Healthcare providers are bundling fees and taking responsibility for assuring value.

The health care industry is in the midst of a major shift that's unlikely to change even if federal law known as Obamacare is repealed.

It's transitioning from a system historically based on volume—the number of procedures performed and patients treated—to focusing on value.

Providers are putting a greater focus on creating value throughout all parts of the healthcare system, including how people pay for it. With this comes an opportunity for employers and patients to see bills for certain procedures, such as in orthopedics, consolidated in what's known as bundled payments.

Without bundling, multiple charges associated with a single procedure are sent in separate bills. For example, the hospital's facility fee, the physician's fee, anesthesiology, pain management and post-acute care all have separate bills, along with many others.

“I would say bundled payments (are) done more to solidify the practice of orthopedics. It gets everybody marching toward the same goal instead of having outliers,” says Mark Gittins, an orthopedic surgeon with OrthoNeuro. “We try to push the equation to a new paradigm of care. The patient sees better quality, quicker turnaround and low cost, and maybe new innovations in procedures and surgical techniques.”

Taking a Bundled Approach

Currently, most patients pay for procedures in a fee-for-service model.

The bundled approach requires agreement from a number of parties including the physician, hospital, anesthesiologist and rehabilitation specialists.

“Bundled payments are the new kid on the block,” says John Palmer, director of public and media relations at the Ohio Hospital Association. “It's been embraced from the government payer standpoint so it's still new on the commercial side.”

The Centers for Medicare & Medicaid Services has been at the forefront of the transition to bundled payments. The federal agency started the voluntary Bundled Payments for Care Initiative in 2011, with the goal of rewarding hospitals that work together with physicians and other providers to benefit patients. The program became permanent in 2016.

Changing the Game

In the bundled payment system, the risk associated with the cost of surgery is moved to the provider.

The benefit to assuming leadership of a bundled payment is that if the cost of treating a patient during their episode of care is less than the negotiated bundle price (which is paid up front), the provider keeps the savings, but if the cost is greater, it absorbs the cost.

“For the provider, it's changing everything,” says Tim Smith, CEO of Orthopedic ONE. “There will be complications, there will be patients who need a lot more care and the financial risk of this situation is on the provider. The provider who's willing to say they will bundle and coordinate and deliver can take on the reward if they do well. So, there is an opportunity for the provider.”

Bundled payments demand greater communication between hospital systems, physicians and other community health partners to control costs. Many organizations believe this creates a better experience for patients in terms of consistent, timely and efficient care, where readmission rates are lower.

“There's a lot of opportunity for quality improvement across the continuum of care when transitions are made between facilities and our nurses help drive those improvements,” says Chad Evans, vice president of population health at Mount Carmel Health System.

Evans says Mount Carmel has been working for more than five years to create its care networks, which help make sure there's an established standard of care.

For example, the system has brought physicians into nursing homes in their network and hired nurses to meet with patients to help coordinate the care the patient is receiving.

“We've done a lot of work with nursing homes and skilled nursing facilities in our network to improve the care that's being provided to our patients (for patients using bundled systems). We've been able to reduce readmission rates from 21 to 14 percent,” says Evans. Currently, Mount Carmel participates in a number of bundles with CMS, including orthopedic.

Locally, bundled payments with CMS are much more common than with private payers.

The Ohio State University Wexner Medical Center is a designated Center of Excellence for joint and spine services through UnitedHealthcare/Optum, which is reimbursed through a prospective bundle payment.OhioHealth does not participate in any orthopedic bundles, according to a spokesperson.

The Benefit for Payers

Not every process or procedure makes sense for a bundled payment. The best candidates have quantifiable costs, limited variability and reliable outcomes. This is one of the reasons orthopedic procedures are popular for bundling.

Employers, especially large companies, are paying for an increasing number of joint replacements and looking to bundled payments to control costs. In 2013, Wal-Mart launched bundled payments for six specialties, including spine surgery. Lowe's also has bundled payments covering its employees, according to The Advisory Board.

“There are challenges,” says Smith. The information systems that are required to do well are sophisticated and it's important to set up a bundled payment arrangement for a procedure that has a high volume.”

Targeting surgeries that are frequently performed is key to making bundled payments that benefit all parties.

“The bundled payment system makes economic sense and sense from a patient experience,” says Smith.

He also notes that bundled payments aren't restricted to large employers.

“Large or small, we welcome any conversation from a company about bundled payments,” says Smith. “It's exciting and it's interesting. We talk about it anytime we get the chance.”

Bailey Cultice is a freelance writer.