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

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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 indices, total 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

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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

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

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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

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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

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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

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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. 

Things They Didn’t Teach You in Medical School: Learning from the Burger Pros

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By Scott Leggett

Sure, you are a doctor, better yet a surgeon. You’ve spent years in education and training. You are at the peak of your game, the pinnacle of your profession. You eat, sleep and drink medicine.

Speaking of eating, perhaps you can learn a thing or two from a company that serves fast food hamburgers.

A fast food hamburger company? you ask. Yep, fast food burgers.

Of course, not just any burger company. You are the best of surgeons; we wouldn’t want you to learn from anybody but what Money Magazine rated as the 2018 best fast food chain in America.

Perhaps you’ve heard of In-N-Out Burger.

So, what does a renowned fast food burger company have in common with surgeons? What can a surgeon learn about practicing medicine from a company with a 70-year track record of focused achievement in the rough-and-tumble world of retail fast food dining?

As it turns out, a lot.

Let’s start with quality

When the burger pros talk quality, they think of quality in terms of the customer experience.

In-N-Out Burger starts at the beginning. While that may seem to be an obvious place to start, it is often overlooked. For In-N-Out, the beginning is with the ingredients, the uncooked beef, the raw potatoes, the freshly baked buns. The very beginning of a meal. For example, In-N-Out delivers fresh meat to every one of its stores every day. Nothing is frozen.

People are at the beginning as well at In-N-Out. Once hired, employees are carefully trained in the values and techniques of In-N-Out and on the company’s relentless focus on the customer.

Surgeons who operate in ambulatory surgery centers (ASC) likely understand the importance of the beginning of the patient journey through the surgical process. As measured against traditional hospitals, the patient experience at ASCs is far superior as staffs are well trained and efficient. Anesthesiologists trained as outpatient clinicians do not overmedicate, leaving patients feeling better following surgery, resulting in a happier patient and improved outcome. An important byproduct of the focus on the patient experience in ASCs is the markedly lower infection rates among ASC patients compared with those treated in traditional hospitals.

In short, from beginning to end, in hamburgers or surgery, the customer or patient experience is the result of the focused management of a process. For their part, ASCs make every effort to enhance the patient experience. The surgeon must do the same.

Consistency

Of course, the challenge is how to consistently achieve great customer experience, time after time, burger after burger, across a company with thousands of employees serving tens of thousands of burgers.

In-N-Out Burger begins training employees in their “Quality you can taste” philosophy from the moment they are hired. They make sure that everyone who works for them understands the importance of practicing their philosophy and keeping it top of mind every day with every customer.

In short, the burger pros pay attention to their team members. They hire carefully, set expectations at the beginning, stick to their standards and continue to invest in their team members.

ASCs’ consistent patient-first approach to medicine is similar to that of a concierge service company rather than what is common in healthcare – a “you need me” mentality. This consistent experience at ASCs is what patients and surgeons consider a trademark for ASCs.

In-N-Out prides itself on consistency for the simple reason that consistency brings customers back for more. Likewise, with ASCs that practice delivering consistent, high-quality services, surgeons can expect the same high-quality, consistent service for their patients. And like the burger pros, consistent delivery is why ASCs can provide bundled payments in such a reliable, predictable manner.

Competition

In their seminal work The Lessons of History, historians Will and Ariel Durant noted that one of the first lessons of history is that life is competition.

This is something the burger pros well understand. Consider the options a consumer has before them when they think about having a burger for lunch or dinner. It is clearly less understood in healthcare in general and in the hospital setting in particular.

ASCs are a four-decade-old industry compared to hospitals that have been around since the turn of the 20th century. The existence of ASCs is a competitive response to hospitals, with ASCs growing at a faster pace than hospitals due to the intense focus on costs. Just like the burger pros, ASCs understand their cost structure and are intensely focused on managing those costs. Therefore, when teaming up with independent surgeons and anesthesiologists via a bundled payment structure, ASCs are naturally and transparently able to compete versus hospitals.

Hospitals, for a variety of reasons, are significantly challenged to compete against the combination of ASCs and bundled payments. Especially when the ASC, their surgeons and staff affiliates and downstream providers work together to provide the patient with the best possible surgical experience. Rather like the crew at the burger store working together to serve the best hamburgers to their customers.

