid Services (CMS), the total cost of U.S. healthcare is approaching 18% of GDP, or $3.5 trillion. Modifying the healthcare delivery system will provide a positive impact on the U.S. economy, as well as on businesses and individual consumers, who will benefit greatly from a transparent, value-based healthcare system.

American academic, economist and business strategist Michael Porter captured the attention of healthcare and business leaders alike when he and fellow author Robert S. Kaplan wrote a groundbreaking piece in the prestigious Harvard Business Review touting healthcare bundled payments as a preferred approach for improving outcomes and reducing costs. Porter and Kaplan’s “The Case for Bundled Payments in Healthcare” was published on June 28, 2016.

Why did Porter and Kaplan strongly support the concept of bundled payments? Because the concept of bundled payments is simple, efficient and effective: link together all medical services associated with a medical condition during an episode of care (generally 60-90 days) through a previously established all-inclusive price, transparent to patient and payer alike.

In contrast to the bundled payment model, today most individual procedures (diagnosis and testing, anesthesiology, surgery, facility costs, post-acute care and physical therapy) are disconnected and paid for individually. This fractured care model generates inefficient outcomes and higher costs. Patients are confused by the multiplicity of bills when simplicity is in order. Payers carry the burden of significantly higher costs.

Bundled healthcare with transparent pricing is an initial step in improving healthcare efficiency and value. Close observers recognize that the American healthcare landscape is interspersed with a notable example of cost-and-outcome-driven efficiency: ambulatory surgery centers (ASCs), where surgical procedures are performed on an outpatient basis. Reflecting this growing trend, 80% of all U.S. surgeries are now performed on an outpatient basis, driven by technological advances including long-acting local anesthesia and minimally invasive surgical techniques. Nearly half of these surgeries are performed outside of hospitals in lower-cost ASCs.

Bundled Benefits

There are demonstrable benefits to keeping surgical procedures in outpatient clinics: patients recover more quickly, procedure costs are significantly lower and there are fewer associated complications. According to the ASC Quality Collaboration Quality Report for the 4th Quarter 2018, in which 1,609 ASCs from around the country participated, complication rates reported by ASCs across a wide range of procedures averaged less than 1%.

Most importantly, performing bundled payments in ASCs can recalibrate the healthcare system through the effect of open market forces. The framework of ASCs and bundled payments has the potential to increase competition, hold providers responsible for outcomes, introduce transparency, incentivize innovation and decrease costs while ensuring quality outcomes for patients.

Many leading payers, including large companies and commercial insurers, are supporting an ASC bundle-based system. They do so with the knowledge that competition and consumer choice will improve overall systemic performance.

In this context, many healthcare leaders consider Porter and Kaplan’s publication a turning point in the long-running debate over bundled payments. Published in the widely respected Harvard Business Review, the Porter/Kaplan article reached senior executives at the largest American companies that collectively provide healthcare coverage to 50% of Americans. These senior executives, responsible for the profitability of their firms, are relentless in their search for value-based healthcare coverage for their employees.

One metric reflecting the payers’ focus — especially self-insured employers — on reducing costs while ensuring outcomes is the dramatic growth in the use of ASC outpatient bundled payments for a single episode of care. Although vastly underutilized as measured against the scale of all surgical procedures performed in the U.S., bundled payments are rapidly gaining traction in the commercial market. Many self-insured companies and private insurance plans view ASC bundled payments as a strategy to inject open market forces, including transparency, choice and competition, into a historically opaque healthcare marketplace.

Where Are the Savings?

The trend towards bundled payments has been gestating for some time. As early as 2001, Blue Shield of California and Monterey Peninsula Surgery Center in Monterey, Calif., entered into an outpatient bundled payment agreement for reconstructive joint and spine surgery. Today, ASC bundled prospective payments are commonplace. For example, in 2019, Carlsbad, California-based Global 1, a medical provider network and claims service organization, is projected to administer in excess of 1,000 surgical bundles per month for large self-insured employers and commercial carriers.

Given the volume of ASC bundled payment procedures Global 1 is processing, it seems logical to ask, where are the savings?

One person who can answer that question is Michael Larsen, executive director of MCSIG, an insurance group that provides insurance plans to more than 70 school systems and municipalities in California. MCSIG reported savings of $7,121,250 through its ASC bundled payment program administered by Global 1. MCSIG also reported the average savings per surgery was $14,683, with a complication rate including infections and readmissions of less than 1%. This is over 485 surgical procedures performed between January 2015 and December 2018.

According to Larsen, “While the cost savings have been tremendous, the consistently amazing outcomes our members have received with Global 1 are even better. The quality is exceptional, and price savings are remarkable. The bundled case in the ASC has delivered enormous value to MCSIG members as measured by the optimum combination of quality, service and price.”

Peer-reviewed scientific studies in highly respected national medical journals have reported ASCs have lower complication rates, elevated patient satisfaction rates and lower prices. The addition of providing these surgical services through a transparent all-inclusive bundled payment system elevates these facilities to true centers of value.

Pivotal Juncture

We are at a pivotal juncture in the vitally important healthcare sector. The lack of market forces has allowed healthcare to become prohibitively expensive. Porter and Kaplan have accurately identified bundled payments as a way forward to improve outcomes and reduce costs. Bundled payments in the ASC setting ignites an even more powerful vehicle for creating transparency, consumer choice, innovation, efficiency and savings compared to the current archaic and inefficient system. The future is now, and it is time to act.

