The CFA Perspective

Physician/Hospital Alignment: Bundled Payment – Part III: California

Posted by Peter Rastello

9/13/10 1:52 PM

Continuing our discussion from Part Two of physician/hospital alignment issues in general, and the reemergence of bundled payment initiatives specifically, an important new pilot will soon take place in California.  The Integrated Healthcare Association ( is launching a new bundled episode of care pilot.  The IHA is a statewide group that promotes quality improvement, accountability, and affordability of healthcare in California and consists of hospitals, hospital systems, managed care organizations, physician groups, vendors/suppliers, and others.  They have been doing some interesting work, including sponsoring the largest non-governmental pay-for-performance program in the U.S., with 8 health plans, 229 medical organizations representing 35,000 physicians providing care for 10.5 million members.


The pilot will include episode payment for total knee replacement and coronary artery bypass graft (CABG) procedures. Implementation will include mutually agreed-upon episode definitions, analysis of health plan claims data, negotiation of a payment model with implementation of this phase of the pilot expected in August 2010.  Later phases of the pilot will expand the number of covered procedures and extend the pilot outside of southern California.


Participation in the pilot is voluntary (all have preexisting contractual relationships) and includes:  Aetna, Blue Shield of California, CIGNA, HealthNet, Cedars-Sinai Medical Center, Hoag Hospital, UCLA Health System, Saddleback Memorial Medical Center, and Tenet-California.  Additionally, several IPAs, and medical groups will participate.


Bart Asner, MD, CEO of Monarch HealthCare and one of the IPA pilot participants, states:


“Over time, pilot participants commit to sharing savings realized via higher-quality, more efficient care.  Ultimately, these savings will flow through to consumers in more affordable health insurance products.”


This pilot was profiled in a Los Angeles Times article entitled “One-Price Approach to Surgery” (LA Times, April 24, 2010) which focused on the “wildly different prices for the same medical procedure, often in the same town.”  They sited as an example, a health insurance executive that had both knees replaced a couple of months apart in separate northern California hospitals, but by the same surgeon.  The bill at the first hospital was $95,000, but the second cost only $55,000.  The article goes on to discuss the potential for bundled payments to increase care coordination and having the potential to slow down the rise of health care costs and drive down premiums.  It also mentions the possible downside of bundling:


  • Works well for defined procedures such as CABG, but is difficult to apply to chronic conditions such as diabetes
  • Does not deter hospitals and physicians from performing unnecessary tests and procedures
  • Will not impact the continual rise of labor costs and prescription drugs; two large cost drivers
  • May give hospitals and physicians greater clout in negotiating prices with insurers


This bundled payment pilot points out the critical “three-legged stool” (hospital/physicians/payer) required for success.  Hospitals must have willing physician partners to work with and the insurance market must be willing to buy this new product at a negotiated price.  Note that since California prohibits the direct employment of physicians, the physician/hospital affiliation model employed under this pilot is the affiliated independent medical group or IPA, which aligns its incentives with the hospital to produce a shared savings.


As one can see, experiments with bundled payments for episodes of care continue to flourish.  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.

Topics: Bundled Hospital Payment, Cardiovascular Physician-Hospital Alignment, Cardiovascular Hospital Services Optimization

Physician/Hospital Alignment and Bundled Payment – Part Two

Posted by Peter Rastello

8/18/10 9:12 PM

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.

Topics: Bundled Hospital Payment, Cardiovascular Physician-Hospital Alignment, Cardiovascular Services Consulting

Is the Heart Hospital Dead? (Well…Maybe)

Posted by Peter Rastello

6/29/10 12:31 PM

The future of physician-owned or joint-ventured heart hospitals would seem to be dead.  What officially killed it is H.R. 3950, the Patient Protection & Affordable Care Act, which declares that, unless they have a provider agreement in place prior to December 31, 2010, physician-owned hospitals (of any type) are excluded from Medicare participation.  These controversial entities have suffered as of late from a confluence of market forces that did not bode well for the long-term health of the heart hospital.  In particular, two major factors worked against them:


  • the continuing trend towards physician/hospital alignment, particularly specialty physician employment by hospitals; and,
  • the continuing trend towards the development of outpatient services at the expense of inpatient hospital services.


Thus, freestanding, for-profit heart hospitals began to lose their novelty and market luster.  Even MedCath, the proprietary developer of heart hospitals, is divesting some properties and looking to sell itself or more of its hospitals.  It recently sold its ownership stake in the Heart Hospital of Austin (Texas) to St. David's Medical Center of Austin.


