1Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
Bundled Episode Payment and Gainsharing Demonstration
TEchnical WhiTE PaPEr
Weslie Kary, MPP, MPhSeptember 2013
2Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
contents
introduction 3Design Principles 4Demonstration Governance 5contracting approach 6Episode Selection 7Use of Data 8Episode Definition Process 9
Total Knee Arthroplasty 10Total Hip Arthroplasty 13Unicompartmental Knee Arthroplasty (partial knee) 14Knee Arthroscopy with Meniscectomy 14Diagnostic Cardiac Catheterizations and Angioplasty 14Maternity, Hysterectomy and Cervical Spine Fusion 15
administrative issues and Their resolution 16Health Plan Issues 16The Hospital Perspective 17The Path to Auto-Adjudication 18
Other Issues 19Retrospective vs. Prospective Payment 19Risk and Stop Loss 21Gainsharing 21State Regulatory Concerns 21Corporate Practice of Medicine Prohibition 22Population Size 23
closing Thoughts 24
ThisprojectwassupportedbygrantnumberR18HS020098fromtheAgencyforHealthcareResearchandQuality.Thecontentissolelythe
responsibilityoftheauthorsanddoesnotnecessarilyrepresenttheofficialviewsoftheAgencyforHealthcareResearchandQuality.
©2013IntegratedHealthcareAssociation.Allrightsreserved.
3Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
TheIntegratedHealthcareAssociation’s(IHA)BundledEpisodePaymentandGainsharingDemon-stration(“BEPGD”or“thedemonstration”)evolvedfromworkthatIHAhadpreviouslycompletedwithanumberofCaliforniahospitalstocreatebenchmarkreportsaroundpricespaidforhigh-costmedicaldevices,includingorthopaedicandcardiacimplants.FundedbytheBlueShieldofCaliforniaFoundation(BSCF),thisprojectoriginallyincludedacomponentinwhichIHAandparticipatinghospi-talswouldmodelepisode-basedbillingandreim-bursementstructuresforproceduresinvolvingtheuseofthesedevices.
WhileIHAwascompletingitsmedicaldeviceproject,theCentersforMedicare&MedicaidServices(CMS)launcheditsAcuteCareEpisode(ACE)demon-stration,focusingonorthopedicandcardiacepisodes.LookingtotheearlysuccessesinmanagingdevicepricesreportedbyACEparticipants,thehospitalsparticipatinginIHA’smedicaldeviceprojectindi-catedtheywouldrathertestepisodepaymentthanmodelreimbursementstructures.
Duringthissameperiod,GeisingerHealthPlanwaspublishingtheresultsofitsProvenCaremodel,showingimprovementsinbothqualityoutcomesandefficiencythatgreatlyintriguedIHA’smemberorganizations.ThePRoMETHEuSPayment®demonstrationwasalsounderway,andFrancoisdeBrantes,leaderofthatdem-onstration,hadpresentedthePRoMETHEuSmodel
individuallytoseveralIHAmembersaswellasatagatheringofthefullIHABoard.
TheinterestsparkedacrossIHA’smembershipandCaliforniahospitalsbytheseevents,accompaniedbythreeextantmodels(ACE,GeisingerandPRoMETHEuSPayment)fromwhichtodrawdesir-abledesignfeatures,createdstrongsupportforIHAtolaunchabundledpaymentinitiative.Inresponse,IHAcraftedaproof-of-conceptepisodepaymentpilotsupportedbytheoriginalBSCFgrantandsupplemen-talfundingprovidedbytheCaliforniaHealthCareFoundation.ThefundingprovidedbytheAgencyforHealthcareResearchandQuality(AHRQ)allowedtheexpansionofthisoriginalproof-of-conceptpilotoverthreeyearsintothemuchmoreambitiousBEPGD.WhileavailablefundingandscopeweregreatlyexpandedfortheBEPGD,fromtheperspectiveofIHAanddemonstrationparticipants,theprojectwasacontinuousevolutionfromtheearlyworkwithdevicesthroughthecompletionoftheBEPGD.Manyofthekeydecisionsandapproachestodesignandimple-mentationthatwereappliedduringBEPGDwereactuallydevelopedduringtheinitialpilotstage.
Thiswhitepaperdescribestheissuesanddeci-sionsthataroseoverthecourseofallofIHA’sworktohelphealthplansandprovidersinterestedinpursuingepisodebundledpaymentnavigatethemyriadoftechnicalchallengesanddetailsinvolvedinitsimplementation.
introduction
In September 2010, IHA was awarded a 3-year, $2.9 million grant from the Agency for Health Research and Quality (AHRQ) to implement a bundled payment strategy in California. The project, titled Bundled Episode Payment and Gainsharing Demonstration, aimed to test the feasibility and scalability of bundling payments to hospitals, surgeons, consulting physicians and ancillary providers in the california delivery system and regulatory environment. issue briefs, practical tools such as episode definitions and contract language, and other resources are available at www.iha.org.
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Design Principles
SeveralkeyprincipleswereestablishedinearlydesigndiscussionsandmaintainedthroughouttheBEPGD.Theseincluded:1.Exclusive focus on procedural episodes.IHA
participantsagreedtofocusexclusivelyonproce-duralepisodesvs.contemplatingepisodepaymenttoreimbursethecareofpatientswithchronicdiseases.IHAmembershavesignificantexperiencewithcapitation,andpreferredthatapproachoverepisodepaymentforprimarycare;thedemonstra-tionwasdesignedtotestepisodepaymentasamechanismtoalignincentivesbetweenspecialistphysiciansandhospitals.
2.Common framework.Allpartiesagreedthatthedemonstrationwouldestablishcommonepisodedefinitionsthatwouldnotbemodifiedbyindividualnegotiations.Thegroupsoughttoestablishcom-monadministrativeparametersandprocesses,sothataproviderimplementingepisodepaymentundermultiplehealthplancontractswouldfacethesameadministrativerequirementsforeachplan.Thethirdcomponentofthecommonframeworkwasthecalculationofhistoricalepisodecostsusingcommonreportspecificationsacrosshealthplans.
3.Risk-based contracts.Anotherprinciplewasthatproviderswouldacceptriskfortheepisodeasdefinedandkeepanyefficiencysavingstheywereabletogenerate—inotherwords,theepisodepaymentwasafixedcaserateratherthanasharedsavingsarrangement.
4.Application of warranty provisions. Allpartici-pantswereinterestedintestingwhetherthetypeof“warranty”thatGeisingerhadpioneeredintheirProvenCaremodelcouldworkinanon-integratedenvironment.Forhealthplans,includingthewarrantywasanon-negotiableconditionoftheirparticipationbutproviderswereequallyinterestedintryingthewarrantyconceptasawaytodemon-
stratebothaccountabilityanddifferentialvalueinthecommercialmarketplace.
5.Any willing participant.AnyorganizationinCaliforniawhichexpressedinterestwasinvitedtojointheIHAdemonstration.Theactualimple-mentationofbundledpaymentwaspredicatedonexecutedcontractsbetweenprovidersandhealthplans,withallparticipantsretainingthefreedomtochoosewithwhomtheywouldultimatelycon-tract.Thecontractsdidnotapplyspecificallytothedemonstration;rather,theywereexpectedtobeamendmentstoexistingcontractsbetweenhealthplanandproviders,spellingoutspecialprovisionsforthebundledpaymentinthesamewaythatthetwopartiesmightnegotiateatransplantcaserate.
6.Automated billing and claim auto-adjudication.Althoughallpartiesrecognizedthatspecialhan-dlingforbillingandclaimprocessingwouldberequiredinitially,bothhealthplansandproviderswereexplicitlylookingtodevelopdefinitionsandadministrativeparametersthatcouldultimatelyallowautomaticbillingbyprovidersandauto-adjudicationbyhealthplans.
IHAimposedtwoadditionaldesignrequirementsonthedemonstration:1.No price discussions or transparent price data.
Indeferencetoanti-trustconsiderations,therecouldbenodiscussionsofpriceoranyaspectofpricedur-inggroupdiscussions.Additionally,althoughIHAestablishedacommondataframeworktocalculatehistoricalepisodeprice,thehealthplansprovidedtheactualreportsdirectlytoeachproviderwithoutsharingthisinformationwithIHA.
2.Continuing availability of service level data.Allproviderswererequiredtoprovidecompletefee-for-service(FFS)billingtothehealthplansduringtheepisodefor“nopay”claimprocessing,
5Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
evenforservicesthatwereprovidedduringthewarrantyperiodandaftertheepisodepaymenthadbeenmade.Thisrequirementwasdesignedto
ensurethatvitaladministrativedataaboutactualservicesrenderedtopatientswerenotlostduetothechangeinbillingstructure.
Demonstration Governance
Theinitialgovernancestructureforthedemonstra-tionincludedthreecommittees:aclinicalcommitteechargedwithepisodedefinitionandqualitymeasure-ment;acontractingandadministrationcommitteechargedwithdevelopingboththecontractingmodelandadministrativeinfrastructureforepisodepayment;andadata/reportingcommitteethatwasintendedtoestablishthedataarchitectureandreportingformats.Decisionsweremadebyconsensus,withIHAmakingthefinaldecisiononissuesthatcouldnotbesolvedviatheconsensusprocess.
Theinitialstructureprovedabitunwieldy,requiringthatallparticipantssendrepresentativestothreecommitteemeetings.Theproviderrepre-sentativesonthecontractingandadministrationgroup,whotypicallyworkedwithinthehospital’smanagedcareandfinancedepartments,wishedtoexertmorecontroloverepisodedefinitionsthatwouldultimatelydeterminethefinancialriskas-sumedbythehospitalthroughthecontractingpro-cess.IHAalsostruggledwiththeroleofthetechni-calcommittee.overtimeitprovedmoreeffectiveforthecontractingandadministrativegroup(whichrepresentedtheendusers)toapprove
reportformatsandfortheprojectdataconsultant(optum,formerlyIngenixConsulting)toworkindividuallywiththehealthplandatarepresenta-tivesonhowtorunthereportswithineachplan’sdatainfrastructure.
