Bundled payments represent an innovative payment reform that offers a full episode of care for a given diagnosis and surgical treatment for a single, fixed price with no hidden or out-of-network fees. In response to the ever rising cost of healthcare, bundled payments are becoming increasingly popular, particularly for self-insured companies for whom the cost of healthcare comes right off of the bottom line. While somewhat slower to penetrate the market in New England compared to other regions such as the Mid South and West Coast, bundled payments can improve value for patients, payers and employers but transitioning care to the ambulatory setting and reducing administrative costs. For many surgical procedures, the same exact care can be provided for half the cost with no impact of quality.
Dr. King and Parsons have been amongst the first orthopaedic surgeons in the Northeast to offer a bundled payment for total hip and total knee replacement surgeries through a corporate entity called PACE, Inc (Personalized Accelerated Care Excellence). Patients with Anthem Blue Cross/Blue Shield and Harvard Pilgrim insurance plans may be eligible to participate provided they meet the criteria for outpatient joint replacement surgery. PACE administers the bundle by receiving a single reimbursement from the insurance company and then making disbursements to the various providers and vendors involved in the care episode. This includes the surgery center, the surgeon, the anesthesiologist, the implant company, the onsite physical therapist, visiting nurses and therapists and outpatient physical therapy. Each of these providers and vendors has agreed to participate in the bundle for a fixed fee through a contract with PACE, Inc. This process avoids the complexity of having multiple entities separately bill the insurance company.
Bundled payments for surgical procedures are particularly attractive for several reasons. 1) the total cost of care is known up front. This is in contrast to fragmented hospital-based care where cost transparency makes it impossible to find out what a procedure will cost through the full episode from preoperative evaluation to 90 days postoperatively. 2) the same quality of care can be delivered for 40-50% of the cost of traditional hospital-based, fee-for-service care. This is made possible largely by avoiding the substantial mark-up that hospitals charge to subsidize their administrative overhead and large capital budgets. Ambulatory surgery centers are more financially efficient. 3) outpatient joint replacement has proven safe, effective and highly satisfying for patients. Ambulatory surgery centers can focus on concierge-level care and staying out of the hospital avoids exposure to sicker patients and more virulent bacteria.
King and Parsons hope to expand the list of orthopaedic surgical procedures that are eligible for bundled payments and to move toward direct-employer contracting for self-insured companies. This would allow such companies to pay directly for lower cost, high quality care and avoid third party payers who work for commission to provide the same service. Direct-employer contracting is a natural extension of the bundled payment model that is also slowly taking shape in other parts of the country due to the significant cost savings that it offers to companies who provide health insurance coverage to their employees.