Bundled Payments in Spine Surgery: Current Understanding and Future Directions

Peer Reviewed

The bundled payment model provides a predetermined level of compensation for all care related to specific surgical care episodes, ranging from pre-operative to post-operative care. This model is thought to incentivize providers to help decrease the cost of care while potentially improving outcomes and healthcare quality. Efficacy of the bundled payment model has been demonstrated in total joint arthroplasty. However, concerns have been raised on whether bundled payments are appropriate for spine surgery, given the variety of surgical procedures, approaches, and levels that may be operated on for a given diagnosis.
Healthcare manager projecting profitability of performance based payment model.While efficacy of the bundled payment model is demonstrated in TJA, concerns sway as to its appropriateness in spine surgery. Photo Source: 123RF.com.In the March issue of Seminars in Spine Surgery, Peter G. Passias, MD, FAAOS, and colleagues presented the latest evidence on the potential cost savings and challenges of implementing bundled payments in spine surgery.1 SpineUniverse spoke with Dr. Passias as well as Matthew J. Smith, MD, EMHL, Chair of the North American Spine Society (NASS) Value Committee, to better understand what bundled payments mean for spine surgeons.

What is the general feeling in the spine community about bundled payments?

Dr. Passias: I think there is certainly apprehension regarding bundled payments in the spine community but, by the same token, there is anticipation that change is inevitable. The apprehension stems from the differing aspects of the various types of procedures that spine surgeons perform. For example, the diagnosis related group (DRG) 460—“spinal fusion except cervical without major complication or comorbidity”—includes 392 different procedures and encompasses 1- to 7-level fusions.

We have had some experience with bundled payments in the past and the results have been mixed at best.

Dr. Smith: In general, I believe that the spine community understands the triple aim of improving the patient experience, improving care of the population, and bending the cost curve. We appreciate that there is an opportunity to improve our practice patterns to reliably achieve this triple aim. The spine community has been open to trying bundled payments. Many of us have been willing to change our practices to see if it is a sustainable business model that also allows us to implement traditionally non-reimbursable services, such as patient education and care coordination. However, early experience with the Center for Medicare and Medicaid Innovation's Bundled Payment for Care Improvement (BPCI) program for lumbar fusions has been worrisome, as summarized by OrthoCarolina, NYU Langone Medical Center, and other institutions.2-4 These reports describe longer lengths of stay and higher 90-day readmissions in some subgroups, leading to increased cost in the BPCI groups overall. In addition, there has been a concern that innovation could be stifled under bundled payments.

More groups seem to be entering into BPCI-A contracts. While BPCI arrangements could be entered into by hospitals, post-acute facilities or physician groups, many BPCI-A contracts for spine care are initiated by physician groups. There may be an opportunity to better align incentives with practice patterns when the physicians on the value front are the ones who are administering the bundle. In other words, it may be easier to create a coherent vision and consensus about the ultimate objectives of the change in a practice unit that can integrate around a patient’s condition and in a setting where the complexity and skills needed can be matched with the resource intensity of the location.5 In contrast, the initial spine care bundles were often in locations with the resources needed to capitalize organizational structures needed to administer the program. The rise of conveners may help mitigate financial risk for individual participants. It is too early to tell if BPCI-A participants are meeting with more success than their BPCI predecessors, but some whispers of optimism have been heard.

The general thought is that the broad heterogeneity within the spine DRGs leads to increased financial risk.

As discussed above, the spine community has been closely following the results of providers who are early adopters of bundle payments. Another sector to watch is private companies directly contracting for health care services for their employees. While the bundles offered by the Centers for Medicare & Medicaid Services (CMS) are mission-driven, employer purchased health care is driven by accountability to corporate shareholders. The corporate arrangements seem to take into account the multifactorial cost-drivers of spine care and the multifaceted and chronic nature of spine pain. Although a referral for surgery is still a trigger, these bundles are not limited to services occurring in the 90 days after surgery, as they are in the CMS bundles. While savings may be available in the performance of and recovery from surgery, it appears that these corporations are attracted to the savings from potentially avoidable surgeries.6 Strict clinical guidelines and shared decision making with a multi-specialty panel are common features of these corporate arrangements.7 Outcomes such as decreased need for nursing home admissions are reported, but these programs also report that more than 50% of patients referred for surgery in their local communities do not meet surgical selection criteria as determined by the panel. Different incentives and different patient populations are under consideration in the CMS bundles compared with the corporate bundles. The model being used by Lowe’s, Walmart, and others could cause significant disruption to the existing business models and practice patterns of most spine providers if adopted more widely.6

Is acceptance of bundled payment options greater among private practice surgeons vs those employed by a large group or hospital-based system?