Loyalty

As Forbes Magazine notes in an October 2018 feature story about In-N-Out Burger, In-N-Out customers have an allegiance to the brand. “They have a loyalty and an enthusiasm for the brand that very, very few restaurants can ever obtain,” says Robert Woolway, who handles restaurant deals for the LA-based investment bank FocalPoint Partners.

And, according to Forbes, that loyalty pays off. “An In-N-Out store outsells a typical McDonald’s nearly twice over, bringing in an estimated $4.5 million in gross annual sales versus McDonald’s $2.6 million. (In-N-Out, which is private, won’t comment on its financials.)”

In-N-Out customers are loyal because they consistently have a great overall experience dining at In-N-Out.

Likewise, surgeons are loyal to ASCs for one simple reason: The experience for the surgeon and their patients is second to none. Patients love the experience, outcomes and lower costs of ASCs. When the patient is happy, so is the surgeon!

Costs

As reported by Forbes Magazine, “McDonald’s and Burger King serve over 80 items; In-N-Out famously serves fewer than 15.”

The big burger chains are rather like hospitals, as they attempt to be everything to everybody. As a result, hospital supply chains are massive, complex, costly and management intensive.

In contrast, ASCs, like In-N-Out, work to keep things relatively simple. Working closely with ASC physician staff and partners they standardize supplies, implants and other costs, making them not only a more competitive but also a more durable business.

Both In-N-Out and ASCs focus on standardized processes. As noted by Forbes, at In-N-Out, “Buns are baked with slow-rising dough each morning. Three central facilities grind all the (never-frozen) meat, delivering daily to the 333 restaurants. Nearly all its locations are in California, and all are company owned. (In-N-Out does not franchise.) Heat lamps, microwaves and freezers are banned from the premises. The recipes for its burgers and fries have remained essentially the same for 70 years.”

Similarly, in a day in the life of an ASC, pre-op teams have the patient ready to go so that when the operating room is ready, the anesthesiologist has the patient completely prepped for surgery. ASC staff work as a team to assist the surgeon to have all equipment and supplies ready and available, opening only requested items to reduce waste. Post-op, the ASC team carefully manages recovery as they begin preparation for the next patient.

Bundled payments

When you know your costs, you can consistently and effectively bundle your services, increasing efficiency and ultimately improving patients’ quality of experience. For the Southern California market, In-N-Out bundles items — such as Combo #1, a double-double, fries and a drink for $6.70 — adding to the customer experience with easy ordering and money savings. In a similar fashion, Global 1, working with ASCs and surgeons, bundles over 100 different surgical case types, offering one price to the patient and the insurance company, and applies savings inherent in bundles to Medicare cases as well.

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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.

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).

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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.

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For Surgeons, BPCI-Advanced Offers New Opportunities for Improved Patient Outcomes, Better Financial Rewards

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By Tom Wilson

While reaction among providers to the formal launch of the Centers for Medicare and Medicaid Services (CMS) BPCI (Bundled Payments for Care Improvement)Advanced has varied widely, surgeons reviewing the details of the risk-based program may find there is a lot to like. Surgical fees for procedures performed under BPCI-Advanced could be as much as 150% of standard fees, with additional bonuses if the surgeon assumes risk and costs are below the CMS target prices. Surgeons that embrace best practices, educate their patients and adopt systems that closely monitor their patients in the post-acute care environment could generate several thousand dollars per case.

Underlying the push into BPCI-Advanced are the encouraging results reported by Medicare in its review of its largest nationwide bundled payments program, the original BPCI. Medicare reports that participation in joint replacement bundles has achieved a 3.8% decrease in spending per episode with attendant stable-to-improved quality. Even more compelling is other data evaluating BPCI high performers who showed up to a 20% cost reduction in bundled joint replacement episodes with significant improvements in quality. Physicians demonstrating this level of performance received substantial bonuses for their successful participation in Bundled Payments for Care Improvement.

