In this episode, Dr. Jon Friedman, Chief Medical Officer of Optum’s Complex Medical Conditions program, discusses United Healthcare’s orthopedic bundled payment program.
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Mike Passanante: Hi, this is Mike Passanante. Welcome back to the Hospital Finance Podcast. Today, I’m joined by Dr. John Friedman who’s the Chief Medical Officer for Optum’s Complex Medical Conditions Program.
He has clinical oversight and responsibility for transplantation, chronic and end-stage kidney disease, bariatric surgery, ventricular assist devices, congenital heart disease, sickle cell disease and spine & joint solutions.
He’s been with Optum for 17 years. And he’s board certified in both internal medicine and geriatric medicine. Dr. Friedman is a member of the American Society of Transplantation, and received the distinguished service award from AST in June 2016 for his efforts in supporting living kidney donation.
Dr. Friedman is going to talk with us today about a new bundled payment model that United Healthcare has introduced for orthopedic care. Dr. Friedman, welcome to the show.
Dr. John Friedman: Thank you very much.
Mike: So, why don’t we jump right in? Can you just give us an overview of the United Healthcare orthopedic bundled payment program and just tell us about the kinds of services it includes and where it’s currently offered.
Dr. Friedman: Sure! So, this is not really a new concept for United. The history of our Centers of Excellence Programs go back 30 years starting with transplantation. And those programs have been bundled for a long time.
The concept was to start with low frequency, high complexity, high cost cases, naturally moved on to the congenital disease, the kidney disease and bariatric disease.
And then, we started to listen to our clients. They said, “You know, 17% of our spend is musculoskeletal. That’s $30 per member per month. And a third of that spend is surgical.” So, the next natural step was to attack the orthopedic and spinal surgery area.
So, the Spine & Joint Program covers elective knee and hip replacements, as well as spinal fusion and disc procedures. And it brings all the right players together to provide better outcome for the patients, a stabilized and transparent cost for the employers who are paying the claims, and an incremental increase in patient volume for the clinical programs that are doing a great job instituting these cost effective measures.
So, the bundled payments include all charges from the day of admission to discharge, and then 90 days out. So, any readmissions or complications at the site of service are covered by that bundle.
And the program has clinical partners in nearly 30 markets right now across the country. And we’re adding new geographies throughout this year. Most of the major population centers are covered right now. And any of the gaps that are left are expected to be filled in 2017.
Mike: And can you briefly explain the differences between prospective bundled payment programs like United Healthcare has developed and retrospective programs like CJR for instance? And tell us why UHC decided to implement a prospective program.
Dr. Friedman: So, our prospective bundle means that the providers have skin in the game for every case they see. They know they’re going to get a fixed payment and have to deliver the quality outcome in order to be profitable.
This is what the large employer customers really want and something that we are proud to help deliver along with our clinical network partners.
The Medicare program is mandatory in 67 markets. It includes over 800 programs. It’s innovative and only actually started a few months before we started ours, the difference being that Medicare settles up at the end of a fixed period of time (like every year), leading to a neutrality of cost versus every case in our prospective bundle having that skin in the game.
We really like this kind of concept of upfront risk because, as I’d like to say, risk drives creativity. The creativity drives quality. Quality leads to a better bottom line.
Mike: No doubt! And just touching on CJR again, when we look at CJR (which a lot of our listeners will be familiar with), an episode begins with an in-patient admission and includes all related part A and B services for the next 90 days. Is the UHC bundle similar or does it only contemplate the initial admission and surgery?
Dr. Friedman: No, it’s very similar. The bundle does cover the in-patient stay and all costs associated with the surgery including any complication and re-admission that arises in the following 90 days.
Mike: When you set up the program, you were looking for both employers and providers that wanted to participate. What were some of the criteria you were evaluating when deciding which entities would be a good fit? For instance, did you look at Hospital Compare data, star ratings, your own proprietary information or maybe a mix of those things?
Dr. Friedman: Yes. We actually use a blend of both public and proprietary information to qualify our provider groups. Our approach leverages data from the CMS Hospital Compare site as well as data we collect directly from our own claims experience and a provider survey administered by Optum’s Clinical Science Institute (which is something we’re very proud of. It’s an organization within Optum that qualifies all of our Centers of Excellence).
Our approach to quality is reviewed each year by an expert panel of orthopedic surgeons from our COE networks to ensure we’re using the latest and best clinical benchmarks. And we believe this external expert panel is unique to United Healthcare.
Mike: And when UHC announced the bundled program, they stated that it saves, on average, $10,000 per operation. Is this savings based strictly on the negotiated rate for the bundle or are there other factors involved?
Dr. Friedman: The negotiated rate delivers the $10,000 off the already negotiated United Healthcare rate. It’s not based upon billed charges. And it’s variable between market to market.
