February 14, 2018
8 min read

Effect of bundled payments on reimbursement, surgical volume

Given the reimbursements currently received for the Comprehensive Care for Joint Replacement model, how can orthopedic surgeons offset the possibly reduced revenue?

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The Sept. 18, 2017 Forbes article, “If we cut surgical pay, will surgeons cut into more people,” is a commentary on one perceived effect of bundled orthopedic payments: If reimbursement goes down, surgeons may decide to do more joint replacement surgeries. The author makes interesting and provocative statements. However, some of the comments question the orthopedic surgeon’s ability and motivation to make the right decisions with their patients.

Orthopedics Today decided the article’s sentiments should be discussed in this month’s At Issue article because it may perpetuate some false concepts. The fact is, no matter what changes are made to reimbursement, the number of procedures, especially joint replacements, is steadily increasing due to the aging population. Some analysts have predicted that by the start of the next decade, twice as many total knee replacements will be performed as are now performed. Overall, I contend that, more than anything else, the increase in total joint replacements reflects better care, better access to care, better comfort for the patients and better quality of life postoperatively.

Anthony A. Romeo, MD
Chief Medical Editor

Onus is on orthopedic surgeons to optimize, select right patients

Jack M. Bert
Jack M. Bert

If we use alternative payment models, just the opposite effect could occur because it puts surgeons at risk for making sure they optimize patients and choose the right patients for surgical procedures or they will become financially liable for readmissions and complications.

Bundled payments put providers at risk and theoretically should reduce the cost of care due to more appropriate patient selection, better implant price negotiation and lower site of service cost. The question becomes, will physicians optimize patients prior to proceeding with the bundled payment experience or proceed with surgery despite moderate to significant patient comorbidities? If so, they may find they will have a high percentage of “bundle busters” or “avalanche cases” that will result in significant financial expense. Unfortunately, in the current fee-for-service system, surgeons are rewarded on the volume of procedures performed and using group-owned ancillaries unrelated to outcomes or cost of care. Payers and employers are seeking “quality care,” which is defined as outcomes plus service divided by cost. Thus, the highest quality providers will utilize appropriate patient selection and optimize patients prior to surgery to attempt to reduce complications and readmissions, which not only improves outcomes, but reduces “case costs.” Hopefully, by optimizing patients prior to surgery, this should reduce the number of inappropriate procedures performed. If the bundle is managed properly, the surgeon group should be financially successful, as well as reduce complication and readmission rates.

Louis F. McIntyre
Louis F. McIntyre

There are now 14 published articles that confirm TKR results in patient satisfaction rates of 80% to 82% and thus, TKR may not realize preoperative patient expectations in all cases. The bottom line is employers who purchase health insurance will expect low-cost, high-quality care in the future and orthopedic surgeons must utilize appropriate patient selection criteria that can be enhanced with preoperative risk stratification tools, as well as case managers, to optimize patients prior to and during the surgical experience and thus improve employee satisfaction at a reduced cost.

When direct “employer-to-provider” bundled contracting becomes more common, this approach to patient selection will be mandatory to avoid poor clinical outcomes and significant financial liability. In addition, a surgeon-directed bundled arrangement will seek to maximize efficiencies to provide the best outcomes at the lowest price. Bundles have the potential advantage of reintroducing price into orthopedics, which will result in competition on both the cost and quality sides of the TJR equation.

Disclosures: Bert reports no relevant financial disclosures. McIntyre reports he is employed by Northwell Health, which is involved with the Comprehensive Cure for Joint Replacement model.

Physicians with a stake in reducing cost of care will deliver better care

William G. Hamilton
William G. Hamilton

This Forbes article makes a simplified assessment of the potential impact that bundled payment care improvement (BCPI) initiatives may have on the volume of future TJRs performed in the United States. While the argument that paying less for procedures leads to surgeons doing more procedures has merit, the design of bundled payments was intended to negate this possible effect.

One indisputable fact of the future of Medicare payments is the current rate of payments and growth is unsustainable. At the current rate of growth, affording the future costs of providing care is challenging. More than one study has projected an exponential increase in the volume of TJR procedures in the next 30 years, and an unsustainable rate of growth of payments in that same timeframe. As critical players in the health care payment system, physicians must partake in the design and execution of plans to make our health care system affordable and sustainable while maintaining and improving value for our patients. Bundled payments is one early, albeit flawed, attempt to reduce payments without sacrificing physician payments.


Reduce waste

CMS has designed the bundled payment system to reward hospitals and physicians who decrease their overall cost for the bundle (all costs incurred for the 30 to 90 days following surgery). For a center which is high-cost, significant profit could be reaped if wasteful services, such as extended rehabilitation or unnecessary readmissions, could be reduced. Depending on who “owns” the bundle (the physician or the hospital system), additional payment can be generated to offset the risk incurred for taking on the initiative. As a result, while maintaining the same volume, surgeons could perhaps increase their reimbursement without increasing their volume. In theory, the result could include lower costs to CMS without physician salary erosion.

