Dr. Su Millennials and Healthcare

Swipe Right on Healthcare?
Millennials Connect with Tech & Convenience

 

When talking to Millennials about health and healthcare, making sure it is communicated clearly via text, an app, or a user-friendly online platform is key. This is the generation of digital natives after all.

According to Pew Research Center and the U.S. Census Bureau, “Millennials have surpassed Baby Boomers as the nation’s largest living adult generation.” Millennials, or Gen Y, shop, eat, communicate, and take care of their health in ways unimagined by previous generations. The technological innovations that have become commonplace with Millennials mean that healthcare will need to continue to adapt to be able to reach younger generations.

Dr. Brian Su is a Board Certified Spine Surgeon, the Chief Development and Strategy Officer of California Orthopedics and Spine, and just shy of being a Millennial himself. He agrees that his Millennial patients prefer to communicate through a screen. “It’s still calling the office and waiting on hold for 20 minutes. I think Millennials don’t have the tolerance for that, and I think they don’t have the time or perhaps the attention span,” says Dr. Su.

Dr. Brian Su is a Board Certified Spine Surgeon

This group of young people is growing up and making their own decisions. With that comes healthcare with convenience, speed, and personalization. As the first generation raised with instant internet access, Millennials have high expectations when it comes to selecting a doctor and that doctor’s ability to evaluate their needs.

With telemedicine and telehealth serving as the new norm due to COVID-19, Millennials have not felt the same discomfort as older generations. Prior to the pandemic, many Millennials preferred to see a doctor virtually, stressing the inconvenience of finding time during the day to make appointments. According to Dr. Su, to support communication efforts for the Millennial audience “online platforms and algorithms for scheduling, video visits and being able to easily contact your doctor electronically need to be efficient and user friendly.”

When it comes to Millennial debt and making healthcare decisions, price and transparency also matter. According to Becker’s Hospital Review, “50 percent of Millennials avoid seeing the doctor to save money.”

Echoing this note, Dr. Su believes, “for younger patients, if they practice good preventative care, they typically don’t get sick. So if they don’t get sick, what’s the point of paying for a high-cost plan? Maybe they choose one that has a high deductible, and they just want to be able to get their routine checkups. So I think when you’re young, you’re not really thinking about that kind of stuff. You’re thinking more about your income and being able to save.” It is clear that Millennials prefer to save by choosing a high-deductible insurance plan that carries a lower premium. Knowing they need insurance, they will often choose the plan that will cost the least.

In matters of health, another influence on Millennials’ decisions is confusion, and likely ignorance, regarding how intimidatingly complex modern healthcare works. Transparency is vital.

This younger generation is generally more health-conscious and more proactive. They are willing to spend more money on gym memberships or fitness classes, healthy food, and self-care products. When asked about the difference between health and healthcare, Dr. Su says, “Health is preventative. Most people think of healthcare as reactive, whereas someone’s health really should be proactive. There’s very much been a push towards preventative care and being proactive. Whether it be eating healthier, more vegetarian, eating less red meat, drinking less alcohol, and so on.” Dr. Su finds that Millennials are more in tune with this movement since healthcare costs can be unpredictable.

As a Global 1 surgeon, Dr. Su understands the benefits of cost transparency for his patients. He has seen first-hand patients delay their procedure based on the cost estimate. With cost sensitivity at such high levels, it is essential to make sure patients of all generations understand their medical bill. With a bundled payment program for healthcare procedures, there is a well-established strategy for managing costs and removing economic uncertainty. For the patient, there is one price, one payment, and no surprises.

With the growing number of Millennials in the workforce becoming doctors, physician assistants, nurse practitioners, and so on, it might be an adjustment for Baby Boomers to be treated by someone who could be the same age as their own child.

According to Dr. Su’s Clinical Assistant and Research Coordinator, Christian O’Connor, a Millennial himself, “A lot of patients we see, especially in the older demographic, are hesitant and/or unwilling to see a physician assistant or nurse practitioner as they believe they are unqualified. If there is any drawback between seeing a doctor and a lower-level practitioner, the gap is very small. I’ve found the Baby Boomer generation is pretty unwilling to pursue that route but the younger generation is willing and thankful to be able to be seen sooner and get the same level of care through lower-level practitioners.”

Despite age prejudices, aging Baby Boomers currently do or will eventually lean on their Millennial children to be a healthcare advocate for them. “It’s actually extremely helpful and improves the quality of care for the patient if a family member is present,” says Dr. Su. “Whether or not it’s a son, daughter, spouse, it just has to be somebody that’s a healthcare advocate. As a patient gets older, it’s important because at the end of the day it’s more information to help the physician.” Ultimately the Millennial generation is going to transform the way healthcare is delivered.

It’s no surprise Millennials and even Gen X are turning to fast-acting membership-based medical practices like Forward and One Medical. O’Connor says, “About 10% of our patients are referrals from One Medical with patients generally being in their 40s, or Gen X.” The medical industry is taking the appropriate steps to evolve and meet quick service expectations by making healthcare on these platforms affordable, accessible, and enjoyable.

The healthcare industry must take notice as Millennials present new and distinct challenges. So, will this younger generation swipe left or right?

Innovations for Spine Surgery: Dr. Rasouli Affirms Outpatient Surgery and AR are “In”

By Scott Leggett 
January 26, 2021

At the forefront of embracing the growing advancements in surgery is Dr. Alexandre Rasouli, a nationally recognized, board-certified spine surgeon. With his focus on the innovations and advancements of technology in surgery, he is paving the way to incorporate these elements into his practice and encouraging other surgeons to follow suit.

“Minimally invasive deformity correction, computer-assisted surgery, and image-guided surgery have revolutionized our ability to successfully treat spinal conditions,” emphasizes Dr. Rasouli.

Dr Alexandre Rasouli

With stress on efficiency, Dr. Rasouli highlights the importance of making sure everything he does is productive, purposeful, and effective. If something does not add value, he will find a new way to perform procedures more efficiently, and that starts with working at a well-fitted Outpatient Surgery Center.

Dr. Rasouli has found, after working at 90210 Surgery Medical Center (affiliated with Cedars-Sinai) for the past six years, that he has been able to complete multiple complex surgery cases with zero complications. Moreover, understanding the importance of teamwork, he surrounds himself with like-minded, experienced surgeons, nurses, and anesthesiologists to ensure each surgical procedure results in minimal blood loss, short operative time, and minimally invasive techniques to yield strong outcomes.

“Surgeons with a particular skill set can leverage their skills to do surgeries in a setting where patients can go home the same day, regardless of the caliber or magnitude of the surgery. So at that point, we decided that the setting of the surgery suddenly becomes the innovation,” notes Dr. Rasouli.