Dr. Passias: I think the initial approach to integrating bundled payment options should be made through academic institutions. First, any mishaps that occur while we are developing the optimal bundled payment system are better absorbed by large academic centers. Individual surgeons are less susceptible to small changes in practice volume and practice reimbursement. Thus, without a doubt, bundled payments options are going to be adopted by academic institutions first.

As has been the case in the past with other government interventions, there is an attempt to do a trial period at certain major academic centers, to see it from there the bundled payment option can be expanded more globally in the spine community.

Dr. Smith: The Martin study showed that hospitals participating in the Bundled Payments for Care Improvement (BPCI) initiative had larger procedure volumes, greater bed counts, and more discharges.2

Who actively advocates for policy changes necessary for spine care?

Dr. Passias: From a physician standpoint, our national spine societies are involved in advocating efforts to improve quality of care as well as improve cost-effectiveness of our interventions, which is a constant issue and concern in spinal surgery. From a broader perspective, there is a large push for bundled payments from hospitals and insurance companies to reduce the cost of spine care. These larger players are overwhelmingly the major contributors to the push for bundled care.

Dr. Smith: The NASS Advocacy Committee, Health Policy Council, Payor Policy Review Committee, Coverage Committee, Value Committee, and Guidelines Committee all are involved in advocating for policy impacting spine care through the federal regulatory and legislative processes as well as through Medicare contractors and private payors. Recently, for example, NASS volunteers were actively involved with CMS in defining an episode-based cost measure for lumbar spine fusion (1-3 levels) for use in the cost category of Merit-based Incentive Payment System (MIPS).

The NASS Coding, Value, Coverage, and Payor Policy Review Committees are all under the umbrella of the Health Policy Council. The Coding Committee works to ensure appropriate coding and fair reimbursement for spine procedures through the American Medical Association Current Procedural Terminology (CPT) and RVS Update Committee (RUC) processes. The Value Committee is active in advocating for alternative payment models, including bundled care, for spine primarily through work with CMS. The Coverage Committee develops comprehensive, evidence-based coverage policy recommendations that have been widely disseminated the implemented, and the Payor Policy Review Committee reviews and responds to payors’ draft coverage policies. NASS regularly comments on proposed and final regulations related to spine care and is an active participant in the Alliance of Specialty Medicine, a coalition of 15 medical specialty and subspecialty medical societies representing more than 100,000 physicians that advocates for specialty care.

Through the Research Council, NASS develops practice guidelines and appropriate use criteria that provide evidence-based tools for clinical decision making in spine care. Additionally, the Advocacy Council is very active in representing spine care practitioners and patients through legislative policy efforts in Washington DC.

What role, if any, do device companies have in accommodating bundled payments?

Dr. Passias: I think device companies’ participation is more reactionary as these companies are faced with initiatives to reduce cost of hardware and implants either through institutional-based vendors, vendorless systems, or sheer cost-cutting through mandates. I think this dilemma also will apply to biologics, which is an expanding field of spine care. Ultimately, the treating physicians will absorb any potential issues with devices such as reoperations and readmission, all of which would all be included in a global bundled payment.

Dr. Smith: The device industry is being impacted by health care reform. As margins have tightened, the easiest place to find savings has been in supply chains. By standardizing implant choices among surgeons, hospitals have realized savings through bulk purchasing.

Secondly bundles may have a detrimental impact on innovation. Bundle payments in and of themselves may also stifle innovation. Of note, the Martin study showed that risk-bearing hospitals used less stabilizing instrumentation and less BMP in spine surgery.2 There may be conflicting missions at academic institutions, where important questions about the comparative effectiveness of different surgical techniques and novel technologies are being studied, but may invoke additional costs. Contemporary surgical techniques may be more costly, but attractive in a cost-effectiveness assessment.8 NYU Langone Medical Center identified advanced surgical technology as a challenge to success in their bundle.4 In his paper, Dr. Passias points out that any increased costs of a cost-effective surgery are born by the bundle, while the benefits are realized as decreased health care utilization in the future.