Challenge of added cost-cutting

Unfortunately, the formula will eventually lead to a “race to the bottom.” Once waste is slowly eliminated, all centers will approach a baseline cost where additional cost-cutting measures will become difficult to achieve. Any physician bonus that may have been achieved in the early years of bundled payments will also disappear. Centers that entered into the BCPI with a low baseline cost have already experienced the disappointment of learning how difficult it is to trim the waste from an already efficient and low-cost program.

One aspect of BCPI that does make sense to me is the inclusion of physicians in the process of making care more affordable, as well as allowing physicians to reap benefits once savings are realized. I believe physicians are the most appropriate players to reduce costs while improving quality, and they will be motivated to do so via legal and ethical gainsharing or co-management arrangements.

Physicians can influence optimizing clinical pathways, increasing discharge disposition to home and reducing readmissions. It can also be helpful to engage patients in the process. Preoperative education can improve preparation and reduce anxiety. If patients understand the goals of the perioperative period and have open lines of communication to the providers, discharge disposition to home can be increased, and ER visits and readmissions reduced. New technologies and platforms that allow patients to communicate more seamlessly with providers (eg, smartphone apps) may facilitate this.

For physicians to succeed in the current bundled payment model, they must have a stake in the development of the systems that will reduce the cost of care, as well as a share of any profit that is realized. The formula for physician compensation must be clear and based on measurable indices. Allowing hospitals to distribute the physicians’ share of savings after using complex formulas and applying obtuse overhead and expenses is a recipe for failure. Likely, the future formula will evolve to better measure value and reward centers that truly provide the best care.

Disclosure: Hamilton reports he receives royalties from, is a consultant and performs product development for DePuy Synthes; and is a principle investigator with institutional funding for studies for DePuy Synthes and Zimmer Biomet.


Volume-based strategy may lead to increased risk despite the possibility of greater revenue

B. Sonny Bal
B. Sonny Bal

The Forbes article touches upon one of the largest conflicts facing surgeons, and one that is recognized by patients and payers alike, ie, most surgeons in the United States get paid more when they operate more. Even higher revenues may be forthcoming for those surgeons who perform procedures in surgeon-owned ORs and hospitals. Due to the direct relationship between surgical volumes and surgeon income, significant variations in surgery rates from one geographic region to another have been identified, independent of disease incidence. Beyond regional fluctuations in surgery utilization, variations in elective spine fusion surgery rates between a fee-for-service model and a salaried health care system were described in an article by Schoenfeld and colleagues in Clinical Orthopaedics and Related Research in 2017. In that study, spinal interbody fusion procedures were utilized at a higher rate in the fee-for-service setting compared to the salaried model, independent of the underlying diagnosis.

The authors of this study commented that provider inducement to operate more and generate additional income in fee-for-service models may lead to suboptimal performance in risk-based reimbursement models, such as bundled payment schemes. The reason for this is that fee-for-service models incentivize higher volumes of care, rather than the efficiency of care that is envisioned by bundled payments models. Other authors have also observed that fee-for-service provides incentives for excessive treatments and suboptimal system payoff. Bundled payments can also lead to suboptimal patient selection and treatment levels, with a high level of financial risk for the provider. These payment schemes are highly sensitive to the bundled payment value and to the risk aversion of the provider. Both bundled payment and fee-for-service models can result in decreased financial performance as the risk aversion of the provider increases.

Risk of increased liability

Independent of how surgeons choose to offset decreased revenues under bundled payment models, it is important to recognize and minimize the risk of increased liability exposure in a bundled payment model. First, surgeons should identify and adhere to practice guidelines whenever possible and if no clear guidelines exist, participate in creating evidence-based guidelines. Surgical interventions outside of these guidelines can create economic risk, as well as potential liability exposure from claims of unnecessary surgery. Secondly, presurgical optimization of controllable, patient risk factors is essential in a payment model where the economic risk of early complications is transferred to the surgeon. Third, while performing surgery in surgeon-owned centers may control costs and optimize revenue in a bundled payment system, patient selection for such venues must be vigilant and adhere to best practices with timely input from anesthesia colleagues. When foreseeable complications occur from ill-advised surgery in outpatient centers because of existing patient comorbidities, significant legal liability exposure can follow.


Understand practice guidelines

The bundled payment schemes, in my view, transfer economic risk to the surgeon, and reflect another milestone in the steady ratcheting down in surgeon reimbursement and pricing power. The intuitive reaction among surgeons, as the Forbes article suggests, will be to operate more. However, a volume-based strategy in a bundled-payment environment may lead to increased liability risk, even as increased revenues may prove elusive. More so than ever before, surgeons should understand practice guidelines, patient risk stratification, the impact of comorbidities on outcomes, the cost structures built into their practices and the quality measures used to gauge their performance and determine financial rewards. Longer-term, medical leadership is urgently needed to step up and participate in the development of quality guidelines and payment schemes that properly incentivize surgeons for both the quality and the quantity of work. Given the enormous market power of governmental and non-governmental payers, the fragmentation of the medical specialties, and the difficulties in measuring health care quality as pointed out in the Forbes article, the future for favorable surgeon reimbursement is likely to prove challenging.

Disclosure: Bal reports no relevant financial disclosures.