So, there are additional savings beyond that amount that are realized via fewer complications and re-admission reduction. We believe that our centers, through our qualification process, have about a 20% lower re-admission rate and 20% lower complication rate.
So, it’s the bundled cost reduction plus higher quality, equaling a bigger savings for the employers.
Mike: We’ll talk more about those Centers of Excellence in a moment. But beyond cost savings, are there any other benefits that employers enjoy as a result of this program?
Dr. Friedman: We think the employers really want to do the right things for their employees. This program, in addition to driving cost savings for the employers, also drives cost savings for the employees, offers terrific clinical outcomes. And we also are providing clinical nurse case managers to help guide these patients through this difficult time of their lives through the continuum of care of these orthopedic procedures.
Mike: Perhaps you can expand on the Centers of Excellence a little bit more here because it appears to be in an employer’s best interest to encourage the use of Centers of Excellence you’ve set up. Can you tell us about some of the incentives employers are using to do that?
Dr. Friedman: The employers are typically encouraging the employees by implementing a benefit design change that provides 100% of the co-insurance after the employee’s deductibles have been met. And of course, different employers have different philosophies about these benefit designs and their overall approach, but we try to collaborate with them on a one-to-one basis to find the right incentives for their unique situations.
It’s challenging to make people go some place that their referring orthopedic surgeon may not be part of. But we think if the patient has some guarantee of quality care, plus a lower cost, we can drive the business to these Centers of Excellence.
Mike: Dr. Friedman, patient experience is so important to hospitals these days as they compete with each other for business and are increasingly rated through various quality measurement programs. How does this type of model improve the patient experience?
Dr. Friedman: So, each participating facility has a care navigator that coordinates with an Optum case manager to ensure that the patient has everything they need and all questions are answered prior to surgery. The Optum case manager then follows up with the patient after the surgery and for the 90 days post-discharge to make sure they have a seamless recovery.
As the bundle quarterback, the hospital is on the hook for costs that come with any complications or readmissions. Thus, they are incentivized to do their best work on these patients and to bring to bear their best tools and techniques to ensure a good outcome. They’re on the hook to do the right thing and to speed the recovery.
We’re working on techniques this year to measure net promoter scores and patient satisfaction. And this will be part of our qualification process going forward.
Mike: So, let’s turn the discussion more towards providers. Why would providers want to participate in these types of bundled payment arrangements as opposed to fee-for-service which is what they’ve historically been used to?
Dr. Friedman: We think that providers know that the days of straight-up fee-for-service operating models are numbered. Medicare has the mandated CJR program and the Bundled Payments for Care Improvement Initiative that came before it and other market factors will continue to drive a move towards value-based care.
The progressive providers know that they have to adapt to survive. And this is a great opportunity for providers who are willing to embrace this change and innovate by standing behind the work that they do in driving cost out of the system while they improve quality.
Really, that is what most of these organizations really want to do anyway—deliver good, high-quality care. And ultimately, value-based care incent that outcome.
Mike: And these same healthcare providers have a well-established processes for billing in a fee-for-service environment. Does this type of program require a change in those processes?
Dr. Friedman: We’ve tried to make it as easy for providers as possible. They send the claims to Optum, Optum re-prices the claim into a single bundled payment that we then back to the insurance carrier or self-funded employer and we prepare a single explanation of benefits for the patient.
The providers may have some back office changes that they need to make in order to streamline this bundled process, but ultimately, one entity (a hospital or physician group) needs to be that quarterback, and then they will distribute the payments to the other components of the bundle—the anesthesiologist, pharmacy and other related costs.
Mike: Do you share data with providers such as historical benchmarks, current performance information, update on post-acute providers, for instance?
Dr. Friedman: Actually, we do. And we really are pushing to become a more transparent company and sharing the data with our providers.
In fact, just last week, I was visiting a very large West Coast hospital and shared their orthopedic data with them. This is a hospital that didn’t qualify for our program. And they were so pleased that we are able to share these numbers because they now know what they need to do to get in.
And as we re-qualify our programs on a yearly basis, we are able to trend these numbers for our hospitals.
Mike: Does UHC have plans for expanding the orthopedic bundle or creating bundles for other clinical areas?
Dr. Friedman: Absolutely! Our customers want bundles. And as noted earlier, innovative providers are more and more willing and eager to deliver care on a bundled basis. We’re investigating other product lines to pursue.
We’re also planning to expand within the orthopedic line itself. We’re looking at arthroscopy, shoulder surgery, ankle surgery and other out-patient procedures. And as I’ve mentioned before, we have these expert panels—in fact, we have one coming up at the end of March—and these are the exact topics we’re going to discuss and how to incorporate them into our program on a go-forward basis.
Mike: Dr. John Friedman, thanks for coming by to the Hospital Finance Podcast today and helping us understand more about United Healthcare’s innovative bundled payment program.
Dr. Friedman: Mike, it’s been a pleasure. Thank you so much.