To gain more traction for this outpatient surgery movement, insurance companies, government entities, and the like will also need to be on board. “We’re going to need vocal surgeons,” says Dr. Rasouli. “The surgeons that are vocal right now are part of the ‘old guard.’ They generally take much longer in surgery, which can lead to additional blood loss and more extended hospital stays for their patients. Those are the surgeons right now that are being looked upon for guidance on policy. In contrast, a surgeon trained in an outpatient surgery center can take approximately half the time to do the same surgery. So it’s going to take some younger, more vocal surgeons to be able to get those entities to start to shift gears a little bit.”

According to Dr. Rasouli, ten years ago, surgeries were driven by scientific studies conducted on the spine. More recently, he has seen a paradigm shift as patients are now more informed. Patients are more likely to conduct their own online research and bring the findings to their surgeon for the procedure they want.

“If a patient wants an artificial disc, it’s because they’ve done the research and they believe an artificial disc is better suited for them,” explains Dr. Rasouli, who is the first surgeon in the nation to use the new modular ProDisc lumbar artificial disk replacement system.

“A surgery is only as complex as the surgeon makes it,” says Dr. Rasouli. To further clarify, complex surgery is “considered complex merely by the fact that they involve a fusion in the back where you have to go in from multiple approaches. There are some surgeries where we have to approach the low back from multiple angles, say from the front and the back. That’s considered a complex surgery. There are surgeries in the neck, for example, where you’re replacing not one disc but several discs simultaneously, say three or four. That’s considered a complex surgery. Any procedure on the mid-spine, what we call the thoracic spine, which carries with it the spinal cord and all those things would be considered a complex surgery,” explains Dr. Rasouli. In addition to completing these complex surgeries in an outpatient setting, they can be done safely and cost-effectively.

There is a well-established strategy for managing costs and removing the economic uncertainty of surgical procedures. That strategy is bundled payments for healthcare procedures. For the patient, there is one price, one payment, and no surprises.

Highlighting the importance of this, Dr. Rasouli says, “some insurance companies have caught on to the value-add proposition. If you can get the same product for a fraction of the price because you’re doing it at an outpatient setting, which is more efficient and doesn’t involve an overnight stay, then it’s less of a financial burden to the system.

In this case, the insurance companies would have to pass those savings onto the system. So I think Global 1 is innovative in that it’s been able to link with a particular payer to offer that and make that a reality. Since migrating more cases to an outpatient setting due to COVID, we’ve seen a 20 percent increase in Global 1 bundled cases with Blue Shield. I’m hopeful other insurance companies will come around.”

When looking to the future, Dr. Rasouli is adamant that if something does not prove efficient, he will not incorporate it. “If I go to wear a pair of goggles that show me exactly where I have to go with my screws, and I wouldn’t need to bring in an x-ray into the room or a microscope, that’s suddenly a big value-add,” notes Dr. Rasouli who is currently working with a company to bring augmented reality headsets into his surgery center.

“In my opinion, the most promising technology in the outpatient setting is an augmented reality headset because remember, you don’t want to add time to the case,” says Dr. Rasouli, who stresses that every millimeter counts when guiding a spinal surgeon through operations.

It is clear that groundbreaking advancements are being made to revolutionize surgery, and “augmented reality, which shows you things that you wouldn’t be able to see no matter how good you are, hold the promise of the future of surgery,” affirms Dr. Rasouli.

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Scott Leggett is co-principal, Global 1. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Find Scott on LinkedIn.

Global 1– As the leader and largest administrator of outpatient surgery center-based perspective and commercial bundled payments in the nation, Global 1 provides an innovative, value-based surgical delivery and payment program. By aligning the facility, surgeon, and anesthesiologist, the Global 1 Bundled Payment Program supports high-quality outcomes in a lower-cost setting, providing a single transparent price for an episode of care. More than 70 bundled procedures are available within specialties including orthopaedics, spine, general surgery, ear/nose/throat, and women’s health.

 

The COVID Challenge for Orthopaedic Surgery – One Surgeon’s Response

By Scott Leggett 
December 9, 2020

Nine months into the COVID-19 pandemic and cases are soaring. As we head into the colder months, the forecast is grim, with an estimated surge of COVID-19 hospitalizations nationwide. The pandemic has made people pause and re-evaluate their careers, lifestyle choices, social circles, and even their healthcare. At a time when our health is most important, people must prioritize the care they need and identify the safest site for receiving their care. When it comes to surgery, the safest location is an outpatient surgery center or OSC – commonly referred to by the industry and Medicare as ambulatory surgery centers or ASCs.

With the overwhelming need for hospital beds for COVID-19 patients, operating in an OSC setting is the clear choice for elective surgeries. In response, Hospitals across the country are beginning to suspend elective surgeries as these beds are a necessity for COVID-19 patients. Underscoring the importance of safe patient care and health protocols amid a pandemic, the need for these very safe OSC facilities is essential.

Dr. Michael Hannon

Dr. Michael Hannon, a double board-certified Orthopedic Surgeon, was forced to re-evaluate his practice once the COVID-19 shut down occurred, tapping the breaks on any hip and knee surgeries until mid-June. Fortunately, Dr. Hannon was able to use the time to help develop a Robotics Total Joint Program and the comprehensive outpatient protocols to support it at Cedars-Sinai Precision Ambulatory Surgery Center, where he is migrating medically appropriate partial and total knee replacement cases. Located in the heart of Beverly Hills, the center was recently ranked among the Top Ten Best ASC in the US by Newsweek and is part of a network for four ASCs treating patients across all specialties.

“Patient care is important,” notes Dr. Hannon. “People are missing routine screening tests, and, unfortunately, they are not getting all the care that they need. If you’re an end-stage osteoarthritic patient, we can perform a safe procedure at our OSC despite the fact that we are in the middle of a pandemic. We’ve developed the appropriate protocols to make these elective surgeries streamlined and as safe as possible.”

To simplify the billing process that comes with elective surgeries, Dr. Hannon teamed up with Global 1 to help provide one, up-front price for the patient in an outpatient setting via the Global 1 bundled payment program. “In my opinion,” says Dr. Hannon, “for patients that don’t have comorbidities, outpatient centers can provide patients a superior experience. Studies have confirmed this to be the case. The Global 1 program provides price transparency and reduces financial anxiety from the procedure.”

According to Dr. Hannon, “there has been a huge impact on doctors in terms of the flow of patients. Our patient volumes are still down 15-20 percent. Elective healthcare has been significantly affected.” Needless to say, the ability to continue to see and care for his patients in a safe outpatient setting has been vital. Patients and doctors have always put a great deal of trust in outpatient surgery centers to provide high-quality service with a high standard of care.

