A subsidiary of Horizon Blue Cross Blue Shield of New Jersey is partnering with five physician practices on a new method to pay for certain types of orthopedic procedures in an effort to improve insurer/provider relations as well as improve quality outcomes and control costs of joint replacements.

“This is a collaborative relationship,” Colleen Matthews, director of the episodes of care program at Horizon Healthcare Innovations (HHI), tells The AIS Report. For the 25 participating orthopedic surgeons in this joint effort, “this isn’t just about working on new models and that things have to change, but that it’s just a great way to be...collaborating with a health plan rather than being in adversarial mode,” Matthews says.

HHI first unveiled the plan to create a major joint replacement episode-of-care pilot with the five orthopedic practices in February. Under this care model, a single practice or provider is responsible for organizing the full spectrum of care for a knee or hip replacement, including pre-operative evaluation and testing, the actual surgery and rehabilitation services.

In return, the practice or physician will receive a fixed reimbursement amount for their services for the episode of care. A collaboration of this type has enabled both carrier and doctor to see things from the other party’s perspective, Michael Duch, M.D., orthopedic surgeon at Trenton Orthopaedic Group, one of the participating physician groups, tells The AIS Report.

Through this bundled payment model, Duch says that he’s learned about things from the insurance perspective and that the physicians have been able to engage with Horizon in discussions about what things cost. “This opens the door in trying to establish the most cost-effective way to ensure quality patient care with good outcomes. So that’s where this has been really fascinating. I’m not sure what the end point is yet, but it’s been opening [my] eyes to so many different things. It has been a fantastic relationship.”

Duch says it’s also been helpful to hear from the other physician groups about what they’ve been struggling with and what they’re doing, “and then trying to put it all together [to determine] cost effectiveness and quality of care with maybe paying less.”

Other participating practices include Hunterdon Orthopedic Institute, Seaview Orthopaedic Associates, Reconstructive Orthopedics, and Shore Orthopaedic University Associates. All of the practices are located in central or southern New Jersey.

Pilot Is Focusing on Osteoarthritis

For now, the bundled payment pilot is focusing exclusively on osteoarthritis patients. “It’s a common problem, the No. 1 diagnosis for joint replacement,” Matthews explains. “It just kind of lends itself” to an episode-of-care bundling pilot. “This is a very elective procedure, whereas some other surgical procedures have more emergent types of situations. This was something we could look at across the board…[as] we were trying to keep the criteria generally straightforward to prove the concept” of the bundled payment, she says.

Matthews says the pilot is using a specific grouper technology to look at the past two years of claims history to get a good idea of the patient’s health status. The pilot will establish budgets for each patient by grouping claims to determine the likely total cost of care for an episode. “If the actual total cost of care is less than the budgeted amount, there will be shared savings among physicians,” Matthews says.

In terms of what would be included or not included in a specific episode of care, “We’ll be looking at claims 30 days before the operation and 90 days after. So, if a patient has a blood clot in the leg as a complication of knee surgery, we would include that in the episode. If the patient has his gall bladder out 60 days after surgery, then we wouldn’t include that in the episode.”

Ultimately, any provider who cares for that patient relative to that episode will have their claims data or costs included in the episode, she says. “So, for example, a patient with a cardiac history that needs clearance for the surgery will be part of the episode. There will be a multitude of different doctors included in the episode. However, it’s the orthopedic surgeon we’re interfacing with who’s steering the ship” of this episode of care, Matthews explains.

Docs Won’t Just Select the Healthy

“Severity indexing” — the process of looking at previous claims history to figure out how much a physician should be paid for an episode of care — is a way to incentivize physicians to treat sicker patients instead of just choosing healthier patients for better outcomes, Scott Schoifet, M.D., partner and orthopedic surgeon at Reconstructive Orthopedics, tells The AIS Report.

“There’s a couple of things you have to watch out for when you do this type of model because if you’re going to reimburse in a bundled payment fashion — meaning a set fee for doing a procedure — then you may have a tendency to preselect healthy patients. So you want to make sure that you’re not necessarily penalized but that you take care of your own complications.” Under this particular model, physicians get paid more if the severity index is higher. “So it doesn’t just make you preselect the healthy patients because if you do a good job on your sick patients you’ll also do very well. You’re incentivized to take care of everybody. And that’s the model we’re currently testing,” Schoifet says.

Data related to these joint replacements are being analyzed by a clinical advisory panel made up of the pilot’s partner physicians and HHI. In looking at the clinical outcomes of this bundled payment model, one of the panel’s goals is to design innovative reimbursement models, “which may ultimately include bundled payments for certain services,” according to HHI. Ultimately, the alliance wants to develop best practices for hip and knee joint replacements.

Matthews says it’s too soon to release any data or related statistics on how many patients have been treated since the pilot’s start date. “We’re still collecting our data on [the patients], so we’re not going to release that externally just yet.” HHI is looking to the first quarter of 2012 to have reportable data, she says.

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