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OrthoCarolina 'bundles' cost of knee, hip replacements

Hospital leaders in Charlotte talk a lot about transforming the health-care system and moving from “volume to value.”

By that, they mean a future where doctors and hospitals get paid, not just for treating patients each time they get sick, but for keeping them well.

Still, the current system relies mostly on so-called “fee-for-service” reimbursement, under which patients and insurance companies pay for each appointment, test or procedure. The more services, the more payments.

Instead of waiting for change to be imposed, doctors at Charlotte’s OrthoCarolina, one of the region’s largest physician groups, have taken the lead in adopting a system to simplify billing and improve coordination of care.

Patients undergoing knee and hip replacements can get a single bill with a “bundled payment” that covers preoperative care, surgery, followup appointments, 90 days of physical therapy and the services of a “patient navigator” who serves as a guide through the process.

“We get paid one price no matter how much work we do,” said Dr. Daniel Murrey, CEO of OrthoCarolina. “I’m projecting that by 2020, all of orthopedics will be paid this way. ... It aligns everybody’s incentives to be focused on the right thing.”

OrthoCarolina, an orthopedics practice with 144 physicians in 33 locations, began working four years ago to build the system and recruit partners (hospitals, employers and insurance companies) for the bundled payment plan.

Since April, OrthoCarolina has contracted with Blue Cross and Blue Shield of North Carolina to provide joint replacement surgery for a single price for patients who agree to have their surgeries at Lake Norman Regional Medical Center in Mooresville. In early September, OrthoCarolina also began offering the plan for Blue Cross patients at Watauga Medical Center in Boone.

More contracts are in the works, but Carolinas HealthCare System and Novant Health, which own all the hospitals in Mecklenburg County, have so far declined to participate, Murrey said. OrthoCarolina doctors perform surgery at these hospitals, but the bundled payment plan isn’t available there.

Patients who participate in the plan get a special OrthoCarolina card that ensures they get one bill instead of separate charges from the surgeon, hospital, anesthesiologist and physical therapist. Patients with insurance must pay their deductibles and coinsurance, and then OrthoCarolina receives a lump sum from Blue Cross. From that amount, OrthoCarolina pays its doctors, the hospital and other members of the team.

If all goes well and care is delivered for less than the contract price, the hospital and doctors keep the savings. If there are complications and the patient needs more care, the hospital and doctors absorb the extra cost. Either way, the patient and the insurance company have paid only what they agreed to in advance.

Murrey declined to disclose the bundled price for joint replacements. But Blue Cross, which has several similar contracts, said the bundled payment ranges from $22,000 to $30,000 in North Carolina. Traditional “unbundled” prices range from $27,500 to $47,300 across the state.

Other health care providers across the country have begun offering bundled payment plans as part of a Medicare initiative launched in 2013 under the Affordable Care Act. So far, 243 health care providers have signed bundled payment contracts for some or all of four dozen medical conditions and procedures. Charlotte-area hospitals are considering whether to participate.

Satisfied patients

While the goal is to provide incentives to control costs, some health policy experts have warned that those same incentives also may entice providers to reduce necessary care or avoid costly patients.

Bundled payments are “just price controls by another name,” according to a September article in Forbes. The article suggested this payment plan will “yield subpar care by encouraging insurers and providers to put their own financial interests above the medical needs of patients.”

A recent Rand Corp. study concluded that a three-year bundled payment program in California failed. “Bundled payments have great promise for controlling health care costs, but thus far efforts to put the strategy in place on a wider scale have struggled,” said Susan Ridgely, the study’s lead author. “We’ve learned lessons from the early setbacks, but more work still needs to be done to realize the potential of this model of payment.”

OrthoCarolina’s Murrey said he’s spoken to a developer of the California project who said it didn’t provide enough incentives to encourage patients to participate. “You need certain volumes to drive the program,” Murrey said.

“We’re working on that,” he added. For example, OrthoCarolina also has a contract with Duke Energy that requires all employees (and dependents covered by Duke’s health insurance plan) to use OrthoCarolina and the Lake Norman hospital if they are having joint replacements or spinal surgery.

Complications can and still do occur, but standardization leads to fewer mistakes, Murrey said. Doctors “get really good at it because they’re (all) doing it the same way every time. We’ve had our best patient satisfaction and our best quality outcomes that we’ve ever had.”

One of those satisfied patients is Brian Stickley, 59, a real estate agent, public address announcer for the Charlotte Checkers and traffic reporter for three Charlotte radio stations.

Last December, the former Charlotte-Mecklenburg police officer had his right knee replaced by Dr. Mark Suprock. Stickley said the only downside was having to drive 60 miles to the Lake Norman hospital from his home in Union County for surgery. He paid $750 to meet his deductible, and his insurance paid the rest.

Stickley had physical therapy at OrthoCarolina’s Matthews office. He gave special praise to patient navigator Carol Ujvari. “She spent a lot of time helping me,” he said. “... Everything was done to make me feel like I was a professional athlete or something.”

Decreased cost

Because of bundled payment contracts, Blue Cross has seen a decrease of about 20 percent in the average cost per joint replacement, said Elaine Daniels, senior contract consultant for the insurer.

In addition to OrthoCarolina, Blue Cross has negotiated all-in-one prices for joint replacement with Duke University Health System and Triangle Orthopaedic Associates in Durham. About 1,000 members have used the plans.

“We’re seeing member satisfaction scores right out the roof. Everyone is so happy,” she said. “They’re getting a higher quality of care at a lower cost.”

Daniels said Blue Cross is talking with Charlotte hospital systems about potential bundled payment contracts for orthopedic procedures. The insurer also hopes to offer all-in-one payment plans for coronary artery bypass grafts and treatment of chronic diseases such as hypertension and diabetes.

For too many years, Murrey said, doctors have ceded control over health care costs. Many doctors don’t even know the cost of implants they use. Under the bundled payment plan, he said all OrthoCarolina surgeons know the cost of care and have incentives to provide it effectively and efficiently.

“Private practice physicians should not be standing on the sidelines waiting for health care to be reformed,” Murrey said. “We’re the people who are delivering the care. We should be the ones responsible.”

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