When the shutdown was enforced in mid-March, Dr. Hannon knew he could not just sit around. “I didn’t stop working because our patients still needed care,” says Dr. Hannon. “It gave me the final push to help an outpatient program, and I am pleased that it has come to life.”

Dr. Hannon has also incorporated robotic surgery to assist with his outpatient knee replacement cases. This technology helps improve outcomes as it provides the surgeon with increased accuracy and consistency.

Another benefit to outpatient surgery is the patient returns home the same day as the surgery. Allowing the patient to recover in the comfort of their own home in a clean and safe environment is key to solving patients’ needs for medical care and potentially slowing the spread of COVID-19. Outpatient centers do not treat sickly people, such as patients with COVID-19 or other infectious diseases.

Finding the silver lining, Dr. Hannon says, “Though COVID-19 has been terrible for so many people, there is some good that comes out of negative situations. Because of the pandemic, we were able to take the time to launch this extensive program. It has given me the time to research, develop, and give my full attention to what was needed. I wouldn’t be surprised if COVID-19 cases continue to increase and elective surgeries at hospitals are halted again. Thankfully, we can continue to provide some needed care in an outpatient setting.”

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Scott Leggett is co-principal, Global 1. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Find Scott on LinkedIn.

Global 1– As the leader and largest administrator of outpatient surgery center-based perspective and commercial bundled payments in the nation, Global 1 provides an innovative, value-based surgical delivery and payment program. By aligning the facility, surgeon, and anesthesiologist, the Global 1 Bundled Payment Program supports high-quality outcomes in a lower-cost setting, providing a single transparent price for an episode of care. More than 70 bundled procedures are available within specialties including orthopaedics, spine, general surgery, ear/nose/throat, and women’s health.

The True Cost of Healthcare: A Hidden Tax on the American Middle Class

By Scott Leggett

Americans’ healthcare costs, as calculated by the Centers for Medicare Services (CMS), have grown consistently at the rate of about 4 percent per year over the past 20 years.

What is the result of this unrelenting growth in healthcare costs? As Americans, we now spend about $10,000 per person or $3.6 trillion annually on healthcare. If you are wringing your hands about this large number, you are not alone.

While this big number is, well, big it isn’t personally significant to most of us.

The significant healthcare numbers are much, much smaller. They are the real cost of healthcare as measured in our paychecks, family budgets, and taxes.

Given that, mine is a simple premise: the actual cost of healthcare is a hidden tax on America that is slowly sapping the earning and spending power of workers across the income spectrum, save for a few with high-incomes of $250,000 or more per year.

Consider one statistic to illustrate my point. The Pew Research Center, using 2001-2014 data from the Bureau of Labor Statistics (BLS), noted in a 2018 article, “One theory is that rising benefit costs – particularly employer-provided health insurance – may be constraining employers’ ability or willingness to raise cash wages.” According to BLS-generated compensation cost indicestotal benefit costs for all civilian workers had risen at an inflation-adjusted 22.5% since 2001 (when the data series began), versus 5.3% for wage and salary costs.” 

These are employee cost data reported by employers as differentiated from employee wage increases. However, it is illustrative of my underlying point; benefit-cost increases – especially healthcare costs – have substantially outstripped wage cost increases. 

As a further illustration, using data from the Pew Research Center reported in 2018, “…despite some ups and downs over the past several decades, today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have mostly flowed to the highest-paid tier of workers.”

Pew Research Center, in the same 2018 article, goes on to note that, “In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.”

Finally, Pew notes that “Meanwhile, wage gains have gone largely to the highest earners. Since 2000, usual weekly wages have risen 3% (in real terms) among workers in the lowest tenth of the earnings distribution and 4.3% among the lowest quarter. But among people in the top tenth of the distribution, real wages have risen a cumulative 15.7%, to $2,112 a week – nearly five times the usual weekly earnings of the bottom tenth ($426).”

Making a similar point, The Wall Street Journal ran a story in 2014 in which they noted, “Rising health costs don’t affect every employee the same. Today, an average family health policy costs employers nearly $12,000 per year, up from only $4,200 in 1999. Had employer premiums not risen, average salaries today would be around $7,800 higher. For a lower-income worker who today makes $30,000, that could have meant a 26% salary increase. By contrast, a ‘one-percenter’ making $250,000 today would have seen his earnings rise only by 3.1%. Health costs are a bigger share of total compensation for lower-wage workers, so rising health costs hit their salaries the most. The result is higher income inequality.”

To put a finer point on this, consider an average American family of four (with no older adults in the household) with an average family income of approximately $75,000 per year. An employer covers this family-sponsored insurance plan. According to Peterson-KFF Health System Tracker, a non-profit focused on measuring healthcare costs, the average family will spend approximately 11 percent of their gross income, or $8,200 per year, on healthcare costs. This number includes expenditures for out-of-pocket healthcare spending (which Kaiser Family Foundation estimates are up 71% over the past ten years), health insurance premiums, and state and federal taxes that fund health programs such as Medicaid and Medicare.

However, there is another side to the story: the costs to the employer. When combined with the typical family spending on health plus the employer’s contribution, the total equals $16,700 or about 22 percent of the family income. Kaiser Family Foundation estimates that the total costs for covering a family of four are even higher, exceeding $20,000 per year or about 26 percent of average family income.

Further, Kaiser reports that insurance premium increases had outpaced wage increases over the past decade, a period following the Great Recession of 2008 when many Americans experienced sustained flat income growth.

The net effect; individuals and families are carrying an increasing burden of overall healthcare costs when their real wages have not increased to offset these costs.

“There is growing evidence that cost protections have eroded for those who have employer-sponsored health coverage, putting the burden of health care costs on workers and their families,” noted David Blumenthal of The Commonwealth Fund as reported by CNBC.

Health System Tracker, in a recent report, notes that “economists generally believe” that the increased cost of healthcare coverage for employers “offset[s] wages.” In other words, instead of giving workers pay increases, employers spend on the ever-increasing cost of health insurance, which, according to Kaiser Family Foundation, is up 26 percent in the past decade.

American’s are living to work as they work to pay for healthcare.

The American Dream, powered by opportunity and hard work, drives many Americans’ efforts to achieve that dream. Ever-increasing healthcare costs are robbing too many Americans of that dream. Healthcare costs are one of the core factors chipping away year by year at America’s middle class, the US economy’s real economic engine driving the American dream. Ever-increasing healthcare costs are the real reason healthcare in the US has to change – this is no longer an option.