Is there concern about patient selection in terms of avoiding high-risk patients?

Dr. Passias: I think we need to start implementing bundled payments for less invasive procedures involving lower-risk patients to see how we can learn from those cases. Then we could move on to more high-risk, high-invasive procedures. We can't abandon patients or higher-risk patients who we know have the potential, if optimized, to benefit tremendously from these interventions.

Thus, we need to learn about bundled payments through our experiences with less risky procedures and then think about applying this approach in a risk stratification. If there will be cases covered by bundled payments involving more complicated, higher-cost procedures with known high reoperation rates (eg, adult spinal deformity surgery), we need to accommodate for those types of scenarios under the payment program in order to care for these higher-risk patients.

Dr. Smith: Unintended consequences can arise with any change initiative, including incentives for “cherry picking” and “gaming the system.” In my experience, this really has not been an issue. Inclusion criteria for bundles are clearly defined. For example, in the BPCI initiative, any Medicare patient treated under DRG 460 is included in the bundle. In fact, the Martin study and the experience at NYU Langone Medical Center suggested that the lack of episode cost reduction observed may be due in part to the complexity of the cases treated.2,4 If there is any effect, it may be to support the premise of health care economists that a patient’s complexity and the skills required for care should be matched with the resource intensity of the location as part of creating efficient integrated practice units.9

Is there potential for “risk adjustment” on penalties for high-risk patients?

Dr. Smith: Heterogeneity is being identified as a fundamental challenge with bundles for spine care. For example, DRG 460 includes 1- to 7-level fusions, posterolateral gutter fusions, posterolateral interbody fusions, and transforaminal interbody fusions. The same episode case rate applies regardless of the use of pedicle screws, interbody cages, or bone morphogenic protein. Conceptual solutions to the problem of increased variability have been discussed. Variability in the costs inherent in these different procedures creates increased financial risk. One way to combat this would be to base the procedural bundle on a trigger with more granularity than DRGs. Actuarial strategies such as risk corridors could increase the precision of the episode case rates and protect against outliers. Lastly, risk adjustment could better match anticipated costs with a given case. However legitimate these proposals are in theory, the information systems to operationalize them are still being developed.

Another way to mitigate the risk of variability in spine care services is to increase the number of patients treated in the bundle. Any organization bearing financial risk must meet financial solvency standards. For the sake of benchmarking sizes of risk-bearing operations, consider that Kaiser Permanente has 4.3 million members in Northern California alone. Inadequate size was thought to be a factor when 147 healthcare organizations failed in California between 1998 and 2002.10 Those 147 organizations cared for, on average, 28,000 patients. §1899(b)(2)(D) of the Affordable Care Act (and reaffirmed in the final rule 83 FR 67816) requires accountable care organizations (ACOs) to have a minimum of 5,000 assigned beneficiaries in order to be eligible to participate in Shared Savings Program. In comparison, the negative results published by NYU Langone Medical Center were based on 350 patients enrolled in the BPCI program.

Dr. Passias, in your paper you noted that “Current reimbursements and penalties are linked to process metrics or quality of care measures that have little to no association with outcomes in spine surgery.” Can you elaborate?

Dr. Passias: I think this is a common theme in the spinal literature, not just from my research group but from others who are broadly in the field where we were mandated by certain national health initiatives to track “never events”—ie, mistakes that should not occur in a hospital setting. While we need to work towards minimizing the occurrences of never events, these events do occur despite optimal care, ideal patient management, and minimization of risk.

Never events are not directly related to patient satisfaction scores and patient-related outcomes, which is ultimately how we define cost-effectiveness of our procedures, but are related to cost including length of stay and perioperative treatment. Thus, while we need to strive toward minimizing costs, perhaps we can tolerate minor complications with the big picture being functional gains and patient satisfaction in the long-term.

Dr. Passias reports personal consulting fees for Spine Wave, Zimmer Biomet, DePuy Synthes, and Medicrea outside the submitted work.

Dr. Smith has received travel expense reimbursement from Rhode Island Quality Institute.

Updated on: 03/26/19
Continue Reading
Bundled Payments in Spine Surgery: Lessons Learned
Peter G. Passias, MD, FAAOS
Assistant Clinical Professor of Orthopaedic Surgery
New York University School of Medicine
Matthew J Smith, MD, EMHL
Director of System Integration
University Orthopedics, Inc.

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