UnitedHealthcare has inked a deal with Baylor University Medical Center that will allow the insurer to bundle payments for the full treatment of spine and joint conditions at the East Dallas hospital.
The arrangement is part of a pilot project that the Hopkins, Minn.-based insurer has launched with 40 providers in 25 markets across the U.S. The Baylor Scott & White flagship is the only participating hospital in North Texas. Called The Spine and Joint Solution, employers in the initial round of the pilot saved $10,000 on operations compared to the median charge in the marketplaces, United says. Baylor University Medical Center came onboard in December.
Participants are paid a flat amount for an entire episode of care, from the diagnosis on through the procedure and to rehabilitation. The method is an attempt to shift more risk onto the provider, to help dial costs down and move away from contracts that reimburse for volume instead of value.
“When we create that prospective bundle, it really behooves the hospital to be efficient. If they’re very efficient while treating that member, then they win,” says Michelle Lobe, the vice president for network strategy and innovation at United. “But hospitals and physicians have to be familiar with those payment models and be able to administer those payment models. They really do put more risk on the provider to manage that patient efficiently.”
Bundle payment models like this are working. Medicare launched a similar pilot for hip and knee replacement surgery across 800 hospitals in 67 urban areas. A recent study published in The Journal of the American Medical Association found that the average Medicare expenditures per episode dropped by nearly 21 percent. Hospitals saved about 8 percent. Researchers estimate that if all American hospitals switched to bundle Medicare payments for similar procedures, Medicare would recoup $2 billion annually.
United calls its model a prospective bundle—the insurer and the hospital negotiate rates up front based on data, and that’s what it gets. Medicare often uses retrospective bundles, which reconciles to a target rate after paying out episodically. Too, Medicare patients may not know they’re being enrolled in a bundle; United gets buy-in from its employers, and allows members to voluntarily enroll. (In October 2013, Medicare began its roll out of prospective bundling, however.)
“We build benefit designs to incentivize them to enroll because their costs are lower,” Lobe says.
While more than 1 million people nationwide are eligible for the United program, it’s unclear how many will participate in Dallas. It’s up to the employers to make the call. In Houston, Memorial Hermann has signed onto the program. United is also negotiating with providers in Austin and San Antonio, which are, for now, confidential.
Gary Brock, the chief integrated network delivery officer of Baylor Scott & White, says this is the nonprofit’s first bundled payment pairing with a private insurer for a condition outside of organ transplants, which has, for the past three decades, typically used bundled pricing. It has pursued similar value-based models that involved it taking on additional risk through the Baylor Scott & White Quality Alliance, its in-house accountable care organization. Brock said that United offered substantial data analytics and reporting through Optum, its services organization, and had an appealing track record of success in bundled payments.
“This project is consistent with Baylor’s move from volume-based payment to value-based care and population health. Working with one payer on a small subset of patients will allow us to develop key partnerships and processes for the important post-acute portion of a patient’s total experience,” Brock says. “Joint and spine procedures are a natural area of interest because of the high volume, and the relative predictability of the care path compared to a medical condition like oncology.”