ThestartoftheBEPGDalsomarkedthestartofarevampedgovernancestructure.Thenewstructurecomprisedatechnicalcommitteewithclinical,contractinganddatarepresentativesworkinginconcertonthenewepisodedefinitions,andasteer-ingcommitteechargedwithprovidingfinalreviewandapprovalofthedefinitionsandstrategicover-sightofthedemonstration.
IHAalsoaddedrepresentativesfromtwomajorclaimsoftwarevendorcompanies,McKessonandTriZetto,toboththetechnicalandsteeringcommit-tees.Theseorganizationswereactivelydevelopingclaimadministrationsoftwareforbundledpayment,andtheirrepresentativesaddedvaluableideasabouthowtostructurethedefinitionstofacilitateauto-adjudication.Additionally,bothfirmsbuilttheIHAepisodedefinitionspecificationsintotheirbetaver-sionsofbundledpaymentclaimsoftware,providinganimportanttestofadministrativefeasibility.
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contracting approach
Goingintothedemonstration,IHAestablishedaprinciplethattheactualimplementationofbundledpaymentwouldbegovernedbyindividualPPocon-tractsbetweentheparticipatinghealthplansandtheparticipatingproviders.Negotiationofallprovisionswithinthosecontractswouldbeconfidentialtothenegotiatingpartiesandthepartieswerefreetomodifyanyprovisionestablishedbythedemonstrationgroupexcepttheepisodedefinition.
IHAdidnotattempttostandardizethecontract-ingstructurebutanticipatedparticipantswoulduseastructuresimilartotheoneshowninFigure1.Inthisstructure,thereisonecontractbetweenthehealthplanandthegeneralcontractororganization(or“bundler,”typicallyahospital)andasetofcon-tractswithsimilarprovisionsbetweenthegeneralcontractorandsubcontractorsforthebundle,typi-callyphysiciangroups.ThecontractbetweenthehealthplanandthegeneralcontractorwasassumedtobeanamendmenttoanexistingPPoagreement;thecontractbetweenthegeneralcontractorandsubcontractorwouldbeanewstand-alonecontractspecifictothedemonstration.
Participantswerefreetocontractselectively;therewasnorequirementthateveryparticipatinghealthplanhadtocontractwitheachproviderorviceversa,althoughallparticipantswereaskedtocommittonegotiatingingoodfaithtowardsexecut-edagreements.Similarly,thebundlercouldcontractselectivelywithsubcontractors—forexample,con-tractingonlywithsurgeonswhoperformedmorethan200jointreplacementsannually.Eachhealthplanrequiredthateverysubcontractingphysicianalreadyhaveacontractasapreferredproviderwith-inthehealthplannetwork,reasoningthatitcouldnotcommunicatetomembersthataphysicianwaspreferredforaparticularepisodebutnotforotherprocedures.Thisselectivecontractingfurtherexacerbatedvolumeissuesforthedemonstrationbylimitingthenumberofparticipatingsurgeons;however,bothhealthplansandhospitalswereinfavoroftheapproachasamechanismtoensurethequalityofservicesprovidedtomembersunderthedemonstration.
Whileallparticipantswereconceptuallyinfavorofthecontractingstructure,allnotedthatobtaining
health plan
hospital
Optional rehab package services
Surgeon group/ iPa foundation
Other MDs, PT
new contract new contract
new contract
Figure 1 CoNtRACtiNg modEl—hospitAl As lEAd
PPO contract amendment
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theinternallegalresourcestodraftthecontractswasasignificantobstacle.IHAusedgrantfundstohelpaddressthisissue.WhileneitherIHAnoritsretainedcounsel,DavisWrightTremaineLLP(DWT),couldprovidelegaladvicetoparticipants,IHAaskedDWTtocreatecontracttemplatesthatmighthelpparticipantsacceleratetheirinternalprocessesaroundlegalissues.IHAalsoengagedDWTtopresenttheanticipatedcontractingstructureina
conferencecall,andtheinternalcounselofeachparticipatingprovidergroupwasabletoaskDWTquestionsaboutboththecontractsandunderlyinglegalissuesofimplementingepisodepaymentinCalifornia.
TheparticipatinghealthplanseachdevelopedtheirindividualversionsofaPPocontractamend-ment,butallnotedthesamplecontractswereasignificanthelpinacceleratingthisprocess.
Episode Selection
IHA’sclinicalworkgroup,andlaterthetechnicalcommittee,wasgivenauthoritytoapprovetheselec-tionofproceduresforinclusioninthepilot.Theworkgroupassessedpotentialproceduresagainstfourprimarycriteria:1. impact.Istheresufficientvolumeintarget
populations?Whatisthetotalspendontheseprocedures?
2. Quality improvement potential.Istherevaria-tioninprocedureexecutiondespiteconsensusoncarepathwaysandappropriatenesscriteria?
3. Efficiency improvement potential.Istheresig-nificantcostvariationthatisnotrelatedtonegoti-atedreimbursementlevels?Whatisthepotentialforsavings?
4. participant engagement.Howlargeistheserviceline?Howmotivatedandengagedarethephysi-cians,hospitals,andhealthplansthatwouldbecontractingfortheepisode?
Thegroupintentionallydidnotassignweightstothesecriteria.Procedureswerechosenbyaconsensusprocess.Therewasunanimoussupportforbeginningwithkneeandhipreplacements,giventhecostvaria-tionthatIHAhaddocumentedinitspreviousworkonimplantcostsandtheearlysuccessesofACEdemon-strationhospitalswithorthopaedicprocedures.once
theissueswithsmallsamplesizeincommercialpopu-lationsforthesetwoproceduresbecameapparent,thecommitteebegantorelymoreheavilyonnationaldatasuppliedbyoptumthatrankedproceduresbasedonvolume,standardizedcostandvariation.Impact(volume)wastheprimarycriterionforselectionofthecardiaccatheterizationandstentingprocedures.
Althoughprocedureandselectiondecisionsbecamemoredatadrivenovertime,practicalconsiderationscontinuedtoplayaroleaswell.Forexample,cholecystectomyrankedhighlyonvolumeandvariation,butonehealthplanvetoedthisproce-durebasedontheperceptionthattheprocedurewasactuallyhighlystandardized,withvariationarisingonlyfromoutlierproviderswhowouldlikelynotbeparticipatinginthedemonstration.Healthplanswereoriginallyveryinterestedinbundlingcoronaryarterybypassgraft(CABGs)procedures,whichrankedhighlyonvolumeandcostbasedonnationaldata.Participatinghospitalsindicated,however,thatthevolumeoftheseproceduresintheirfacilities(andinCaliforniaingeneral)wastoolowtowarranttheeffortofimplementingbundledpayment.otherfactorsalsoplayedaroleinepisodeselection.Forexample,IHAchosekneemenisectomyspecificallytoexpandthedemonstrationintotheout-patientprocedurerealm.
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Use of Data
IHAmadeanearlydecisionnottoattempttoaggre-gatedataacrosshealthplansgiventhepotentialdelaysadataaggregationeffortwaslikelytoinduce.Also,IHAcouldnotvieworaggregateactualcostorpricedatagivenbothanti-trustandproviderconfidentialityconcerns.Toaddresstheneedtocalculatehistoricalepisodecosts,IHAchosetodevelopcommonreportspecificationsandcodethateachparticipatinghealthplancouldrunagainsttheirowndatatoproduceandsharehistoricalepisodecostdatawitheachoftheparticipatingproviders.
IHAthencontractedwithoptumtodevelopspecificationsandcodetogeneratethepayerreports.optumalsosupportedepisodedefinitiondevelop-ment,andtranslatedclinicalspecificationsintocode-baseddefinitionsthatcouldbeusedbothasthebasisoftheplannedhealthplanreportsandforclaimsadministration.Additionally,optumagreedtomakeinformationfromitsnationaldatabaseontheunder-age65commercialpopulationavailabletotheproject.
optum’snationaldatabaseprovedenormouslyhelpfultotheprojectbecausetheneteffectofthedecisionnottoaggregatedataacrossplanswastoleaveIHAotherwisewithoutanydataintheearlystagesofthedemonstrationproject.ultimately,IHAdrewonoptum’snationaldatatosupporteveryas-pectofepisodeselectionanddefinition.Thesedatafedreportsthatrankedproceduresbyvolumeandstandardizedcosts,answereddefinitionalquestionssuchasthefrequencyofuseofspecificprocedurecodeswithinacodefamily,andwereusedtoestimatetheportionofchargescapturedbytheIHAdefini-tionsandthe“value”ofspecificexclusionsbuiltintothedefinition.
IHAexperienceddecidedlymixedresultswithitsapproachofsupplyingthehealthplanswithcodetorunstandardizedreportsforeachprovidergroupparticipatinginthedemonstration.
1. onehealthplansucceededinrunningallthereportsandproducedoutputforeachparticipatinghospital.AsIHAhadhoped,thisplanalsodecon-structedthecodeandrepurposedittorunthereportsforotherregionsandtosupportnegotia-tionswithkeyhospitalsoutsideofCalifornia.
2. onehealthplanhadgreatdifficultyrunningthereports.Althoughtheyultimatelysucceededwithreportsfortheorthopaedicprocedures,theyfoundtheresourcerequirementsonerousandwereextremelyreluctanttocommittorunningreportsforanynewprocedures.
3. onehealthplanaskedforanearlyversionofthecode,testeditagainstaninternaldatabase,con-cludedthatprocedurevolumewasinsufficienttojustifytheeffortofparticipationinthedemonstra-tionandwithdrew.IHAwasunabletoconfirmordenythevalidityoftheiranalysissinceithadnolineofsightintothewaythereportswereused.
4. onehealthplanneversucceededinsecuringtheinternaldataresourcesneededtorunthereports.
EventhehealthplanthathadthemostsuccesswiththereportslatertoldIHAthattheapproachwascumbersome.Theirusualprocesswastodevelopdatatosupportcontractingwithintheregionalcontract-ingteam;butforthedemonstration,IHAworkedwiththeirnationaldataorganizations.Asplanned,thenationalteamsentthereportstotheregionalman-agedcarenegotiators,buttheserepresentativeswereill-equippedtointerpretthereportsandthereforereluctanttosharethemwiththeircounterpartsontheprovidercontractingsideofthetable.Whentheyturnedtotheirusualchannelswithquestions—theirregionaldataexperts—thatgroupstruggledtoassistbecausetheyhadnotbeeninvolvedearlyonwiththecodedevelopment.
