Bundled Payments for Spinal Surgery: the Time has Come

The time is now to acknowledge and transition more complex spinal surgery procedures to the outpatient setting. But while the ASCs and the surgeons are ready, are the payers up to speed? If not, here's what you CAN do as a workaround.

Spinal fusions, multilevel fusions and more complex cases have moved safely to the ASC. In St George, Utah, St George Surgical Center has been contracting with both HMOs and PPOs for years. The problem is, many payers are not ready to pay more than ASC Groupers, at or even below current Medicare rates. That's offensive and undeserved. As director business development, I've started to take a hard-"er" line approach and recommended to the CEO that we let the lowball offers "rot" on our competitors' balance sheets and fill their ORs with cheap cases while we target more lucrative, leading edge opportunities.

For the past 5 years or so, we've been contracting directly with self-funded employers for certain surgical procedures. Back in 2015, our CEO spent 8 months to painstakingly calculate costs per hour in supplies, staffing, overhead, implants, and then contract with certain surgeons and anesthesia professionals (MDs, DOs, CRNAs) to create over 220 bundled price surgical case rates.

What resulted were the following case rates:

We publish these openly and transparently on our website. But we don't offer these rates to any payer who refuses to pay in full same day via ACH and won't unequivocally guarantee payment when they pre-authorize a case, except in very rare cases where the TPA or employer is somehow connected. In Utah, that could mean socially or in a small town, through other relationships.

These rates include any implants or hardware. They also include an overnight stay if the physician feels that's necessary. It is already bundled into the price.

• The episode of care begins about three business days prior to surgery, with the anesthesia consult and the surgeon consultation where the decision to schedule surgery is documented.
• The episode of care ends at the discharge management visit, which may occur same day as surgery or a few days afterward.

Local patients are most often discharged to home. Out of town patients ("medical travel" patients or "domestic medical tourism", if you like) are discharged to a nearby hotel at the Inn at Entrada at Snow Canyon Resort. There, patients are accommodated in "casitas". These casitas are privately-accessed hotel or "serviced apartment" units situated along the perimeter of Utah’s premier golf experience. (Entrada is frequently ranked as the number-one, year-round golf course in the state by Golf Digest Magazine. With over 300 days of annual sunshine, it’s no wonder it is considered Southern Utah’s most luxurious accommodation, and we negotiated special pricing for our patients and visiting physicians, employers and their procurement teams. The average price per night is well under $200.

Yes, we could have negotiated with Marriott, Hilton, Hyatt Place, Holiday Inn for similar pricing, but why?

These individual units don't require our patients to pass through a lobby and encounter other guests. There are no stairs, no wall-to-wall carpets to harbor germs and dirt, everyone gets their own patio, tile floors, full kitchen, full bath, a bedroom and a living room, and fitness center privileges and country club restaurant privileges. Grocery and pharmacy delivery is available, and PT can accompany the patient to the fitness center to kickstart their rehab.

Employers with whom we contract directly, pay the cost of the travel, accommodation and the bundled price for the surgery and many waive the deductible and copayments for plan employees and dependents. No HMO or PPO would ever dream to wrap a pretty bow around such a treatment episode. Some employers even kick in an extra incentive payment to the patients' HSA accounts if they agree NOT to use the in-network PPO or HMO providers and agree to travel.

To date, we've attracted patients from 40 states and Canada for bundled price surgery at St George Surgical Center, as well as many patients who would have otherwise been scheduled at the local hospital with no real difference in care, quality or safety. Often we schedule these cases with the same surgeon who would have performed the procedure at the hospital, in-network, at a much higher price. In fact, we have a lower published infection rate than the hospital, we're accredited and we actually have high patient satisfaction scores on social media.

So again, let the PPOs and HMOs with these lowball ASC groupers go pay the hospital $20,000 to $30,000 more. And let the health plan sales folks answer their prospects and renewal clients why they don't have SGSC in their panel. It isn't our story to tell. They should be put in the hot seat to explain. There's no good reason why should we enable them and accept their lowball offers while they agree to pay the hospital so much more for the same procedure. In my role, I view every disgruntled self-funded employer or union who asks that "why" question as a very hot lead. It's easy to explain our program and our value proposition to them when they are being pressured to save money...especially if it is taxpayer money and the prospect is a city or county or state government.

