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Will the bundled payment model work for ASCs?

The federal government has initiated broad adoption of bundled payment methodologies in inpatient settings including the Bundled Payment for Care Improvement (BPCI) initiative and more recently, the Comprehensive Care for Joint Replacement (CJR) regulations. According to the Centers for Medicare & Medicaid Services (CMS) more than 500 hospitals now participate in these programs.

“Bundled care, however, has not been widely adopted in the ambulatory environment with commercially insured or federally insured patients,” says Thomas D. Wilson, past president of the ASCA Board, co-founder and principal of Global One Ventures (G1), a third party administrator in Carlsbad, California, and chief executive officer of Monterey Peninsula Surgery Centers in Monterey, California. “From 2010 to 2015, more than 2,000 commercially insured bundled surgical cases were performed in California ASCs with overnight stay capability administered by Global One Ventures.” The types of surgery involved included total and partial joint replacement and repair, major spine surgery, hysterectomy, thyroidectomy, mastectomy and breast reconstruction. The payers included Blue Shield of California, UnitedHealthcare (UHC), and large self-insured employers and union groups, he says.

The bundle included all facility and professional fees during the episode of care. The California Department of Managed Care (DMHC) approved the bundled payment agreements, and the California Department of Insurance (DOI) performed a regulatory review.

“Results from the implementation exceeded expectations,” Wilson says. “Patient satisfaction was high; 98 percent said they would recommend a bundled payment methodology to friends. Complication rates were low, with a combined rate of subsequent emergency room (ER) visits, infections and readmissions of 0.67 percent in 2015. And financial savings were significant with an average of $7,648 per case. The total cost is 30–60 percent less per bundled case than if the procedure had been performed in the hospital setting.”

Patient Education

The bundle program paired a comprehensive patient-centric education session with clinical advancements in anesthesia and surgery, says Scott H. Leggett, co-founder and principal of GI and chief executive officer of Surgery One in Carlsbad. “The patient and a family member or friend received preoperative and postoperative education including a surgery-specific guide that reviews the procedure and explains what could be expected with the surgery. Pain management, recovery in the facility and at home—including appropriate and safe physical therapy exercises—and frequently asked questions were also reviewed.” If possible, a home health agency made a preoperative home visit or call. The clinical staff discussed post-discharge care and instructions, including physical therapy and home preparation, with each patient. “The visit allays patient concerns and anxiety while establishing expectations regarding pain control, healing and resumption of normal activities,” he adds.

Financial Results

An essential component for a successful bundled payment program is the generation of savings, says Hilary W. Galbraith, vice president of operations at Monterey Peninsula Surgery Centers. “The model is exceeding financial expectations, especially in mature markets,” she says. “In Monterey County, where the network of providers—ASCs, surgeons and anesthesiologists— has been intact for five years, 451 bundled surgical cases were performed in 2015, paid by commercial carriers and a self-insured union group with 9,000 covered lives.”

The average allowable procedure reimbursement rate—hospital, surgeon and anesthesiologist—for the 451 cases performed in Monterey County in 2015 would have been $18,957 if these cases had been performed in the local hospitals as an inpatient procedure or in the hospital outpatient department (HOPD), she says. The average bundled fee rate for the provider network was $11,309.

Wilson says “We estimate the ambulatory bundled payment model can save CMS in excess of $500,000,000 annually for diagnosis-related groups (DRG) 460, 470, and 473 alone. In 2013, more than 500,000 (540,598 discharges) of these three procedures were performed on CMS beneficiaries in inpatient settings alone, and the number is increasing rapidly.”

The hike in the number is due to the increased number of baby boomers aging and needing this service, as well as to advances in surgical technique, pain control medication and implant technology, Wilson says. “According to CMS hospital data, Medicare spent more than $7.1 billion on for DRG 470 alone in 2015. Our ambulatory bundled payment program is estimated to save 12.5 percent to 15 percent on the current CMS spend. We also conservatively estimate that potentially 50 percent of CMS beneficiaries are medically appropriate to be transitioned to the ASC setting.”

Satisfaction All Around

Nearly half of all patients in the bundled program completed a satisfaction form, and many commented that they appreciated the all-inclusive rate of the bundled fee that incorporates the facility, surgeon, anesthesiologist, first assistant (if necessary), pathology and any laboratory tests, Leggett says. “Consumers expect price transparency and desire one-stop shopping with no hidden additional fees. As co-payments and deductibles continue to increase, patient-consumers will expect this transparency to allow them to make an informed decision on their treatment options.”

Physicians also appreciate the value proposition that they are financially rewarded for their focus on best practices, generating greater efficiencies and reduction of waste, Leggett says. “They are willing to accept financial risk of reduced payments if a readmission occurs as they benefit from the financial rewards resulting from the majority of their patients who experience excellent outcomes,” he says. “They also value a well-run, streamlined, high-quality surgery center that focuses solely on surgery, their specialty.” In addition, if their patients are satisfied with the bundled payment protocol, it contributes to their overall high level of personal satisfaction of functioning within this system, he adds.

ASCs, as well, welcome the bundled model. “They have survived in a global facility fee environment for more than 35 years,” Wilson says. “Extending the reimbursement bundle to include the physician providers is a welcomed evolution since the ASCs are owned by the physicians. This creates a financially aligned collaborative approach to care, encouraging adoption of best practices and rewarding greater efficiency.”

The bundled payment methodology rapidly generates a new business opportunity for the ASC as complex cases migrate from the inpatient setting to the more efficient ambulatory environment, he adds. “Provided the reimbursement rates are fair, ASCs generally sought to participate in our bundled payment facility network.”


G1 tracked outcomes including readmissions, ER visits, infections and falls at the Monterey facilities in 2015. “In the study period, we performed 451 bundled payment surgeries with two ER visits (0.44 percent) and one readmission (0.22 percent),” Wilson says. “There were no falls and no surgical site infections within 30 days. The complication rate was 0.67 percent.” All patients recovered successfully; all complications were thoroughly analyzed, he says.

Lessons Learned

“Over a five-year period, we have seen that the bundled payment methodology is extremely successful in the ambulatory setting for commercially insured patients,” Wilson says. “The model featuring ASCs outperformed acute care facilities in a statewide demonstration project.” This success is attributable to the partnership structure of the ASCs that unites the major stakeholders as owners/administrators, he explains. “The physician ownership of ASCs financially aligns the surgeons, anesthesiologists and the facility to adopt best practices, reduce waste and standardize supplies and expensive implants. This enables the facility to scale purchases at lower costs and eliminates redundancies. The results are savings of 30 percent or more to the commercial payer with total complication rates significantly less than 1 percent.”

Galbraith says, “The same elements that enable the bundled payment method to succeed in the commercial market can be applied to federal programs (CMS) with similar results. The time is now for CMS to embrace bundled payments in ASCs.”