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Physician Group Practices: Succeeding in Bundled Payments

Article · March 6, 2018

On January 9, 2018, the Centers for Medicare and Medicaid Services (CMS) Center for Medicare and Medicaid Innovation (CMMI) announced that it will be launching a new voluntary bundled payment model called Bundled Payments for Care Improvement Advanced (BPCI Advanced). In rolling out this new bundled payment model, CMS is clearly signaling its continued effort to drive a national shift toward reimbursements that are based on value and not simply on the volume of services provided. BPCI Advanced will begin in October as its predecessor, the Bundled Payment for Care Improvement initiative (BPCI Classic) ends on September 30, 2018. The aims of these voluntary bundled payment initiatives are to maintain or improve the quality of care and to reduce the costs of common Medicare-reimbursed procedures. Physician group practices are succeeding in the current BPCI Classic initiative, and their experience offers valuable insights for bundled payment programs and care redesign approaches initiated by physician groups.

Signature Medical Group, Inc., an independent, multispecialty physician group based in St. Louis, Missouri, is both a BPCI Classic participant physician group practice and a BPCI Classic convener. As a convener, Signature brings together and manages >50 other orthopaedic physician group practices for BPCI Classic Model 2. In BPCI Classic Model 2, participants aim to meet a target price for an entire episode of care, including acute and post-acute services extending up to 90 days after surgery. Each participant is financially at risk for episode costs that exceed the target price. If a participant manages to keep all aggregate costs for the episode below the target price, they receive a payment from CMS for a share of the savings. Participants also must maintain or improve quality outcomes to receive their full savings payment from CMS.

In our experience, physician groups have had strikingly different results in implementing BPCI Classic than hospitals, as presented in the most recent Lewin Group evaluation of the BPCI initiative. The divergent results for these two types of BPCI Classic participants — physician groups and hospitals — demonstrate the important contribution of physician group practices in value-based care initiatives.

Physician Group Practice Success in Bundled Payments

The findings from the latest evaluation of the BPCI Classic initiative from the Lewin Group appear to be inconclusive as to whether CMS’ voluntary bundled payment models are successful. The Lewin Group found that at participating hospitals, lower-extremity joint replacement was the only episode within Model 2 that registered a significant decline in average Medicare payments. Specifically, between October 2013 and September 2015, the average cost of hospital non-fracture episodes declined by $1,105 per case without any discernible difference in quality.

Lewin’s Model 2 study, however, did not include the results from 277 participating physician group practices; it included the results from hospitals only. For Signature as a BPCI Classic participant as well as the >50 physician groups that Signature manages in BPCI Classic, the results are much more promising. Over the 2015 performance period, the physician groups working with Signature achieved average CMS claims-based cost savings of $3,214 for elective lower-extremity joint replacements, or 15% per episode, compared with the 2009–2012 historic baseline period. Substantial reductions in post-acute adverse events were achieved as well, with improved quality outcomes.

As participants gained experience in managing bundles, savings and quality further improved. For the 2016 performance period, for example, average CMS claims-based post-acute costs for elective lower-extremity joint replacements were reduced by $5,381 (37.5%) per episode compared with the 2009–2012 baseline. Adverse outcomes similarly declined across the spectrum of events, ranging from a 23% reduction in acute myocardial infarction within 7 days of surgery to a 72% reduction in pulmonary embolism during the initial acute care stay.

Lessons Learned

We have found four common and strategic elements that drive physician groups to embrace bundled payments: (1) physician engagement, (2) care coordination, (3) data analytics, and (4) patient optimization.

