GE, Boeing, Lowes … Adopt Bundled Payments
JUNE 08, 2017
WHY GE, BOEING, LOWES, AND WALMART ARE DIRCTLY BUYING HEALTHCARE FOR EMPLOYEES
By: Jonathan R. Slotkin, MD / Olivia A. Ross / M. Ruth Coleman / Jaewon Ryu, MD
Bundled payments in health care have gained favor because they can reduce costs and help improve outcomes. In essence, episodic bundles cover the cost of a patient’s care from start to finish—all the procedures, devices, tests, drugs and services a patient will need for, say, a knee replacement or back surgery.
While Medicare has led the development of bundles in the U.S., large employers are now directly purchasing bundled care for their employees through selected providers. It is little surprise that direct employer-purchasing of bundled care is a burgeoning area of healthcare payment innovation. Purchasers of healthcare services encounter widely disparate charges across different healthcare delivery systems for equivalent surgical procedures, varying by up to 40%. Boeing and General Electric have been among the leaders in adopting bundles, in part to address these disparities.
…Hospitals and individual participating physicians undergo a thorough and iterative evaluation process. Fewer than 5% of healthcare systems initially identified for participation meet all of the quality requirements for consideration. An invitation-only request for information leads to an extensive review of the system’s quality, outcomes, and patient satisfaction data.
……Negotiated prospective bundled rates cover all services rendered during the episode of care including facility fees, professional fees, ancillary care, implants, and durable medical equipment; the bundles created significantly exceed the services typically included in standard fee for service (FFS) care for the same procedures. These charges usually average 10% to 15% less than what would traditionally be paid in standard fee-for-service arrangements. HDP and the hospital systems negotiate the final terms of the contract, including provisions for outlier situations (such as catastrophic or unrelated complications), and ad hoc additional services occasionally needed (such as pain injections or nerve testing studies).
…The elements .. bear a notable resemblance to current payment innovations such as certain Medicare bundles and employer-purchased bundles. Implementing and expanding these prescient efforts created routine operational processes and a contagious mindset: that quality improvement is part of everyday work, and that we keep score.
Does the program actually lead to improved value care delivery?
Programs of this type are not worth the investment if they do not increase value for patients, purchasers, and hospitals by improving patient outcomes and satisfaction and decreasing costs.
…The program has led to lower patient out-of-pocket costs and excellent patient satisfaction scores. The average Lowe’s associate who has joint replacement surgery performed by one of the centers personally saves approximately $3,300 in copayments and other fees as compared to those patients who get the same care under traditional insurance. In an analysis of 12 month’s experience, 100% of Lowe’s … joint surgery patients reported that they would refer co-workers or family to the program for a similar surgery. Data from The Boeing Company’s experience has shown similarly high employee satisfaction.
Twelve-months claims data comparing Lowe’s associates who have surgery with local providers under traditional insurance as compared to those who have surgery as part of the model demonstrated striking findings. 9.1% of patients having joint surgery with local providers needed discharge to a skilled nursing facility after surgery, compared to 0% of those getting care within the program. 5.9 % of those having lumbar spine surgery with local providers needed skilled nursing care after surgery, while 0% of program patients needed that care. In addition, standard health plan participants had a 6.6% chance of being readmitted to the hospital within 30 days after joint surgery as compared to just 0.4% of program patients. Savings from avoiding unnecessary surgery alone was estimated at $1.3 million. For the highest volume spine procedures, 52% of patients recommended for surgery by home providers are found by our COE providers to not be appropriate surgical candidates. More than 90% of those patients heed that recommendation and do not go on to have surgery at home through traditional insurance. Early estimates around the newer spine program have indicated savings of an additional $1 million to $2 million per year.
Employer purchased bundled payment innovations continue to expand. Prepared healthcare systems are pursuing these relationships, while others caught behind feel trepidation.
We are grateful to Eric Foster of Lowe’s Companies, Inc. for valuable support and data for this article.