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With over 100 surgery centers and 600 surgeons in the statewide network, the Blue Shield California (BSC)-Global 1 bundled payment program is going strong with many plans to expand.

Tom Wilson is Co-Principal of Global 1 and Co-Manager of Convergent SameDay Orthopedic Strategies. Contact Tom Wilson at: tom@globaloneventures.com, (760) 602-7872.

Global 1, a licensed third-party administrator (TPA), is the largest commercially insured bundled payments manager in California and amongst the largest in the nation. Global 1’s innovative bundled payment structure is designed to deliver cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting. 

Things They Didn’t Teach You in Medical School: Learning from the Burger Pros

By Scott Leggett

Sure, you are a doctor, better yet a surgeon. You’ve spent years in education and training. You are at the peak of your game, the pinnacle of your profession. You eat, sleep and drink medicine.

Speaking of eating, perhaps you can learn a thing or two from a company that serves fast food hamburgers.

A fast food hamburger company? you ask. Yep, fast food burgers.

Of course, not just any burger company. You are the best of surgeons; we wouldn’t want you to learn from anybody but what Money Magazine rated as the 2018 best fast food chain in America.

Perhaps you’ve heard of In-N-Out Burger.

So, what does a renowned fast food burger company have in common with surgeons? What can a surgeon learn about practicing medicine from a company with a 70-year track record of focused achievement in the rough-and-tumble world of retail fast food dining?

As it turns out, a lot.

Let’s start with quality

When the burger pros talk quality, they think of quality in terms of the customer experience.

In-N-Out Burger starts at the beginning. While that may seem to be an obvious place to start, it is often overlooked. For In-N-Out, the beginning is with the ingredients, the uncooked beef, the raw potatoes, the freshly baked buns. The very beginning of a meal. For example, In-N-Out delivers fresh meat to every one of its stores every day. Nothing is frozen.

People are at the beginning as well at In-N-Out. Once hired, employees are carefully trained in the values and techniques of In-N-Out and on the company’s relentless focus on the customer.

Surgeons who operate in ambulatory surgery centers (ASC) likely understand the importance of the beginning of the patient journey through the surgical process. As measured against traditional hospitals, the patient experience at ASCs is far superior as staffs are well trained and efficient. Anesthesiologists trained as outpatient clinicians do not overmedicate, leaving patients feeling better following surgery, resulting in a happier patient and improved outcome. An important byproduct of the focus on the patient experience in ASCs is the markedly lower infection rates among ASC patients compared with those treated in traditional hospitals.

In short, from beginning to end, in hamburgers or surgery, the customer or patient experience is the result of the focused management of a process. For their part, ASCs make every effort to enhance the patient experience. The surgeon must do the same.

Consistency

Of course, the challenge is how to consistently achieve great customer experience, time after time, burger after burger, across a company with thousands of employees serving tens of thousands of burgers.

In-N-Out Burger begins training employees in their “Quality you can taste” philosophy from the moment they are hired. They make sure that everyone who works for them understands the importance of practicing their philosophy and keeping it top of mind every day with every customer.

In short, the burger pros pay attention to their team members. They hire carefully, set expectations at the beginning, stick to their standards and continue to invest in their team members.

ASCs’ consistent patient-first approach to medicine is similar to that of a concierge service company rather than what is common in healthcare – a “you need me” mentality. This consistent experience at ASCs is what patients and surgeons consider a trademark for ASCs.

In-N-Out prides itself on consistency for the simple reason that consistency brings customers back for more. Likewise, with ASCs that practice delivering consistent, high-quality services, surgeons can expect the same high-quality, consistent service for their patients. And like the burger pros, consistent delivery is why ASCs can provide bundled payments in such a reliable, predictable manner.

Competition

In their seminal work The Lessons of History, historians Will and Ariel Durant noted that one of the first lessons of history is that life is competition.

This is something the burger pros well understand. Consider the options a consumer has before them when they think about having a burger for lunch or dinner. It is clearly less understood in healthcare in general and in the hospital setting in particular.

ASCs are a four-decade-old industry compared to hospitals that have been around since the turn of the 20th century. The existence of ASCs is a competitive response to hospitals, with ASCs growing at a faster pace than hospitals due to the intense focus on costs. Just like the burger pros, ASCs understand their cost structure and are intensely focused on managing those costs. Therefore, when teaming up with independent surgeons and anesthesiologists via a bundled payment structure, ASCs are naturally and transparently able to compete versus hospitals.

Hospitals, for a variety of reasons, are significantly challenged to compete against the combination of ASCs and bundled payments. Especially when the ASC, their surgeons and staff affiliates and downstream providers work together to provide the patient with the best possible surgical experience. Rather like the crew at the burger store working together to serve the best hamburgers to their customers.

Loyalty

As Forbes Magazine notes in an October 2018 feature story about In-N-Out Burger, In-N-Out customers have an allegiance to the brand. “They have a loyalty and an enthusiasm for the brand that very, very few restaurants can ever obtain,” says Robert Woolway, who handles restaurant deals for the LA-based investment bank FocalPoint Partners.

