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Case report
Baptist Health System: Succeeding in bundled payments through behavioral principles Joshua M. Liao a,n, Amanda Holdofski b, Gary L. Whittington b, Michael Zucker c, Sergio Viroslav d, David L. Fox e, Amol S. Navathe a,f a
University of Pennsylvania School of Medicine, Philadelphia, PA, United States Baptist Health System, San Antonio, TX, United States c Ranger Health, San Antonio, TX, United States d The San Antonio Orthopaedic Group, San Antonio, TX, United States e Northeast Orthopaedics & Sports Medicine, San Antonio, TX, United States f CMC VA Medical Center, Philadelphia, PA, United States b
art ic l e i nf o Article history: Received 2 February 2016 Received in revised form 26 April 2016 Accepted 28 April 2016
Implementation lessons
Program design features (e.g., governance method, payout design) can be used effectively to gain physician buy-in and participation within organizations undertaking new bundled payment programs. Gainsharing mechanisms that intentionally integrate individual- and cohort-level incentives maximize behavior change for physicians across the performance spectrum Data transparency is vital to bundling efforts: it fosters the kind of communication, feedback, and consensus needed not only to reduce cost structures and improve performance, but also create cultures of improvement that extend beyond new payment incentives.
1. Background Amid rapid movement towards value-based reimbursement,1 bundled payment represents a promising alternative to traditional fee-for-service (FFS) payments. The bundled payment mechanism reimburses providers a fixed amount for a single episode, which encompasses the period between an initial trigger event (e.g., surgery) and a preset duration of subsequent care (e.g., hospital n
Corresponding author. E-mail address:
[email protected] (J.M. Liao).
and post-hospitalization period). By shifting financial and technical risk to providers, bundling can align incentives along the spectrum of care and encourages physicians, hospitals, and postacute care providers to coordinate patient care more closely than under perhaps any other payment mechanism.2 In 2009, the Center for Medicare and Medicaid Services (CMS) engaged 5 health systems to explore bundling through the Acute Care Episode (ACE) demonstration,3 which produced cost savings and gains in care coordination by bundling payments for individual care episodes.4 CMS has since scaled the effort to bundle reimbursements for acute and post-acute care to over 2000 participants in the ongoing Bundled Payments for Care Improvement (BPCI) initiative.5 Despite some promising results,4 however, not all bundled payment programs gain lasting traction.6 Bundling initiatives can be beset by a number of barriers, including lack of physician participation, administrative burden, and disputes about risk assumption. Organizations face the additional challenges of reducing wide provider practice variation, building cross-continuum collaborations with partners involved in episodes of care, and engaging physicians still largely paid on a FFS basis — all of which require resource investment and new financial risk. Additionally, to succeed in BPCI and other bundling arrangements, health systems and providers must align new financial incentives in a way that improves patient outcomes while also protecting organizational mission and operating margin. This will become increasingly critical as CMS tests different approaches of bundling7 and accelerates toward value-based payment through
http://dx.doi.org/10.1016/j.hjdsi.2016.04.008 2213-0764/& 2016 Published by Elsevier Inc.
Please cite this article as: Liao JM, et al. Baptist Health System: Succeeding in bundled payments through behavioral principles. Healthcare (2016), http://dx.doi.org/10.1016/j.hjdsi.2016.04.008i
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initiatives such as the Comprehensive Care for Joint Replacement (CJR),8 a new model that mandates 90-day acute and post-acute care bundled payment for joint replacements in 67 metropolitan markets. In this case study, we describe the experience of one organization, Baptist Health System (BHS), as it implemented bundled payments for orthopedic surgery. We also highlight how their strategies – although not explicitly framed within behavioral economics – possessed a number of behavioral features that enabled sustained program effectiveness.
2. Organizational context BHS is a clinically integrated network of five hospitals in San Antonio, Texas9. Coming out of a change in corporate management eight years ago, the health system faced several strategic challenges. First, amid a highly fragmented local market in which physicians’ loyalties were split among multiple health systems, it had been losing core physicians – and patient volume – to competitors. Second, Baptist identified the need to improve its reputation and relationships with non-employed physicians, many of whom possessed historical skepticism about hospital administrations. With the announcement of the Medicare ACE program, Baptist recognized an opportunity to simultaneously align incentives with independent physicians, increase the quality of care, and gain market share. Orthopedics was a particularly suitable service line due its high case volumes, profitability, and the surrounding market fragmentation among local surgeons. Although it was not without risk – the prospect of discounting an already discounted Medicare business concerned a number of senior executives – Baptist entered ACE in 2009 by proposing a 2.5% discount on the Medicare Part A component for demonstration-related orthopedic Medicare Severity Diagnosis Related Groups.
3. Problems 3.1. Problem 1 – Engaging physicians practicing across different health systems in the Baptist bundling program For BHS, succeeding at bundling meant engaging a disparate group of physicians who were otherwise competitors practicing across multiple health systems. Baptist leaders knew that engagement required more than participation; they would need a cohort of physicians who were willing to commit time and energy into working together iteratively to develop a process that would in part require them to change their practice styles. While the added financial incentives within ACE were important to creating initial inroads with physicians, BHS also understood that it would only be part of the ultimate solution. Without other examples to draw upon, how would the new bundling program bring administrators and physicians together to address these challenges? 3.2. Problem 2 – Building a system of culture for sustaining improvement Baptist leaders also knew that committed clinicians would be necessary, but not sufficient for success. Because a one-off administrative push would be insufficient for thriving in a multi-year effort such as ACE (and later BPCI), the bundling program also needed to build a sustainable culture of improvement and value. Without such an environment, bundled payments would not produce the magnitude of gains needed to capture continued attention among physicians. The challenge was clear: beyond
compensating clinicians differently, Baptist's also needed to create a “new way of practice”.
4. Solution: The Baptist Bundled Payment Program To foster meaningful engagement, Baptist leaders pursued joint governance by creating a committee with equal representation from health system executives and several physician leaders. The latter were chosen from different practice groups based on deliberate criteria (e.g., high clinical case volumes, influence among their peers), but none more important than the openness to trialing new ways of providing patient care. Ultimately, these clinical champions fulfilled a critical role, guiding the early development of the bundling program, serving as proponents to other surgeons and relaying the collective interests of the bundling cohort back to BHS leadership. Creating new culture and system of care delivery was no small task for an unprecedented program attempting to convene independent surgeons from variable practice settings and cultures. Rather than dictate strict goals for them to address, Baptist leaders saw the wisdom of letting physicians in the program cohort drive system and clinical redesign. The health system enabled this by systematizing the process of “opening the books” to physicians about quality and cost information. In turn, this data infrastructure became a vehicle for several key facilitators of program success. First, transparency about hospital financials helped built trust among physicians and create an avenue for providing feedback — both constructive and critical — to Baptist. Second, information about individual surgeons’ performance fostered debate and discussion not just between the health system and physicians, but among clinical peers. These early efforts would go on to become the seeds for lasting culture change. In implementing these strategies, Baptist maintained a “long view” on its bundling efforts. The leadership did not design the program explicitly to scale and serve as a “best practice” example for others. Instead, they focused on doing what was best for patients and participating physicians, confident that commitment to professional and clinical excellence would ultimately translate into business success (e.g., improved reputation among patients and physicians, better payer relations, and increased market share through both attraction of new surgeons and increased volume from existing surgeons). Over a three year span, program leaders were able to utilize these strategies as foundations for other design features — unblinded performance review, renegotiated vendor agreements, new standardized clinical pathways, dynamic gainsharing mechanisms — and demonstrate both cost reductions and quality gains. Anecdotally, the program also some affiliated surgeons to increase the volume of procedures performed at Baptist. By the end of the ACE program, BHS had managed to save an average of $284 per joint replacement and a total of $6.1 million on orthopedic MS-DRGs. Based on this success, BHS extended its orthopedic bundled payment program in 2013 through BPCI. The health system has continued to improve quality and drive down costs under the new mandate to address both acute and post-acute care processes. In fact, the orthopedic program became so successful that in the last several years, Baptist has expanded to offer bundles for colorectal surgery, vascular surgery, acute myocardial infarction, chronic obstructive pulmonary disease, heart failure, and pneumonia. 5. Design principles A critical component that allowed BHS to succeed in bundling where others had failed was the early time and energy
Please cite this article as: Liao JM, et al. Baptist Health System: Succeeding in bundled payments through behavioral principles. Healthcare (2016), http://dx.doi.org/10.1016/j.hjdsi.2016.04.008i
