Bundled Payment Options Explored for BPH Patients

Practice managers gathered recently at the 11th Annual American Urological Association’s Practice Management Conference in Orlando to hear the presentation, “Concep­-tualizing a Bundled Payment for BPH Patients.” During the presentation, experts discussed the benefits of a bundled payment reimbursement model, as well as details of how to arrive at a bundled payment value for an episode of benign prostatic hyperplasia (BPH).

“One capability that everybody running a physician practice of any sort needs to know [is] how to do better cost accounting and more relevant cost accounting with regards to bundled payments and other types of novel reimbursements,” said Ellis ‘Mac’ Knight, MD, senior vice president and chief medical officer of the Coker Group. “We’re starting to see them [bundled payments] come along through the Medicare bundled payment pilot.... We’re seeing more commercial insurers come along with bundled payment, particularly around surgical procedures.”

Dr Knight said the main advantages of the bundled payment approach are improved quality of care, by promoting care coordination, best-practice care procedures, and data-driven performance im­- provement at the bedside level. He said that bundled payments also lower the costs of care, for example, by reducing waste and inefficiency in the system.

“Bundled payment hopefully can reestablish—especially I would say in the hospital setting, but perhaps even at the practice level—a more firm relationship between cost and pricing. In the hospital, as you all know, there is no relationship between those 2 things. The price charged is really a fictitious number that really doesn’t have a basis in reality, especially a basis in true cost reality,” noted Dr Knight. “So bundled payments and knowing the true costs that go into that, and using that to set price, will alleviate that [problem]. That, coupled with the increased consumer demand for price transparency, I think will be a big step forward in helping reform the system.”

Dr Knight also said he believes the approach of the single bundled payment is preferable to fee-for-service with shared savings. This is because in the single bundled payment “the clinical process of care, the clinical procedure, is designed by the people that know best how to do that – ie, the clinicians, particularly physicians,” said Dr Knight. With fee-for-service with shared savings, he noted, “The shared savings are not a true cost reduction. Those are savings of the insurers, of the payers themselves, lowering their spend and really not freeing up any of the waste and inefficiency in the system.”

He said, however, that practices must ramp up in many areas to be successful with bundled payments, with the most important realm being “clinical integration.” “It’s a relentless focus on the …equation …[of] the quality over the cost.” Having the appropriate technology infrastructure, care management infrastructure, and business/administration infrastructure are also important, according to Dr Knight.

Cass Schaedig of HealthTronics IT Solutions furthered the discussion by describing the company’s analysis of calculating total payment perw BPH episode. The data are from HealthTronic’s InfoDive urology database, using information from 204 urology-provider groups between January 2012 and March 2014. The HealthTronics team defined a BPH episode as starting with an International Classification of Diseases, Ninth Revision, Clinical Modification diagnosis code of 600.01—for a diagnosis of BPH with urinary obstruction and other lower urinary tract symptoms—and ending 90 days later, covering all services rendered throughout this period. They excluded patients who also received a code of 185 (prostate malignancy) or 790.93 (elevated prostate-specific antigen) in those first 90 days.

The total average payment per episode was $691.19. This included 18.86 total relative value units (RVUs) and 7.52 work RVUs. Surgery and evaluation/management comprised 84% of the total payment per episode. Ms Schaedig indicated that the analysis also uncovered potential inefficiencies in the system, such as the fact that cystoscopy was included in 22.1% of BPH episodes but comprised only 8.94% of the payment total.

Yet, however revealing such results may be from a health-systems perspective, it is still up to practice managers to determine what they consider to be an appropriate definition of an episode, and to roll up their sleeves and calculate revenue per episode and cost per episode, explained Robert Dowling, MD, who is consulting medical director for HealthTronics IT Solutions. He said a key step in this process is figuring out how to move from current practice to algorithm-guided pathways.

“You’re going to recognize that there’s a lot of variability in your practice, more than likely,” explained Dr Dowling. “So in your practice when you do the analysis you’re going to be faced with the fact that not every physician does things the same way. [And] again it’s an opportunity to converge a bundled concept with the concept of clinical integration [to achieve maximal efficiencies].”

Next comes the accounting. First the practice manager must work with the clinicians to determine what comprises a BPH episode. After you define the episode, you gather the number of episodes, number of services, total number of RVUs, and cost per RVU or collections per RVU. Then you input the desired profit margin, allowing you to calculate the desired collections per episode and RVUs per episode.

When RVUs are not available, the practice manager can analyze data from his/her practice to determine the number of BPH episodes over a set period and then the number of services per episode and the cost of those services, including salaries, drugs, supplies, and general overhead. The manager can then calculate the total cost per episode, input the desired profit margin, and arrive at the desired collections per episode.

“I think that for those of you who have just started to think about bundled payments and haven’t done [these steps], this is a potential starting place to do a claims analysis in your practice. Using either [of these] 2 methods or your own method, start to figure out what it costs at a service level to take care of a patient,” concluded Dr Dowling. “And then thinking about this, go through the exercise before you start negotiating with a payer or an intermediary for a bundle.”

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