  • Physician Engagement. Signature’s experience demonstrates that physician engagement is essential to the success of bundled payment programs. Engaged physicians motivate the entire care team and the patient, drive care plan improvements, and advance the idea that care coordination across the episode is the goal. Physician engagement and an individualized approach to post-acute care can have a significant impact on the patient’s utilization of available services. For example, many patients who are discharged directly to home following their acute surgical stay are given access to supportive resources to address their individual needs, such as transportation assistance. From our experience and observations, engaged surgeons are also more likely to be invested in coordinating care when they follow patients for a 90-day period following surgical discharge, which can positively impact patient outcomes.
  • Care Coordination Among Providers. In a fragmented health care system, excellent care coordination among providers is a key component of constructing a successful bundled payment program. A properly structured bundled payment program encourages communication and coordination of care among a wide variety of providers. For instance, physician group practices can partner with a preferred network of post-acute care providers who are willing to adhere to physicians’ care plans, to align outcome goals, and to keep lines of communication open. Case managers employed by the physician groups work with surgeons and post-acute care providers to align expectations and care protocols.
  • Data Analytics. Data analytics are another essential element that drives successful bundled payment programs. Change is hard, especially in a health care system that has entrenched protocols and procedures. However, effective use of data analytics can help providers to address this resistance directly and move past it quickly. When data are collected on individual physician performance, colleagues can be compared with one another to encourage healthy competition and to motivate physicians to find ways to improve. Analytics can be used to identify variations in care plans, point out protocols that need improvement, and guide the development of a unique, detailed care redesign strategy for each organization.
  • Patient Optimization. Successful implementation of new models of care such as bundled payments also requires an increased focus on patient optimization by addressing manageable conditions prior to surgery. Orthopaedic surgeons are now connecting patients with resources to manage conditions such as diabetes, smoking, mental health, and related issues, potentially avoiding adverse outcomes after surgery. For example, physician group practices may choose to employ a licensed clinical social worker to address behavioral health issues such as depression or anxiety, which can negatively impact surgical outcomes if not appropriately managed.

Policy Considerations for Future Physician-Led Bundles

The newly unveiled BPCI Advanced program recognizes and hopes to build on the successes of the current BPCI initiative in moving reimbursement away from the historic fee-for-service model. Physician group practices should carefully evaluate their opportunities in this new program and understand some of the key differences between BPCI Advanced and BPCI Classic. For example, CMS’ designation of BPCI Advanced as an Advanced Alternative Payment Model will allow participating physicians to qualify for a 5% Medicare incentive payment and a reduced reporting burden under the Merit-Based Incentive Payment System (MIPS). In BPCI Classic, CMS currently applies a 2% discount to the target price, whereas in BPCI Advanced, CMS initially will apply a 3% discount. Also, the timing of payment reconciliation — when CMS compares aggregate episode expenditures against the participant’s target price and either pays the participant for cost savings or collects repayment for costs over the target price — is different between the two programs. In BPCI Classic, payments are reconciled quarterly, whereas in BPCI Advanced, they will be semiannual.

Although the physician group results discussed above are not comparable to the hospital results in all aspects, we contend that physician groups can provide integrated, coordinated care as effectively as, or perhaps more effectively than, large hospital and health care systems. We also believe the physician group results were achieved because of the structure of BPCI. Specifically, it aligned incentives to garner physician participation; empowered physicians to manage care throughout a 90-day episode; encouraged physician collaboration and the sharing of best practices; and, through CMS-issued waivers of certain fraud and abuse laws, reduced critical regulatory barriers that otherwise would have impeded the effective coordination of care among many different providers. The resulting improvement in the quality, efficiency, and effectiveness of patient care reduces care fragmentation and overutilization, which in turn drives improved outcomes and reduced costs.

Based on Signature’s experience, we believe that bundled payment models should take into consideration several concepts:

  • Physician groups can collaborate to deliver coordinated, integrated health care as well as large health care systems can.
  • When a bundled payment model is structured correctly and incentives are aligned properly, physicians will engage voluntarily.
  • Episodes of care should be physician-led, with the quality rating component tied to an entire episode of care as well as to the operating physician (who, in the case of joint replacements, is the appropriate manager of all care delivered in an episode).
  • Reconciliation in a bundled payment model should occur on at least a quarterly basis, as less frequent (e.g., annual) reconciliations will make it difficult for physicians to gauge their group’s true performance and cost management relative to their target price.

Moving Toward a Sustainable Physician-Led Model

The current BPCI Classic initiative has given back control of medical decision-making to the physician in the physician group practice, to the benefit of the Medicare beneficiaries and the Medicare trust fund. Physician groups have undertaken significant additional investments and have made changes to antiquated standards of care while making excellent progress in leading successful new models of care. Physicians have opportunities to continue driving health care transformation through BPCI Advanced and commercial bundle opportunities. However, for sustainable health care transformation, policymakers should empower physician participation and encourage physician leadership in valued-based care models. Signature believes that physician group participation is essential to the sustainability of progressive health care initiatives, such as bundled payments, as physicians have demonstrated that they can contribute and commit to meaningful change that truly transforms health care delivery.


Disclaimer: The statements contained in this article are solely those of Signature Medical Group, Inc., and do not necessarily reflect the views or policies of the Centers for Medicare and Medicaid Services. Signature Medical Group assumes responsibility for the accuracy and completeness of the information contained in this article.

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