Non-covered in the ASC? Why?

Forgive me for sounding like the two-year-old who always asks "why" but "why"? For years, minimally invasive technology and pain management techniques have been available to transition more complex spine cases into the ASC.

I started contracting with self-funded employers and bypassing work comp insurers and medical PPOs and HMOs who would not approve spine cases in the ASC setting in 1995 with bundled case rates negotiated in advance. I laugh out loud when people tell me that the Surgery Center in Oklahoma "invented" this trend. I also grimace when people mention reference-based pricing (RBP), as that usually always costs more. Twenty-five years later, I still see denials as an ever-present aspect forcing simple spine procedures into the hospital for thousands of dollars more.

Since then, I've learned some dirty little secrets that may be the root cause of many HMO, PPO and TPA's reticence to get with the program and transition to the ASC when there isn't a compelling reason to take the case to the big hospital down the road. It's called K-I-C-K-B-A-C-Ks and rate padding. Lots of TPAs do it, but not all. I am discovering which are which in my new role. Many PPOs do it as well. When they both do it, the employers really get taken advantage of.

The hospital contracts with the HMOs or PPOs at much higher rates, but will then agree to pay as much as 12% (I've seen the deals range from 4% to 12% around the country) of revenue from that payor or TPA back to the TPA or insurer.

Hospital drools thinking it gets to lock out the ASC of the contract for rates that are $20-30K higher. That was true in the past, but not any more. They then have to pay for the steerage as an outright payment or turn a blind eye to the PPO or TPA padding the bill to the employer.

The employer thinks that the "greedy healthcare provider" keeps all the cash paid out of the 501C9 ERISA trust account or the general assets of the corporation as operating expense for their self-funded health benefit plan. Not hardly but hey when you are being greedy turnabout is fair play. Let the TPAs and PPOs and ASOs besmirch your reputations.

The employers and unions see the line item charges for claims adjudication, repricing, network leasing, and more, so they don't ever think that their loyal vendor could ever dream of double and triple dipping with these kickbacks and bill padding. Wrong!

The ASOs, PPOs or TPAs don't really care how high that bill might be because they position themselves to get a percentage. And... t's OPM (other people's money). The higher the base, the higher percentage kickback they get - on other people's money. All on the unsuspecting employer's dime.

Bundled payments for spine surgeries

While bundled payments are disrupting traditional healthcare payment and delivery models, spine has come of age too. While others perceive spine surgery cases priced in bundled case rates as more challenging than total joint replacement, I've been in this for 25 years, so my perspective is quite different. As an international healthcare industry consultant, my experience in the market place is different. I've been at it longer and seen more contracts and won more direct contract deals for outpatient surgery on a wider scale than a surgeon or ASC administrator who only sees what they personally negotiate in their community.

Lessons shared

For the ASC administrator here's my best advice: If you must, lead with the joint replacements, hernias, tonsils, and gynecology bundles. Prove your argument in dollars saved. Then, return 6 months later and add spine.

Better yet, offer to do a 3-year claims history audit and see what the spine surgery utilization has been. That takes longer to do, because you have to piece the pastiche of fee-for-service, unbundled claims together like a quilt to demonstrate your story and value proposition.

Don't expect the latter suggestion and strategy to be easy either. Take a lesson from the "doyenne of bundled price surgeries". Early on, before I learned about the dirty little secret of the double and triple dipping, I thought, "Just ask your TPA or ASO for the claims history going back 3 years." Some of the TPA and ASOs had the audacity to tell the employer, "That's proprietary. you can't have it." Then came HIPAA. Now they tell the employer, "That's not allowed. You'll violate HIPAA." Hogwash! It's their data. But they need to protect and preserve their rights by negotiating the right to request and receive their claims data and put a turnaround time (with in 5 business days) in their TPA or ASO contract. Unfortunately, many don't think to do this or only put in that they can request it. So what! It's the receipt that matters!