Inaddition,thelackofvolumewhencommer-cialproceduresweresplitbyhealthplanandby
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hospital,madereportresultsunreliableformostparticipants.Quiteafewparticipatinghospitalshadnovolumeatallwiththetwohealthplansthatwereultimatelyabletoproducereports.
Thestrugglestoprovidedatatothenegotiatingteamsnegativelyimpactedprojectmomentum,addingmonthsofdelaybetweenthecompletionofthefirstepisodedefinitionsandtheexchangeofinitialdatabetweentheplansandtheparticipatingproviders.Then,healthplanreluctancetocommittoproducingdatafornewepisodesprovedasignificantobstacletomovingnewepisodesintoanimplementationstage.
Twopositiveoutcomesoftheapproachwere:1. optumranthereportsagainsttheirnationaldata
base,whichlettheparticipantslookattheresultsofthedefinitionalworkagainstareliablylargenumberofepisodes,somethingnosinglepayerinCaliforniacoulddobecauseindividuallytheylackedasufficientvolumeofepisodes.
2. TheWisconsinPaymentReformInitiative,whichhadelectedtoadoptlargepartsofIHA’skneereplacementdefinition,wasabletorunthereportsagainsttheirall-payerstatedatabase,quicklyproducinginformationacrossallprovidersinWis-consintojump-starttheirownbundledpaymentdemonstrationproject.
AfinalkeyissuearounddataisthatthereportingstructuredevelopedforBEPGDwastiedtodetailedclaimleveldata,whereasprospectivepaymentforbundlesdiscouragesthereliablecodingandsubmis-sionofindividualservicebillsgoingforward.Thedemonstrationwasnotabletotestwhetherpartici-pantcommitmenttoprovidingFFSclaimswithinthebundledpaymentdemonstrationwouldbesufficienttoretaindetailedserviceleveldataovertimeorwhetheraseparateencounter-basedreportingsystemwouldberequiredatsomefuturedate.
Episode Definition Process
onceBEPGDparticipantshadagreedonaspecificprocedure,IHAengagedaclinicalconsultantandaskedoptumtodevelopapreliminaryepisodedefini-tion.optumandtheclinicalconsultanthelpedwithpatientselectioncriteria,identifiedtypicalclinicalriskassessmentstrategiesforthepatientpopulation,andidentifiedcodingscenariosthatwouldaccompanycommoncomplications.Thispreliminarydefinitionwasthenpresentedtothetechnicalcommitteeandtheconsensusprocessbegan.Boththeclinicalconsultantandoptumactivelyparticipatedincommitteemeet-ingstoanswerparticipantquestions.
Severalbackgrounddecisionsandextraneousfactorsinfluencedthesediscussionsandtheepisodedefinitionprocess:1. Common definition.Allparticipantsinthedem-
onstrationagreedtoincludetheepisodedefini-tion—withoutmodification—intheindividualcontractsgoverningimplementation.Whileall
otherepisodeprovisionscouldbenegotiatedbe-tweenthecontractingparties,thefactthatthedefi-nitioncouldnotbechangedmadeittheprimarydriveroftheamountandtypeofriskthatwouldbetransferredtoprovidersthatimplementedepisodepayment.
2. No risk adjustment.IHAmadeanearlydecisionnottoadoptorattempttodeveloparisk-adjust-mentmethodologyfortheepisodesandinsteadtoattempttolimitthedemonstrationpopulationtofairlylowriskpatients.Theintentwastoselectthepatientsforwhomanycomplicationsoccurringduringthewarrantyperiodmightbereasonablyassumedtobewithinthecontrolofthetreatingphysicianorhospital.WhileIHAoriginallybasedthisdecisionontiming—comingtoagreementonariskadjustmentmethodologywaslikelytoaddmanymonthstothedefinitionprocess—italsobecameapparentovertimethatexistingrisk
10Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
adjustmentmethodologiesaremuchbettersuitedtoretrospectiveepisodeanalysisandretrospectivepaymentadjustmentsthantoreal-timepatientidentificationandprospectivebundledpayment.Theproblemisthatriskadjustmenttypicallyreliesoncomplexalgorithmsappliedtodetailedandrelativelylong-termaccumulationsofclaimhis-torythatarenotavailableinreal-timetoeithertheproviderortheclaimprocessor.
3. Weigh administrative complexity.Most—thoughnotall—membersofthegroupexplicitlywishedtobalanceadministrativecomplexitywithepisodecomprehensiveness.Thegrouptypicallydecidednottoincludeservicesorcomplicationsthatmarginallyincreasedthecomprehensivenessoftheepisodewhilesimultaneouslyincreasingadminis-trativeburden.Adiscussionaroundextendingtheepisodeperiodtocapturelatesurgicalinfectionsillustratesthisconcept.IHA’sclinicalconsultantadvisedthatanysurgicalsiteinfectionwithintwelvemonthsoftheprocedureisdeemedtobecausedbytheoriginalprocedure.Also,alargepercentageofinfectionsarenotfounduntilmorethansixmonthsfollowingtheoriginalprocedure.Thegroupelectedtomaintaina90-daywarrantyperiod,however,becausethelongerthewarrantyperiod,themoredifficultitbecomestoprocessepisodepayments.Addingfurtherweighttothisdecision,optumdatashowedthatasmanyastenpercentofpatientschangedinsurancecoverageduringa90-dayepisodeperiod,thereforealongerepisodeperiodseemedlikelytoleadtomorepatientsbeingdroppedfromtheepisodepaymentdemonstration.
4. plan for auto-adjudication.Thegroupalwayslookedtoidentifydefinitionaltermsthatwouldallowforeventualauto-adjudication.usingpatientselectioncriteriathatwouldprovidebothprovid-ersandhealthplanstheabilitytoprospec-tivelyidentifypatientsiscriticaltothisgoal.Inprospectivepaymentsituations,thebundler
cansetupnotesinthebillingsystemandnotifysurgeonsandotherproviderstobillthebundlerratherthanthehealthplan,andalsotocollectpatientcoinsurancebasedonthebundledrate.Thehealthplancansetupanotificationinitssystemsnottopayindividualclaims,therebyminimizingretrospectiveclaimadjustments.
Whileeachoftheabovedecisionsaffectedthedevelopmentofallepisodes,mostotherdecisionsweremadewithinthecontextofaspecificdefini-tion.Eachdefinitionrepresentedafreshstartinwhichallpreviousepisode-specificdecisionswererethoughtandbecameprecedent-settingonlyiftheyhadcontinuingapplicability.Also,whilesomedefinitionalapproachesthatweredevelopedlaterinthedemonstrationcouldhaveimprovedearlierepi-sodedefinitions,IHAdidnotreopentheconsensusprocessonepisodesthathadbeenapprovedasfinaltocapturelaterenhancements.
totAl KNEE ARthRoplAsty
onereasonIHAselectedtotalkneearthroplastyforitsfirstprocedurewasthatseveralotherinitiativeshadalreadydevelopedadefinitionfortheprocedure,includingtheMinnesotaDepartmentofHealth’s
An important lesson learned:
Participants were not able to make nearly as much use of the definitions from existing grouper soft-ware and other bundled payment demonstrations as had been anticipated because those approaches almost universally relied on coding unavailable at the time of procedure or claim. That is, episode definitions that had been designed for retrospective payment could only be assigned retrospectively. Once participants determined that prospective payment required a prospective view of patient identification, analyzing previous definitions was eliminated as a step in the definition development process.
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BasketsofCareinitiative1,GeisingerHealthPlan,theACEdemonstrationandPRoMETHEuSPayment.Nonetheless,thisfirstdefinitiontookalmostninemonthstocompletewhilethegroupbuiltconsensusaroundmanyofthetoughestdefinitionalissuesforthedemonstration.
ImportantdebatesanddecisionsmadewithrespecttotheTotalKneeArthroplastydefinitionincluded:1. only include patients with an American society
of Anesthesiologists (AsA) score <3.Foreachdefinition,IHAlookedforclinicalindicatorsthatwouldallowprospectiveidentificationofapopula-tionofrelativelylow-riskpatients.IHAparticu-larlywantedtofindindicatorsthatwouldworkforboththeprovidersandinclaimadjudication.ASAratingisanimperfectindicator,butwastheindica-torthedemonstrationparticipantsdeterminedtobethebestwaytoidentifyin-patientkneereplace-ments.DemonstrationparticipantstoldIHAthattheindicatorisimperfectbecausetheASAassign-mentismadebytheprofessionaljudgmentoftheanesthesiologistjustbeforetheprocedureoccurs.Thus,althoughtheassignmentsarebasedonclini-calguidelines,inpracticetheycanvarybyanes-thesiologistandfurthermorearenotmadeearlyenoughtobepartofthepre-authorizationprocesswhenschedulingthesurgery.However,theprovid-ersagreedthattheycouldmakefairlyreasonableassumptionsatthepointofpre-authorizationaboutwhichpatientswouldberatedASA1or2bytheanesthesiologists.
ThesecondproblemwithASAratingisthatitisnotontheclaimandthereforenotavailabletothehealthplanforauto-adjudicationorforretro-spectivecostanalysis.However,thehealthplansagreedthatapre-authorizationdecisionbasedonapresumedASAratingcouldworktoidentifythepatientsintheclaimsystems.Additionally,participantsagreedthataretrospectiveassign-mentofAPR-DRGSeverityofIllness(SoI)of2
orlesswasanadequateapproximationofanASAratingof2orless.However,thedecisiontouseAPR-DRGSoIlevelfortheretrospectivelookatepisodecostswasnotwithoutitsownproblems.WhileallparticipatinghealthplansassignanAPR-DRGwithSoIatsomepointintheirdatasystems,somehealthplansmaketheassignmentinseparateanalysissystems.TheneedtolinkdatasystemstoobtaintheAPR-DRGSoIwasoneofthereasonssomehealthplanshaddifficultyrun-ningthereportpackage.