Adding to the long-term trends of ever-increasing healthcare costs against a backdrop of stagnant purchasing power is the impact of the COVID-19 pandemic. According to a report published earlier this year by the non-profit Families USA, “the COVID-19 pandemic and resulting economic crash have caused the greatest health insurance losses in American history.” The report went on to note that in the first half of 2020, “5.4 million laid-off workers became uninsured,” representing an increase in uninsured adults that is 39 percent higher than any annual increase ever recorded.

Today, the US healthcare crisis dwarfs any challenge America has experienced. News of the pandemic and presidential election has mostly masked coverage of the broader healthcare crisis. Nonetheless, we Americans face an unprecedented challenge long in the making, brought to a boiling point by the pandemic.

With the election looming, it will likely be next year before we have wide-spread public awareness of this crisis’s extent. We must answer this challenge immediately.

Employers who provide roughly 50 percent of the healthcare coverage in America and other health plan sponsors must be prepared to step up and aggressively take charge of their healthcare spending. Employer support for healthcare innovation, evolving business models, and streamlined regulations will be required to confront this crisis in the near term. An unprecedented crisis requires an exceptional response.

Many employers are considering new approaches to managing benefit costs using the concept of value-based benefit design. I know first-hand from my experience with ambulatory surgery centers and bundled payment procedures that there are value-based options immediately available to employers and plan sponsors to increase quality and simultaneously reduce healthcare costs today and into the future.

We can no longer afford to ignore this crisis. It requires immediate, large-scale decisive action to meet runaway healthcare costs head-on. Join me in raising awareness and taking action now.

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Scott Leggett is co-principal, Global 1. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Find Scott on LinkedIn.

An Alternative for Elective Surgery in Light of Coronavirus: Independent Outpatient Surgery Centers

By Scott Leggett

It is no surprise that the American hospital system has been drastically affected by the COVID-19 pandemic.

The silver lining is that, for years, a movement toward independent outpatient surgery centers (OSCs) has been gaining momentum and is poised to take on a significant role in our healthcare system. Bonus: even Medicare is onboard.

While hospitals should always be the epicenter for the sick or injured, OSCs (commonly referred to by the industry and Medicare as ambulatory surgery centers or ASCs) are growing in numbers to provide a solid alternative for those generally in good health seeking a variety of scheduled procedures.

For decades, OSCs have seen record-low infection rates due, in part, to the singular purpose of these facilities – treating non-emergent injuries, not illnesses. Extensive precautions are taken to protect the surgical environment through sterilization and elimination of exposure to outside diseases. As OSCs are gearing up for the post-COVID transition of ramping back up elective surgeries, OSCs are stepping up their game even more:

  1. Providers wear the recommended CDC Personal Protective Equipment (PPE) and get screened on a regular basis
  2. OSCs practice the same level of social-distancing as hospitals – patients are accepted at the facility door, and their loved ones are provided updates remotely
  3. All patients are screened closely prior to surgery
  4. All patients are discharged the same day or within 24 hours from the facility to recover comfortably with loved ones
  5. OSCs efficiently adding even more measures to sanitize and reduce the risk of exposure to virus and bacteria

Often a more economical alternative to in-patient hospital care, OSCs provide a wide variety of surgical options depending on the particular facility. Previously, common procedures included low-acuity orthopedics, hernia surgery, ophthalmology, and gastrointestinal (GI).

Now, due to incredible technology and advanced pain management techniques, it is very common for OSCs to offer major spine, joint replacement, women’s health, cardiac, and general surgery. Beginning in 2020, Medicare has approved reimbursement of certain joint replacement surgeries in an outpatient setting.

Bottom line – There are few elective surgeries that cannot be done in an OSC. And since most of these facilities operate outside the hospital system, they are not impacted by the financial turbulence affecting hospitals.

Time will tell what the ultimate impact of COVID-19 will be on the American economy and the healthcare system. An early observation of the new norm is that various industry movements already trending will just get super-charged; we see this accelerated movement of more elective surgery from hospitals to OSCs. A safe bet would be that OSCs have the potential to create a new standard of care for elective surgeries. In the meantime, I’ll take outpatient surgery, and hold the lime.

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Scott Leggett is co-principal, Global 1. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Find Scott on LinkedIn.

Global 1 Webinar: Framing the Future of Outpatient Care

The Price of Surgery – Beyond the Hard Costs: A Case for Neuroscience and Bundled Payments

By Scott Leggett

There is a cost to healthcare that is often overlooked. This cost does not appear directly on medical charts or profit and loss statements or in budgets, but it is a real cost nonetheless. And it is a cost that plays out in the patient’s health and well-being as well as their financial well-being.

Moreover, it is a price primarily borne by patients, though it may be a surprise that surgeons may incur unexpected related costs — more on that in a moment.

We call this cost “healthcare financial anxiety” (HFA), the symptoms of which are mental and physical stress related to the impact on one’s life by an unplanned medical procedure. Simply put, patients are anxious about the financial implications if they suddenly face an unexpected medical procedure, serious injury, or long-term disability.

Stories appearing in mainstream media about $650,000 in medical bills that are arbitrarily not covered by insurance add to this anxiety. It is a real, everyday consideration for patients.

What might have been referred to as pseudoscience a few decades ago now finds strong support in the relationship between neuroscience and the immune system. Indeed, there is a field of medicine devoted to the subject, psychoneuroimmunology (PNI).

PNI has been identified as a significant field for the future of medical research, the treatment of diseases, and our attitude toward handling stress. It studies the vast array of relationships between the human mind, body, and physical and mental well-being beyond anxiety over the ever-present looming risk of unexpected healthcare costs.

That impact is often overlooked or minimized when patients interact with the periphery of the healthcare system, such as dealing with the healthcare bureaucracy, insurance companies, scheduling, and preoperative assessments.

What Are the Costs?

Assessing the financial cost of anxiety over the uncertainty of healthcare costs is difficult. However, costs for anxiety and related mental health issues in general are on the rise among one population that is relatively easy to measure: employees covered by employer-sponsored health plans. This population represents about half of the insured in the U.S., with employers spending more than $1.2 trillion annually to provide insurance coverage to those they employ. According to a 2018 story published by CNBC, “Anxiety is expensive for U.S. employers.”

Quoting data from Aetna Behavioral Health, CNBC enumerates the rising costs of mental health for employers, noting that “annual costs are increasing twice as fast as all other medical expenses in recent years.” Further, according to data compiled by the consulting firm Wills Towers Watson, “People struggling with a wide range of mental health issues submit two to four times as many medical claims.” These increased costs are reflected in real dollars. People suffering from anxiety and depression “submit an average of $14,967 per year in claims, compared with $5,929 a year for the total population.”

