Value-based care and orthopedic surgery: Past, present and future

By Umar Ghilzai, medical student, Medical College of Georgia at Augusta University, ughilzai@augusta.edu; Omar E. Hayek, medical student, Medical College of Georgia at Augusta University, ohayek@augusta.edu; and Janis Coffin DO, FAAFP, FACMPE, MGMA member, professor, family medicine, Medical College of Georgia at Augusta University, jcoffin@augusta.edu.

The traditional fee-for-service (FFS) payment model for providers is gradually being replaced by value-based care (VBC). VBC is a form of reimbursement that ties payments for care delivery to the quality of care provided and rewards providers for efficiency and effectiveness. The goals of VBC are to advance the Quadruple Aim of providing better care for individuals, improving population health management strategies, reducing healthcare costs and decreasing physician burnout.^1,2 In VBC, reimbursement is generally via “bundled” payments in which patients pay a single price covering the entire episode of care as determined by historical costs. This form of reimbursement has emerged as an alternative and potential replacement for FFS reimbursement, which pays providers retrospectively for services delivered based on bill charges or annual fee schedules.

Key takeaways

• VBC shows significant promise in providing better care for patients and improving population health management strategies while reducing costs for healthcare groups, as compared to previous FFS reimbursement models.
• Prospectively paid, bundled payment agreements, the mainstays of VBC, lead to more financial stability for orthopedic groups, especially during unprecedented times.
• Telehealth has proven to be cost-effective and useful as a diagnostic and evaluative tool for orthopedic surgeons with high rates of patient satisfaction.
• CMS and its subsidiaries have made substantial moves toward making VBC and its many ideals, including bundled payment reimbursements for many orthopedic procedures, a mandatory endeavor for certain hospital systems by 2024.
• As virtual patient interaction, frugality in practice, and emphasis on positive patient outcomes become more important during the ongoing COVID-19 pandemic, healthcare systems could be forced to embrace the principles of VBC earlier than previously anticipated.

Bundled payments

As VBC becomes the norm for more healthcare organizations, bundled payments are also becoming an increasingly popular way to reimburse providers within the framework of VBC. In this reimbursement model, a healthcare network receives a single payment for services performed. This payment is then disseminated to all parties involved in that service. The payment is generally predetermined, and the value is set based on the historical costs of all steps, starting with primary evaluation and ending with post-intervention evaluation. For the patient, bundled payment plans generate value by encouraging providers to consolidate care effectively between specialties and provide a more comprehensive healthcare experience. Reimbursement for the provider, however, comes with some risks. If a provider exceeds the pre-arranged reimbursement of services, they are responsible for accrued losses. In comparison, if a provider keeps the cost of services below the pre-decided value, they keep the difference. This gives providers an incentive to keep costs down for patients, while still carrying out the same steps in evaluation and treatment.³

Orthopedic surgery, specifically within the realm of arthroplasty, was one of the first areas impacted by VBC. In response, the Acute Care Episode (ACE) project was started as a venture from 2009 to 2011 in which bundled payments for total knee arthroplasty (TKA) and total hip arthroplasty (THA) were trialed at three hospitals. The hospitals responded by establishing oversight groups for quality, finance and provider incentive program committees to observe patient outcomes, accounting/payments and public concerns, respectively. Each institution then developed strategies for cost saving and quality improvement, focusing on optimizing and standardizing preoperative and postoperative pathways to decrease variability in length of hospital stay, discharge planning earlier in a patient’s admission to decrease overall length of stay, and negotiate with device vendors to reduce implant pricing.⁴ All three hospitals ultimately reduced the overall cost per episode between 10% and 15%, two reduced length of hospital stays for TKA and THA by almost one full day (3.9 to 3.2 days; 3.5 to 2.8 days) and surgeons at each hospital received bonus payments ($275 to $400 per procedure) for their work in successfully improving quality while reducing costs.^5,6 The efforts of these hospitals led to more involvement from the Centers for Medicare & Medicaid Services (CMS) and the rollout of the Bundled Payments for Care Improvement (BPCI) initiative. The BPCI is now in its fourth iteration, known as “model 4,” in which CMS pays a “single, prospectively determined bundled payment encompassing all services furnished by the hospital, physicians, and other practitioners during an episode of care.”⁷

While some hospital systems and orthopedic physician groups have struggled to successfully adapt to the recent, widespread acceptance of bundled payments for orthopedic procedures, others have thrived. Using the precedents set forth by the pilot hospitals in the ACE project, the New York University (NYU) Department of Orthopaedic Surgery has outlined the “Seven Pillars of Bundled Payment Success” to spearhead its adoption of bundled payments.



