Bundling Payments

San Antonio Project Seeks Lower Costs, Improved Care

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Medical Economics Feature - July 2009  


Tex Med. 2009;105(7):51-53.  

By  Ken Ortolon
Senior Editor  

Can cheaper health care be better health care? Baptist Health System in San Antonio thinks so, and it's betting some of its potential profits that it can prove it.

The five-hospital Baptist Health System is one of five hospitals or hospital systems around the country the U.S. Centers for Medicare & Medicaid Services (CMS) selected for a demonstration to test the effectiveness of bundling payments for both inpatient hospital and physician services into a single payment. CMS believes bundling payments for all services during an inpatient stay may better align incentives for hospitals and physicians to work together to improve quality and achieve greater efficiency in the care delivered to Medicare beneficiaries.

"What CMS is interested in, obviously, is ways to drive both cost and quality," said Carol Wratten, MD, interim chief medical officer for Baptist Health System. "And it's been shown many times before that places that become more efficient and do things at a lower cost usually have higher quality outcomes."

The project, known as the  Acute Care Episode (ACE) Demonstration , targets payments for orthopedic and cardiology services involving implantable medical devices, such as artificial knees and hips and pacemakers. Participating hospitals must agree to give CMS a discount from the normal Medicare payment for those services. The hospitals hope to finance that discount and actually increase their revenues by meeting a series of quality and efficiency measures, as well as getting medical device vendors to lower their prices on implantable devices in return for greater volume.

While Dr. Wratten says many of the orthopedic surgeons and cardiologists who practice at Baptist hospitals are "enthusiastic" about the project, some San Antonio physicians and the Texas Medical Association have raised ethical questions because it involves gainsharing for both the physician and the patient. Gainsharing refers to an arrangement between a physician and a hospital to share in the cost savings that result from specific actions to improve the efficiency of care delivery.   

Aligning Incentives  

CMS announced the ACE Demonstration in January, and it is expected to run through December 2011. Baptist Health System is the only Texas hospital or hospital system chosen to participate and is the only one that will participate for both orthopedic and cardiology services. Other participants include Oklahoma Heart Hospital in Oklahoma City, Exempla Saint Joseph Hospital in Denver, Hillcrest Medical Center in Tulsa, and Lovelace Health System in Albuquerque. The project was open to hospitals in Texas, Oklahoma, New Mexico, and Colorado. Dr. Wratten says CMS chose Baptist from more than 100 hospitals that applied.

Baptist initially expected to roll out the project in April but at press time was still negotiating with medical device vendors.

The project covers payments for 28 cardiac and nine orthopedic inpatient surgical services and procedures. Officials chose those services because of historically high volume and because quality metrics are available.

CMS will market the hospitals, known as "value-based care centers," to both beneficiaries and referring physicians.

To participate in the project, the hospitals must offer CMS a discount. CMS will return half of that discount to the patient, and Dr. Wratten says that could be as high as $1,200. The hospitals also had to agree to collect data on 22 quality metrics.

Physicians who participate in the project also could see their payments increase. While the hospital has agreed to discount its fee, physicians still will be paid 100 percent of the Medicare allowable and will not have to worry about collecting the 20-percent patient copayments. The hospital will do that.

In addition, if the project is successful, physicians could earn up to an additional 25 percent. Dr. Wratten says the hospital will make those payments monthly if the project shows a profit and if it meets the quality metrics. The consequences of not realizing the profit and quality targets are unclear.   

Reducing Inefficiency  

Baptist created a committee of hospital administrators and physicians to oversee the program and establish the quality metrics needed to qualify for gainsharing. The hospital system also set up working groups in each of the service areas involved that are developing standardized order sets and other quality initiatives that Dr. Wratten hopes will improve care and eliminate unnecessary costs.

"If everybody knows what it is they're supposed to do and you have reduced the unnecessary variation, then the risk of medical error is going to be less and the chance that the patient is not going to get something that is recommended that they should get will be less," she said.

Participating physicians also are working with the hospital system to convince the implantable device vendors to cut their prices. Dr. Wratten says there is tremendous variation in price among vendors even though the devices may be "pretty equal in their efficacy."

The vendors are reluctant to give those discounts but "are coming around" because of potentially higher sales to Baptist.

"We're the only facility in Texas [to participate in the ACE project] and it will be advertised on the CMS Web site that there is a cost savings to the patient," she said. "CMS believes, and we hope, that that will drive volume to our facilities and increase the volume of business that our physicians do. And that will benefit the vendors. So even though they may make a little bit less on individual implants, they will make more down the road." 

Patients vs. Profits  

Dr. Wratten says many of the physicians who practice at Baptist facilities have been very cooperative and enthusiastic about the project.

"We have really good core groups in orthopedics, cardiovascular surgery, and cardiology that are really working with us," she said. "And some of them are excited to put the patient in the middle and to have aligned incentives to do the right thing for the patient."

San Antonio orthopedic surgeon David Fox, MD, is excited about the project on two fronts.

"As an orthopedist, I think it's going to be a great thing for the Baptist hospital system in San Antonio. Medicare is going to market the demonstration, and the hope and belief is it will drive business to San Antonio," said Dr. Fox, who has been active on the ACE Demonstration committees at Baptist. "I think it's exciting that we're going to be on the edge of how I think health care is going to go."

Dr. Fox believes Medicare eventually will steer patients toward centers of excellence that have "a certain amount of expertise," especially in large urban areas such as San Antonio, Houston, and Dallas.

He also sees great value in the project's quality improvement efforts. Total joint replacements are performed in all five of