Population health and past utilization data paint the needs analysis picture

Without the past claims data and some insight about current employee and dependent population health statistics, you won't be able to target your message like a laser beam and demonstrate where they could have saved in the past three years, how much, and what they are likely to save in the future. That's how you sell bundled spine surgery. If you are waiting for the TPAs, PPOs, and HMOs to do this in their contracts, hell might freeze over first. Also talk about presenteeism (where the worker is at work, but not really because of pain and radiculopathy, medications, and just feeling like crap) and lost productivity. All that gets bundled into the proposal. They also save money with adjudication of claims because with a single bundled claim, there's one 1500 form or UB04 to process, no audits to speak of, no repricing fees, no network lease payments. With delegated credentialing and an accredited ASC there's a second value proposition as they don't have to take on deep provider vetting on their own. They contract the accredited ASC to do it an ensure the risk of errors and omissions in their credentialing and privileging. And by remaining stateside, conservative employees who don't travel outside the USA are happier, there's better professional liability insurance at no additional cost and the union members are happier because they are keeping cash in these United States of America.

Are you ready?

Many ASCs are just starting to bundle case prices. Even fewer are ready or trained to market these prices and cases to employers, directly. In St George, I discovered that the ASC was already 5 years in with 220+ prices developed and 45 contracts with employers and TPAs on the books. Serendipity for me. Work close to home. That's a first in 35 years!

I met the administrator in December 2018. In May of this year, I offered to work as a part time, W2 employee as Director of Business Development. He and our CFO jumped at the chance.

I work 2 days a week. I have so much fun doing this that I should probably pay them. Our CEO's leadership style and ethical orientation is exemplary. He should lead a finishing school for ASC administrators. Work is 7 minutes from my home (I live at Entrada, 2600 feet from where the patients are accommodated.) If a patient needs something I'm generally just down the street. I am no longer a nurse or an EMT, but I can respond quickly and triage. I brokered the deal with Entrada as a resident. I don't get any commission from Entrada for the bookings. The owners of the casitas split the take among all owners. Troon Privé' manages the property. If you have one of their managed properties with guest accommodations available, check them before you check hotel chains and franchises.

Where to find help if you want to do this at your ASC or medical group

The other three days of my week, I still consult with my established and new client hospitals, ASCs and medical groups, investors, governments and foreign clients. I also teach seminars and private workshops on how to build these programs, step by step and develop your prices.

Our administrator and I will be speaking at the Becker's event in Chicago next month on how we do this. We'll include some lessons learned, a video and take home tools we hope all ASCs and surgeons will implement. That event backs up to another event in Panama where I will be the featured international keynote speaker at an event to develop a medical travel growth and product strategy for that country.

I've been hired to do this sort of work in over 100 countries around the world. But I am not available (self-imposed) to consult to hospitals or ASCs within 100 miles of my part-time employer. That wouldn't be ethical.

I am also working on the completion of a manuscript for CRC/Informa, an international publisher that has published many of my past titles. This one is a book for employers on how to cost contain healthcare benefits spending through medical travel and bundled price case rates. I am also working on the 3rd edition of the Managed Care Contracting Handbook which, in this edition will go deeper than I've ever shared on direct-with-employer contracting for the provider audience. It was premature in the previous editions.

Software to manage the program

Two days ago, my business partners and I who developed HIGOWELL (a U.S. patent pending software for medical travel case management with nearly 700 registered users and no sales team, released in December 2018), released for beta testing, a brand new software application to help ASC and hospital administrators develop their bundled case pricing. It hasn't been named yet! Using lessons learned from more than 25 years of building bundled surgical case rates, and what I know as a former ASC administrator, the tool was developed and is now in testing phase. If you want to be a beta tester, get in touch with me ASAP.

I wouldn't have invested the time, risk capital and effort for writing books, contract templates, or the software tools if I didn't passionately believe that spine surgery, joint surgery, and bundled pricing and direct-with-employer negotiations have come into their own for ASCs.

