by Maria K Todd, MHA PhD

Founder and Executive Director
The Center for Health Tourism Research

For an employer that wants to contract with a hospital or medical travel provider in another city or state, bundled case rate examples in this article give insight into what's likely to be acceptable if the employer prepays the estimated case rate up  front and settles on any additional incidental costs within 10 days' time from discharge.  

Many employers and insurers are still paying north of $50,000 for these cases after network access fees, fee schedule payments for claims, together with rehab, medications, implants, pre-op testing and imaging, and more. Some are already paying for travel, they're just traveling to places that may still be more expensive.  

With Mercury Health Travel, employer and labor unions gain insight into what's possible with regard to savings, and where to find providers willing and ready to negotiate bundled case rates and deliver quality care.

Bundled Case Contracting with Commercial Payers

Along with care coordination and risk-based shared savings, an increasing number of PPOs, HMOs and other third-party payers are contracting with providers for bundled payment initiatives.

Humana - partners with providers to incorporate bundled payments with hip and knee replacement surgeries much like the CMS Comprehensive Care for Joint Replacement Model. Retrospective modeling is the system they are using which is where fee-for-service where providers are paid as usual, but at the end of a performance period, the cost of the bundle is reconciled versus the cost target and savings are evaluated and shared. This method is very confusing and gives most of the power for decision making to Humana. They only charge you for down side risk and limit the upside risk and keep the savings for themselves.  Contracting this way is problematic for providers because they can't access the cash, have to take great pains to negotiate fair and equitable terms, and Humana as the power to do whatever it wants because it has possession of the cash and arguing rights without a requirement to provide transparency about how the math was done unless you remember to add that transparency requirement and a time frame to deliver it on request, to your contract.

Cigna - is working to implement value-based care payment strategies including episodic bundled payments for hip and knee surgery as well as maternity care. Cigna’s transition to value-based care began in 2008 when it launched its first patient-centered medical home pilot with Dartmouth-Hitchcock in New Hampshire.  Cigna plans to implement its value-based alternative payment models in a similar fashion to CMS. Cigna takes on the same goal as CMS to ensure half of their healthcare spending is in alternative payment models by 2018.  But don't assume that the programs are identical at every touchpoint.  They call their program Cigna Collaborative Care which now includes value-based arrangements with 160 primary care physician groups, as well as more than 70 value-based arrangements with specialty practices in the fields of obstetrics/gynecology, orthopedics, gastroenterology, general surgery and cancer care. They recently announced several new Cigna Collaborative Care arrangements for cancer treatment. Other specialty initiatives include episodes-of-care arrangements for maternity care, hip and knee surgery, gallbladder surgery and colonoscopy, as well as pay-for-performance maternity care arrangements. Cigna also plans to launch episodes-of-care programs for cancer care and heart surgery. We've also started seeing inklings of new initiatives in psychiatry and psychotherapy services that place providers at risk for outcomes.  The company also has value-based collaborative arrangements with 101 hospital systems comprising more than 370 hospitals.

Our physician, hospital and ASC clients are concerned about bundled payment risks - and they should be

Physicians may find bundled payments a challenging form of reimbursement since there may be costs associated with a patient’s treatment that are out of their control. Hospitals and ASCs are at even greater risk. For those entering into deals with CMS directly, there should be a sigh of relief because of the transparency of applied policies, metrics, data sharing and appeal that's available.  In the commercial setting - maybe not exactly.

RELATED ARTICLE: HOW TO QUOTE AN OUTPATIENT SURGERY CASE RATE

The Centers for Medicare & Medicaid Services (CMS) has invested its time and resources into expanding upon bundled payments. The federal agency introduced the Medicare Bundled Payment for Care Improvement (BPCI) initiative in October 2013.  In that program, a number of different medical facilities, including post-acute care centers, hospitals, and physician groups participate under 4 different demonstration projects. Payments are tied to multiple services Medicare beneficiaries receive during an episode of care. The first system consists of paying hospitals for an inpatient, acute care stay. The second and third models are based on a retrospective bundled payment platform that looks at spending against a set price for an entire episode of care.  