And, according to Forbes, that loyalty pays off. “An In-N-Out store outsells a typical McDonald’s nearly twice over, bringing in an estimated $4.5 million in gross annual sales versus McDonald’s $2.6 million. (In-N-Out, which is private, won’t comment on its financials.)”

In-N-Out customers are loyal because they consistently have a great overall experience dining at In-N-Out.

Likewise, surgeons are loyal to ASCs for one simple reason: The experience for the surgeon and their patients is second to none. Patients love the experience, outcomes and lower costs of ASCs. When the patient is happy, so is the surgeon!

Costs

As reported by Forbes Magazine, “McDonald’s and Burger King serve over 80 items; In-N-Out famously serves fewer than 15.”

The big burger chains are rather like hospitals, as they attempt to be everything to everybody. As a result, hospital supply chains are massive, complex, costly and management intensive.

In contrast, ASCs, like In-N-Out, work to keep things relatively simple. Working closely with ASC physician staff and partners they standardize supplies, implants and other costs, making them not only a more competitive but also a more durable business.

Both In-N-Out and ASCs focus on standardized processes. As noted by Forbes, at In-N-Out, “Buns are baked with slow-rising dough each morning. Three central facilities grind all the (never-frozen) meat, delivering daily to the 333 restaurants. Nearly all its locations are in California, and all are company owned. (In-N-Out does not franchise.) Heat lamps, microwaves and freezers are banned from the premises. The recipes for its burgers and fries have remained essentially the same for 70 years.”

Similarly, in a day in the life of an ASC, pre-op teams have the patient ready to go so that when the operating room is ready, the anesthesiologist has the patient completely prepped for surgery. ASC staff work as a team to assist the surgeon to have all equipment and supplies ready and available, opening only requested items to reduce waste. Post-op, the ASC team carefully manages recovery as they begin preparation for the next patient.

Bundled payments

When you know your costs, you can consistently and effectively bundle your services, increasing efficiency and ultimately improving patients’ quality of experience. For the Southern California market, In-N-Out bundles items — such as Combo #1, a double-double, fries and a drink for $6.70 — adding to the customer experience with easy ordering and money savings. In a similar fashion, Global 1, working with ASCs and surgeons, bundles over 100 different surgical case types, offering one price to the patient and the insurance company, and applies savings inherent in bundles to Medicare cases as well.

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With over 100 surgery centers and 600 surgeons in the statewide network, the Blue Shield California (BSC)-Global 1 bundled payment program is going strong with many plans to expand.

Scott Leggett is co-principal, Global 1 and managing director, Convergent SameDay Orthopedic Strategies. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA).

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Global 1, a licensed third-party administrator (TPA), is the largest commercially insured bundled payments manager in California and amongst the largest in the nation. Global 1’s innovative bundled payment structure is designed to deliver cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting.

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For Surgeons, BPCI-Advanced Offers New Opportunities for Improved Patient Outcomes, Better Financial Rewards

By Tom Wilson

While reaction among providers to the formal launch of the Centers for Medicare and Medicaid Services (CMS) BPCI-Advanced has varied widely, surgeons reviewing the details of the risk-based program may find there is a lot to like. Surgical fees for procedures performed under BPCI (Bundled Payments for Care Improvement) Advanced could be as much as 150% of standard fees, with additional bonuses if the surgeon assumes risk and costs are below the CMS target prices. Surgeons that embrace best practices, educate their patients and adopt systems that closely monitor their patients in the post-acute care environment could generate several thousand dollars per case.

Underlying the push into BPCI-Advanced are the encouraging results reported by Medicare in its review of its largest nationwide bundled payments program, the original BPCI. Medicare reports that participation in joint replacement bundles has achieved a 3.8% decrease in spending per episode with attendant stable-to-improved quality. Even more compelling is other data evaluating BPCI high performers who showed up to a 20% cost reduction in bundled joint replacement episodes with significant improvements in quality. Physicians demonstrating this level of performance received substantial bonuses for their successful participation in BPCI.

Success with Bundled Payments

Medicare’s reported successes with bundled payments under the original BPCI may prompt surgeons to dive into the details of BPCI-Advanced. They will find the program is best suited to healthcare organizations with experience in successfully managing risk in the episode of care setting. These organizations, termed “conveners” by CMS under BPCI Advanced, are charged with assembling the bundle, from pre-op all through downstream care, and managing it through the 90-day continuum of care as set forth in the BPCI guidelines. Both individual physicians and group practices can be conveners. For years, many healthcare experts have contended that attending physicians are most knowledgeable and best positioned to quarterback the bundle through the episode of care. BPCI-Advanced gives physicians who consistently deliver great outcomes the opportunity to be rewarded.

As experience with healthcare bundled payments has demonstrated, providers working together under a bundled payment plan are likely to more closely align their efforts to benefit the patient, and more efficiently deliver their services.

