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Hoag Orthopedic Institute (HOI) in Irvine, CA, the highest-volume orthopedic hospital in the state, is showing that orthopedic bundles might be the best evidence that risk-based contracts can work to improve quality and outcomes for patients while also benefitting the hospital’s bottom line.
Having a hospital dedicated to one specialty and physicians heavily invested financially is a boost to bundling success.
HOI has one of the highest orthopedic volumes in the United States and was one of the first to adopt orthopedic bundles. The experience has been a positive one for both patients and the hospital, says CEO Jennifer Mitzner.
The hospital began exploring bundled payments with commercial health plans in 2009, finding that it was uniquely positioned for bundling because it is a specialty hospital.
“But mostly I would attribute our success early on to our alignment model. At HOI, the entire clinical performance improvement and business model is aligned with the physicians,” she explains. “The specialty model, joint venture nature of HOI allows for complete clinical, financial, and governance alignment. All parties, clinicians and physicians, own it quite literally.”
Because physicians are directly invested in the hospital, they are closely aligned with quality improvement efforts, Mitzner says. The hospital’s quality committee, the performance improvement committee (PIC), is “the cornerstone of HOI’s performance,” she says.
“It’s an open committee format with everyone invited to attend and participate — front line, supervisors, managers, surgeons. The quality team actively participates, and it’s very disciplined around a performance improvement structure,” she says.
“Decisions are made and the course corrected, all based on data. The bundling success is based largely on our clinical infrastructure as well as our detailed cost accounting.”
HOI uses time-driven activity-based cost accounting, similar to what is used in manufacturing settings, to detail costs and time-study patient care.
“That allows us to support price bundles, monitor performance, and most importantly, use the data to further improve the care model,” Mitzner says. “I would imagine most organizations understand their clinical performance rates, such as infections, outcomes, and readmissions, but the time-driven activity-based cost accounting gives you more depth in understanding how you provide care. It furthers your alignment with the physicians, which is so important to making orthopedic bundles work.”
However, HOI’s success with bundles did not come overnight. The hospital faced early challenges with quickly improving its data analytics, and in the early years commercial payers did not know how to handle bundles. They were set up to pay individual claims, and bundles did not fit.
“Partnering with individual health plans to take individual, discrete fee-for-service claims and find a way to bundle them was a challenge early on, and I would say in some ways it is still a challenge,” she says.
“The claims processing systems have not caught up with the bundled payment programs.”
Financial Disclosure: Author Greg Freeman, Editor Jesse Saffron, Editor Jill Drachenberg, Nurse Planner Jill Winkler, Editorial Group
Manager Terrey L. Hatcher, and Consulting Editor Patrice Spath report no consultant, stockholder, speaker’s bureau, research, or other
financial relationships with companies having ties to this field of study.