“Medicare test would make hospitals bear risk for knee surgeries…” Modern Healthcare: July 9, 2015

The volunteer phase of the war on Fee-for-Service is over, and now the draft is underway, with the news this month that CMS is requiring participation in bundled payments for hip and knee replacement for 75 geographies across the U.S.

Many hospitals have been content to watch the CMS Center for Medicare and Medicaid Innovation (CMMI) from the sidelines, and have not invested in tools or data that could help them manage costs passed on to Medicare.  Without bundles in place, if an orthopedic surgeon is a high utilizer of services, or refers patients post-operatively to costly rehabs or skilled nursing facilities (SNFs), the hospital services are well reimbursed, and the total cost of the hip or knee replacement doesn’t affect the hospital.

With bundled payments, hospitals will have to examine every facet of their operations to coordinate a patient’s care for 90 days from the date of admission, forcing hospitals to identify and contract with the best physicians, rehab centers, skilled nursing facilities and home health agencies.

The task is twofold: 1) How can I best manage the patient while in the hospital to minimize complications and related readmissions, and 2) who are the best provider partners in my area to whom we should steer patients?

The first part puts greater emphasis on things hospitals can control, and now perhaps have greater incentive to manage:  quality, training, best practices, optimal staffing, supply management, equipment and medical devices, safety policies and procedures, and so forth.

The second issue is more difficult and less familiar to many hospital leaders.  How do they develop a network of quality providers who are practicing efficient medicine?  What if an area’s “top surgeons” in a Fee-for-Service context turn out to be high utilizers, or tend to have higher complication rates, or refer to SNFs that always maximize length of stay?

Researchers at Dartmouth began studying unwarranted variation and related answers to these challenges over 30 years ago.  Today, we feature a company in our portfolio, RowdMap, whose team specializes in developing insights from Dartmouth and a variety of other sources that help providers determine what payment models (bundles, shared savings, ACO, medical home) are best for them, what providers represent the best partners to coordinate care, and how they compare with their competition.

Managing risk and unwarranted variation are critical to successful participation in bundled payment arrangements.  For hospitals to succeed in bundles, or any of the new value based arrangements, they must assess their own “risk readiness”, and begin to manage practice patterns, referrals and payer relationships differently.

Stephen DeLozier, Strategy and Development, Hospitals and Health Systems, Leverage Health.

Marshall Votta, SVP Leverage Health