The department believes these “pillars” have accounted for its success during the transition from FFS to VBC bundled payment.⁸ These principles ensure quality of care across all patient interactions while also reducing costs.

Although orthopedic surgeons have been managing the transition to VBC and bundled payments for more than a decade, it’s a watershed moment due to the COVID-19 pandemic. Historically, orthopedic procedures are one of the most common in operating rooms, with five primarily orthopedic procedures — THA, TKA, disc laminectomy, spinal fusion, treatment of lower extremity fracture or dislocation — accounting for 17% of all operating room procedures in U.S. hospitals.^9,10 These procedures are valuable for hospitals as a means of collecting revenue. During the pandemic, elective orthopedic procedures were largely cancelled leading to large financial losses in hospital systems and orthopedic practices.¹¹ These financial losses, while widespread, were not equivalent. Practices that utilized prospective, VBC bundled payment agreements were more protected from financial losses as compared to retrospectively paid, FFS competitors.¹² This could suggest that the ongoing financial impact of COVID-19 on practices may force FFS practices to adopt a VBC bundled payment model going forward.

Telehealth

As the field of orthopedic surgery continues to head toward models that improve the value of delivered care, it’s important to consider telehealth, which can contribute to further cost savings. There has been a recent surge in telehealth adoption due to significant advances in audio-visual communication tools and software, whether that’s built-in computer cameras or phones with video-recording capabilities that are able to connect to the internet. It has never been easier for patients to connect with their healthcare providers via audio and video calls. Additionally, the COVID-19 pandemic has been an incredible catalyst for the development and implementation of such tools due to the prevalence of social distancing policies.

While interest in this field is continually growing, there is already an abundance of research suggesting that telehealth visits in orthopedic surgery can provide significant cost savings to patients, practitioners and governments. An analysis performed by Harno et al. in Finland comparing the cost of telehealth visits to traditional in-person orthopedic outpatient visits at two Finnish hospitals showed that the direct cost of the outpatient visits was 45% greater than the telehealth visits,¹³ with hospital service charges accounting for most of the cost difference. Ohinmaa et al. utilized data from a randomized control trial that included 145 patients undergoing orthopedic consultations and compared the costs associated with conventional outpatient visits to the costs associated with telehealth visits.¹⁴ The authors found that the telemedicine visits were cheaper to conduct for patients and hospitals. Finally, a randomized control trial of 389 patients in remote Norway performed by Buvik et al. in 2019 revealed that video-assisted orthopedic consultations provided significant cost savings when compared to traditional in-person visits.¹⁵

While orthopedic surgeons must weigh the financial and clinical pros and cons of telehealth incorporation into their clinics, patients have responded to telehealth in some studies with almost unanimous satisfaction.^16-18 The obvious benefits for patients include 24/7 access to their healthcare team, no burden of transportation, and more recently, no fear of contracting ailments such as COVID-19. The acceleration of telehealth use in many orthopedic practices due to the COVID-19 pandemic has shown the value that telehealth has in evaluating patients for post-operative visits and fracture follow-ups.¹⁹ Results of such studies have given governments across the globe increased confidence in telehealth resulting in the shift of policy to allow practices to use telehealth more broadly during the COVID-19 pandemic.^20-23 The overall cost-effectiveness, convenience and patient satisfaction with the use of telehealth in orthopedic clinics could suggest that its use as a diagnostic and evaluative tool may become a mainstay in the years to come.²⁴

Future considerations

It is increasingly clear that the future of medicine will revolve around VBC, and the field of orthopedic surgery is primed to be at the forefront of this ongoing revolution. As research on VBC in the field of orthopedic surgery continues to show cost-effectiveness, patient satisfaction, and added “quality,” the question remains: When will VBC become mandatory? A recent announcement by CMS seems to indicate that this transition will occur sooner rather than later. On Sept. 10, 2020, the CMS’ Center for Medicare & Medicaid Innovation (CMMI) announced that in 2024, all BPCI-A participants (greater than 1,700 healthcare systems) will transition to a mandatory VBC bundled payment model. CMS’ eagerness to mandate these policies, combined with substantial data showing improved patient outcomes and considerable financial savings, especially amidst the COVID-19 pandemic, may force some groups to adopt these changes even sooner than 2024.

Notes:

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