2.include only patients with Body mass index
(Bmi) <40.Manypracticingorthopaedicsur-geonsbelievethatobesepatientsaremorepronetocomplicationsfromjointreplacementsurgery.AlthoughtheteamdevelopingMinnesota’sBas-ketsofCaredefinitionforkneereplacementfoundnosolidevidencetosupportthistheoryintheliterature,theystillelectedtolimitpatienteligibil-itytothosewithaBMI<35toaddresssurgeons’concerns.oneofthekeysurgeonsatahospitalparticipatingintheIHAdemonstrationhadsuchstrongviewsonthistopicthatheaskedtoaddressameetingoftheclinicalcommitteetomakehisargumentforapplyingalowBMIthreshold(e.g.32).IHA’sclinicalconsultantopposedthethresh-old,arguingthatitwouldseriouslylimitthenumberofpatientsincludedinthedemonstration.ParticipantsalsoconcludedthattheycouldnotaccuratelypricealowthresholdusinghistoricalclaimdatasinceBMIhasnotbeenreliablycodedinclaimhistory.overcontinuingprotestbytheparticipatingsurgeonandhisfacility,theBMIthresholdwassetat40(morbidlyobese).
3. Exclude pre-procedure services from the ppo
definition.Thisdecisionwasprimarilyadminis-trative.Sincethetriggerfortheepisodewastheadmissionfortheprocedure,itwasassumedthattheserviceproviderswouldbillthehealthplansdirectlyforpre-procedureservices.Thesebillswouldhavealreadybeenprocessedbythetimethe
1.http://www.health.state.mn.us/healthreform/baskets/TotalKnee090622_FinalReport.pdf
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claimforthewholebundlewassubmitted.Includ-ingtheseservicesthereforewouldhavemeantthathealthplanswouldneedtoidentifyandreprocessthepre-procedureserviceclaimsasno-payclaims,andthenthehospitalwouldhavetore-paytheclaimsoutoftheepisodepayment.
4. Exclude post-acute facilities and rehabilitation
services from the standard episode definition
for knee and hip replacement. Participatinghospitalswerereluctanttotakeonthesignificanteffortofnegotiatingnewcontractswithpost-acuteproviderstoprovidepost-acuteinpatientandtherapyserviceswithinthebundleforpurposesofasmalldemonstrationproject.WithinthePPoenvironment,participatinghospitalswouldnotbeallowedtoinsistthatpatientsseeonlytheircontractedpost-acuteandphysicaltherapistpro-viders.Inaddition,severaloftheparticipatinghospitalshadasignificantpopulationofkneereplacementpatientscomingfromoutsidetheimmediatelocalservicearea.Theyarguedthatpatientswouldwanttoreceivepost-acuteandrehabservicesclosetohomeratherthanclosetothehospital.Insum,theywereunwillingtoas-sumetheriskforservicestheydidnotfeeltheyhadthemechanismstomanage.
usingoptumdata,IHAconfirmedthatinpa-tientpost-acuteservicesareprovidedtoonlyasmallpercentageofcommercialkneereplacementpatients,thereforeexclusionoftheseserviceswasnotamajorissueforthehealthplans.Excludinghomehealthandphysicaltherapyserviceswasamajorpointofcontention.Thecompromiseposi-tionofofferingtheseservicesasaseparateoption-alpackageforthePPodefinitionpleasedalmostnoone.HoagMemorialHospitalPresbyterian(hereaf-ter“HoagHospital”)wastheonlyparticipantthatplannedtocontractfortheoptionalbundle.TheychosethisapproachbecausetheyhadalreadysetupthecapabilitywithintheirseparateMedicalTravelProgramtoprovidephysicaltherapytopatientsimmediatelyfollowingsurgery.
5. Exclude acute myocardial infarction (Ami) as a
covered complication of knee and hip replace-
ment during the warranty period.Thisexclu-sionwasamongthemostcontentiousofissuesthegroupdebated.Aftermuchdiscussioninwhichhealthplansarguedthataheartattackimmediatelyfollowingakneereplacementwasalmostcertainlyrelatedtothekneeprocedureandthehospitalsexpressedconcernedaboutthelevelofrisk,AMIswereinitiallyincludedasarelatedcomplicationinwhatwasintendedasthefinalversionofthe
kneereplacementdefinition.Aftersigningoffonthatversion,thehospitalslaterre-openedthedebate,continuingtoprotestthelevelofpotentialfinancialconsequenceforanoutcomethat,whilerelated,wasnotnecessarilyundertheircontrol.Disagreementamongthepartiesonthisissueaddedseveralmonthstothedefinitiondiscussions.
6. Exclude readmissions to another hospital.Themostcontentiousofalldefinitionalissues—andtheonlyissuewhereIHAexerciseditstie-breakingauthority—waswhetherthehospitalthatper-formedtheoriginalprocedurewouldbeheldliableforthecostifapatientinthewarrantyperiodwasreadmittedtoadifferenthospital.Thepilothospi-talsrefusedabsolutelytoaccepttheresponsibility,
one perspective on unintended consequence:
a physician representing the medical group at one of the hospitals said, “Yes, a heart attack seven days after a knee replacement is almost certainly related to the procedure. The real cause though is most likely undis-covered heart disease present at admission. You can force us to accept this risk as a related complication. however our likely reaction to control the risk will be to subject every patient to a full cardiac work-up before the procedure, adding $3,000 to the cost of every knee replacement we do. is that what you want to have happen?”
13Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
ofpayinganon-affiliatedproviderforservicestheycouldnotmanageandthatwouldlikelybechargedatbilledrates.Thehealthplanswereequally
adamantthatthewarrantyshouldcoverrelatedcomplications,regardlessofwheretheyweretreated.Intheend,thehealthplansagreedtothisexclusionwhenfacedwiththecertaintythatthehospitalswouldnotparticipateinthepilotifpar-ticipationmeantacceptingthisrisk.
TheargumentthatultimatelyconvincedIHAtoexcludereadmissionstootherfacilitiesisthatincludingthemplacesthepatientinthemiddle.Intheabsenceofagoverningcontractbetweenthehealthplanandthereadmissionfacility,thepatientisultimatelyliableforthecharges.IHAworriedthatpatientswouldbeplacedinanuntenablepositionduringadisputeoverreadmissionchargesfromafacilitynotparticipatinginthedemonstra-tion.IHAfeltthatevenonesuchoutcomewoulddoomthedemonstrationwithbothemployersandCaliforniaregulators.
7.Exclude ms-dRg 469 patients (joint replace-
ment with significant comorbidities and/or
complications) from the definition.Thisexclu-sionwasamistakethatIHAdidnotfullyappreci-ateuntilverylateinthekneeandhipreplacementepisodediscussions.Theintentoflimitingthe
definitiontoMS-DRG470(jointreplacementwith-outsignificantcomorbiditiesorcomplications)wastoexcludepatientsknowntohavesignificantco-morbidconditionsatthetimeoftheproce-dure.Thisdecisionfollowedfromtheobjectivetoselectalower-riskpopulationforpurposesofthedemonstration.However,theeffectofthedecisionwastoalsoexcludelow-riskpatientswhosufferedsignificantcomplicationsduringaroutinekneeorhipreplacement.Thesewerepatientswhosecomplicationsshouldhavebeenincludedintheepisodebyvirtueofthewarrantyprovisions,butwereexcludedbyvirtueofapost-dischargeas-signmenttoMS-DRG469.
Thisexclusionhadsignificantcostimplica-tions.optumestimatedthatexcludingpatientswhowouldhavebeengroupedtoMS-DRG470intheabsenceofcomplicationsexperiencedduringtheacuteperiodoftheepisode,butwhoweregroupedtoMS-DRG469becauseofthosecomplications,understatedhistoricalepisodecostsbyalmost4%.
totAl hip ARthRoplAsty
IHAelectedtosplitDRG470intoseparatedefinitionsforkneeandhiparthroplastytoreflecttheopinionsofboththeproviderparticipantsandtheorthopaedicconsultantthattheresourcerequirements,andthere-foretheresourcecosts,forthesetwoproceduresareactuallyquitedifferent.unlikeMedicare,privatehealthplanstypicallynegotiateseparatepricesforthetwoproceduresandsotheyagreedwiththisap-proach.Modifyingthekneedefinitiontoaddresshiparthroplastywasaquickprocesswithnomajorareasofcontroversy.Thedefinitiondoesincludediffer-entparametersfortheoptionalpost-acutebundletoreflecthip-specificrehabilitationpathways.
IHAaddedhiparthroplasty(andlater,unicom-partmentalkneearthroplasty)inparttoincreasethepotentialvolumeofpatientsinthedemonstrationforparticipatingorthopaedicsurgeons.Inretrospect,IHAmighthavetreatedalloftheseproceduresasasingledefinitionwithafewvariablesthatdrove
An important lesson learned:
DRGs may be valued in episode definition for both the universal availability of the grouper software and the fact that they provide a common understanding of patient classification between providers and health plans. however, they can’t stand alone for prospective episode payment because they are assigned post-discharge based on actual rather than anticipated outcomes. For example, a patient who enters the hos-pital for a routine knee replacement but experiences complications may be assigned post-discharge to a DRG that reflects the complication rather than the original procedure. a better solution may be to base patient selection only on prospectively known factors, such as admitting diagnoses and procedure code; the iha demonstration did not test that alternative.
14Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
differentnegotiatedrates,anapproachlaterappliedtothecardiacprocedures.
UNiCompARtmENtAl KNEE ARthRo- plAsty (pARtiAl KNEE)
Similartohiparthroplasty,IHAsawtheadditionofunicompartmentalkneesasawaytoincreaseindividualsurgeonvolumewithoutalongdefinitiondevelopmentprocess.
KNEE ARthRosCopy With mENisCECtomy
KneearthroscopywasIHA’sfirstoutpatientdefinition.Thedecisiontotakeonthisepisodewasinfluencedbythedesireofthehealthplanstotakeonahigher-volumeprocedureandtoaddfree-standingambulatorysurgerycenterstothedemonstration.Movingtotherealmofoutpatientprocedurescausedtheparticipantstorethinkseveralaspectsoftheepisodedefinitionthathadbeendevelopedpreviously.1. NoASAratingcriterion.Foroutpatientproce-
durestheASAratingwaseliminatedasapatientselectioncriterionontheassumptionthathigherriskpatientswouldnothavetheproceduredoneinanoutpatientsetting.