In the big picture, employer mental and behavioral health expenses have increased in recent years, more than 10% annually against a 5% increase for other healthcare costs, according to Aetna Behavioral Health.

The costs are real. Some of these costs can be put to HFA.

Concern for Surgeons

For surgeons, there are several implications. First, patients are experiencing more anxiety than ever before; the uncertainty of overpaying for medical procedures adds to underlying tension. Second, the science of psychoneuroimmunology tells us that there is a real relationship between mental and physical well-being. Third, there is a potential cost for physicians in all of this as a patient’s mental health and welfare have implications for surgical outcomes.

There is much to consider here, most of which are outside the purview of this article. What can be implemented are strategies to assist patients in better managing the contingencies of medical procedures.

On the medical side, surgeons have successful, well-established processes and procedures for preparing patients for surgery. On the financial side, not so much.

True, financial considerations are not the first concern of surgeons. However, there is a well-established strategy for managing costs and removing the economic uncertainty of medical procedures. That strategy? Bundled payments for healthcare procedures.

For the patient, there is one price, one payment, and no surprises. Very often the total cost of bundled services is far lower than a list of similar services offered unbundled. Bundling eliminates the unknowns and attendant anxieties. There are no surprise medical bills with bundled healthcare services. The patient knows in advance the cost of the services and the exact amount of whatever out-of-pocket expenses they will incur. As such, the patient goes into surgery without the apprehension of healthcare financial anxiety.

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Scott Leggett is co-principal, Global 1. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Find Scott on LinkedIn.

Global 1 | Since 2009, Global 1 provides predetermined, single-payment pricing for an episode of care at its network of more than 135 outpatient surgery centers. The program is designed to provide alignment with the facility, surgeon, and anesthesiologist which leads to a high-quality outcome in a lower-cost setting. Today, more than 800 physicians use Global 1 bundled payments for 70+ surgical procedures including orthopedics, spine, general surgery, women’s health, and ear/nose/throat. 

How to “Aldi” Healthcare by Taking Out Costs

By Thomas D. Wilson

Aldi. The mere utterance of the name stirs fear in the heart of competitors, and joy in the heart of consumers. Aldi, the German-owned international grocery store chain with a growing presence in California, is renowned for offering quality products at low prices and even lower operating costs. It is a company that understands managing costs equals a healthy bottom line.

What if someone could “Aldi” healthcare? What if some healthcare provider, some innovator, could take the costs out of healthcare just as Aldi has taken the costs out of groceries? What if healthcare providers could get better outcomes for their patients with a better outcome for their bottom line?

Sounds impossible? If Aldi can do it with groceries, why can’t someone find a way to do it with healthcare?

In fact, we can reduce healthcare costs, much as Aldi has achieved with groceries.

The ambulatory surgery center (ASC) and its bundled payments model is the “Aldi” of healthcare.

To better understand the business art form of taking the costs out, let’s take a quick look at Aldi’s business model.

Renting a Shopping Cart

It starts with a quarter, twenty-five cents. Customers shopping at Aldi are familiar with Aldi’s renting shopping carts to shoppers at the entrance to an Aldi store for a quarter. For the uninformed, renting shopping carts may appear unfriendly and exploitative of customers, even off-putting. But Aldi knows that paying an employee to chase around the parking lot gathering up shopping carts is an unnecessary expense, especially if customers will simply return the carts once they have loaded their groceries into their car. Hence the twenty-five-cent cart rental. Return your cart and Aldi returns your quarter. That is how you take the costs out of a business.

Aldi shoppers, who enjoy legendary low prices, reportedly consider the cart rental and returning the carts after use, an essential part of the Aldi experience.

Likewise, customers bring their own bags and bag their own groceries at Aldi. There is no staff to bag groceries and carry them out to your car. An unnecessary expense when customers can do it themselves.

And, while you are at the checkout counter, stand back as Aldi cashiers are legendary for their productivity. They don’t hunt for bar codes on packages because Aldi, which packages and sells many of its own brands, prints the bar codes several places on the packaging, and they train cashiers to memorize the prices on produce and other unmarked items, making checkout more a sprint than a marathon. Customers reportedly love the speed and efficiency. No long, slow-moving lines at Aldi.

Fewer Brands

In the store itself, there are far fewer brands on the shelf, making inventory management more efficient and reducing demand for shelf space and the square footage to support it. That adds up to lower inventory costs, while the smaller store footprint costs less in rent, maintenance, lighting, heating, and cooling.

Speaking of the stores, while they aren’t plain, no one would describe them as fancy. As it turns out, fancy costs more.

However, what catches the customer’s fancy are the legendary low prices offered at Aldi. The company can offer lower prices simply because it focuses on taking the cost out of every element of its business.

Indeed, Aldi legend has it that in the early days when Aldi was growing from a one-store operation in post-World War II Germany, store managers had to use public telephones near their store as Aldi’s owners considered the telephone an unnecessary expense.

The name of the game for Aldi: taking the costs out to reduce prices for its customers. Nobody in the grocery business does this better, not Walmart, not Costco, not Trader Joe’s.

Importantly, Aldi does this without sacrificing quality, for, as any student of process improvement knows, quality is always less expensive if the process is managed from end to end.

ASCs and Bundles — the Aldi of Healthcare

Which brings us to the ambulatory surgery center and bundled payments.

Like Aldi, ASCs focus on taking the costs out. This does not mean that patients wrap their own bandages or take their own vital signs. It does mean that an ambulatory surgery center offering bundled payments is as intensely focused on managing costs as is Aldi. The result: Some surgical procedures performed at an ASC and billed under a bundled payment arrangement cost half as much as the same procedure performed in a traditional hospital. A 50% savings on a procedure that costs upwards of $50,000 at a hospital is meaningful to anyone, especially if outcomes and patient experience are as good as or better than the hospital.

While it is relatively easy to see how Aldi takes the costs out of the grocery business, it is not so easy to see how to take the costs out of healthcare. After all, if it were possible to simply take out costs, wouldn’t everyone in healthcare do that to lower costs?

This may be one of the great mysteries of life and business. Few sectors of our economy have been so resistant to cost management as has been the healthcare sector. Yet, as the experience of ASCs offering bundled payments shows over thousands of procedures over many years, it is possible to take costs out of healthcare while equaling or improving upon the outcomes of more traditional, more expensive healthcare providers.