Under the BPCI-Advanced model, there are a total of 32 different types of cases, 29 of which are inpatient. To set benchmark pricing targets by procedure or clinical episode, CMS uses national, regional and the providers’ own historical data. Patients are risk-adjusted for severity of illness. The convener analyzes raw data produced by CMS utilizing internal expertise or, more commonly, if the convener is a provider (i.e., group practice), retains an analytics company to review the raw data produced by CMS. The analysis reviews the total utilization and cost by provider establishing national, regional, local and individual benchmarks including the post-acute care process, comparing all participating physicians to determine cost averages for the participating physicians. Based on this data, CMS sets a target price of 97% of the expected actual cost for services adjusted for inflation. If the convener and associated providers exceed the target cost, they pay a percentage of the overage. If they generate greater efficiencies and undercut the target cost, they share in the savings. Thresholds and ceilings eliminate outliers and limit the amount of retained savings or risk.

Risk and Reward

Why take on the risk? The obvious answer is for the reward. But there is more. For conveners and providers who understand their business, who excel at delivering professional services, BPCI-Advanced is a way to shine professionally, increase earnings and, most importantly, deliver better outcomes for patients.

How to manage the risk? You begin with a convener experienced in successfully managing at-risk models. From that experience, conveners know that they must follow the wisdom of an ancient Chinese proverb: Take care in the beginning.

Successfully executed healthcare bundles initiate care long before the delivery of the actual surgical procedure. Detailed care plans, developed in coordination with all providers, from the surgeon to the post-operative home care providers, are essential. It is during the development of the care plan that risk assessments are made based on the patient’s co-morbidity, with detailed strategies to address and offset specific risk factors. A key to the development of the care plan is establishing mechanisms for coordinating care among all providers and identifying appropriate postoperative monitoring of the patient.

The patient is part of the care plan from the outset of the episode of care. Patients are counseled to set their expectations so they can anticipate, step-by-step, how they will progress through the process from pre-op through to full recovery. For example, in the case of a joint replacement, patients may be counseled to lose weight or exercise to build strength where needed.

For surgeons, as previously noted, there is the opportunity to earn up to 150% of surgical fees plus participate in the savings pool if they are a convener. This is the reward incentive for participating in the program. Of course, there is risk. When total costs exceed the target, conveners are invoiced retrospectively for their portion of the overage.

Commitment to Best Practices

Physicians must be willing to work as a team, to adopt best practices and standardize the selection of post-acute care entities that deliver the greatest value. Care coordination and a commitment to BPCI-Advanced procedures and best practices as outlined by the convener are required.

For its part, the convener orchestrates the entire episode of care, performs the analytics and employs a full-time clinical care coordinator (typically an RN) who, ideally, through state-of-the-art digital technology such as electronic monitoring, Facetime and text messaging, is able to track patient progress based on the care plan created for the patient. Overall, successful plans eliminate unnecessary use of skilled nursing facilities and focus on recovery in the comfort of the patient’s home environment utilizing home healthcare and outpatient providers. Advanced patient-facing technology is utilized to monitor the patient’s recovery at home alerting the physician to any untoward developments, allowing early intervention to avoid emergency room visits and readmissions.

Research has shown that elective procedures such as total joint replacements (as opposed to emergent procedures such as cardiac events) fare better under the bundled payment model. This is due to the opportunity to develop a tailored and detailed care plan for the patient, and the predictability of the surgical interaction and recovery process. Accordingly, the next phase of bundled payments may incorporate the ASC (ambulatory surgical center). This will present surgeons with an even greater opportunity to manage the total episode of care and more directly participate in the proven savings that the ASC has demonstrated in the last two decades.

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Tom Wilson is Co-Principal of Global 1 and Co-Manager of Convergent SameDay Orthopedic Strategies. Contact Tom Wilson at: tom@globaloneventures.com, (760) 602-7872.

Global One Ventures (Global 1) is a California-based, licensed third-party administrator (TPA) dedicated to developing and administrating an innovative medical payment and delivery system through its network of providers. With more than 10 years of experience, the focus of Global 1’s bundled payment structure is to deliver innovative, cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting. For more information, visit: g1surgery.com.

Convergent SameDay Orthopedic Strategies is a full-service consulting company delivering contracting expertise, clinical education, process infrastructure and coaching in support of successful outpatient joint replacement programs. For more information, visit: convergentortho.com.

Spine Surgeon Talks Benefits of Affiliation with Blue Shield, Global 1

By Scott Leggett

Like most doctors, Brian Perri, DO, a spine surgeon practicing in Beverly Hills, Calif., is challenged to provide the best care for his patients while helping patients and payers control the costs associated with acute surgical procedures. Dr. Perri employs three key strategies to assure his patients get the best surgical care with the best outcomes at the best price.

First, Dr. Perri went in-network with Blue Shield both professionally and with his affiliated surgical facility. This affiliation with Blue Shield gives him access to the Global 1, or G1, bundled payments program, a recently established partnership between Blue Shield and Global 1, a California Third Party Administrator (TPA).

“I am now in-network from a professional standpoint; we can now accept all Blue Shield patients through the Global 1 program,” Dr. Perri said.

Next, he shifted appropriate surgical cases from higher-cost hospitals to ambulatory surgery centers (ASCs). This has allowed Dr. Perri to continue assuring that his patients receive the best care with optimal outcomes while reducing the overall cost of care.

“We can perform nearly all spine surgeries at our surgery center provided the patient is healthy and covered from an insurance standpoint,” said Dr. Perri.

Finally, Dr. Perri embraced contracting for surgical services using pre-negotiated bundled rates. This allows Dr. Perri to manage and direct the bundled payment process while ensuring his patients or their insurers make one payment for all related episode-of-care costs.