Success with Bundled Payments

Medicare’s reported successes with bundled payments under the original BPCI may prompt surgeons to dive into the details of BPCI-Advanced. They will find the program is best suited to healthcare organizations with experience in successfully managing risk in the episode of care setting. These organizations, termed “conveners” by CMS under BPCI Advanced, are charged with assembling the bundle, from pre-op all through downstream care, and managing it through the 90-day continuum of care as set forth in the Bundled Payments for Care Improvement guidelines. Both individual physicians and group practices can be conveners. For years, many healthcare experts have contended that attending physicians are most knowledgeable and best positioned to quarterback the bundle through the episode of care. BPCI-Advanced gives physicians who consistently deliver great outcomes the opportunity to be rewarded.

As experience with healthcare bundled payments has demonstrated, providers working together under a bundled payment plan are likely to more closely align their efforts to benefit the patient, and more efficiently deliver their services.

Under the BPCI-Advanced model, there are a total of 32 different types of cases, 29 of which are inpatient. To set benchmark pricing targets by procedure or clinical episode, CMS uses national, regional and the providers’ own historical data. Patients are risk-adjusted for severity of illness. The convener analyzes raw data produced by CMS utilizing internal expertise or, more commonly, if the convener is a provider (i.e., group practice), retains an analytics company to review the raw data produced by CMS. The analysis reviews the total utilization and cost by provider establishing national, regional, local and individual benchmarks including the post-acute care process, comparing all participating physicians to determine cost averages for the participating physicians. Based on this data, CMS sets a target price of 97% of the expected actual cost for services adjusted for inflation. If the convener and associated providers exceed the target cost, they pay a percentage of the overage. If they generate greater efficiencies and undercut the target cost, they share in the savings. Thresholds and ceilings eliminate outliers and limit the amount of retained savings or risk.

Risk and Reward

Why take on the risk? The obvious answer is for the reward. But there is more. For conveners and providers who understand their business, who excel at delivering professional services, BPCI-Advanced is a way to shine professionally, increase earnings and, most importantly, deliver better outcomes for patients.

How to manage the risk? You begin with a convener experienced in successfully managing at-risk models. From that experience, conveners know that they must follow the wisdom of an ancient Chinese proverb: Take care in the beginning.

Successfully executed healthcare bundles initiate care long before the delivery of the actual surgical procedure. Detailed care plans, developed in coordination with all providers, from the surgeon to the post-operative home care providers, are essential. It is during the development of the care plan that risk assessments are made based on the patient’s co-morbidity, with detailed strategies to address and offset specific risk factors. A key to the development of the care plan is establishing mechanisms for coordinating care among all providers and identifying appropriate postoperative monitoring of the patient.

The patient is part of the care plan from the outset of the episode of care. Patients are counseled to set their expectations so they can anticipate, step-by-step, how they will progress through the process from pre-op through to full recovery. For example, in the case of a joint replacement, patients may be counseled to lose weight or exercise to build strength where needed.

For surgeons, as previously noted, there is the opportunity to earn up to 150% of surgical fees plus participate in the savings pool if they are a convener. This is the reward incentive for participating in the program. Of course, there is risk. When total costs exceed the target, conveners are invoiced retrospectively for their portion of the overage.

Commitment to Best Practices

Physicians must be willing to work as a team, to adopt best practices and standardize the selection of post-acute care entities that deliver the greatest value. Care coordination and a commitment to Bundled Payment Care Improvement Advanced procedures and best practices as outlined by the convener are required.

For its part, the convener orchestrates the entire episode of care, performs the analytics and employs a full-time clinical care coordinator (typically an RN) who, ideally, through state-of-the-art digital technology such as electronic monitoring, Facetime and text messaging, is able to track patient progress based on the care plan created for the patient. Overall, successful plans eliminate unnecessary use of skilled nursing facilities and focus on recovery in the comfort of the patient’s home environment utilizing home healthcare and outpatient providers. Advanced patient-facing technology is utilized to monitor the patient’s recovery at home alerting the physician to any untoward developments, allowing early intervention to avoid emergency room visits and readmissions.

Research has shown that elective procedures such as total joint replacements (as opposed to emergent procedures such as cardiac events) fare better under the bundled payment model. This is due to the opportunity to develop a tailored and detailed care plan for the patient, and the predictability of the surgical interaction and recovery process. Accordingly, the next phase of bundled payments may incorporate the ASC (ambulatory surgical center). This will present surgeons with an even greater opportunity to manage the total episode of care and more directly participate in the proven savings that the ASC has demonstrated in the last two decades.