How to take the costs out? Bundle services for a single episode care. Bundling significantly reduces costs especially when providers are guaranteed patient volume in exchange for reduced fees. Simply said, there are obvious economies to bundling. Imagine what a new car would cost if you unbundled it and had to buy the tires, engine, seats and interior appointment separately. Unbundled healthcare services are the norm; bundling is the exception. Were it the norm, overall healthcare costs in the U.S. would be significantly reduced.

What about quality? Evidence shows that bundling services has no negative impact on quality and may, in fact, improve quality, as providers, connected as they are through the bundle, coordinate care more effectively.

An example of this is seen in the findings of a study of more than 1,600 elective spine surgery cases conducted between 2010 and 2017 at Monterey Peninsula Surgery Center. A review of these surgical cases shows that there were 11 hospital admissions (0.68%), eight emergency department visits (0.5%) and one surgical site infection (0.06%). Of the 11 hospital admissions, six were for pain management, two for anaphylactic reaction to antibiotics, and the remaining two for miscellaneous postoperative complications that were quickly resolved. Of the eight emergency department submissions, four were for urinary retention, two were for pain management, and two were for anaphylactic reaction to medication and wound swelling. In all, the outcomes were on par with or better than in-patient outcomes for similar procedures. Bundled payments procedures performed at an ambulatory surgery center are safe.

Blocking the Bundle

Why has the U.S. healthcare community been so resistant to bundling? Why does healthcare as a sector continue to resist the structured, comprehensive pricing models common to virtually all other business sectors? Perhaps it is inertia; perhaps it is that overall healthcare as it is currently practiced is profitable for most market players. Perhaps it is the significant role government plays in the healthcare sector.

Whatever the cause, it is a given fact that healthcare in the U.S. costs too much. The entire sector is vulnerable to disruption by outside forces. Bundling is a responsible, self-regulating response to the healthcare cost crisis. Bundling benefits providers, payers and patients.

An ambulatory surgery center providing bundled pricing services are the Aldi of healthcare. It is safe to say that everyone likes to save money, be it with groceries or surgical procedures. As Aldi’s relentless cost management approach to its business continues to drive its success, it stands as a model for healthcare. Take the costs out of healthcare through ASCs and bundling, and you will most certainly get a great deal more than your twenty-five cents back.

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Tom Wilson is Co-Principal of Global 1 and Co-Manager of Convergent SameDay Orthopedic Strategies. Contact Tom Wilson at: tom@globaloneventures.com, (760) 602-7872.

Global 1 | Since 2009, Global 1 provides predetermined, single-payment pricing for an episode of care at its network of more than 135 outpatient surgery centers. The program is designed to provide alignment with the facility, surgeon, and anesthesiologist which leads to a high-quality outcome in a lower-cost setting. Today, more than 800 physicians use Global 1 bundled payments for 70+ surgical procedures including orthopedics, spine, general surgery, women’s health, and ear/nose/throat.

Cutting Costs Through Healthcare Price Transparency: Close but No Cigar

By Scott Leggett

Earlier this week, the Trump administration made a dramatic move to improve healthcare price transparency. President Trump signed an executive order directing agencies to draw up rules requiring insurers and hospitals to make public the negotiated prices agreed upon in contract negotiations. Their goal: Give healthcare consumers the kind of pre-purchase pricing information common to most other marketplace transactions.

Among those backing the administration’s efforts were almost 4,000 physicians who independently signed a letter collectively supporting the executive order to compel price disclosure in healthcare.

As reported by the Wall Street Journal, the physicians noted in their letter that they make “caring for patients [their] professional priority.”

In addition to this most recent and most controversial executive action by the administration, Congress has taken up the cause of price transparency with proposed legislation supported by America’s Health Insurance Plans (AHIP) and the ERISA Industry Committee, representing large employers. Opposing are hospitals.

Ironically, in spite of good intentions and great effort, no one — not the hospitals, Congress or the Trump administration — gets the proverbial cigar. All parties have largely overlooked an immediately available, proven approach to provide price transparency to patients prior to receiving treatment.

Too Expensive

Driving this quest by the administration and Congress to harness market forces to drive down healthcare costs is a simple reality: At a total annual cost of more than $3.5 trillion — the equivalent of spending more than $10,000 for every person in the country — healthcare in the U.S. is too expensive.

Consider the experience of private employers, the largest sponsors of healthcare in America, who collectively spend more than $1.2 trillion annually providing healthcare coverage for almost half the U.S. population. For these employers, healthcare costs have increased by 50% in the past decade, a decade encompassing a great recession and historically low rates of inflation. Other estimates show the cost of hospital services have increased by 250% in the 20-year period from 1997-2017. This is against an overall U.S. inflation rate of 55.6% during the same period.

Looking at healthcare costs in another way, Secretary of Health and Human Services (HHS) Alex M. Azar II, in a March 2018 speech, noted: “Federal spending on our major healthcare programs is projected to rise from 5.5% of our economy in 2016 to 8.9% of our entire economy 30 years from now. By themselves, these programs will consume almost all of the income taxes collected by the federal government.”

By any measure, current trends in healthcare costs are unsustainable.

Drawing the Red Line

It was in the same March 2018 speech that Secretary Azar drew a red line around price transparency stating unequivocally, “I believe you ought to have the right to know what a healthcare service will cost — and what it will really cost — before you get that service.”

Azar’s speech followed years of political posturing, hand-wringing, finaling, promising — and even legislating — changes to healthcare. All this activity was largely for naught as the overall cost of healthcare in the U.S. continued its inexorable rise.

As the New York Times reported in March of this year: “Price transparency has been a hallmark of health policy under Mr. Trump. In a country that spends more than $3.5 trillion a year on health care, administration officials say, it is absurd that consumers cannot shop for medical goods and services as they shop for airline tickets and electronic gear.”

As a step toward transparency, via a regulatory decree, beginning in January 2019, the Trump administration, through the Centers for Medicare and Medicaid Services (CMS), required hospitals to post their chargemaster price list on their website. For those not familiar with chargemaster, it is a listing of hospital retail prices by diagnostic related group, or DRG. Each DRG is given a code number theoretically allowing patients who know their DRG to compare prices among hospitals.

In practical terms, where a given diagnosis may comprise multiple hospital, doctor, lab and post-op charges, the chargemaster prices list is virtually useless for patients in calculating the total cost of treatment. Further, hospitals significantly discount off their chargemaster pricing when negotiating contracts with insurance providers or with customers paying cash for healthcare services.

Complex system

In March of this year, foreshadowing the president’s executive order, HHS signaled that it may require hospitals and insurance companies to disclose to the public their negotiated prices. As reported by National Public Radio, “HHS is arguing that the healthcare system, the hospital pricing system, is way too complex and opaque. Consumers don’t know what they’re buying and what they’re paying for it.”