“The bundled payment that is proposed to the patients covers everything,” noted Dr. Perri.

The result: happy patients, less administrative red tape and a streamlined administrative process.

“This is a much better experience for both the doctor and the patient,” observed Dr. Perri of the Blue Shield/Global 1 bundled payments program.

“There is very minimal administrative interference with patient care. It is more of a one-on-one and personal interaction with much higher patient satisfaction scores,” Dr. Perri said.

“The Global 1 approval process is very straightforward,” he added.

Dr. Perri’s engagement with Blue Shield, Global 1, ASCs and bundled payments reflects Blue Shield’s recognition of emerging opportunities to make a meaningful impact on rising healthcare costs. These opportunities include:

  • Contracting with providers for surgical services using pre-negotiated bundled rates.
  • Allowing its surgeons to quarterback the bundle payment process.
  • Shifting appropriate surgical cases from higher-cost hospitals to ambulatory surgery centers (ASCs).

From a marketplace perspective, Blue Shield recognized the opportunity in bundled payments: Combining professional and technical allowances into a single rate would help stabilize the wide variation in payments while paying providers a fair rate.

Blue Shield understood that administering such bundles in a conventional claim system would not be possible and building a unique ASC network of surgeons would require a partner.

As such Blue Shield chose to partner with Global 1, a California TPA, whose principals had a long and successful history in managing ASCs and managing bundled rates for commercial patients from the medical travel space.

The program is now officially in its fourth year and continues to expand. For example, plans are in place to implement an additional patient benefit in January 2019 by lowering the patient co-insurance when using an ASC setting for surgical services.

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With over 100 surgery centers and 600 surgeons in the statewide network, the Blue Shield California (BSC)-Global 1 bundled payment program is going strong with many plans to expand. If you would like to learn more about the program for you and your BSC patients, please call Joy Houle at Global 1 to obtain more information, (760)602-7872.

Scott Leggett is co-principal, Global 1 and managing director, Convergent SameDay Orthopedic Strategies. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Contact Leggett at info@GlobalOneVentures.com or 760-494-9211.

Global One Ventures (Global 1) is a California-based, licensed third-party administrator (TPA) dedicated to developing and administrating an innovative medical payment and delivery system through its network of providers. With more than 10 years of experience, the focus of Global 1’s bundled payment structure is to deliver innovative, cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting. For more information, visit: g1surgery.com.

Convergent SameDay Orthopedic Strategies is a full-service consulting company delivering contracting expertise, clinical education, process infrastructure and coaching in support of successful outpatient joint replacement programs. For more information, visit: convergentortho.com.

Looking Behind the Headlines, Physicians Find Good News in the Implementation of U.S. Healthcare Policy

By Tom Wilson

Physicians reading the news about U.S. healthcare policy may wonder about the fate of their profession amidst the backdrop of highly-charged healthcare policy debates in Washington, D.C., and attendant media coverage often focusing on the political stories rather than the practical realities of delivering medical care to patients.

Behind the headlines, behind the political battles, behind the avalanche of media coverage, there are reasons for physicians to feel encouraged by actual healthcare policy implementation.

Health and Human Services Secretary Alex M. Azar II, in a recent speech, outlined an aggressive agenda intended to speed long-standing efforts to reform healthcare by empowering the consumer, improving transparency, encouraging innovation and challenging vested interests. In the details of this effort is very positive news for independent physicians.

Azar, speaking before America’s Health Insurance Plans meeting in March of this year, laid out his agenda with a focus on four areas of reform. They include:

  • Giving consumers greater control over health information through interoperable and accessible health information technology.
  • Encouraging transparency from providers and payers.
  • Using experimental models in Medicare and Medicaid to drive value through the introduction of market forces into healthcare, shifting control from large healthcare systems to the consumer.
  • Removing government burdens that impede this value-based transformation.

For independent physicians, each of these four focus areas has important implications.

Health Information

Giving consumers greater control over health information means, in part, that consumers will take possession of their own electronic health records, carrying their EHRs with them on their nearly ubiquitous mobile devices, or making them available via downloads at the request of a patient.

“Patients ought to have control of their records in a useful format, period. … [T]he healthcare consumer, not the provider, ought to be in charge of this information,” Azar noted.

Having healthcare records in a pocket or purse will open new options for patients, driving healthcare consumerism and empowering consumers to shop for and evaluate healthcare services. With almost every consumer facing significant out-of-pocket expenses associated with any major healthcare event, it is inevitable that healthcare consumers will focus on cost management in healthcare, just as they do in every other aspect of their economic lives. Recognizing this, Azar pragmatically advocates aligning policy with the technological and financial realities of modern healthcare consumption.

According to Azar, unless this technology is in the hands of consumers, “the benefits may never arrive.” Further, Azar noted, “[E]mpowering consumers and individuals has been key to the advances of the Information Age.”

Supporting healthcare consumerism is seen as a means of controlling and driving down unsustainable healthcare costs, just as consumerism has had the same effects in other market sectors.

Transparency

Here Azar is equally direct, stating, “I believe you ought to have the right to know what a healthcare service will cost — and what it will really cost — before you get that service.”

Consumers know with certainty what they will pay for goods and services in every other area of their lives, save for healthcare.

Recognition of this reality by forward thinkers in the greater healthcare community, including physicians, insurance companies, regulators, payers and thought leaders, has led to the successful creation and implementation of bundled payments as a means of providing complete episode-of-care services to a patient for a predetermined fixed price, provided to the patient prior to the outset of care.

While there are ongoing efforts to promote across the board price transparency in healthcare, bundled payments remain the only proven, reproducible packaging of healthcare services that provides true transparency for consumers.

Experimentation

Here, Azar is most clearly intent on unlocking larger market forces to drive down healthcare costs.

“We want to move to a system where we can be agnostic about ownership structures, a system that will allow independent providers to group together to drive innovation, quality and competition,” Azar noted.

The key here for doctors is Azar’s support for independent physicians and organizational flexibility that supports innovation, which in turn yields higher quality and drives competition to lower healthcare costs overall.

In the end, such an effort will yield value to the marketplace.

Azar intends to power this change with the financial and regulatory clout of Medicare and Medicaid. Here physicians can expect experimentation that will touch them directly with new payment and incentive models, reduced regulatory burden (already under way with MIPS) and incentives to streamline and improve the effectiveness of electronic health records and the sharing of health records with patients and other providers.

Finally, Azar wants to ease the collection of outcomes data and open the way for sharing that data to inform innovation and engage consumers with meaningful, relevant, timely healthcare metrics they can employ in their own healthcare decision making.

Government Burdens

“The fourth key engine for transformation,” Azar noted, “[is] addressing any government burdens that may be getting in the way of integrated, collaborative and holistic care for the patient.”

This call for deregulation may be most welcome by physicians, who, as a group, have been the focus of increasing regulation by both government and payers in an effort to control healthcare costs at the point of care.

Among the four proposed focus areas, the easing of the regulatory burden on physicians may be the most welcome of all.

Change Is Coming

According to Azar, the administration will not be deterred by special interests as it moves to implement marketplace changes to drive down the cost of healthcare.

As he noted at the close of his speech, “Change represents opportunity, and I exhort all of you to take advantage of the opportunities represented by what I’ve discussed today. Because I assure you: Change is possible, change is necessary, and change is coming.”

Healthcare Consumer, Meet Bundled Payments

Story Highlights
• Consumers, driven by ever increasing healthcare costs and rising deductibles, are actively shopping for healthcare services.

• Physicians are increasingly expected to assist the patient in finding best-value services for prescribed procedures.

• Patient satisfaction assessments are commonly used to reflect the perceived value people receive from their physician.

• Bundled payments for single episode healthcare services lower costs, improve outcomes and generate high patient satisfaction scores.

By Scott Leggett

Consumerism is coming to healthcare. Count on it.

What is consumerism? Google the word and you will find it defined as the “protection or promotion of the interests of consumers.”

Translate consumers to patients and consumerism in healthcare means the protection and promotion of the interest of patients.

If that sounds a lot like what doctors do every day in their care of patients, you are partially correct. Physicians, by definition, protect the interests of patients and help promote the patient’s interest in their own good health.

What about the promotion of the interests of patients? Here the word promotion takes on an economic cast. That is, while the doctor protects the interests of the patient by healing those who are ill or contributing to the wellness of the healthy, the doctor promotes the interests of the patient by keeping an eye on costs and providing guidance to patients on cost savings and healthcare services.


Is Healthcare Consumerism Real?

In a research study conducted in 2016 by Porter Research and Navicure, nearly two-thirds of responding physicians reported that healthcare consumerism is a consideration with their patients. Almost 70% reported patients are price shopping. More than half of all patients ask about payment plans, and a roughly equal number inquire about the total cost of anticipated treatment.

Clearly, physicians are already encountering the impacts of healthcare consumerism. And while a majority of surveyed doctors reported encountering patients expressing concern about healthcare costs, the study only briefly touched on the fact that nearly half of all patients are inquiring about total payment costs and payment plans. This interest in costs and services will continue to grow and represents the coming wave of healthcare consumerism.

Then there is the issue of consumer choice and how the consumer chooses a doctor. Consumerism at its essence is about choice. For healthcare the manifestation of this choice is expressed as patient satisfaction.

As a further indication of the rise in healthcare consumerism, consider that by 2023 millennials as a generational group will be the largest consumers of healthcare services in the U.S. It is anticipated that they will further accelerate the healthcare consumer movement since they have grown up using electronic media and making informed choices in their role as consumers, just as they have grown up expecting to be satisfied by the outcomes of those choices.

As noted by Dr. Kevin Pho on his widely followed website, KevinMD.com, “As healthcare slowly transitions to a consumer-driven business, patient satisfaction becomes an increasingly important variable in how patients select their care providers.”


Bundled Payments

Enter bundled payments. This well-established approach to packaging healthcare costs — patient pays one amount for all services related to a single episode of care — follows a familiar practice for virtually everything the consumer/patient buys outside of healthcare. Consumers buy specific goods or services and pay one fixed price, such as with the purchase of a house or car.

Bundled payments in healthcare are analogous to packaged pricing elsewhere in a consumer’s life, providing both a single price for goods and services and price transparency.

For the consumer, “episode of care payments” probably sounds like healthcare jargon. However, packaged pricing is how consumers save money at Costco. They get the idea of packaged pricing, and they get price transparency.