2. Variablewarrantyperiodlength.Whilepartici-pantsinitiallyassumedthatthe90-daywarrantyperiodwouldbestandardacrossdefinitions,theyconcludedthatforthisprocedurea30-dayperiodwouldcoverallrelevantcomplications.Sincethelongerthewarrantyperiod,thegreaterthedif-ficultyinsegregatingrelatedandunrelatedpost-procedureclaims,shorterwarrantyperiodswereusedwheneverpossibleforlaterdefinitions.
3. Afixed-dollarliabilityforcomplications.Withthisdefinition,IHAintroducedtheconceptofapplyinganepisoderateadjustment(apenalty)forcompli-cationsduringthewarrantyperiod.Theapproachwasdevelopedtoaddresstheissuethatacomplica-tionrequiringaninpatientadmissionfollowinganoutpatientprocedureeffectivelycomprisedthesameproblemsasareadmissiontoanotherfacilityfollowinganinpatientprocedure—highcoststhat
couldeasilybecomethepatient’sresponsibilitytopay.undertheepisoderateadjustmentapproach,participantsagreedthatthehealthplanswouldpayforallservicesfromotherprovidersduringthewarrantyperiod,butapplyafixeddollarpenaltytothereimbursementoftheoriginalfacilityifanyofasetofdefinedcomplicationsoccurred.Theamountofthepenaltywouldbenegotiatedindividuallybe-tweeneachhealthplanandparticipatingprovider.
diAgNostiC CARdiAC CAthEtERizAtioNs ANd ANgioplAsty
IHAstartedwithfivepotentialepisodesthatwereeventuallycompressedintotwodefinitions.Thetwodefinitionsallowforthreeseparatenegotiatedepisodesofcare(diagnosticcatheterizationonly,angioplastyonevessel,angioplastytwovessels).Thestartingdefinitionswere:1. Diagnosticcatheterization,nointervention2. Angioplastyinonevessel,baremetalstent3. Angioplastyintwovessels,baremetalstent4. Angioplastyinonevessel,drugelutingstent5. Angioplastyintwovessels,drugelutingstent
Aftermuchdiscussion,thegroupagreedthatsepa-rateepisodepricesshouldapplybasedonthenumberofvesselswithstent(1or2)butnotonthetypeofstentoronhowmanystentswereplacedineachvessel.
Precedentsestablishedduringthedefinitionprocessforthecardiacproceduresincluded:1. patient selection based on pre-procedure set-
ting rather than on diagnosis codes.onecardiacconsultantadvisedthatorganizationswouldwantpatientswhocouldwalkintothecathlabiftheyhadto,thereforethedefinitionsexcludepatientswhowereadmittedtothecathlabfromaninpatientsettingorfromtheemergencydepartment.
2. the exclusion of community-supplied routine
follow-up care.Thehospitalparticipantsadvisedthatpatientsareoftenreferredtotheinterven-tionalcardiologistforjusttheprocedureitself,and
15Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
thenreturnedtotheprimarycarephysician.Sincethehospitalcouldnotcontractwiththeseprimaryphysicians,theywouldhavenomechanismtotrackorpayexpensesforroutinefollow-upcareprovidedinthecommunity.Thedefinitiondoesincludefollow-upcareprovidedbytheinterven-tionalcardiologistorhisorhercardiologygroup.
3. Repeat procedures considered a complication.Thedefinitiontreatsrepeatdiagnosticcatheteriza-tionswithintheepisodeperiodas“complications”ofapoorlyperformedoriginalprocedure.
4. Use of the “episode rate adjustment” approach.Thedefinitionappliesthe“episoderateadjust-ment”forcomplicationsthatIHAdevelopedforthekneearthroscopyproceduretoin-patientcardiacprocedures.
Therewasseriouscontentionwithinthegroupabouthowbesttoaddressthemostsignificantcom-plicationthatmayfollowoneoftheseprocedures—anarterialperforationleadingtoanemergencycoronaryarterybypassgraft(CABG).Thefirstdiffi-cultyisthatthereisnoindicatorintheclaimrecordthatdifferentiates:(a)aCABGthatisperformedbecauseofaperforation,from(b)aCABGthatisperformedbecausethatistheappropriatetreat-mentforthelevelofcardiacdiseasefoundduringthediagnosticcatheterization.Secondly,hospitalsstrenuouslyobjectedto:(a)aninitialrecommen-dationthattheCABGwouldbeassumedtoresultfromacomplicationand(b)thedisproportionate
levelofriskassociatedwithtreatingaperforationvs.thereimbursementsreceivedfortheperformingtheoriginalprocedures.Theyarguedthattheriskratiowasmoreakintothepossibilityofanadmissionfollowingasimpleoutpatientkneearthroscopythantotherisksassociatedwithtreatingcomplicationsofakneereplacement.Thedebatewaseventuallyresolvedbyapplyingthe“episoderateadjustment”developedforthekneemeniscectomytothecardiacprocedures.Thehealthplansagreedtothisapproachontheassumptionthataperforationwouldleadtoalargeclaimthatwouldbesubjecttoreviewandthatthereviewwouldrevealthatanepisoderateadjust-mentwaswarranted.
mAtERNity, hystERECtomy ANd CERviCAl spiNE FUsioN
usingtheconsensusprocessesandapprovalmechanismsdescribedabove,IHAcompletedfouradditionalepisodedefinitionsforatotaloftencompletedepisodedefinitionsintheBEPGD.Theseadditionaldefinitionswere:1. Maternitycomprehensive2. Maternitydeliveryonly3. Hysterectomy4. Cervicalspinalfusion
CompletedocumentationonallIHAepisodedefinitionsisavailableat:http://iha.org/episode-
definitions.html.
16Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
administrative issues and Their resolution
TheIHAdemonstrationhadanexplicitobjectivetoidentifyandaddressadministrativeissuesinherentinprospectivebundledpayment.Whileauto-adjudicationwastheultimategoal,allparticipantsunderstoodthatmanualprocessingwouldberequiredinearlystagesofthepilot.Administrativeissuesweremanyandcom-plex;addressingthemmanuallyrepresentedsignificanteffortandexpenseforbothhealthplansandproviders.
hEAlth plAN issUEs
1. Avoiding duplicate payments.Thisissue—howtoensurethatfee-for-service(FFS)billssubmittedin-correctlybyparticipatingproviderswerenotpaidinadditiontothefullbundledpaymentmadetothebundlerorganization(typicallythehospital)—wasthenumberoneadministrativepriorityforallparticipatinghealthplans.ToavoidpaymentonFFSbills,thehealthplansneededtheabilitytoturnoffauto-adjudicationforthepatientundergo-ingtheprocedure,meaningtheyneededtoidentifythepatientbeforeanyclaimswerereceived.Thedemonstration“solved”thisproblembymakingthedeterminationofpatientinclusionpartofthepre-authorizationprocess.However,thissolutiononlyworkswhenpre-authorizationisrequiredfortheprocedure.Also,whiletheplanshavetheabil-itytoturnoffauto-adjudicationofallclaims,theycan’tselectivelyturnoffpaymentforonlyexpensesrelatedtotheprocedure.Thelongerthewarrantyperiod,thehigherthelikelihoodofinappropriatedelaysinpaymentonunrelatedclaims,potentiallycausinghealthplanstomissclaimturnaroundtargetsestablishedintheiremployercontracts.
2. Recovering duplicate payments.Healthplansarguedforacontractualprovisionthatwouldal-lowthemtorecoverduplicatepaymentsmadetothebundler.Thebundlerswerehighlyresistanttothisconceptforanumberofreasons,includingthefactthattheywouldhavenocontractualbasis
torecoverapaymentmadetoanon-participatingprovider(e.g.,lab).IHAdidnotincludethisprovi-sionintheBEPGDstandardprovisions,thoughsuchanarrangementmayultimatelyhavebeennegotiatedbetweentheparticipants.
3.Accounting for bundled payments.Healthplansquestionedhowtobookabundledpaymentwithintheiremployeraccountingsystems—treatthewholebundleasahospitalbill?Artificiallysepa-ratethepaymentintophysician,hospitalandotherprovidercomponents?Allofthehealthplansdeterminedthattheycouldnotadequatelyaccountforthebundlesfortheirself-insuredbusinessandelectedtoparticipateinthepilotfortheirinsuredbookofbusinessonly(furtherreducingthepatientpopulationinthedemonstration).
4. Ability to process the claims out of any claim
office.ThenationalplansparticipatinginBEPGDneededtheabilitytoprocessthebundledpaymentclaimsinanyclaimofficesincetheemployerofapatienthavingakneereplacementinCaliforniamightbelocatedelsewhereinthecountry.
5.Benefit design changes.Thehospitalsandphysi-ciangroupsgreatlydesiredthatthehealthplansincentivizepatientstousetheparticipatingphysi-ciansandhospitals,andfavoredthepatientincen-tiveapproachusedinCMS’sACEdemonstration.Thisapproachrequiredaddingbenefitincentivesthathealthplansneededtofileasnewbenefitop-tionswithstateregulators.Healthplansadvisedthatthetypicalcycle-timeforfiling,approval,newcommunicationmaterialsandsaletocustomerswasabouttwoyears,makingtheinclusionofthesechangesimpossiblewithinthedemonstrationpe-riod.Thedemonstrationdidnotincludeanybenefitincentivesforuseofparticipatingproviders.
6. Repeated benefit calculation. AlthoughthehealthplansenvisionedimplementingBEPGDasachangetopaymentonly—equivalenttochangingfroma
17Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
perdiemreimbursementarrangementtoaDRGreimbursementarrangementwiththehospitals—theywereunabletoentirelyavoidbenefitadmin-istrationissues.InCalifornia,thepatients’shareofcoinsurancemustbecalculatedontheactualpaymentmadetotheprovider.Additionally,sincebundledpaymentratesaretypicallycalibratedtoanhistoricalaveragecostfortheprocedure,it’spossibleforpatientswhousefewservicestoowemoreasashareofthebundledratethantheywouldhaveowedincoinsurancefortheindivid-ualservices.Similarly,patientswhousemoreservicesthanaveragecansavemoneyunderbundledpayment.Mosthealthplanselectedtoholdthepatientharmlessfortheexistenceofthedemonstration,assessingthepatientthelesserofwhattheywouldhavepaidincoinsur-anceontheFFSbillsvs.thecoinsurancedueonthebundledrate.
7. processing “bundle breakers.”Participantsidenti-fiedanumberofscenariosinwhichapatientwhowasoriginallyconsideredtobeinthebundlewouldbelaterexcluded,breakingthebundleandnecessi-tatingthereprocessingofallclaimsunderFFS.Themostimportantofthesewaslossofcoverageduringthewarrantyperiod.
thE hospitAl pERspECtivE
1. getting the physician bills directly. Inagree-ingtoactasthebundler,thehospitaltookontheresponsibilityforeducatingallparticipatingphysi-ciansandancillaryproviderstoassurethatbillsbesentonlytothehospitalandnottothehealthplan.Italsoseemedlikelythatbothphysicianandhospitalbillingsystemswouldneedmodificationtopreventtheirautomaticallysendingbillstothehealthplanonrecord.
2.paying the physician bills. Thebundlerbecomestheclaimpayerforallcoveredservicesprovidedtothepatientwiththebundleandissubjecttoallstatelawandregulationaroundtimelinessofclaimpayment.
3. Accounting for and reconciling payments within
their own systems.Theprovidersandhealthplanswereanxioustounderstandtherelation-shipbetweenpaymentamountstheywouldhavereceivedunderbundledpaymentversuspaymentstheywouldhavereceivedunderstandardcontractprovisions.Thosecomparisonsrequiredtrackingpaymentstotwodifferenttypesofbillsforthesameservices.
4. Accurately capturing all related services. Similartocapitationpayments,bundledpaymentsbytheirnaturediscouragetheaccuratecodingandreportingofservicesthatwillnotbeseparatelypaid.Ifphysiciansarepaidacaserateforprofes-sionalservices,includingx-raysandothertests,whycreateano-paybillforthoseservices?GivenCaliforniaproviders’previousexperiencewithcapitation,theirsuggestedsolutionwastocon-siderusingexistingencounterdatasystemstocapturebundledservices.Thehealthplanswereopposedtotheideaofhavingtoaddencounterdatatotheirinternalclaimdatatogetanaccurateunderstandingofhowserviceutilizationwasaf-fectedbybundledpayments.
Toaddressthisissue,thehospitalsagreedtocreateapackageoftheindividualclaimsforallservicesprovidedtothepatientandtosubmitallclaimsaftertheprocedurewasperformed.Thehealthplansagreedtoreleasetheentirebundledpaymentamountwhenthefirstbillingpackagewasprocessed.Hospitalsagreedtosubmitasecondpackageofbillsforallservicesprovidedduringthewarrantyperiod,eventhoughatthatpointtheyshouldhavebeenpaidinfullforthebundle.Thehealthplansagreedtoprocesseachofthesebillsas“nopay”claimstoensurecompletedatacapture.
5. Administering the gainsharing program. Partici-pantsrecognizedthatadministeringagainsharingprogramthatwouldbetrustedbythephysiciansrequiredsophisticateddatainfrastructureandre-portingcapabilities.Whilemostallofthepartici-patinghospitalsintendedtousegainsharingwithin
18Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
thebundledpaymentdemonstration,noneactuallydid.Asoneexample,HoagHospitalimplementedbundledpaymentthroughthemechanismofajointventurewiththeirphysicians,thusnegatingtheneedforgainsharing.
thE pAth to AUto-AdjUdiCAtioN
Toaddressadministrativeissues,allparticipantsagreedtobeginthedemonstrationusingmanualprocessing.Transplants—whicharetypicallyreim-bursedbycomprehensivecaseratesandarestilloftenpaidmanuallybyhealthplans—providedthemodeladoptedbymostparticipants.Wherepossible,thehealthplanselectedtohaveallbundledpaymentclaimspaidfromtheirtransplantunit.
Giventhemagnitudeandintractabilityoftheadministrativeissues,allparticipantsagreedtoat-tempttoresolveissuesinwaysthatcouldultimatelysupportauto-adjudicationoftheclaims.Auto-adju-dicationwasobviouslydesirableonthehealthplanside,buttheprovidersalsowantedtosubmitclaimsusingtheirexistingbillingsystemsandprocessesforFFS,retainingonlytheresponsibilityofdistrib-utingthebundledpaymentatthebackend.
AtthebeginningoftheBEPGD,therewerenoexistingsoftwaresystemstoauto-adjudicateprospectively-paid,commercialbundledpayment.WhileIHAattemptedtokeepauto-adjudicationinmindduringepisodedefinitiondevelopment—forexample,touseonlyinformationavailabletoaclaimprocesseraspatientselectioncriteria—IHAhadnoupfrontassurancethatitcouldwork.McKessonandTriZettowereinthedesignphaseforbundledpaymentsoftwareasthedefinitionswere
beingdeveloped.IHAinvitedbothvendorstojointhetechnicalworkgroupsothattheycouldcom-mentonnewepisodeparameterswhilethedefini-tionswerestillunderdevelopment.Theinclusionoftheserepresentatives,bothhighlyknowledgeableaboutbundledpayment,wasanenormoushelpintheepisodedevelopmentprocesses.Thevendorscameatthedefinitionwithamuchdeeperunder-standingoftheunderlyingcodingstructuresforthebillsandwereabletosupplytheexhaustivecodesetsfortheepisodedefinitionsthatthehealthplansrequired.Theyofferedsuggestionsforminormodi-ficationstothedefinitionsthatcouldenhancetheeaseofadministration.Bothvendorselectedinde-pendentlytodelivertheirsoftwarewithapre-loadoftheIHAdefinitions,contributingtothespreadofthedefinitionsdevelopedduringthedemonstration.
Duringthedevelopmentofthedefinitions,healthplansindicatedthattheywerenotpreparedtogotoscalewithimplementingthedemonstra-tionuntilthesoftwarewasavailabletoadjudicatetheclaims.Althoughthesoftwarebecameavailableduringthedemonstration,forthemostparthealthplanselectednottoimplementtheclaimprocess-ingenhancements.Planscitedboththeexpenseofamajorsystemupgradeinthefaceofuncertainreturnfrombundledpaymentarrangementsandaninabilitytoimplementtheupgradewithinthetime-lineofthedemonstration.AetnaactedasabetasitefortheMcKessonsoftwareanddeployeditforitsbundledpaymentcontractinsouthernCalifornia,butthesmallpatientpopulationworkedagainstarobusttestofauto-adjudication.
19Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
Other issues
REtRospECtivE vs. pRospECtivE pAymENt
Retrospectivevs.prospectivepaymentisaphrasethatconflatestwokeyconceptsinbundledpayments—risktransferandclaimadministration.Eachoftheseconceptsrequiresaseparatedesigndecision.
Intheory,thesetermsconveyachoicebetween(1)makingfee-per-unit-of-serviceclaimpaymentsfollowedbyaretrospectivereconciliationtoabudgetversus(2)suspendingnormalFFSpaymentsinfavorofafixed-feepayment.Inthiscontext,thetermprospectivepaymentisusedinthesenseofMedicare’sInpatientProspectivePaymentSystem(IPPS,i.e.,DiagnosisRelatedGroupmethodology).ForMedicareDRGs,theamountofpaymentispro-spectivelyfixedbutisnotpaiduntilafteratrigger—thehospitaldischarge—occurs.Thisinterpretationcontraststotrueprospectivepaymentapproachessuchascapitation,wherepaymentsaremadepro-spectivelyforapopulation.
AtthetimeIHAbeganitsbundledepisodepay-mentdemonstration,thetermretrospectivepaymenthadcometomeantheshared-savingsapproachthatPRoMETHEuSPaymentwasusingintheirearlypilots.InthePRoMETHEuSmodel,FFSpaymentswereretrospectivelyreconciledagainstabudgetfortheepisode,withprovidersandpayerssharingsavings(typically50-50)iftotalpaymentswerelessthanthebudget.Payersabsorbtheentirelossifpay-mentsaregreaterthanthebudget.Inotherwords,providersshareonlyupsiderisk.ThecontrastingmodelatthetimewastheCMSACEdemonstrationthatprospectivelysetafixedfeeforeachepisodeandrequiredatwo-wayriskshare;providerswerepaidonlytheagreeduponamountandretainedallsavingsorabsorbedalllossestotheextenttheactualcostsoftheepisodevariedfromtheagreeduponreimbursement.Inthismodel,thesavingstoMedicarewerealsoquantifiableinadvanceandassuredthroughthemechanismofsettingthefixedpaymentatadiscounttotheIPPSpayment.
IHAelectedtoapplyaprospectivepaymentmeth-odologywithinitsdemonstrationproject.ParticipatinghealthplansadvocatedforthisapproachinreactiontotheperceivedcomplexityofthePRoMETHEuSPaymentapproachcomparedtotheseemingeleganceoftheACEdemonstration.Inaddition,thosewhohadlivedthroughthe90’seraofrancorousproviderrela-tionsvoicedstrongoppositiontotheideaofeveragaintyingreimbursementtoaretrospectiverec-onciliationprocess.Healthplansalsoadvocatedforthetwo-wayrisksharebecauseitofferedstrongerincentivesthanashared-savingsapproach.Further-more,participantsfeltthatinlightofCalifornia’slonghistoryofmanagedcareandcapitation,tobeginwithashared-savingsapproachwouldactuallyrepresentastepbackwardsalongthepathofprovideraccountability.Providers,lookingtothesuccessesreportedbyACEdemonstrationparticipants,wereeagertotestthatmodelintheirmarketsandthere-forereadilyagreedtotheapproachthathadbeenusedinACEoverthePRoMETHEuSPaymentretrospectivereconciliationapproach.
Insummary,IHAmadeadecisionaboutadmin-istrationthatwasbasedprimarily,thoughnotexclu-sively,onthepreferredapproachtorisktransfer.Thisdecisionwaslatercalledintoquestion.HealthplansbegantounderstandthecomplexitiesofsuspendingFFSclaimpaymentinfavorofprospectivepaymentandthesystemramificationsbeyondclaimadjudi-cation.Concurrently,providersbegantounderstandboththeextentoftherisktransferandtheaddition-alexpenseandliabilityofassumingclaimadjudica-tionresponsibilitiesinastructurewhereoneentity(typicallythehospital)acceptsateampaymentthendisbursesindividualpaymentsforallprovidersparticipatinginanepisode.