On June 3, Physician Hospitals of America, representing 260 physician-owned hospitals, along with the Texas Spine & Joint Hospital filed suit in U.S. Federal Court challenging the constitutionality of Section 6001 of the new law.  They denounce the passage of healthcare reform, saying it will destroy the 60 hospitals currently under development, cost 25,000 jobs in 38 states, and cost billions of dollars in invested costs.   This time, politics, and of course, supporting market trends, seem to have won out over entrepreneurship and the free market.  Unless, that is, that section of the law is overturned in court!


The overall strategic, competitive and financial value of the freestanding heart hospital concept has been debated time and again over the past several years, with full-service hospitals out to kill it, and our purpose is not to rehash this debate here.  It would seem then, that the following conclusions can be drawn from a distillation of current trends and recent legislation:


  • There will be no new physician-owned heart hospitals developed in the U.S. if H.R. 3950 stands and/or the specific prohibition on physician ownership is not repealed or overturned in court.
  • Existing physician-owned or joint-ventured heart hospitals, while under increasing economic pressure, are still viable competitors to hospital cardiovascular programs in specific markets and under specific market circumstances.
  • Physician/hospital alignment strategies up to and including employment models can be viewed as a successful alternative against physicians considering options such as heart hospital support, ownership or participation.
  • Hospitals and health systems will continue to develop their cardiovascular programs by incorporating heart hospital concepts into their strategies, including developing new hospital-owned heart hospitals and/or purchasing existing/competing heart hospital ventures to expand their capabilities, market reach and market share.
  • Physicians can no longer view freestanding heart hospitals as viable investment opportunities. Existing development will be halted and no new development will be allowed.


If there is a lesson here, it is that even in a market-driven economy such as healthcare, politics cannot be divorced from economics and market trends must be continuously and critically evaluated by all providers if they are to succeed and prosper.


What do you think?  As always, CFA values your thoughts and comments.

Topics: Cardiovascular Physician-Hospital Alignment, Physician-owned Heart Hospital

The Transradial Approach to PCI – A “Win-Win” for Everybody?

Posted by Peter Rastello

3/31/10 7:30 AM

When was the last time you came across a simple and straightforward change in clinical technique that typically results in better clinical outcomes, fewer complications, higher patient satisfaction, and lower cost per procedure?  While that has occasionally happened in the cardiovascular field, the increasing trend for substitution of the transradial (through the wrist) for the transfemoral (through the groin) approach for PCI, seems to be a real "win-win" for everyone involved.

 Traditionally, guidewires and catheters for PCI are inserted through the femoral artery.  Bleeding or vascular complications occur about 2% of the time.  Patients are recovered lying flat and immobile for 4-6 hours to prevent bleeding, which has also been helped by the advent of vascular closure devices.  The patient is more comfortable, dangerous bleeds are reduced, but vascular complications still exist.  Enter the transradial approach in the late 1980's.  Outside of the U.S., about 40-50% of all PCI's are done transradially.  In the U.S., that number currently is in the low single digits and only a small percentage of U.S. interventional cardiologists have been trained to use this approach.

 The advantages of the transradial over transfemoral approach are significant and include:

  • The initial needle puncture is simple and straightforward
  • Not impacted by a patient with peripheral vascular disease, obesity or female gender
  • No need to recover the patient lying flat and immobile; patients are recovered sitting up and can leave the cath lab almost immediately post-procedure; this allows (theoretically) the patient to forgo spending an overnight stay in the hospital
  • Because no vascular closure device is required, a significant cost is eliminated
  • Less bleeding and other complications, significantly decreasing the risk of mortality
  • If present, bleeding or other complications are readily identified and easy to address
  • Overall case cost is decreased by obviating the use of vascular closure devices
  • It is safer, more convenient, and more comfortable for the patient

 There are several reasons the approach has not been used more frequently, including:

  • Lack of trained cardiologists
  • Lack of financial incentives due to the existing reimbursement structure
  • Lack of a marketing campaign by device manufacturers (who have concentrated their efforts outside the U.S.)
  • Lack of patient demand because the approach has not been widely publicized
  • An impression that the learning curve is too steep and learning inertia on the part of busy interventional cardiologists
  • Lack of recognition and inclusion in practice guidelines or recommended practices by professional societies

 As with any procedure, there are certain contraindications and potential complications.  Additionally, physicians need to be trained in the procedure by those with solid experience.  Like all new procedures, there is a learning curve.  Despite these factors, the transradial approach is gaining momentum, fostered by recent study results and an increasing recognition by influential physicians that this approach has real benefit.  CV services management staff should fully evaluate this approach, seek out physician champions and put together an implementation plan to successfully integrate this technology into their program.  This can be a perfect hospital and physician performance improvement project or targeted metric as part of a physician/hospital alignment effort.  It's not very often that a modest clinical change can simultaneously improve clinical outcomes, reduce complication rates, increase patient satisfaction, and lower procedure costs and be a "win-win" for all involved!