Protect and Promote

It is in the interest of the patient to improve care and ensure best outcomes. It promotes the interest of the patient by simplifying their interaction with the healthcare system, which is too often complicated and mind-boggling to the consumer of healthcare services. It most definitely promotes the interests of patients to lower the cost of healthcare services.

Bundled payments do all of this.

As a physician, protecting the interests of your patients comes as second nature. Now is the time to promote the interests of your patients as well.

Bundling payments equips you to protect and promote at the same time. Your patients will be grateful. So will their checkbooks!

Medical Disruption Prompts Physicians to Make Change Amidst Increased Pressure to Reduce Costs

By Tom Wilson

The gauntlet has been thrown down: Healthcare in the U.S. is too expensive. Fix it.

Caught in the crosshairs of this challenge to the healthcare industry as a whole are healthcare’s indispensable players: physicians.

Working with, around and sometimes seemingly against physicians to answer the challenge of fixing healthcare are a host of players with little or no experience in the field. However, what they lack in experience these new players make up for with market power, financial power, technological sophistication and successful track records at disruption. Think Amazon, Apple, Google, Microsoft, Uber and a host of others less familiar, but no less formidable, corporate and nonprofit entities.

What does this mean?

Never in the annals of healthcare has so much innovative firepower been directed at an industry notoriously resistant to the kind of productivity and technological changes that have been accepted as standards for operations and product improvement for other industries. Think banking and finance, communications, transportation and manufacturing.

In the face of this tsunami of disruption prompted by the increasingly urgent search for cost savings in healthcare, doctors often face stark choices: Will they choose to practice medicine as independent physicians or work for a hospital foundation? Will physicians stick with the way things have always been done or embrace the new technologies and techniques sweeping the healthcare industry? Think digital medicine, big data, artificial intelligence, telemedicine, bundled payments, outpatient surgery, remote patient monitoring, the focus on health rather than care.

Taken together these disruptive forces represent a new form of competition in healthcare. Doctors are challenged to embrace the newly competitive healthcare marketplace or risk their ability to compete at all.

What exactly is the cause of these increases in healthcare costs?

There are compelling numbers that point to consolidation among traditional healthcare service providers add to increased costs, along with reduction in competitive pressures that operate so effectively in other markets to moderate cost increases.

“Prices are high and vary in seemingly incoherent ways, yet quality of care is uneven, and the system lacks the innovation and dynamism that characterizes much of the rest of our economy,” noted Martin Gaynor of Carnegie Mellon University in a white paper on healthcare consolidation. “The dearth of competition in our healthcare markets is a key reason for this dysfunction.”

Driving this dysfunction are the numbers that show a healthcare provider marketplace undergoing considerable consolidation that has had surprising impact underlying higher healthcare costs.

  • Hospitals operating in markets with no local competitors charge about 16% more on average than hospitals with four or more competitors.
  • Even in markets where there is competition, dominant players — hospitals with significant market share — charged nearly three times more than their competitors.
  • Group practices with nine or fewer physicians declined from 40.1% of all practices in 2013 to 35.3% in 2015. During the same period, large practice groups, with 100 or more physicians, increased from 29.6% to 35.1% of all practice groups.
  • The American Hospital Association reported that, during roughly the same period, the number of physicians and dentists employed by hospitals increased by 56.7%. Physicians employed by hospital foundations use more costly hospital facilities to provide outpatient care.
  • A recently released report on the impacts of consolidation in the California Healthcare market found “a strong correlation between consolidated hospitals, physicians and insurance markets and higher prices.”

Often overlooked in this analysis of the decline of competitiveness is the rise of what has become a proven alternative to expensive fee-for-service in-patient hospital surgical care: ambulatory surgery centers (ASCs) and bundled payment models, both of which have proven to lower costs and improve outcomes, particularly when surgeries are bundled in an ASC setting.

Even as healthcare consolidation continues, the number of ASCs operating in the U.S. has grown dramatically. According to the Ambulatory Surgery Center Association, there are currently more than 5,600 ASCs in the United States. This is up from approximately 1,000 ASCs in operation in 1988.

California leads the nation in the number of ASCs with 794 as of June 2017.

So while there’s has been a marked increase in hospital consolidation, there has been parallel growth in ASCs as outpatient surgery centers act as an effective counterweight to the higher costs resulting from the consolidation of hospitals.

At the same time, the application of bundled payment models has increased dramatically with the focus on payers contracting directly with doctors rather than hospitals.

As reported in Becker’s Hospital CFO Report, “Payers are increasingly contracting with physicians, and not hospitals. And why physicians? Because they view the physicians predominantly as decision makers … Under these arrangements, physician groups pay out the hospital facility fee, saving the insurer from a more complicated three-party agreement. However, this type of arrangement means only the physician groups, and not the hospitals, receive a share of the savings created by the bundle.”

While competitive and disruptive forces are unsettling healthcare and physician practices with doctors facing increased pressure to adapt or be left behind, innovation in the form of ASCs and bundled payments is alive and well and contributing to the unrelenting efforts to reduce healthcare costs in the U.S.

