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Bundled Payments Are Moving Upstream

Article · February 26, 2019

By creating a Musculoskeletal Institute and a bundled payment model that focuses on the condition or person level of care, rather than the procedure level, leaders at Dell Medical School at The University of Texas, Austin are finding early success in improving care outcomes while controlling the cost of care for degenerative musculoskeletal disease. Results include double-digit improvement in functional status of the patients at the first follow-up visit, and a decrease of more than 25% in the utilization of elective surgical procedures among the population receiving care.

Development of Bundled Payments

Medicare pioneered bundled payments with the adoption of the diagnosis-related group (DRG) system for hospital inpatient services in 1983. Since then, bundled payments have expanded and evolved from hospitals to incorporate other providers with the goal of improving patient outcomes and lowering costs, through financial incentives to coordinate care and eliminate inefficient services. Passage of the Affordable Care Act gave the Center for Medicare and Medicaid Innovation (CMMI) the ability to pilot additional payment reforms and expand bundled payments over the past 5 years.

CMMI recently announced the voluntary Bundled Payments for Care Improvement – Advanced (BPCI-A) program, which expands DRG-based bundles. A physician- or hospital-based clinical entity can choose to be accountable for a 90-day period involving one of 29 inpatient and three outpatient clinical episodes, such as myocardial infarction and stroke, which have historically been paid through DRGs. The entity is at risk for excess overall Medicare spending, can retain savings relative to a target price, and must also meet benchmarks for quality.

Episode-based bundled payment programs have improved care coordination, optimized operational efficiencies, and reduced total episode costs, all without negatively impacting patient outcomes. However, they have had little impact and may have aggravated one of the major drivers of health care spending in the United States: preventable utilization of health care services for chronic conditions, such as avoidable hospitalizations or elective surgical procedures. For bundled payments to fulfill their promise of delivering greater value to patients, bundling must shift toward the condition or person level rather than the procedure level.

Many of the value-based payment models that have been implemented to address chronic diseases, such as primary care medical homes and accountable care organizations, have aimed to support value-based primary care. But the vast majority of specialists continue to be paid through fee-for-service approaches, now including bundled payments for major procedures and acute events that mostly reflect complications of chronic diseases. As a result, even when specialist providers are engaged in alternative payment models, such as procedure-based bundled payments, the payment system does not support specialist engagement in preventing greater utilization of resource-intensive procedures.

By complementing population-based payments to support primary care, bundling payments at the condition level can promote innovation in specialized care delivery models to manage chronic conditions more efficiently. Multidisciplinary teams of providers who manage chronic conditions such as diabetes, heart disease, and degenerative joint disease have achieved better results than generalists who treat multiple different conditions. Bundling payments at the condition level encourages collaboration across providers, including specialists, to develop care delivery models to achieve better condition-specific health outcomes at the same or lower cost.

Collaborative Approach at UT Austin

An illustrative example involves our collaborative work on reforming care and payment for degenerative joint disease. Dell Medical School at The University of Texas at Austin has created a Musculoskeletal Institute (MSKI) with a multidisciplinary team (Integrated Practice Unit) focused on optimizing outcomes that matter to patients in ways that reduce health care costs over time. The Musculoskeletal Institute has a coordinated team of surgeons, advance practice nurses, physical therapists, nutritionists, behavioral–health trained social workers, pharmacists, and other health professionals.

Many factors must be considered in creating a bundled payment for the management of hip and knee arthritis.

Hip or Knee OA Care Management - Musculoskeletal Institute and Bundled Payment Program at Dell Medical

  Click To Enlarge.

First, an episode trigger must be defined by specifying inclusion and exclusion criteria and the duration of the episode of care. We include patients who are referred to a specialist for the management of hip or knee arthritis, and the duration of the episode is 1 year.

Second, we define the range of services that are included and the complications and comorbidities that are included and excluded.

Third, the bundled payment allows flexibility to shift resources to support a new care model with more developed, better targeted services to reflect patient needs: physical therapy (both on-site and virtual); imaging; professional services (including office visits and surgery); physician administered medications, including injections; behavioral health interventions, including cognitive behavioral therapy; substance abuse counseling, including smoking cessation; weight loss counseling; and pain management, including weaning patients from dependence on opioid pain medications.

We use evidence-based care pathways, standardized treatment processes, and shared decision-making tools to train our staff members to work at the top of their license. We also make liberal use of telehealth, which is both more cost-effective than many in-person office visits, and more convenient for our patients. Many of these services have limited or no reimbursement under existing payment models and procedure-based bundles.

Fourth, the bundle must include measurement of outcomes that matter to patients that can be used to support continuous improvement, including validated measures of pain, functional status, mental health, and overall quality of life.

We are testing and refining this delivery and payment model in our Musculoskeletal Institute. We partnered with our county health district, which had a strong interest in using specialist resources more effectively for their population with degenerative joint disease. The condition-based bundle was priced based on historical specialist claims data for patients referred to a specialist for the management of hip or knee arthritis. The pricing episode was based on 12 months of related services only using claims data for each hip or knee arthritis patient, starting from the first evaluation and management visit by a specialist. Based on this analysis, a baseline spending amount, utilization, and surgical case rates were established. The contract also requires reporting on changes in patient-reported outcome measures. We use handheld electronic devices to measure joint symptom scores (KOOS, JR and HOOS, JR) at baseline and throughout the entire episode of care.

Although the program is only 18 months old, patients in the program have experienced improvement in functional status (21% and 29% improvement in KOOS, JR and HOOS, JR scores, respectively), across surgical and non-surgical management. Furthermore, the utilization of elective surgical procedures decreased by more than 25% when compared with the period prior to the creation of the Musculoskeletal Institute. Importantly, our model has created a financial platform for an integrated set of patient-focused services that are not historically offered to patients with a chronic condition where most costs incurred are related to specialized surgical procedures.

Addressing the Challenges

We and others have identified many challenges in developing bundles for chronic conditions. We have found many payers are not prepared to adapt to this nontraditional type of billing and payment. Patients have also initially been perplexed that they can access different types of services for their condition in one place. But with further experience demonstrating improved outcomes at a lower cost, and further engagement with payers, we expect that condition-based bundled payment models will become a more integral complement to primary care payment reforms to achieve high-value care.

Payers are beginning to take steps to make value-based contracting for patients with specialized chronic care needs more routine. CMMI has requested comments and is developing models for direct provider contracting. Direct provider contracting is one promising avenue to build a specialized condition-based platform, similar to the physician-focused alternative payment model that we have implemented. Given that BPCI-A already includes both hospital and rehabilitation services for joint replacement, the procedure-based bundled payment program could be extended to include preoperative visits, related services, and non-operative treatment modalities for the management of hip and knee OA.

Such a model could support integrated condition-based payment models that not only encourage efficient use of joint replacement, but that also support high-value management of this common and debilitating condition to avoid costly complications and unnecessary procedures. Developing such routine pathways could provide critical momentum for scaling promising care reforms that engage specialists in high-value health care.

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