 For further information, CFA suggests you review the article, Trends in the Prevalence and Outcomes of Radial and Femoral Approaches to Percutaneous Coronary Intervention:  A Report from the National Cardiovascular Data Registry, published in the November 2009 Journal of the American College of Cardiology - Cardiac Interventions.

Topics: Heart Hospital Services Optimization, Clinical Performance Improvement, Cardiovascular Physician-Hospital Alignment, Clinical Programs & Services

2010 is Here and “Most Cardiologists Lose, Some Lose Big”

Posted by Peter Rastello

2/10/10 5:06 PM

The CY 2010 Medicare Physician Fee Schedule (MFFS) Final Rule, as originally presented by the Centers for Medicare and Medicaid Services (CMS), passed into law January 2010 despite heavy lobbying efforts on the part of cardiologists, cardiac imagers and others. The new fee schedules, mandated by adjustments in the Sustainable Growth Rate (SGR) formula that governs physician payments, are phasing in sharp cuts in reimbursement for office-based imaging procedures; shifting payments from specialists to primary care practitioners; and changing coding and reimbursement for consultations, office visits and hospital visits; among other changes. The net result is an approximate overall cut of 21%. The RVU conversion factor drops from $36.0666 to $28.3895.

At the last minute, implementation of a portion of the reductions was put off until March 1, 2010. Intense lobbying and lawsuits questioning the rules methodology by the American College of Cardiology (ACC) and others are continuing in an effort to prevent full implementation. Only Congressional action can change the implementation schedule or the substance of the changes.

"Most cardiologists lose, some lose big," is a quote from a slide presentation put together by the ACC for its members before implementation was scheduled to take place at the beginning of the year.

As referenced in our last posting, a December 2009 a poll by the American College of Cardiology asked cardiologists to answer the question, "Did your practice integrate with a hospital in 2009?" As reported on the ACC website,

• 13% said yes, my practice integrated in 2009.
• 23% said no, but my practice has concrete plans to integrate.
• 50% said no, but my practice is thinking about it in the next 1-2 years.
• 15% said no, my practice has no plans to integrate with a hospital.

A month or so into the new reimbursement climate, what would the answers be if the same question were posed today? One could conclude that these substantial reimbursement changes may tip the scale in favor of a more concentrated effort at integration between physicians and hospitals. Certainly, when and if the full fee schedule changes are implemented, the concern for future income and practice revenue stability of those affected will grow.

CFA is aware of cardiology groups that have been thrown into turmoil over these changes because of, among other factors, the way the group compensates its members; their respective work assignments and subspecialties, and associated reimbursement; which members own or otherwise control ancillary and testing equipment and services; and related issues. These changes can shake the very foundation of cardiology practice compensation methodology. Group practice compensation is a critical issue for member stability and the ultimate success of the group. Variation in compensation and perceived inequities under the pressure of reduced reimbursement could cause a group to become unstable, split apart or possibly seek closer integration with a hospital or health system as a strategy to return the group to a semblance of economic stability and harmony.

If the fee reductions are mitigated in the near term, as has frequently been the case in the past, there will still be erosion of the financial performance of cardiology practices. As healthcare costs increase, the assault on physician payment is anticipated to continue unabated. In the mind of most physicians, governmental reimbursement will inevitably be eroded at their expense and the overall reimbursement environment will remain toxic.

CFA recommends that cardiovascular physicians monitor their professional societies for updated information on reimbursement changes. These would include, and, among others.

It is critically important that cardiovascular management and hospital administrative staff monitor the situation with their cardiovascular physician colleagues' practice circumstances. Hospital management should be open to evaluating alternatives for collaboration and more effective alignment and integration with their cardiovascular medical staff.

Topics: Heart Hospital Services Optimization, Cardiovascular Physician-Hospital Alignment, Cardiovascular Hospital Services Optimization