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Bundled Payments Driving Urgency for MDs to Learn ‘Spend Anatomy’

01/16/18

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Debbie Schuhardt, MHA, FACHE, Principal, Clinical Advisory Solutions

“No outcome, no income” was how a colleague of mine recently described the value-based bundled payment model becoming more common in health care. That simple statement sums up the mindset we must adopt across all aspects of care delivery to successfully manage costs within an episode of care.

In this equation, physicians bring depths of medical knowledge to achieve desired patient outcomes. But they may not realize how much their clinical decisions affect income under the bundled payment model. What is the cost of the devices they are using? Does the device they prefer cost more than the devices their peers use? Are the outcomes with those devices better? What about costs related to the patient’s rehab? Are there other expenses that are affecting bundled payment reimbursements?

The answers to those questions teach physicians a new type of anatomy—spend anatomy. And, learning spend anatomy is taking on new urgency in light of bundled payments—one payment to cover an entire episode of care.

In my more than 25 years’ experience in various roles as a hospital administrator, and now leading the service line optimization team at Vizient, I have learned that the most effective decisions—both clinical and financial—happen when doctors are provided evidence and actionable data. By “actionable,” I mean that the data is credible such that it is able to inform clinical decisions, which directly impact cost and quality. 

Variations in physicians’ utilization of medical devices and durable medical equipment can increase cost and create outcome differences. Less variation typically means more predictable outcomes. When provided the costs associated with their selection of devices and supplies, physicians have a better picture of the value they drive and can make decisions accordingly. Understanding how their decisions impact both cost and quality is a key to driving changes in behavior that reduce variation.

Here is an example: At its monthly meeting, a group of spine surgeons at a mid-Atlantic hospital reviewed the amount, type, cost, patient profile and outcomes of demineralized bone matrix (DBM) products. The evaluation was part of an initiative to reduce the hospital’s orthobiologics spend, which had included buying DBM at different price points from different vendors. The surgeons ultimately decided to consolidate DBM vendors into a single choice, and they established protocols to address utilization of high-cost, bone-growth products. The combination of protocols, variance and utilization reductions and enhanced buying power achieved through vendor negotiation saved the hospital $1.6 million on a $10 million annual orthobiologics spend.

In a broader example, doctors today are assessing patient risk factors, like weight, smoking status and comorbidities, well in advance of scheduling surgery. Doing so offers an option when balancing outcome and income. A physician might choose rehabilitation and pain management, which can oftentimes either delay surgery without patient harm and/or eliminate it for some patients. Surgery is reserved for the right patient at the right place and time for the right reasons.  

Looking at a surgical stay from an episode standpoint, there are a whole host of items that need to be managed to ensure positive outcomes medically and fiscally. Consults, pain management, operating room availability and blood use play key roles, as do products, which have both acquisition and utilization components. This creates the need for physicians to come together and talk about possible variations in how they are treating similar patients. I have seen both scheduled meetings and informal conversations act as catalysts for positive changes that likely would not have happened without physicians’ collective review of data and evidence.

Learn more about optimizing service line performance.

About the author. In her current role, Debbie Schuhardt leads the service line optimization team at Vizient, where she helps health care organizations drive changes that improve service line performance. A Fellow of the American College of Healthcare Executives, Schuhardt’s breadth of experience includes change management, service line development and management, supply chain improvement specifically in the areas of orthopedics and spine, utilization management, performance improvement, ambulatory care, physician practice management, women’s services, oncology, and training and mentoring.

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