The price transparency push received additional coverage last month when the Wall Street Journal ran a story headlined, “White House Wants Patients to Know Health-Care Prices Up Front.” The story went on to report: “The administration is strongly interested in forcing insurers to publicize the negotiated rates they pay for services, the people said. The requirement could affect insurers providing coverage in the private-employer market, where about 158 million people get their health insurance.”

Reflecting the widespread interest in healthcare cost containment, Senators Lamar Alexander, R-Tenn., and Patty Murry, D-Wash., chair and ranking member respectively of the Committee on Health, Education, Labor and Pensions, recently proposed the Lower Health Care Costs Act of 2019. The proposed bipartisan legislation includes language addressing prescription drugs, surprise hospital bills, vaccines, interoperability and price transparency. Regarding price transparency, the legislation requires hospitals and insurers to provide to patients cost estimates for upcoming treatments within 48 hours of a request.

As reported in Modern Healthcare, ERISA’s James Gelfand noted regarding the pending pricing estimates that “indeed, access to this information should help patients to better navigate the healthcare system.”

Pushback

Forcing the opening of the healthcare pricing kimono and requiring that negotiated rates between hospitals and insurance companies be made public has major implications for the industry as a whole. Armed with competitive pricing information, hospitals and insurers alike would be positioned to demand consideration equal to or better extended to their competitors.

Further, truly transparent pricing would encourage self-insured employers to shop around for the best prices on high-volume healthcare procedures common to their employee population. At present, that kind of competitive information is blocked from disclosure via contractual agreements between the contracting parties.

In the face of the wave of activity around price transparency, the defenders of the status quo offered many reasons for opaque healthcare pricing. Hospitals argue that the reason healthcare pricing is not more transparent has to do mostly with the fact that healthcare is paid, in large part, through insurance with insurance companies negotiating discounted rates with hospitals based on their volume purchase of services. These discounted rates are closely held by hospitals and insurance companies alike.

The American Hospital Association (AHA) has been notably active in pushing back against healthcare price transparency. As one AHA executive noted in a story reported by National Public Radio, “This isn’t really what consumers need or want,” said [Tom Nickels], the AHA’s executive vice president for government affairs. “What consumers need and want is what are their out-of-pocket costs.”

Speaking on behalf of investor-owned hospitals, Chip Kahn, CEO for the Federation of American Hospitals, made it clear he does not want the hospitals he represents to be responsible for cost estimates.

“Placing the onus on hospitals to provide cost estimates for any service reasonably expected to be provided in conjunction with the specified service is inappropriate as the hospital cannot accurately know exactly what services would be provided in all instances,” Kahn noted as reported by Modern Healthcare.

Still other news stories on the battle over price transparency report that patients alone do not make the selection of their inpatient healthcare provider. Physicians play an important role in selection. In addition, in emergencies, patients often seek out the nearest available care without considering price. Also, patients have been slow to make use of tools facilitating comparison of healthcare pricing.

And so, the argument goes on with almost everyone seemingly ignoring or overlooking an obvious solution.

The Key to Healthcare Price Transparency

Ironically, the current ongoing battle for healthcare price transparency overlooks a well-established tool that guarantees price transparency while substantially reducing healthcare costs for patient and payer alike — meeting or perhaps exceeding all the stated goals of the Trump administration. Widespread implementation of this tool would also meet or exceed the stated objectives of pending Senate legislation.

The tool: healthcare bundled payments. 

Bundling all services for a single episode of care — from pre-op to post-operative care, for example — into a single coordinated package of services priced with a single price point is comprehensive, transparent and value-based. For surgical procedures, combining bundled payments with outpatient surgery in an ambulatory surgery center (ASC) can reduce costs even further as services are provided with measurable outcomes equal to or better than inpatient surgical procedures.

Chargemaster vs. Bundles; an Exercise in Comparison

A simple exercise illustrates where we are today with healthcare price transparency.

Making an online visit to the Monterey Peninsula Surgery Center (MPSC) website quickly reveals that for more than 75 surgical procedures, MPSC posts the total cost of the procedure — a single episode of care — on its website.

For example, a total knee replacement (total knee arthroplasty) is priced at $24,569.

By contrast, it is impossible to determine the total cost of a knee replacement by visiting any of the hospital websites in the greater Monterey Bay Area in Central California, or virtually any other hospital website, for that matter. According to healthline.com, the average cost for a total knee replacement in the U.S. is $49,500.

If the objective of price transparency is to give patients advanced information on costs while driving down the overall cost of healthcare, there must be some large-scale example of the benefits of bundled payments in reducing costs.

Earlier this year, Municipalities Colleges Schools Insurance Group (MCSIG) announced that it generated over $7 million in savings through a bundled payment network for surgical procedures.  MCSIG provides a variety of healthcare plans to over 70 school systems and municipalities in California.

According to MCSIG, from January 2015 through December 2018, 485 surgeries were performed on MCSIG members who reside on California’s Central Coast through the Global 1 ASC bundled payment network. Global 1 (G1) is a licensed third-party administrator headquartered in Carlsbad, California.

The total savings to MCSIG during this four-year period was $7,121,250.  The all-inclusive bundled payment includes the physicians and facility fees for the episode of care.

The cases were performed in five ASCs by over 70 surgeons, involving a wide variety of surgeries including total joint replacement, spine surgery, complex joint repair, hysterectomy, gallbladder removal, tonsillectomy, thyroidectomy, hernia repair, mastectomy and breast reconstruction.  The average savings per case was $14,683.

The ASCs, surgeons and G1 were at risk for the cost of complications related to the surgery during the episode of care.  The complication rate, including infections and readmissions, was extremely low, at less than 1%.

MCSIG’s innovative health plan emphasizes wellness and rewards its members (patients) for selecting centers of excellence, including the G1 provider network, through waiving the member’s out-of-pocket expenses, thus extending savings from the payer to the patient through benefit design and price transparency.

Michael Larsen, executive director of MCSIG, commented: “While the cost savings have been tremendous, the consistently amazing outcomes our members have received over the last four years working with G1 are even better. The quality is exceptional, and pricing is near miraculous from what others are charging along the Central Coast.”

Tom Wilson, co-founder of G1, stated, “G1 is uniquely able to leverage the great value ASCs provide to payers and patients through surgical bundled payments.”

The Bundle’s the Thing

While laudable, the efforts by the administration and Congress to drive healthcare price transparency and reduce overall healthcare spending in the U.S. widely miss the mark. While transparency by itself is a good start, it is impossible for consumers to determine healthcare costs based on transparency alone. Truly transparent pricing will arrive when healthcare services are bundled, giving patients a single price point for a single episode of care.

