The CFA Perspective

Physician/Hospital Alignment and Bundled Payment – Part Two

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Continuing the discussion from Part One of physician/hospital alignment and the reemergence of bundled payment initiatives, let’s discuss the impact of health care reform in the area of bundled payment for care.  A national pilot program on payment bundling is included in H.R. 3590, the Patient Protection & Affordable Care Act.  This pilot program is set to commence in 2012 (no later than January 1, 2013) and run for five years.

Although conceptually similar to previous efforts by HHS, this pilot is intended to bundle payment for an entire episode of care inclusive of up to 30 days post-hospital discharge (implying an unprecedented level of physician/hospital cooperation, coordination and collaboration!).  While no identification of covered procedures/conditions has yet been made, but it seems reasonable that major cardiovascular procedures, and possibly certain medical cardiology admissions such as heart failure, will be included as has been done in past pilot projects.  Some other details included in the legislation (and pending final detailed regulations), include the following:

• Inclusive of Medicare beneficiaries
• Up to eight medical conditions for an episode of care to be selected
• Conditions will be a mix of chronic and acute
• Bundled services to include acute inpatient, physician, outpatient hospital, post acute, and other appropriate services
• An episode of care is defined as three days prior to admission, inpatient hospital admission, and the 30 days following discharge from a hospital
• Program to be established no later than January 1, 2013
• Quality measures to be developed under contract for use in the program
• The pilot to be conducted for a period of five years
• Applications can be submitted by an “entity” consisting of a hospital, a physician group, an SNF, and a home health care agency
• The Secretary of HHS will make bundled payments (amounts to-be-determined) to the contracting entity
• Quality measure to be reported and to include:
  • Functional status improvement
  • Reducing rates of avoidable hospital readmission
  • Rates of admission to emergency room after hospitalization
  • Incidence of healthcare acquired infection
  • Efficiency measures
  • Measures of patient-centeredness of care
  • Measures of patient perception of care
  • Other appropriate measures of patient outcome
• An interim report on the demonstration not less than two years after implementation
• A final report no later than three years after implementation

Participation in such a pilot project is always challenging – it must make both strategic and operational sense to the participant(s).  Notice the high level of cooperation, coordination and information required of the participating “entities” especially among hospital and physicians inclusive of both pre-hospitalization, hospitalization and 30-days post-acute care phases!  The work that will need to go into the program design on the part of all of the participants, just to be able to file an application, let alone pull off designing and managing such a program at the local level will be extraordinary.

Will this pilot program “have legs?”  Only time will tell.  However, it is vital for hospitals and physicians to recognize that such efforts will only continue and place an increased burden on hospitals to solidify their alignment strategies with select physicians.  It is hard to image that success under the requirements of care coordination, bundled payment and pay-for-performance scenarios can be possible without the appropriate physician/hospital alignment strategies in place.

CFA will keep you informed on further developments on hospital/physician alignment and bundled pricing, and would welcome your thoughts and comments as we progress. For further information, CFA recommends you review H.R. 3590 and, in particular, the proposed bundled payment pilot program.

Hospital and Physician Alignment in the Cardiovascular Enterprise

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Hospital cardiovascular program managers and cardiology, cardiovascular surgery and vascular surgery practice administrators are well aware of the continuing evolution of cardiac and vascular medicine and the multitude of challenges facing each of us.  For cardiovascular program leaders across the country, the challenges of the past will continue into 2010, along with new circumstances requiring creative solutions.  The national debate over healthcare reform that is heating up is leading to more confusion and indecision about the future.  Hospitals and physician practices continue to be inundated with strategic, clinical, financial, operational, and competitive issues that require informed organizational responses.  The possible strategies to successfully address these issues are numerous and varied.

In such times, an approach that pools resources to solidify the program's foundation for the future is critical to short term and ongoing success.  Sound physician/hospital alignment has the potential to be a CV service line transformative strategy that can:

1. Align strategic, operational and financial incentives between physicians and hospitals
2. Provide a platform for developing customized integration strategies
3. Improve operating performance and profitability
4. Reduce/prevent competitive risk and predatory recruitment
5. Gain competitive advantage; retain and expand market share

Experience in the field of cardiovascular physician/hospital alignment projects, leads to several key conclusions when planning for a cardiovascular program's future:

• If you have seen one and done one, then you have seen just one and done just one. Unfortunately, what has worked in one city, for one hospital or group of physicians, may not work for you. A situation that seems similar to yours may be different in a crucial aspect that precludes your success.
• While there is a major trend towards hospitals employing specialists like cardiologists and cardiovascular surgeons, this is not always doable-nor is it frequently the best answer in all circumstances and in all communities.
• It isn't always about money. Yes, economics and aligned incentives are important, but a myriad of personal, political and other factors can impact physician thinking and hospital actions. How often has a physician said that he wishes he was in charge of the CV service line for just one day? Very often, the issue is the appropriate exercise of control and sharing of management responsibilities.
• Do not think that establishing a physician/hospital alignment model is simple, straightforward and completed quickly-it can be a contentious, problematic, sometimes meandering, and occasionally disappointing process.
• Incremental steps are not a bad strategy. Alignment options short of employing physicians offer hospitals and physicians a chance to work together more closely and experience a new collaborative business model. Experiencing what it is like to work together under a new arrangement can prove invaluable to both parties prior to employment should that be a consideration. This is especially true during this period of uncertainty about the implications of healthcare reform.

Interested in further information on the topic of Hospital and Physician Alignment in the Cardiovascular Enterprise?  Download a copy of CFA's article Physician and Hospital Alignment Strategies: