bundled payments reduce joint replacement surgery costs portsmouth nh
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  • Posted 12/08/2019

Bundled Payments and Joint Replacement Surgery: A fixed transparent pricing model that combines high value and high satisfaction

Joint replacement surgery delivers high patients’ satisfaction when it comes to pain relief and return to activities. As the baby boomer generation now reaches their late 60s and 70s and as the percentage of people with arthritis in their 50s and early 60s increases, the demand for these procedures continues to increase. Statistics show an almost exponential rise in the prevalence of joint replacement that will continue over the next 2-3 decades. Thus, arthritis represents a virtual public health epidemic with millions of people worldwide suffering its effect, and joint replacement places a huge cost burden on society. 

For younger patients, who are commercially insured, insurance claims have shown procedure prices that range anywhere from $50-120K. When this is combined with lost time to wage earning, the cost to the patient is even greater. Studies have also shown that there is wide variability in pricing, and that there is not association between price and quality. Quality in joint replacement is a combined measure of patient satisfaction with the outcome, functional improvement and lack of complications. The value of joint replacement is loosely defined as quality divided by price. 

We use the word price here to reflect what health systems charge for these procedures, which in a fee-for-service model, if far more than the actual cost of the procedure. The cost of the procedure is a combination of the facility fee, the implant, the surgeon’s fee, the anesthesia fee, the cost of nursing care and the cost of physical therapy. The facility fee includes the cost of the operating room and any equipment necessary to complete the surgery. When all these costs are aggregated, the full episode cost from preoperative to 90 days after surgery can be calculated. While this cost may vary depending on certain factors such as length of hospital stay, a relatively narrow range that accounts for 90% of patients can be estimated. 

When insurance claims are scrutinized after patients undergo hip and knee replacement surgery, it becomes obvious that the largest contributor to the price tag is the hospital fee. If this line item could be deleted, the price could be substantially reduced without changing anything about the actual surgery itself. Furthermore, the hospital stay has no association with the outcome provided the same surgeon performs the procedure. 

The solution to this unwieldy price tag is fixed-price bundle payments combined with outpatient joint replacement. The latter refers to same-day surgery wherein patients are discharged from an ambulatory surgery center just hours after joint replacement. Our AVATAR approach, which is detailed in other posts and elsewhere on the site, reviews the details, success and high satisfaction rate of same-day joint replacement. 

Fixed-price bundles refers to a payment reform method where the entire episode of care including surgery, recovery and physical therapy is performed for a single price with one payment and one bill. The payment is submitted to a convener which then pays out the fixed amount to each of the sub-components of the cost: surgeon, anesthesia, physical therapy, facility, implant etc….By avoiding the price of a hospital stay, the entire bundle of care for hip and knee replacement can be performed for about 40% of the price of inpatient care in a fee-for-service setting. And all elements of the surgical procedure are the same as is the implant used. In other words, there are no cut corners and no hidden costs that fall outside the bundle. There is also no risk of “out-of-network” billing. 

Currently, in our practice, this option is available for commercially insured patients with Anthem, Blue Cross Blue Shield, Harvard Pilgrim and HPI. To date, we have performed bundled joint replacement cases in over 100 patients with an overall complication rate that less than half of that reported in the national literature. We have patient satisfaction ratings over 99% for this process and we have saved the healthcare system several million dollars in the process.

For patients who are savvy consumers of healthcare looking to save money, for self-insured employers who pay directly for the cost of employee care and for insurance brokers looking for innovating cost-saving measures, contact us to learn more about this option.


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