Building Payer-Provider Partnerships for Bundled Payment Models

A bundled payment model born from a payer-provider partnership between Blue Cross Blue Shield Rhode Island (BCBSRI) and University Orthopedics has helped deliver a holistic, outpatient delivery of a common operation, ultimately highlighting both organizations’ effort to move more towards value-based reimbursement.

The average cost of a total knee replacement is $31,124, according to a study from Blue Cross Blue Shield Association. Total hip replacements are similarly as expensive, averaging $30,124. These totals can feel insurmountable, especially in the healthcare industry increasingly working toward lower costs and better outcomes.

Bundled payments have demonstrated the ability to cut down on those massive costs, piquing the interest of leadership at BCBSRI.

“It’s important from a cost-savings standpoint. We’re looking at the reduction of expenses, probably in the magnitude of about thirty percent,” said Chris Bush, vice president of network management at BCBSRI.

To cut down these extreme costs, BCBSRI purposed partnering with University Orthopedics for a bundled payment model to include outpatient hip, knee, and shoulder replacement and arthroplasty surgeries. But this required establishing a strong partnership between both organizations in order to deliver these services.

“We’re constantly looking for providers who are willing to make those transitions,” noted Kevin Splaine, executive vice president of care integration and management at BCBSRI. “We emphasize care being done at the most appropriate and least costly setting that can deliver high-quality consistently.”

University Orthopedics’ Kettle Point Ambulatory Center was the prime location for patients to receive care outside of a traditional hospital setting.

“University Orthopedics will be responsible for delivering an array of services outside of the surgery,” Splaine continued. “There’s a lot of things outside of what you would think of as an orthopedic surgeon’s responsibilities that they’re now taking on and designing around member experience.”

Services included in the bundle are surgery, transportation to and from care, nurse care managers, post-operative examinations, home health services, and physical and occupational services.

But ironing out the specific terms of the agreement required collaboration between BCBSRI and University Orthopedics. Many providers are hesitant to jump into bundled payment models with payers because payers can dictate the terms of service and what is included in the bundle.

BCBSRI and University Orthopedics took a different approach.

“Blue Cross worked with us instead of giving us what the bundle is,” Weber Shill, MBA, chief executive officer of University of Orthopedics explained. “Blue Cross let us design the bundle. Since the providers were involved right from the start, they really took ownership. They felt it was a fair and balanced approach to doing it that worked for everybody.”

Each provider organization has different capabilities, so payers must recognize their different strengths and leverage these in partnerships. This also allows the partnership to be creative and find solutions that work for both sides when discussing the specifics of the agreement.

“You need to have a provider who has the understanding, the vision, and the willingness to want to do this,” emphasized Splaine. “If it’s a payer that is looking to impose that upon a provider, you see significant abrasions. Here we have the benefit of a provider who had the vision and the desire to do that.”

Part of the discussion included determining which elements of care delivery were considered a part of the care episode.

“Blue Cross let us really limit the terms to the orthopedic episode. That fostered physician buy-in because they could control it,” Shill explained. “We laid out every aspect of the patient care episode from initial diagnosis to patient education to the surgery itself, to transportation, to home care, to physical therapy and rehabilitation. We asked what we could do to make these efficient and provide the best possible patient experience and patient care.”

Keeping the patient at the forefront of these decisions was critical.

“We’ve had a keen eye on member experience and trying to optimize those opportunities to have some direct interaction with our members that results in a differentiated level of care,” Bush said. “This arrangement is hitting on all three of those areas: cost, quality, and member experience.”

Because this arrangement emphasizes moving unnecessary care out of the hospital, many patients have a faster recovery time. And having all the services coordinated through one provider allows a more seamless patient experience.

“Many of those members are up and active day one,” Bush pointed out.

While the current bundled payment is limited to only three operations, both organizations have plans to expand.

“We would like to expand to include other types of bundles for other services that might be more routine but may be lower dollars,” Shill expressed. “There’s a lot of opportunity out there to reduce variation in the care for these. By reducing variation, you reduce costs and the byproduct is a great patient experience.”

Similarly, BCBSRI hopes the services can expand beyond their commercial population.

“The commercial population tends to be a less risky population in terms of their overall health. So to start things off, we felt the commercial population was the right place to begin,” Bush articulated.

Growing the bundled payment model and expanding the eligible population will ensure the growth of value-based care.

“It’s our desire to find more provider partners who are willing to think along these lines and continue to move away from fee for service. The industry as a whole is moving in that direction,” Splaine concluded.