Willing to assume risk? Try bundled arrangements
Willing to assume risk? Try bundled arrangements
Volume pricing by procedure can work for rehab
If you can’t beat em, join em. That’s the approach a few rehab providers have chosen by trying the new cutting-edge reimbursement trend, bundled pricing. Also known as the episode-of-care approach, bundled pricing allows a hospital to charge one sticker price to cover all elements related to the continuum of care for specific types of cases.
The price might include surgical fees, operating room costs, and other associated hospital costs, as well as expenses incurred outside the hospital realm relating to patient treatment, such as follow-up medical visits to specialists outside the hospital, durable medical equipment, or outpatient physical therapy.
Going a step beyond global pricing
Shepherd Center in Atlanta, for example, has benefited from global pricing arrangements that assume risk for all procedures performed on a specific type of patient during the hospital stays. Shepherd is taking risk assumption one step further by pursuing episode-of-care deals for patients with multiple sclerosis and three categories of spinal injury patients: high-level quadriplegics, low-level quadriplegics, and paraplegics.
"Because we’re also an acute care hospital, that gives us the capability to package price that very few other rehab centers would be able to do," says Mitch Fillhaber, Shepherd’s vice president of marketing and managed care.
Specifically, the concept works like this:
A provider identifies a high-volume, high-cost procedure that has strong potential to be performed efficiently without sacrificing quality of care. For example, Medicare demonstration projects in bundled care have been conducted for total joint replacements and coronary artery bypass procedures.
The rehab unit of a hospital, either independently or through the hospital’s managed care department, aligns with other health care providers involved in the procedure. This typically involves a vendor and a physician practice.
The team works together to develop a critical pathway for the procedure, developing "best practice" methods that follow patient care from the moment the decision is made to perform the surgery through preadmission checkups and tests, the actual surgical procedure, and any needed follow-up care, such as rehab or physician visits. Costs and medical outcomes are monitored to ensure goals for efficiencies, functional outcomes, and quality of care are met.
Shepherd’s global pricing arrangement with United Healthcare, a Minneapolis-based HMO that charges United-defined case rates for all care delivered at Shepherd to the three categories of patients, Fillhaber says. Shepherd has benefited from the arrangement in several ways:
• The insurer is less involved in day-to-day care decisions. "There’s a certain degree of micro-management [from an insurer] that every facility has to cope with. We felt that if we could develop a comprehensive global rate, . . . it would minimize their need to be aggressively involved in administration [of patient care]," he says.
• Shepherd enjoys more latitude in patient care. As the patient moves along the continuum of care, goals and needs may change. By charging one case rate for all care delivered, there no longer is a concern about whether a method of suggested care is a noncovered benefit.
• Good results are easier to demonstrate. As a spinal cord injury center, Shepherd typically treats patients with higher acuity levels, which often means higher costs. "Contracting on a per-diem level invites comparisons between Shepherd and other hospitals. It’s too convenient for a health plan to perceive us as costly and deny an admission that we’ve been referred by a regional hospital or trauma center," Fillhaber says. By being able to produce care at or under a set budget, Shepherd can demonstrate it has the ability to be efficient.
Under the global case rate structure, Shepherd assumes all the risks for care within a defined range of ICD-9 codes. If care for a patient totals less than the agreed-upon price, Shepherd keeps the profits. But if care exceeds that amount, Shepherd eats the loss.
Shepherd’s experience with global case rates has worked so well that the hospital is pursuing episode-of-care contracts with managed care companies for multiple sclerosis patients and for the three types of spinal cord injury patients involved in the current global pricing deal. The hospital is actively pursuing contractual arrangements with other payers, as well.
The multiple sclerosis arrangement is part of a disease state management program Shepherd developed that sets a price based on a 12-month period of care, Fillhaber says. Based on eight years worth of data Shepherd has collected from more than 2,000 multiple sclerosis patients, the hospital developed three pricing structures based on a patient’s level of drug regimen.
Patients are grouped into one of three categories: an ambulatory group, an immunosuppressant group, and a steroid group. Or payers can contract with Shepherd based on a composite rate for all their enrollees with multiple sclerosis, which is somewhere between the highest rate of reimbursement (the steroid group) and the lowest rate of reimbursement (the ambulatory group).
The costs of care contracted under these arrangements include those for medications, durable medical equipment, home health care, and any primary and specialty care related to management of the disease, such as doctor’s visits, Fillhaber says. Also, the contract lists exclusions for specific types of care identified by ICD-9 codes and has a stop-loss provision when costs exceed 2.5 times the case rate in use. Once charges exceed that rate, reimbursement reverts to a fee of 80% of actual charges. This situation might occur if complications develop from a patient treatment or if other extreme events occur.
The episode-of-care arrangements Shepherd is pursuing for a select group of spinal patients includes all medical and surgical costs incurred at Shepherd as well as any continued therapy, such as preventive care visits or telemedicine outreach needed, Fillhaber says.
Why haven’t more providers entered these kinds of arrangements? Some say managed care companies in some markets are reluctant to pass on the risks — and possible gains — to providers, while others say rehab can be a difficult area in which to implement the concept.
Robert Westergan, MD, medical director of the Jewett Orthopaedic Clinic in Winter Park, FL, says his practice has approached local payers about participating in an episode-of-care arrangement for joint replacement patients — to no avail.
Tom Pedersen, a consultant with Phoenix HealthCare in Redondo Beach, CA, says phys ical therapy and orthotics services can be tricky. Both represent areas in which care isn’t always delivered "off the shelf" due to patient complications and differences in patient mix. Pedersen says it is hard to apply a set concept to treating a particular class of patients because each patient is different, and it is hard to predict how many therapy visits a patient will need. In the case of durable medical equipment, it could take several fittings for a cust omer to be satisfied with a prosthetic device.
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.