Thedefinitionallinkbetweenthepaymentmeth-odologyandtherisk-shareapproachhassincebeenbrokenbytheCMSInnovationCenter’sBundledPaymentsforCareImprovementinitiative(BPCI).
20Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
AllBPCImodelsrequiretwo-wayrisksharing,butthreeofthefourmodelsuseretrospectiverecon-ciliationandoneusestheprospectiveapproachpioneeredintheACEdemonstration.Fromanadministrativeperspective,bothapproacheshavesignificantprosandconstobebalanced.Whatisbeingbundledmakesadifference—forexample,the
prosofprospectivepaymentmayoutweighitsconsonanepisodeforawell-definedteamofprovidershandlingaprocedure,butnotwhenbundlingpay-mentforchronicconditions.Similarlyalocalhealthplanmaybeabletoapplynon-standardclaimpay-mentprocessesmorereadilythananationalplanwhereclaimsarehandledbydifferentclaimoffices.
Approach pros Cons
clearly aligns payment with intent; reim-bursement is made to a team of providers delivering care during a defined episode.
Provides the bundler with a real-time line of sight into what services are being provided to patients covered by the demonstration (because the bundler receives the bills and pays the subcon-tracting providers).
Providers are able to maintain confiden-tiality into the distribution of payments among the care team.
in combination with a pre-authorization process, clearly identifies up front which patients will be included in the demon-stration, allowing for enhancements such as collecting copayments based on the bundled price. 2
no disruption to provider billing processes; all providers bill the health plan.
health plan continues to capture all services provided to patient and can report them to their employer customers.
allows application of claim data-based risk-adjustment methodologies at the time of payment reconciliation.
Providers are required to change their billing practices. For example, participating physicians should bill the bundler rather than the health plan.
Disrupts existing payment processes at the health plan; requires new adjudication software to make scalable.
requires new claim administration processes and expense for the bundler, and subjects the bundler to state claim adjudication regulation.
health plans have less visibility into how payments are distributed, so they are less able to report to their employers what care has been provided to patients (the capitation data dilemma).
Payment is reconciled long after care is received, limiting the usefulness of the payment change as a tool to incentivize care changes.
requires new processes for health plans to credibly report and reconcile payments to the agreed upon payment amount.
requires new processes for the bundler to understand bills and payments across organizations in order to accept or challenge retrospective health plan payment adjustments.
agreements that included downside risk may require use of a health-plan-imposed withhold or provider-based reserves to refund over-payments to the health plan.
prospective
Retrospective
2.Incontrast,inretrospectivereconciliation,copaymentsareappliedtotheindividualservicesandmaybeoverorunder-appliedbasedontheactualbundledpaymentamountpostreconciliation.
21Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
RisK ANd stop loss
Hidingbehinddefinitionalissueswasalargelyunex-pressedcontestofwillsbetweenthehealthplansandthehospitalsovertheissueofstop-lossprotectiononepisodepayment.Theissueremainedunstatedingroupdiscussionbecausestop-lossisapriceissueandIHAcouldnotaddresspriceduetoanti-trustconcerns.ParticipantsalsospecificallyrequestedthatIHAnotaddressthisissuebecauseofitssensitivity;stoplosswasanongoingsubjectofindividualnegotiationsbetweenspecifichospitalsandthehealthplansovertheirentirecontracts,notjusttheirepisodepaymentcontractamendment.
WhileIHAcouldnottakeonthisissueinanysub-stantiveway,itwasclearthatmanyofthemostconten-tiousissuesaboutrisktransfer—forexample,hospitalliabilityforreadmissionstoanotherfacility—couldhavebeenresolvedmuchmorequicklyhadthehealthplansandhospitalsbeenwillingtodiscusssomeexplicitformofriskprotectionforparticipationintheBEPGD.The“EpisodeRateAdjustment”concept—apredefinedpenaltyamountforcomplications—thatIHAdevelopedinthecourseofdefiningthefirstoutpatientepisode(seekneemeniscectomy,above)effectivelyprovidedstop-lossprotectionagainsttheriskofanadmissionfollowingaprocedureperformedinanambulatorysurgerycenter.IHAlaterappliedthissameprovisiontoaddressavirtualproviderrevoltagainsttheconceptofacceptingriskforanarterialperforationfollowingaroutinediagnosticcardiaccatheterization.
gAiNshARiNg
TheprimarydrawoftheBEPGDfornearlyallproviderorganizationsseemedtobetheopportunitytoimple-mentagainsharingprogramwiththeirphysicians.Theparticipantsexpectedthatthisgainsharingprogramwouldapplyonlytocommercialpatients,andthatitwouldbestructuredsimilarlytothoseemployedbythehospitalsparticipatingintheACEdemonstration.WhileIHAwasunabletoadviseparticipantswithconcernsaboutthelegalityofanticipatedgainsharing
programs,IHAdidretaincounseltopresentageneralunderstandingoflegalissuesrelatedtogainsharing.IHAalsoorganizedawebinarontheobjectivesforgainsharing,anappropriatestructureforagainsharingprogram,andthespecialconcernsofbothhospitalsandphysiciansinconsideringgainsharing.3
Gainsharingisonepossiblestrategytosup-portclinicalalignmentbetweenahospitalanditsphysicians,withothersincludingemploymentagreements,co-managementagreementsandjointventures.ToIHA’sknowledge,noparticipantinBEPGDelectedtoimplementaformalgainsharingprogram.Theadministrativeeffortofbuildingandsustainingagainsharingprogramforademonstra-tionwithlowpatientvolumewascertainlyoneconcernforparticipants.However,thedrivingforcebehindthisdecisionmighthavebeentheavail-abilityofothermechanismsforphysician/hospitalengagement.Asexamples:(1)HoagHospitalpar-ticipatedinthedemonstrationviaitsjointventurebetweenthephysiciansandhospital;(2)thesurgerycenterswereownedbythephysiciansthemselves,makinggainsharingimplicit,and(3)SutterHealthstructuredparticipationtoincludeseparatecon-tractsbetweenthehealthplanandthehospitalsandthehealthplanandphysicians.
stAtE REgUlAtoRy CoNCERNs
InCalifornia,plansthatinvolvepre-paymentforhealthcareservicesareregulatedbytheDepartmentofManagedHealthCare(DMHC).PPoplansaretypical-lyregulatedbytheCaliforniaDepartmentofInsurance(DoI)butforreasonsofhistoricalartifact,theDMHCalsoregulatesthePPoplansofBlueShieldofCalifornia(BSC)andAnthemBlueCross,earlycontractingpartici-pantsintheBEPGD.
Giventhisdualregulatorystructure,IHAwasconcernedthatthedesignofthedemonstrationproj-ectnotsubjectPPoplanstoadditionalregulationbyDMHC.Furthermore,itwasimportantthattheparametersofthedemonstrationwouldallowBSC
3.http://iha.org/pdfs_documents/bundled_payment/Gainsharing-Webinar-Physician-Hospital-Relationships-in-orthopaedics.pdf
22Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
andAnthemBlueCrosstosatisfyallPPoregulationsimposedbyDMHCexclusivelyontheirplans.
IHAmetearlyonwiththeDirectorofDMHCtodiscussthedesignoftheprogramandwhetheritmightinvokeDMHCregulationofPPoplansotherthanthoseofBSCandAnthemBlueCress.Thekeyissuespresentedwere:1. Thereisnopre-paymentforservices.Thefull
bundledpaymentwouldbemadeafterdischargefortheinitialprocedure,uponreceiptofapost-dischargeclaimspackageforallservicesprovideduptothatpoint;afinalpackageofclaimsissubmit-tedforservicesprovidedduringthepost-dischargeperiod(includingchargesforcomplicationsandre-admissions)butnoadditionalpaymentisprocessed.
2. Notransferofinsuranceriskisinvolved;episodepaymentismadeonlyifandwhenaprocedureisperformed.
3. Decisionsaboutthenecessityofthesurgeryaremadethroughcurrentclinicalandmedicalneces-sityreviewprocessesandwouldbeunaffectedbythechangetoapaymentmethodologybasedontheentireepisodeoftreatment.
4. Episodedurationwouldnotexceed90days,andmightonlybe30or60daysdependingontheintensityoftheprocedureandwhencomplicationswouldbemostlikelytooccur.
TheDMHCagreedwithIHA’sassessmentoftheissuesandlaterprovidedwrittennotificationthatthedemonstrationasproposedwouldnotinvokeKnox-Keenelicensurerequirements.
Inaddition,theDirectorexpressedstrongsupportforcreatingaregulatoryenvironmentinCaliforniathatwashospitabletoinnovativedemon-strations,particularlythosethathadthepotentialtoimprovebothqualityandpricetransparency.Theideathatbundledpaymentsforprocedurescouldallowconsumerstomakeapples-to-applesproviderpricecomparisonsforapre-definedbundleofserviceswasparticularlyappealing.Toback-upherexpressionofsupport,theDirectordesignated
anassistantdeputydirectorasIHA’sprimecon-tactwithinDMHC.ThisindividualbecamedeeplyfamiliarwiththeprojectandactedasDMHCliaisontothedemonstration,facilitatingconversationswithothersatDMHCwhowouldreviewtheactualcontractsubmissionsbytheplans.
BecauseIHAisnotahealthplanregulatedbyDMHC,anyplanwithPPoproductsundertheDepartment’sjurisdictionneededtoindependentlynegotiateapprovalofitsbundledpaymentagree-mentswithDMHC.WhileIHAwasnotprivytoanydiscussionsbetweenDMHCandthehealthplans,IHAunderstoodthattheprimaryconcernsexpressedbytheDepartmentwere:1. Howdidtheplanintendtocommunicatetotheen-
rolleethathewasaparticipantinapilotprogram?2. Whatinformationwouldtheplanprovidetothe
enrolleeonthesubjectoftheimpactofbundledpaymentoncoinsuranceamounts?
