Northeast Ohio hospitals seeing benefits of bundled payment model

A new national contract could bring hundreds of patients from across the country to St. Vincent Charity Medical Center in Cleveland for bariatric surgery.

The draw? A new and growing payment model that links historically siloed charges into one bundled payment, incentivizing providers to keep costs down, giving insurance companies and patients an expected price tag and potentially improving quality of care.

Bundled payments may be a solution to what Tom Campanella, director of the health care MBA program at Baldwin Wallace University, calls one of the biggest challenges in health care: fragmentation.

A surgery in a hospital can mean several separate charges: one for the surgeon, another for the anesthesiologist, a pathologist or emergency room physician if they're involved, then the rehab, occupational therapy, and on and on.

“The analogy I would use is a balloon,” Campanella said. “You have all these different parts, and even if you squeezed down on one, the other side would pop up from a cost standpoint. So now they're saying let's wrap all of that together in a bundle.”

Bundled payments have an agreed-upon price tag. Any money not spent below that target is savings for the hospital, but overspend and the hospital pays.

Several Northeast Ohio hospitals have been piloting the bundled payment model through the Centers for Medicare and Medicaid Services. As CMS begins to see the benefits of bundled payment, officials expect to see the approach more and more in the commercial industry, such as the contract St. Vincent landed.

Already, third-party vendors to negotiate bundled payment contracts between hospitals and insurers or employers are emerging, Campanella said.

“It's moving like crazy,” he added.

St. Vincent was selected through a national competitive selection as the first hospital in the country to participate in the Pacific Business Group on Health Employers Centers of Excellence Network for bariatric surgery. Through the contract, which went into effect Jan. 1, the hospital will provide weight-loss surgery for large national employers through a bundled payment arrangement.

Dr. David F. Perse, St. Vincent president and CEO, said the contract will help the hospital have a national reach and compete locally in what can sometimes create “an untenable situation for health competition.”

“In our market, the dominance of the big players is keenly felt by us,” he said. “So bundled models, I believe, create opportunity for entities to reach beyond local markets and to perhaps be evaluated more soberly with regard to cost and quality.”

CMS has been piloting the model in recent years through its Bundled Payment for Care Improvement (BPCI) initiative. University Hospitals, Cleveland Clinic and Lake Health have all implemented the BPCI model 2, which bundles payments to include an inpatient stay in an acute care hospital, plus the post-acute care and all related services for up to 90 additional days.

By linking acute care and post-acute care services under one total cost threshold, the various providers — from the initial physician to the staff at a rehab hospital — are pushed to communicate throughout the continuum of care.

CMS attaches a single price point to that bundle, based on individual hospitals' historic costs.

Though the program is voluntary so far, hospital leaders say it makes sense to jump onto the initiative — it's where health care is headed.

Rick Cicero, senior vice president for business development at Lake Health, said bundled payments are a “natural progression” from the diagnosis-related group, or DRG, system established in the 1980s. It established classifications for inpatient procedures and groups to help control costs.

The bundled model builds on this by adding the care a patient receives after they walk out the hospital doors. Bundled payments are one of the main ways CMS is looking to shift toward value-based payments, said Brent Carson, vice president of managed care and market solutions for University Hospitals, which implemented BPCI in its Case, Parma and Elyria medical centers for joint replacement.

Though there aren't additional dates set to roll out more mandatory bundled payment rules, many agree that's likely. And although there's also no set time to re-evaluate the established prices for procedures, Carson believes that's probably coming, too.

“We believe over time it is going to get more and more challenging in terms of the targets,” he said.

The bundles are about bringing all providers together around the patient to provide seamless care, Cicero said.

“It really forces us to communicate to us in ways we didn't before. We've always done well with our doctors and everything in the hospital, but now we're bringing post-acute care into it,” he said. “It really brings a better product and produces better outcomes for patients.”

Already, he said, Lake Health has seen reduced readmissions and is getting people out of the hospital faster and getting them home or into therapy.

Don Schiffbauer, director of clinical operations at UH Elyria Medical Center, said he has seen some of the same. Having just started the BPCI program in July, full metrics aren't available yet, but the initial results look promising, he said, which can translate to benefits to patients beyond those covered by Medicare.

“Even though we're participating in a Medicare program, we're not just relegating this to the 65-and-older population,” Schiffbauer said. “We recognize that the quality and collaboration that we have, it's applicable to the entire population for these diagnoses.”

Although there's financial risk, there's also room to add efficiencies and grow the margin of savings. Lake Health and UH don't yet have cost savings data from the bundled payments, having just started in July. Data at the Cleveland Clinic show close to $2,000 savings per procedure, said Kevin Sears, executive director of market and network services for the Cleveland Clinic, which has been piloting BPCI since 2013 for total hip and knee replacements.

The procedures that typically make the most sense for a bundled payment arrangement are those that have a clearly defined start and end, Sears said.

Carson said UH chose hip and knee replacements for that same reason — it's a defined procedure.

It makes more sense, especially for programs such as BPCI that, for the most part, don't carve out exceptions for complications. The historical benchmark included patients with co-morbidities and other complications, so the established bundled price should cover outliers and average out for hospitals.

Bariatric surgery doesn't quite fit that bill. It's complicated and can cross into a lot of fields of medicine, from psychologists and dieticians to surgeons and radiologists.

But the contract St. Vincent has allows for exceptions and some adjustments to the cost. As one of its strongest programs, bariatric surgery makes sense for St. Vincent to bundle, Perse said.

Already, St. Vincent has received dozens of inquiries about the program and has identified at least 30 individuals who have expressed interest and meet the qualifications.

As St. Vincent works out the details of the contract this year, Perse said it will position the hospital well to offer other specialty services beyond the region.

As patients across the country see the option to have bariatric surgery at St. Vincent in their health benefits, there are still added considerations. For instance, what portion of that negotiated price tag falls to the patient varies depending on the insurance company and employer's offered plan.

And the cost to travel to Cleveland twice — for an initial consult and then the surgery — is not insignificant, Perse said. Hospital leaders are working on establishing payment plans to help make it viable for patients.

But that defined price tag can make the trip worth it, he said. Patients, employers and insurers know the cost ahead of time and can make an educated decision on that cost and the benefit of the travel.

With more than 40 obesity-related diseases, many of which can be addressed through weight loss, the cost savings can reach far beyond the negotiated bundled payment.

In the first year, Perse said he hopes to see 50 patients come. Within one to three years he'd like to see that grow to 300.

“Understanding costs is always better in the business world than your estimate thereof,” he said. “When you can look at a product line and pin a cost more accurately, in general, that's more efficient.”

Combining various fees and charges into a fixed singular cost adds clarity, he said.

Campanella of Baldwin Wallace said people aren't likely to pay to send somebody across the country for care without understanding the total cost.

“We've got to know what we're getting into,” he said.

"Northeast Ohio hospitals seeing benefits of bundled payment model" first appeared in Crain's Cleveland Business.