Transparent Bundled Payments Mesh With Big Tech in Race for Healthcare Value and Cost Savings

By Scott Leggett

Before the exciting news of big tech companies, including Amazon and Apple, announced their entrance into the healthcare space, the creation of bundled payments was born as an alternative to the traditional fee-for-service model.

The bundled payment approach consolidates fees for whole treatment regimens from start to finish, allowing an objective decision and a transparent financial transaction for the patient. In the face of the sophisticated technology tidal wave engulfing healthcare, the simple technology of bundling healthcare services and fees stands as the surest way to reduce costs and deliver true value to the patients.

As spine surgeon Adam Bruggeman, MD, said in comments reported by Becker’s Spine Review, public and private payers need to know they’re paying for value and quality, not quantity.

“The easiest way surgeons will be able to show value,” he noted, “is through partnering with CMS (the federal Medicare administrator) and private insurers through bundling in a way that financially incentivizes the physician significantly and also provides the insurance company with cost savings.”

Prevention, Bundles and Engagement

No single deal speaks louder about technology’s influence on the future of healthcare than the partnership recently unveiled among Amazon, Berkshire Hathaway and JPMorgan Chase. The three companies intend to expand the role of technology to streamline healthcare and increase transparency, thus reducing costs. Their willingness to disrupt the healthcare space will fuel the innovation represented by bundled payment arrangements that have long-delivered transparency, simplicity and cost savings.

The three-company partnership also promises to invest heavily in prevention to reduce healthcare costs. Historically, prevention and bundled payments taken together have been effective at offsetting higher healthcare costs.

Adding to the focus of the corporate trio on reducing healthcare costs is Apple’s announcement that it will enable its customers to view their health records right on their mobile devices. Apple customers will be able to access healthcare data via their phone just as they access their bank accounts.

A key component of all these initiatives is patient engagement. As recently reported by the Healthcare Intelligence Network (HIN), engaged patients improve outcomes. According to HIN, “84% of physicians believe patient engagement is beneficial.”

In support of Apple’s medical records initiative, HIN reports that “60% of providers believe access to online records improves quality of care.” Engaged patients have lower readmissions and encounter fewer medical errors.

Patient engagement plays an important role in bundled payments as well. As noted in an article recently published by RevCycleIntelligence.com, “Patients need to be on board with the healthcare organization’s clinical and financial goals to succeed under bundled payment models.”

Disruption

Like so much disruption coming from the tech sector these days, new initiatives to reshape healthcare promise technology-driven change with or without cooperation from traditional health systems.

Heralding changes in how and where consumers get medical care, observers see the technology transformation in healthcare as accelerating the shift away from inefficient care in high-cost settings and toward a competitive model like bundled payments where results counting patient engagement is encouraged and supported by new, innovative healthcare solutions.

Amidst this change, physicians will play an important role in helping patients navigate the healthcare options before them. With the assistance of technology created by companies like Apple, Amazon, Berkshire Hathaway and JPMorgan Chase, physicians will have unparalleled support to educate and engage patients in better choices of prevention and healthcare options.

As Neil Badlani, MD, notes in an article published in Becker’s Spine Review, “As physicians, it is our responsibility to educate our patients with accurate and comprehensive information about their conditions and treatment options.”

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Trend Alert: Outpatient Care, Bundled Payments Gain Momentum

PAYERS, PROVIDERS AND PATIENTS EMBRACE LOWER COST MEDICAL MEASURES IN 2017

By Scott Leggett and Sohrab Gollogly, MD

For all its uncertainty in other areas, the past year in healthcare may well go down as a watershed in the transition to more cost-effective healthcare.

Players big and small moved decisively toward ambulatory surgery centers in 2017, continuing the shift away from higher-cost hospital settings. More of the same is likely ahead in 2018 as the industry prepares for what many see as an inexorable realignment of healthcare relationships and financial incentives.

“Right care, right place, right time, for the right reason, at the right cost,” Mizuho Securities analyst Sheryl Skolnick told the Wall Street Journal. “High-cost inpatient facilities are the loser, oftentimes, in that scenario.”

The transition could prove pivotal. Insurers and other healthcare payers are increasingly turning their back on hospitals’ fee-for-service reimbursement model, and instead are embracing risk-based financial models such as bundled payments. This will allow surgery centers to compete more evenly, on the basis of cost, medical outcomes and patient satisfaction.

Notable Developments for Outpatient Care and Bundled Payments in 2017

EXPANDED USE OF BUNDLED PAYMENTS EXPECTED WITH SHIFT TO RISK-BASED REVENUE – American Medical Group Association (AMGA) members indicated in a survey released in December that they expect nearly 60% of their Medicare revenues to come from risk-based products by 2019. This shift is expected to expand the use of bundled payments, in which independent physicians working in outpatient surgery centers offer competitively priced treatment packages covering everything from pre-operative work to rehabilitation.

HOSPITALS INVESTING IN OUTPATIENT CARE – Hospitals are themselves investing in outpatient settings. Faced with a continuing decline in hospitalization rates, they too are benefiting from technology that makes ambulatory surgery centers more and more capable of performing advanced medical procedures.

OUTPATIENT CATEGORIES ADDED TO BPCI MODEL – The Centers for Medicare Services, under its Bundled Payments for Care Improvements (BPCI) Initiative, announced BPCI Advanced, which added three outpatient categories to the BPCI model.

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