CMS' BPCI is not a leading edge innovation. It was 18 years later than me!

The federal government was not the leader with bundled payment initiatives, including BPCI, for total joints and select spine cases. They began in 2013. I started in 1995. I never liked how they've structured their models and I don't believe they will work or be sustainable. The reason? They are still working through the lessons I learned years before about what to include, how to control and contain costs and what NOT to include.

As a result, many HMOs and PPOs have debased the definition of an episode of care using a variation of BPCI language to contract with ASCs and force the inclusion of services not available from an ASC (lab, radiology, and more). I see this problem across most of the portfolio I inherited and with other bundled price surgery network outlets starting to spring up everywhere.

In the contracts I reviewed when I started in May, most of the PPO and TPA contracts have these debased and unrealistic definitions included in their language. For those who will not amend, I have a plan for how to deal with them on renewal. They may not like it. Especially if we went to the effort and expense to contract with them but they didn't refer any business. Oh well...

Spine Surgery is different

One cannot bundle spine cases as easily as a LEAN or SIX SIGMA model could be used to bundle other cases. There are many surgical approaches, varied technologies, different implants (You know I was also a surgical nurse in another life, right?) and different surgeon preference cards, time to complete cases, and instrumentation.

Patients are also quite complex, especially those with bad arthritis, obesity, and other concomitant conditions unrelated to their spinal problems. For example cervical fusions may require two operating sites on the body unlike their other bundled case priced cousins like the joint replacement cases and general surgery and ENT procedures. That also means that for a certain percentage of cases, the inpatient setting may be more appropriate for patients that are higher risk. But there's no reason to treat them all the same and force them all the the hospital setting when the would be safe and appropriate in the ASC. The surgeon should be the independent decision-maker. Not an HMO, PPO, or TPA or employer or even the government.

Specifying the EPISODE OF CARE

You must also clearly define what is included in your bundles. You should not include post-op infections or other complications or 90 days of follow up care in the bundle. If the patient is local, they can buy that from the surgeon as evaluation and management visits for which fee-for-service is paid. Out of town patients should be handed off in accordance with accreditation standards and national patient safety goals protocols developed for medical travel patients. They can see their hometown doc (if there is one) for follow up care, paying E&M service fees for the remainder of the 90 days. If there isn't one, telehealth may suffice with video assist. Or... they might travel back to see the surgeon who did the surgery. All that depends on how far away they traveled.

You can also make the bundled price spine surgery "product" limited so that you are not bundling in Factor VIII and von Willebrand factor, or other high cost medications. This is also where I take issue with the logic associated with CMS' BPCI and its copycats. They want the kitchen sink loaded into the definition and to pay a pittance for it. Kinda like a Dire Straits song...

Also, don't bundle in physical therapy or overnight stay with nursing care past the 23-hour limit and make that only when medically necessary. Parse those out and prescribe. Don't bundle. You also don't have to bundle for complications that just "happen". Someone could have a perfect surgery and then slip on the ice at home or have a car accident. Don't make your episode of care more difficult by adding in things that are not under your direct care and control.

Risk-based payments and commercial payers

Just because a payer wants to pay you on the basis of outcomes doesn't mean you have to accept that contract. Are you not already accepting shared financial risk by bundled pricing negotiated in advance?

Many payers attempt this lame, wimpy approach with my clients and I recommend marching them right out the door they came in with these contract templates. Most payer negotiators have not done their homework. They come with a template that has a line for a signature. They don't know how to negotiate better than you. They don't know how to negotiate. They are signature collectors. They likely won't have prepared any basis of measurement to define the outcomes they are willing to pay. They often figure if you don't ask for metrics and don't demand that the metrics be restated in the contract, its an easy way for them to chisel reimbursement after the fact or deny payment outright.

We've got some chisels of our own in surgery. Use your virtual chisels to recontour their contract draft agreements and have your own definition of an episode of care.

While you are at it chisel away at timely payment and require payment via ACH same day to chisel away at revenue cycle costs and time.