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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 One Ventures (Global 1) is a California-based, licensed third-party administrator (TPA) dedicated to developing and administrating an innovative medical payment and delivery system through its network of providers. With more than 10 years of experience, the focus of Global 1’s bundled payment structure is to deliver innovative, cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting. For more information, visit: g1surgery.com.

Convergent SameDay Orthopedic Strategies is a full-service consulting company delivering contracting expertise, clinical education, process infrastructure and coaching in support of successful outpatient joint replacement programs. For more information, visit: convergentortho.com.

Spine Surgeon Talks Benefits of Affiliation with Blue Shield, Global 1

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By Scott Leggett

Like most doctors, Brian Perri, DO, a spine surgeon practicing in Beverly Hills, Calif., is challenged to provide the best care for his patients while helping patients and payers control the costs associated with acute surgical procedures. Dr. Perri employs three key strategies to assure his patients get the best surgical care with the best outcomes at the best price.

First, Dr. Perri went in-network with Blue Shield both professionally and with his affiliated surgical facility. This affiliation with Blue Shield gives him access to the Global 1, or G1, bundled payments program, a recently established partnership between Blue Shield and Global 1, a California Third Party Administrator (TPA).

“I am now in-network from a professional standpoint; we can now accept all Blue Shield patients through the Global 1 program,” Dr. Perri said.

Next, he shifted appropriate surgical cases from higher-cost hospitals to ambulatory surgery centers (ASCs). This has allowed Dr. Perri to continue assuring that his patients receive the best care with optimal outcomes while reducing the overall cost of care.

“We can perform nearly all spine surgeries at our surgery center provided the patient is healthy and covered from an insurance standpoint,” said Dr. Perri.

Finally, Dr. Perri embraced contracting for surgical services using pre-negotiated bundled rates. This allows Dr. Perri to manage and direct the bundled payment process while ensuring his patients or their insurers make one payment for all related episode-of-care costs.

“The bundled payment that is proposed to the patients covers everything,” noted Dr. Perri.

The result: happy patients, less administrative red tape and a streamlined administrative process.

“This is a much better experience for both the doctor and the patient,” observed Dr. Perri of the Blue Shield/Global 1 bundled payments program.

“There is very minimal administrative interference with patient care. It is more of a one-on-one and personal interaction with much higher patient satisfaction scores,” Dr. Perri said.

“The Global 1 approval process is very straightforward,” he added.

Dr. Perri’s engagement with Blue Shield, Global 1, ASCs and bundled payments reflects Blue Shield’s recognition of emerging opportunities to make a meaningful impact on rising healthcare costs. These opportunities include:

  • Contracting with providers for surgical services using pre-negotiated bundled rates.
  • Allowing its surgeons to quarterback the bundled payment process.
  • Shifting appropriate surgical cases from higher-cost hospitals to ambulatory surgery centers (ASCs).

From a marketplace perspective, Blue Shield recognized the opportunity in bundled payments: Combining professional and technical allowances into a single rate would help stabilize the wide variation in payments while paying providers a fair rate.

Blue Shield understood that administering such bundles in a conventional claim system would not be possible and building a unique ASC network of surgeons would require a partner.

As such Blue Shield chose to partner with Global 1, a California TPA, whose principals had a long and successful history in managing ASCs and managing bundled rates for commercial patients from the medical travel space.

The program is now officially in its fourth year and continues to expand. For example, plans are in place to implement an additional patient benefit in January 2019 by lowering the patient co-insurance when using an ASC setting for surgical services.

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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. If you would like to learn more about the program for you and your BSC patients, please call Joy Houle at Global 1 to obtain more information, (760)602-7872.

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). Contact Leggett at info@GlobalOneVentures.com or 760-494-9211.

Global One Ventures (Global 1) is a California-based, licensed third-party administrator (TPA) dedicated to developing and administrating an innovative medical payment and delivery system through its network of providers. With more than 10 years of experience, the focus of Global 1’s bundled payment structure is to deliver innovative, cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting. For more information, visit: g1surgery.com.

Convergent SameDay Orthopedic Strategies is a full-service consulting company delivering contracting expertise, clinical education, process infrastructure and coaching in support of successful outpatient joint replacement programs. For more information, visit: convergentortho.com.