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With over 135 surgery centers and 830 surgeons in the statewide network, the Blue Shield California (BSC)-G1 bundle payment program is going strong with many plans to expand.

Scott Leggett is co-principal, Global 1 and managing director, Convergent SameDay Orthopedic Strategies. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). 

Global 1, a licensed third-party administrator (TPA), is the largest commercially insured bundled payments manager in California and amongst the largest in the nation. G1’s innovative bundled payment structure is designed to deliver cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting. 

The $3.5 Trillion Challenge — A Case for ASC Bundled Payments

By Thomas D. Wilson

According to Centers for Medicare and Medicaid Services (CMS), the total cost of U.S. healthcare is approaching 18% of GDP, or $3.5 trillion. Modifying the healthcare delivery system will provide a positive impact on the U.S. economy, as well as on businesses and individual consumers, who will benefit greatly from a transparent, value-based healthcare system.

American academic, economist and business strategist Michael Porter captured the attention of healthcare and business leaders alike when he and fellow author Robert S. Kaplan wrote a groundbreaking piece in the prestigious Harvard Business Review touting healthcare bundled payments as a preferred approach for improving outcomes and reducing costs. Porter and Kaplan’s “The Case for Bundled Payments in Healthcare” was published on June 28, 2016.

Why did Porter and Kaplan strongly support the concept of bundled payments? Because the concept of bundled payments is simple, efficient and effective: link together all medical services associated with a medical condition during an episode of care (generally 60-90 days) through a previously established all-inclusive price, transparent to patient and payer alike.

In contrast to the bundled payment model, today most individual procedures (diagnosis and testing, anesthesiology, surgery, facility costs, post-acute care and physical therapy) are disconnected and paid for individually. This fractured care model generates inefficient outcomes and higher costs. Patients are confused by the multiplicity of bills when simplicity is in order. Payers carry the burden of significantly higher costs.

Bundled healthcare with transparent pricing is an initial step in improving healthcare efficiency and value. Close observers recognize that the American healthcare landscape is interspersed with a notable example of cost-and-outcome-driven efficiency: ambulatory surgery centers (ASCs), where surgical procedures are performed on an outpatient basis. Reflecting this growing trend, 80% of all U.S. surgeries are now performed on an outpatient basis, driven by technological advances including long-acting local anesthesia and minimally invasive surgical techniques. Nearly half of these surgeries are performed outside of hospitals in lower-cost ASCs.

Bundled Benefits

There are demonstrable benefits to keeping surgical procedures in outpatient clinics: patients recover more quickly, procedure costs are significantly lower and there are fewer associated complications. According to the ASC Quality Collaboration Quality Report for the 4th Quarter 2018, in which 1,609 ASCs from around the country participated, complication rates reported by ASCs across a wide range of procedures averaged less than 1%.

Most importantly, performing bundled payments in ASCs can recalibrate the healthcare system through the effect of open market forces. The framework of ASCs and bundled payments has the potential to increase competition, hold providers responsible for outcomes, introduce transparency, incentivize innovation and decrease costs while ensuring quality outcomes for patients.

Many leading payers, including large companies and commercial insurers, are supporting an ASC bundle-based system. They do so with the knowledge that competition and consumer choice will improve overall systemic performance.

In this context, many healthcare leaders consider Porter and Kaplan’s publication a turning point in the long-running debate over bundled payments. Published in the widely respected Harvard Business Review, the Porter/Kaplan article reached senior executives at the largest American companies that collectively provide healthcare coverage to 50% of Americans. These senior executives, responsible for the profitability of their firms, are relentless in their search for value-based healthcare coverage for their employees.

One metric reflecting the payers’ focus — especially self-insured employers — on reducing costs while ensuring outcomes is the dramatic growth in the use of ASC outpatient bundled payments for a single episode of care. Although vastly underutilized as measured against the scale of all surgical procedures performed in the U.S., bundled payments are rapidly gaining traction in the commercial market. Many self-insured companies and private insurance plans view ASC bundled payments as a strategy to inject open market forces, including transparency, choice and competition, into a historically opaque healthcare marketplace.

Where Are the Savings?

The trend towards bundled payments has been gestating for some time. As early as 2001, Blue Shield of California and Monterey Peninsula Surgery Center in Monterey, Calif., entered into an outpatient bundled payment agreement for reconstructive joint and spine surgery. Today, ASC bundled prospective payments are commonplace. For example, in 2019, Carlsbad, California-based Global 1, a medical provider network and claims service organization, is projected to administer in excess of 1,000 surgical bundles per month for large self-insured employers and commercial carriers.

Given the volume of ASC bundled payment procedures Global 1 is processing, it seems logical to ask, where are the savings?

One person who can answer that question is Michael Larsen, executive director of MCSIG, an insurance group that provides insurance plans to more than 70 school systems and municipalities in California. MCSIG reported savings of $7,121,250 through its ASC bundled payment program administered by Global 1. MCSIG also reported the average savings per surgery was $14,683, with a complication rate including infections and readmissions of less than 1%. This is over 485 surgical procedures performed between January 2015 and December 2018.

According to Larsen, “While the cost savings have been tremendous, the consistently amazing outcomes our members have received with Global 1 are even better. The quality is exceptional, and price savings are remarkable. The bundled case in the ASC has delivered enormous value to MCSIG members as measured by the optimum combination of quality, service and price.”

Peer-reviewed scientific studies in highly respected national medical journals have reported ASCs have lower complication rates, elevated patient satisfaction rates and lower prices. The addition of providing these surgical services through a transparent all-inclusive bundled payment system elevates these facilities to true centers of value.

Pivotal Juncture

We are at a pivotal juncture in the vitally important healthcare sector. The lack of market forces has allowed healthcare to become prohibitively expensive. Porter and Kaplan have accurately identified bundled payments as a way forward to improve outcomes and reduce costs. Bundled payments in the ASC setting ignites an even more powerful vehicle for creating transparency, consumer choice, innovation, efficiency and savings compared to the current archaic and inefficient system. The future is now, and it is time to act.

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With over 100 surgery centers and 600 surgeons in the statewide network, the Blue Shield California (BSC)-Global 1 bundled payment program is going strong with many plans to expand.

Tom Wilson is Co-Principal of Global 1 and Co-Manager of Convergent SameDay Orthopedic Strategies. Contact Tom Wilson at: tom@globaloneventures.com, (760) 602-7872.

Global 1, a licensed third-party administrator (TPA), is the largest commercially insured bundled payments manager in California and amongst the largest in the nation. Global 1’s innovative bundled payment structure is designed to deliver cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting.