The Bundles are Coming!

July 2015

While lore has it that the midnight ride of Paul Revere was associated with the cry “the British are coming” it is unlikely that was ever said by him or anyone else. Nevertheless, the phrase has been associated with events of the early days of the American Revolution. A similar fictitious cry today in the halls of U.S. hospitals might be “the bundles are coming.” The Centers for Medicare and Medicaid Services (CMS) has now announced that fully bundled payments for total joint replacement are being proposed in the Federal Registry on July 14, 2015 for implementation in upcoming months. Demonstration projects have been underway for several years and it appears that total joint replacement with be the first, but not likely to be the last, surgical treatment to be paid by a full bundle. A somewhat surprising part of this is that the post-discharge interval to be covered by the proposed bundle will be 90 days.

The concept of the bundled payment is that a single payment is made, in this case by Medicare, that covers the entire inpatient, professional, and post-discharge (90 days) costs of care. Surgical, anesthesiology, and all consultant fees are bundled into a single payment. All post-discharge costs including emergency department visits and readmissions are similarly to be paid from this single payment. This single payment will eliminate the traditional fee-for-service payment model where more consultants, more post-discharge laboratory and imaging studies, and more readmissions generate more revenue. All will be folded into the single payment, which will be computed from historical payments made for those inpatient procedures. Success with bundled payments will require effective and coordinated efforts by surgeons and hospitals that can lead to improved margins, while inordinate complications and inefficiency will lead to economic losses. This is likely to initiate the Inpatient Payment Revolution.

At MPA Healthcare Solutions, we have over 15 years of experience in the risk-adjusted design of fair, intelligent bundled-cost analytics. Our experience indicates that surgeons and hospitals will have to develop coordinated efforts together to reduce preventable complications and unnecessary costs of care. Integrated post-discharge strategies will be necessary to avoid Emergency Department visits and readmissions, as areas that traditionally have not been of great concern. Our data indicates that the opportunity for improved outcomes at reduced costs exists for most hospitals; if not in total joint replacement surgery then in other areas that will be targeted in the immediate future.  Implementation of bundled payments will require detailed outcomes and costs analysis in order to improve margins.  It will also require a fair approach to gain-share distribution to keep all participants fully engaged.

We will be glad to provide presentations to administration or the medical staff to facilitate a better understanding of what bundled payments mean. We have developed simulations of how gain-share formulas can be designed.  We are positioned to assist you in meeting the new Revolution of Payment Reform in patient care.

Donald Fry

Donald E. Fry, M.D. is Executive Vice President for Clinical Outcomes Management at MPA Healthcare Solutions, Adjunct Professor of Surgery at Northwestern University, and Professor Emeritus of Surgery at the University of New Mexico School of Medicine. At MPA Healthcare Solutions, Dr. Fry provides clinical leadership in analyzing and evaluating clinical performance, guiding quality improvement, and creating incentives for coordinated, cost-effective care.

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