The difference between this program from CMS and look alike programs from commercial payers is that not all commercial payers adopt all the rules, formulas, or applications of policy. So while something may appear the same on the surface, the iceberg of variation lives under the surface. And unlike CMS each is P-R-O-P-R-I-E-T-A-R-Y, meaning you don't get the same policy transparency and due process you get through CMS. While CMS uses an Administrative Law Judge (ALJ) to settle disputes with the program - a dispute with a commercial payer requires providers to submit disputes to litigation, arbitration or mediation and often without the necessary transparency for the arbiter to make decision. Remember, no subpoena duces tecum is used in arbitration. Put your subpoena language inside your contract language so you have it when you need it.

CMS also initiated the Comprehensive Care for Joint Replacement (CJR) model to cover the expenses of hip and knee replacement surgeries among Medicare beneficiaries. Through bundled payment models, hospitals, physicians, and post-acute care centers are meant to work in coordination to treat a patient before, during, and after a joint replacement surgery in order to receive payment for an episode of care.  With hip and knee replacement surgeries becoming one of the most expensive and most common operations among Medicare beneficiaries, it is understandable that CMS has pursued an alternative payment model to cover these expenses.

Bundled pricing primer for self-funded and self-insured U.S. employers and labor unions

People are working past the age of 65, and in those cases, Medicare becomes the secondary payer. In 2014, more than $7 billion was spent just on the hospitalizations associated with joint replacement surgeries.  With a domestic medical travel program, employers and labor unions that are self-funded for their healthcare claims can opt to choose high performing providers outside their local area and tap into other domestic providers willing to offer bundled case rates to steer cases to their hospitals and ASCs that may be located in less expensive rural markets.  For that reason over all others, plan administrators may be curious to find out if a bundled pricing program can be implemented for their company. We can help you to determine and decide for yourself.

Median case rates paid by Medicare in 2013 (weighted, n= 36 million cases) for the following cases can give you a hint at what prices are being paid nationwide:

  • Total Hip Replacement  $15,000
  • Partial Hip Replacement $15,000
  • Total Knee Replacement $14,000
  • Total Ankle Replacement $20,000

For an employer that wants to contract with a hospital or medical travel provider in another city or state, these numbers give an idea of what's likely to be acceptable if the employer prepays the estimated case rate up  front and settles on any additional incidental costs within 10 days' time from discharge.  Many employers and insurers are still paying north of $50,000 for these cases after network access fees, fee schedule payments for claims, together with rehab, medications, implants, pre-op testing and imaging, and more. Some are already paying for travel, they're just traveling to places that may still be more expensive.

ABOUT THE AUTHOR

Maria Todd is a trusted adviser and expert specialist to hospitals, clinics, governments, healthcare business owners, investors, and independent professionals. Clients call on her to help them do a better job of marketing, branding, or contracting with insurers and employers, and to grow their business.

Maria is the CEO of Mercury Healthcare International, in Denver, Colorado and the founder of Mercury Health Travel, the leader of the Health Tourism Practice Group of Mercury Advisory Group, the Executive Director of the Center for Health Tourism Strategy, its research and education resource center, and a Board Member and Advisor at Higowell, the world's first health tourism operations platform. She has been recognized as an Academician with the Ukrainian Academy of Rehabilitation and Human Health and is a member of the Scientific Committee of Termatalia in Spain. She is also a Board Member at Global Health Connections, a nonprofit organization associated with the University of Colorado MBA-HA program. She is the author of 15 internationally-published business improvement books in healthcare administration and health tourism. 

Invite Dr Todd to speak at your next event.  She presents a compelling workshop of interest to tourism and economic development officials, foreign investors, healthcare strategists, and suppliers on Opportunities for Economic Development through Inbound Medical Tourism Sector Development.