Also, chisel away at any ambiguity about pre-authorization as well. Make the pre-auth equate to a firm purchase order. There's no reason that any provider should take financial risk of non-payment for the accuracy of a pre-authorization given by an employer or plan administrator. It violates every one of the 12 maxims of equity.

Unlike fee for service, or even reference-based pricing, a negotiated in advance, bundled price for a surgery can be paid same day as the surgery. The ASC need not be a credit grantor to ASOs, PPOs, TPAs or employers.

Private Equity Involvement

If you aren't dong well financially, and you think you want to try bundled price direct with employer contracting, be careful. Private equity investment injects immediate capital into the an ASC, but I tend to avoid this as a primary recommendation if it can be avoided, even though I consult to many PE and VC clients. You lose control to some extent when PE and VC is involved. And perhaps, your ASO, TPA and PPO contracts and their lowball payments, wide episode of care definitions, risk sharing and late payments and costs to appeal wrongfully denied claims are why you are in a financial pickle. Only if there's no other way, should you trade the cash cushion upfront and the remainder paid as capital gains. LEAN up and push through the urge to involve outside capital partners if at all possible. You'll come out better on the other side in most cases.

Adding new physicians

Medical groups can bundle case rates and lease or otherwise negotiate facility use and costs. My foreign surgeon clients do this all the time. The ASC should see revenue as revenue. If you bring a fully-marketed deal to them and it pays the ASC fairly, its all good.

Employing new physicians is become very expensive because you'll probably be subsidizing them for about five years before they make money. I wrote the best selling book on the Physician Employment Contract Handbook, which can help you if you need a guide. This book is in 2nd edition and is available in 18 e-reader formats and hardback from your favorite online or retail bookseller. The first edition was co-published in 1999 by McGraw Hill and MGMA, and the second edition in 2011. But nonetheless, new hires do end up performing cases that boost productivity and revenue for both surgeon and ASC.

Online marketing

Many spine practices don't know how to advertise or market. They market features, technologies they adopted, and clinical stats. That's like the guy on Broadway saying "wanna buy a watch?"

Some are afraid to market their prices directly as they fear the ASOs, TPAs and PPOs will want the advertised prices without honoring the terms and conditions that are a part of the bundled price negotiation. If that describes your practice or you simply want amplification of your program, SurgeryShopper.com may be a no-cost solution for you. This new website and company which I co-founded has enjoyed phenomenal traffic and provided many referrals since its launch in June.

In its first three months, the site averages approximately 3500 hits per day from the USA and Canada, with an average on-page time of over one minute (high) and a 38% bounce rate, which is extremely low.

These stats translate into one thing: people are finding the site and when they get on the site they stay on the site exploring, reading, and searching prices. If you aren't getting that kind of traffic for your ASC or medical group site, you may need a tune up. We found that a nearly $600 a month spend for Google Adwords targeting the wrong search terms and features-based content was not working at the ASC. That's also something I can help with. I have taken the Google certification training and put that training into practice with SurgeryShopper.com. I am like the testing lab. I test on SurgeryShopper and translate the lessons learned to private consulting clients and SGSC,

In bundled price surgery, I've learned that call volume is the key conversion target; not emails form submissions. When a patient picks up the phone, they are usually ready to commit. They don't want to wait for a response by email. We are starting to watch call volumes increase at SurgeryShopper. The spine surgery price page is always among the top four (competing with knee, hip and eye surgery prices).

Of more than 81,000 page views since July, spine pricing page views total 8500 page views. 12% of visits are from Canada. Don't expect patient prospects ready to buy to fill in forms to have you call them when you get around to it. Set up a special phone number so you can measure call volume and conversions for your bundled price surgeries.

Also, don't comingle your messages to consumers, employers, and insurers on the same pages in the same contents. You won't rank on SEO and you will confuse your visitors. Three targets... three sections. Don't skimp on marketing and promotion. You will be on your own. You cannot rely on ASOs, TPAs, and PPOs to steer volumes to you in exchange for a discount. Learn how to use social media to amplify and support your brand, not to count likes and follows. Revenue matters. "Likes" don't pay the bills.

Need help? Call me. (800) 727.4160