3. Whatoversightdidtheplanintendtoprovideoverthebundler’spaymenttosubcontractingphysi-ciansandotherproviders[becauseofimplieddelegationofrisk]?
4. Whatstepswastheplantakingtoensurethatthehospitalhadadequatereservestomakethesepayments,andthattheactualclaimprocessesandpaymentscompliedwithexistingregulationsgoverningclaimpayment?
Theneedtoaddresstheseregulatoryconcernsnegativelyimpactedthedemonstrationtimeline.AnthemBlueCrosshadwithdrawnfromthedemon-strationearlyon,butBSCengagedinseveralmonthsofbackandforthcommunicationwithDMHCbeforetheywereabletoimplementtheirBEPGDcontracts.
CoRpoRAtE pRACtiCE oF mEdiCiNE pRohiBitioN
Californialawprohibitsthepracticeofmedicinebyindividuals,organizations,andcorporationsthathavenotbeenlicensedtopracticemedicine.Thisstatutegenerallyprohibitshospitalsfromhiringoremploy-
23Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
ingphysiciansorotherhealthcareproviders.TheconcernaroundCorporatePracticeofMedicineforBEPGDwaswhetherahospitalasprimecontractor(thebundler)couldbeconsideredinviolationofthisprohibitionbyvirtueofexecutingsubcontractswithphysicianstoprovideserviceswithintheepisode.Toaddressthisissue,IHA’ssamplecontractsclearlyestablishedthattherelationshipbetweenpartieswasthatofgeneralcontractortosubcontractorratherthananemploymentagreement.Inthesamplecontracts,thegeneralcontractoracceptspaymentfortheentirebundle,butactsonlyasanagentofthesubcontractorinacceptingandthendispersingpaymentforservices.TheparticipatinghospitalsworkedwiththeirinternallegalcounseltoassesswhetherthistypeofcontractualagreementwouldadequatelyaddressCorporatePrac-ticeofMedicineconcerns.Intheend,thedominantmodelchosenbythehospitalswastoexplicitlysplittheepisodeservicesandpaymentsintotwocomponents—abundleandpaymentforprofessionalservicesandabundleandpaymentforfacilityservices.InadditiontoaddressingtheCorporatePracticeofMedicineprohibi-tion,thisapproachsatisfiedtheconcernsDMHChadexpressedabouthealthplandelegationoffinancialrisk.
popUlAtioN sizE
Populationsizeforepisodepaymentdemonstrationsneedtobeconsideredfromseveralperspectives:1. Whatisanadequatetotalpopulationofpatients
tomakethedemonstrationmeaningful?Thatis,whatgetstheattentionofthemarket?
2. Whatvolumeofproceduresisnecessaryforahos-pitaltoadequatelyspreadtheriskofparticipation?
3. Whatisanadequatepopulationofpatientstoincentivizeaphysicianorgroupofphysicianstochangepractice?Thatis,whatgetstheattentionofthedoctors?
Thenumberofkneeandhipproceduresinclud-edintheBEPGDultimatelyprovedinsufficienttoaddressanyoftheseperspectives.
IHAparticipantsinitiallyestimatedthatthe
demonstrationwouldincludeabout500PPojointreplacementproceduresperyear.AlthoughIHAwasawareofsignificantmarketfragmentation—kneereplacementssurgeriesareperformedinmorethan300hospitalsinCalifornia,withonlyahandfulperformingover500peryear—thedemonstrationbenefitedfromtheparticipationoftwohospitalswithhighorthopaedicvolumes:HoagHospitalandCedars-SinaiMedicalCenter.Eachofthesehospitalsaveragedabout1800dischargesinMS-DRG470annuallyacrossallpayersandcontracttypes.
TheearlywithdrawalofAnthemBlueCross,adominantPPopayerinthesouthernCaliforniamarket,wasaseriousblowtotheestimate.oneparticipatinghospitalinsouthernCaliforniaindi-catedthatAnthemBlueCrossmightrepresentasmuchas50%oftheirPPopatientvolume.
IHApursuedsolutionstoincreasethevolumeofkneereplacementsinthedemonstrationonseveralfronts.First,toincreaseoverallvolume,IHAaggres-sivelyrecruitedhigh-volumehospitalsandsucceededinbringingseveralkeysystemsintothedemonstra-tion.Toincreasevolumeperparticipatingorthopae-dicsurgeonandperhospital,IHAaddedepisodesforhipreplacementandforpartialkneereplacement.Workingwithonehealthplan,onephysicianorgani-zationandonehealthsystem,IHAalsodesignedanHMo/MedicareAdvantageversionofthekneeand
An important lesson learned:
While participants debated at length about the impact of various clinical exclusions on population size, clinical exclusions were largely extraneous to popula-tion size. One definitional exclusion proved the exception to this rule. An Optum analysis showed that requiring the patient to maintain coverage with the same health plan during the 90-day episode period eliminated roughly 10% of potential episodes from the analysis pool. This finding highlights the need to carefully consider the impact of coverage changes during an extended warranty period.
24Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
hipreplacementepisodes.TheotherhealthplanshadlittleinterestinanHMoversionofBEPGDhowever,feelingthatefficiencyissueswereadequatelyaddressedbyexistingcapitationarrangements.
Anobviousimplicationofthelowpatientvolumesisthatthedemonstrationdidnotgenerateenoughadequatesamplesizetoallowforarigorousimpactevaluation.Italsoexposedhowmarketfragmenta-tioncanimpactpaymentreforminitiativesasawhole.Hospitalswereaskedtoundergoasignificanteffortwiththeirphysiciansthatwouldlikelynotpayoffin
anyincreasedvolume.Healthplanswerefacedwiththedauntingadministrativechallengesofbundledpaymentwithonlymodestpotentialforcostsavings.
Demonstrationmomentumslowednoticeablyasvolumeissuesbecameapparent.ParticipantsfacedwithcompetingopportunitiesforpaymentreformundertheAccountableCareActincreasinglychosetodevotethoseresourcestothedevelopmentofAccountableCareorganizationsandtopreparingfortheacquisitionofnewpopulationsthroughtheinsuranceexchangeandCalifornia’sdual-eligibledemonstration.
closing Thoughts
IHA’sBundledEpisodePaymentandGainsharingDemonstrationdidnotsucceedinitsambitiousgoaltorapidlyimplementepisodebundledpaymentacrossmultiplepayersandhospital-physicianteams.However,thedemonstrationdidexposeandaddressthemyriaddetailsnecessaryforsuccessfulbundledepisodepaymentimplementation,producingawealthoflessonslearnedaswellasusefulresources.Thedemonstration:1. Producedtencode-basedepisodedefinitionsthat
representedastrongconsensusacrossparticipatinghealthplans,hospitalsandphysicianorganizationsonhowperformanceriskmightbeprospectivelytransferredtoproviderswithinthecontextofdiffer-entaccountabilityinitiatives.Thedefinitionsprovedadaptabletoothergeographiclocations,asdemon-stratedbytheWisconsinPaymentReformInitia-tive’sabilitytoimplementthetotalkneearthroplas-tydefinitionwithonlymodestmodifications.
2. Developedextensivespecificationsforhistoricalcostanalysisandilluminatedflawsintheapproachofusingretrospectiveepisodegrouperstodefineprospectiveepisodepayment.Thedataapproachbywhichhealthplanscreatedconsistentbutin-dividualizedhistoricalaveragecostreportsprovedcumbersomebutfeasible,andallparticipantsgainedinsightintothedistributionofepisodecosts.
3. Definedandsuccessfullydeployedacontractingstructurewithacommonframeworkbutindividu-allynegotiatedtermsthatsatisfiedbothcontract-ingpartnersandCaliforniaregulators.Contracttemplatesdevelopedforthedemonstrationhavebeenadaptedandusedbynationalhealthplansandparticipantsinotherbundledpaymentinitiatives.
4. uncoveredandaddressedthechallengestoelectronicadjudicationofepisodebundledpay-ments,showingthatprospectiveepisodepay-mentisadministrativelyfeasible,andprovidingaframeworkforfurthermarketdevelopmentofadministrativesolutionstoaddressthechallengesofpaymentreform.
Collectively,IHA,demonstrationparticipants,andtheirclinicalandtechnicalexpertscreatedasetofvaluable,practicalaidsfortoallembarkingonthechal-lengingpathtobundledepisodepaymentimplemen-tation.IHAacknowledgesandappreciatestheuntoldhoursvolunteeredbydemonstrationparticipantsaswellasthecontributionsofitsclinicalconsultants.Eachofthesecontributorsbroughtnotonlyessentialtechni-calknowledge,butalsoafirmbeliefthatphysicians,hospitalsandhealthplanscouldworktogethereffec-tivelytoimprovecarequalityandefficiencyundertheframeworkofabundledepisodepaymentprogram.
25Bundled Episode Payment and Gainsharing Demonstration | Technical White Paper
ABoUt thE AUthoR
WeslieKary,MPH,MPP,servedasIHA’sProgramDirectorforEpisodePaymentfrom2008through2011,aperiodcoveringtheoriginaldesignoftheBundledEpisodePaymentandGainsharingDemonstration.Ms.KarycurrentlyisaPrincipalProjectSpecialistintheHealthSystemsInnovationGroupatAmericanInstitutesforResearch(AIR).
ABoUt thE iNtEgRAtEd hEAlthCARE AssoCiAtioN
TheIntegratedHealthcareAssociation(IHA)isanot-for-profitmulti-stakeholderleadershipgroupthatpromotesqualityimprovement,accountabilityandaffordabilityofhealthcareinCalifornia.IHAleadsregionalandstatewideinitiatives,includingtheCaliforniaValueBasedPayforPerformanceProgram.Moreinformationandotherresourcesareavailableatwww.iha.org.
ACKNoWlEdgmENts
ThisprojectwassupportedbygrantnumberR18HS020098fromtheAgencyforHealthcareResearchandQuality.ThecontentissolelytheresponsibilityoftheauthorsanddoesnotnecessarilyrepresenttheofficialviewsoftheAgencyforHealthcareResearchandQuality.TheauthoracknowledgestheassistanceandthoughtfulcommentsofJettStansbury,DirectorofNewPaymentStrategiesandTomWilliams,PhD,PresidentandCEo,attheIntegratedHealthcareAssociation.