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investments made by its leaders. In the planning process, they carefully considered the motivations of participating physicians and prioritized the most engaging and acceptable program features. As a result, despite not explicitly setting out to create a behaviorally designed bundling program, BHS ultimately settled on one that was nonetheless defined by behavioral features. 5.1. Establishing physician buy-in using salience, immediacy and mental accounting Recognizing that success would depend critically on sustained buy-in from non-employed physicians, hospital leaders made it a priority to establish the program's financial viability to prospective participants. With approximately 10% of existing CMS fee-for-service provider payments delayed due to problems with claims processing, Baptist designed the bundling program to guarantee surgeons’ professional fees at 100% of the Medicare Part B fee schedule and created the opportunity for them to earn an additional 25% of their professional fee through gainsharing, all while the health system received 2.5% less from CMS. In addition, BHS also assumed the responsibility and risk for patient collections, further de-risking participation for clinicians. Together, these policies reduced uncertainty about the bundling program by removing downside risk and created the prospect of only financial upside, critical elements for early engagement and interest among physicians. Once physicians were enrolled in the program, BHS leadership further engaged them by delivering separate, monthly gainsharing checks to eligible participants in person to the physician office. Despite the additional administrative work it created (e.g., added revenue cycle complexity, decelerated cash flow), the approach became a separate, organic recruitment vehicle: as surgeons began seeing colleagues receive bonus checks when they were not, some became motivated to participate in the bundling program. By the end of the first year, higher volume surgeons were receiving monthly checks averaging around $2100.10 Although BPCI regulations subsequently limited payouts to a quarterly basis, Baptist still provides payouts more frequently than many other programs, which pay physicians on an annual basis. The focus in BPCI on both hospital and post-acute care, along with the increase in maximum gainshare from 25% to 50% of professional fees, has also enabled surgeons to earn larger amounts through the bundled payment program. This approach to gaining buy-in leveraged the behavioral principles of salience, immediacy, and mental accounting (Table 1). Salience describes how individuals frequently make decisions without fully considering all of the available information when
information is expansive and/or nuanced. Put another way, environmental constraints can “bound” an individual's rationality – and ultimately the quality of their decisions – by limiting the amount, accuracy, or relevance of information available to them. By guaranteeing professional fees early in the bundling effort, BHS leaders increased the program's salience to physicians in its bundling cohort. For surgeons who also maximized their individual gainsharing potential, CMS became their most profitable payer for joint replacement cases. Through immediate, separate bonus checks, Baptist reinforced salience while also leveraging the power of immediacy and mental accounting. Based on the observation that immediate rewards are more likely than delayed rewards to elicit strong behavioral responses, immediacy can be operationalized to create short feedback loops that reinforce behavior. By making it a point to provide monthly or quarterly rather than yearly payouts, regardless of disruptions to revenue cycle operations, BHS leaders utilized this strategy to accelerate buy-in by conveying a clear, consistent message about the benefits of bundling. Their approach also tapped into mental accounting, a principle that describes how financial incentives can become stronger, and register more clearly in peoples’ minds, when given separately and explicitly. In Baptist's case, delivering distinct, paper payouts inperson reinforced physician motivation in ways that would not have been possible had bonuses been simply lumped into routine, electronic paychecks. Just four months into the bundling, physicians began calling program leadership to enroll in the program and earn gainsharing checks. 5.2. Using informational transparency to increase salience and leverage relative social ranking Before the bundled payment initiatives, orthopedists that operated at BHS lacked the individual-level performance data needed to review and improve their practices. By creating transparency and showing surgeons information about actual costs and quality outcomes, Baptist leaders were able to initiate frank discussions with their surgeons about the value of care they were providing to patients. To engage clinicians who were otherwise competitors in a safe, non-punitive atmosphere, Baptist initially provided them with anonymized performance data and allowed physicians to drive transparency themselves as they sought deeper and more actionable data. Performance feedback provided was granular and actionable, including information about quality (e.g., surgical site infections, readmissions) and cost (e.g., implant and device prices, blood products, supplies, room and board) that were felt to be
Table 1 Behavioral economics principles in the Baptist Bundled Payment Program. Principle
Description
Immediacy
People respond more strongly to immediate incentives rather than delayed incentives.
Relative social ranking
Mental accounting and salience Social pressure
Goal gradients and threshold effects
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Examples at Baptist Health System
Committing to monthly payout checks early in the bundling program (regardless of overall program savings or disruption to revenue cycle operations) People care about how they compare with others, especially Using informational transparency about individual performance to rank surgeons based on quality and cost metrics when those people are known and in close proximity to them. Guaranteeing professional fees and protected surgeons from downside risk The incentive is stronger if given distinctly and explicitly rather than folded into regular compensation or feedback for early on in the program; providing separate, physical checks for bonus payouts; delivering payouts in person to physicians an activity. People will try to improve their performance when others in Linking individual and cohort success together by blending individual and cohort performance threshold requirements for gainsharing the group have a stake in seeing individuals’ performance improve People try harder when they are close to achieving a goal and Using separate individual and cohort quality thresholds as gainsharing tend not to try as hard if they are far from the goal. criteria; adjusting baseline and target performance goals for individuals over time as the bundling program matured
Please cite this article as: Liao JM, et al. Baptist Health System: Succeeding in bundled payments through behavioral principles. Healthcare (2016), http://dx.doi.org/10.1016/j.hjdsi.2016.04.008i
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under the influence of surgeons. While helpful for understanding general ranges of quality and cost, however, the blinded information possessed several limitations for driving behavior change. Without being able to ascribe data to individuals, surgeons could not determine problem areas for themselves or specific partners. They were also unable to identify which individuals to turn to for best practices, as well as which individual's choices might be adversely affecting overall bundling performance. Over time, the cohort-level performance requirements dictated by the gainsharing structure produced momentum for un-blinding information and led a growing number of surgeons to begin asking for identified feedback data. Identifying individuals, they believed, would support the collective interest by sharing best practices and addressing lower performers directly. Led by the clinician champions, some of whom were the first to voluntarily un-blind their quality and cost information, the cohort of surgeons grew increasingly comfortable with sharing performance data under the protection of peer review. Eventually, individual rankings based on quality, cost, and combined quality-cost targets became standard practice in Baptist's program. Creating this kind of individual-level cost and quality transparency provided two key benefits: BHS and surgeons could more actionably address outliers and drive value gains together, and clinicians took on active roles in evaluating their own and their peers’ performance. In fact, the process eventually became such an integral part of the cohort's culture that in order to further improve their performance, physicians began proactively requesting individual-level quality and cost information beyond what the bundling program required. The success of these strategies reflects the effectiveness of two behavioral concepts: salience and relative social ranking. BHS increased salience for clinicians by using performance data to remove informational constraints. Faced with their own line item costs (e.g., implants, medications) and quality outcomes (e.g., surgical site infections), surgeons used more accurate and complete insight into their practice patterns to spur improvements. By unbounding rationality for participating surgeons, the bundled payment program was able to sustainably encourage more high value behavior. This motivation to improve was also augmented by peer effects. Whereas salience improves individual rationality, the phenomenon of relative social ranking describes peoples’ internal drive to be ranked highly compared to others. As a type of social force, it explains why individuals have a tendency to change their behavior when they are ranked next to others. It also describes how individuals sometimes change their behavior to appear more favorable in the eyes of others. The power of these behavioral principles was on full display in Baptist's attempts to drive down high implant costs for joint replacement surgery. Enabled by cost and quality data transparency, the surgeons identified variation in implant choice and high overall costs as major barriers to better, higher value care. In turn, the salience and peer comparisons created by this process, along with a consensus about the clinical equivalence of different device brands, motivated Baptist leaders and physicians to work together to address this issue. Ultimately, they agreed that surgeons in the bundling program would utilize only agreed-upon devices, a decision that allowed the Baptist program to increase purchasing power and negotiate more favorable prices from vendors. However, to ensure that these strategies remained firmly centered on patient well-being, surgeons were also allowed to make exceptions based on clinical circumstances and use other devices by providing clear rationale about patient benefit. The effect of this approach proved to be powerful. Cost outlays
and variations in device spending plummeted within the first two years of the bundling effort. Additionally, motivated by the experience to pursue the highest standard of care possible, surgeons in the bundling program quickly began to identify and achieve increasingly ambitious quality targets – even beyond those initially set by BHS – that have further strengthened the program's value proposition. 5.3. Building effective gainsharing through social pressure and avoidance of threshold effects in favor of goal gradients BHS designed its gainsharing program to maximize participation from all bundling participants. Leveraging a CMS requirement that both the entire program and individual physicians meet minimum quality metrics to receive bonus payments, health system leaders analogously set two gainsharing thresholds — one for individual surgeons (individual threshold) and another for all bundling participants as a cohort (cohort threshold). By pegging the individual threshold higher than the cohort threshold, BHS created two-sided peer effects. Under this system, physicians who performed well individually could only earn gainsharing bonuses if the entire cohort also met a collective quality threshold. This structure created added incentive for high performers to help peers meet cohort quality and cost targets, whereas low performers experienced peer pressure to increase their performance and avoid hindering the bundling cohort. As its bundled payment program matured and baseline quality and cost targets shifted, BHS modified its gainsharing mechanism using relative social rankings to sustain clinician engagement. It maintained a cohort threshold but also instituted individual rankings to encourage physicians to pursue the highest performance possible. This design feature helped sustain momentum among all physicians, particularly high performers who would have otherwise maxed out their gainsharing bonuses against historical thresholds. Several other behavioral principles lie behind the BHS gainsharing mechanism. Its underlying individual-cohort dynamic reflects the power of peer pressure, another type of social force that can act as a strong motivator for behavior change. As Baptist leaders observed by creating tiered cost and quality thresholds, collaboration and accountability can increase when individual and cohort success is directly linked together. However, because peer pressure can be limited or even counterproductive if individuals feel they are unfairly compared or singled out, the program's physician leaders were critical in communicating the appropriateness of the dual thresholds and preventing potential backlash among surgeons. Combining multiple thresholds and rankings also leveraged the benefit of goal gradients. These related concepts — which describe how individuals tend to work harder as they approach a reward but can conversely disengage when they are too far away from target goals — are particularly powerful when performance varies widely. In these circumstances, absolute thresholds or peer effects create inclusion but may be limited for motivating both individuals furthest from target goals and those who quickly surpass them. In contrast, goal gradients create engagement at all performance levels, leading to more widespread change. As Baptist leaders discovered, goal gradients also helped reset attainable goals for many surgeons and prevent apathy among low performers as overall performance improved.
6. Unresolved questions and lessons for the field Baptist accomplished what few health systems have been able to by designing a program that created alignment with clinicians
Please cite this article as: Liao JM, et al. Baptist Health System: Succeeding in bundled payments through behavioral principles. Healthcare (2016), http://dx.doi.org/10.1016/j.hjdsi.2016.04.008i
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and sustained a culture of continuous improvement. However, as its program enters its seventh year, it must address challenges that other organizations will also likely face as they consider bundled payment. 6.1. Addressing post-acute care costs Under the ACE program, Baptist was tasked with increasing the value of care in episodes spanning from patients’ orthopedic surgery through their post-surgical hospital stay. Key components of the health system's success in this early period of bundling — in particular, data transparency and decreased device costs — relied on its direct control over the clinical operations and quality and cost data related to each bundle. In contrast, care episodes within BPCI have been extended to include patients’ post-acute care, a change that requires BHS to collaborate with independent rehabilitation centers, skilled nursing facilities, home health agencies, and other organizations to coordinate care beyond hospital discharge. Faced with the prospect of improving the value of care over a broader continuum of care, the health system has begun identifying preferred post-acute care providers with similar values that can be held accountable to high quality and cost standards. The ability to create alignment in the post-acute setting will be vital to Baptist's continued success in bundling. 6.2. Expanding bundled payment to non-surgical specialties Within the last year, BHS has expanded bundled payment to non-surgical conditions, including acute myocardial infarction, chronic obstructive pulmonary disease, heart failure, and pneumonia. Importantly, its experience with orthopedic bundling helped increase enthusiasm among clinicians in these other clinical areas, many of whom were receptive to bundled payment based on both program results and the positive experiences of many participating orthopedic surgeons. However, while these service lines represent important opportunities for growth and value, they also create unfamiliar sources of risk and uncertainty for the health system. Due to unforeseeable disease exacerbations or the need for multiple encounters, the care processes and costs needed to manage chronic medical conditions under bundled payments can be difficult to predict. Given these challenges, it will also require close collaboration along the full continuum of care, spanning outpatient, inpatient and post-acute settings. For Baptist, and other health systems like it, the long-term viability of bundled payment as an alternative to FFS payments depends on its ability to produce meaningful value propositions in non-surgical specialties. 6.3. Creating bundled payment contracts among multiple payers Baptist has managed to succeed at bundling over six years in CMS demonstration programs. To date, however, it has not established bundled payment contracts with any private payers, a move that would help bundling gain further traction as a payment model. Negotiating such contracts represents an active focus area for the health system going forward.
Funding/Support This work was supported by a grant from The Commonwealth
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Fund (grant number 10051754) (PI: Amol Navathe).
Disclosures None reported.
Acknowledgements Brian Lewis, Shan Largoza, Sherry Mullins, Paulette Melonson.
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Disclaimer The views expressed in this article represent the authors’ views and not necessarily the views or policies of their respective affiliated institutions.
Conflict of interest disclosure statement This statement accompanies the article Baptist Health System: Succeeding in bundled payments through behavioral principles, authored by Joshua M. Liao and co-authored by Amanda Holdofski, Gary L. Whittington, Michael Zucker, Sergio Viroslav, David L. Fox, Amol S. Navathe and submitted to Healthcare as an Article Type. Below all authors have disclosed relevant commercial associations that might pose a conflict of interest: Consultant arrangements: None Stock/other equity ownership: None Patent licensing arrangements: None Grants/research support: None Employment: None Speakers' bureau: None Expert witness: None
Please cite this article as: Liao JM, et al. Baptist Health System: Succeeding in bundled payments through behavioral principles. Healthcare (2016), http://dx.doi.org/10.1016/j.hjdsi.2016.04.008i