Newtown, CT – September 2, 2016
What happens when physicians are engaged in an APM that is meaningful to them? Better care and lower costs for patients – It seems almost like a big “duh,” and yet it’s amazing how many payers and purchasers gravitate towards models that put organizations in charge of improving outcomes instead of physicians. Earlier this week we released a Case Study on a pilot launched by the Pennsylvania Employees Benefits Trust Fund (PEBTF) on knee and hip replacement bundles. The short version is pretty simple. PEBTF was approached by the Orthopedic Institute of Pennsylvania (OIP) and Pinnacle Hospital to launch this pilot. Kate Farley, PEBTF’s Executive Director, had wanted to launch such a pilot for several years but met with institutional resistance from her third party administrators. So we took this on (and as I often point out, if we can do this, given our size and limited resources, what’s the excuse for organizations 1000 times larger than us?), and ran all of the administrative operations to support the pilot. Of course, that’s the easy stuff. The hard part is what OIP pulled off, and it’s impressive. There are, of course, lots of lessons to be learned and emulated from this pilot, but two really stand out.
What this means to you – First, the physicians did almost all of the heavy lifting, which makes sense because they’re the ones that operate on the patient and follow-up with them. Clearly you need the collaboration of the hospital, but the hospital is the bit player. And yet it’s that bit player that CMS and many payers have decided to put in charge of these episode of care payments (and other APMs). The savings achieved by this pilot were spectacular and came entirely from OIP better managing patients pre and post discharge. And the bitter irony is that there would have been substantial shared savings if Pinnacle hadn’t been paid by DRG. And here is the second important lesson. Some commercial payers have gravitated to paying hospitals by DRG, and while that may make sense in a fee-for-service payment world, it is completely counterproductive in an APM world because there’s nothing to be squeezed out of a DRG payment unless the reimbursement rate itself goes down. Private and public sector payers need to pay attention here because what this pilot (and many others) clearly shows is that budgets and risk contracts for procedural episodes should really be designed to split out the perioperative phase from the pre- and post-operative phases. And all contracts should have downside risk. There should be no more joint replacement bundles without downside risk unless state regulations stand in the way. Had this been in effect for this pilot, the physicians could have earned up to $2,000 in shared savings. In addition, and this is also essential for private sector employers, you have to reward these high performing physicians with more volume. On that note, an upcoming webinar by our CPR colleagues will delve into this essential issue of fitting payment and benefits reform. There’s a long weekend coming up and you should take some of that time to read this Case Study, if only to realize how much better the system will be when all physicians are encouraged to take the reins of delivery system reform, and how fast it happens when you design alternative payment models the right way.
Francois de Brantes