Value Based Care and Bundled Payments

Katy E. French; Alexis B.  Guzman; Augustin C. Rubio; John C. Frenzel; Thomas  Feeley

Article | Healthcare: The Journal of Delivery Science and Innovation | September 2016

Value Based Care and Bundled Payments: Anesthesia Care Costs for Outpatient Oncology Surgery Using Time-driven Activity-based Costing

by Katy E. French, Alexis B. Guzman, Augustin C. Rubio, John C. Frenzel and Thomas Feeley

Abstract

Background: With the movement towards bundled payments, stakeholders should know the true cost of the care they deliver. Time-driven activity-based costing (TDABC) can be used to estimate costs for each episode of care. In this analysis, TDABC is used to both estimate the costs of anesthesia care and identify the primary drivers of the costs of 11 common oncologic outpatient surgical procedures. Methods: Personnel cost was calculated by determining the hourly cost of each provider and the associated process time of the 11 surgical procedures. Using the anesthesia record, drugs, supplies and equipment costs were identified and calculated. The current staffing model was used to determine baseline personnel costs for each procedure. Using the costs identified through TDABC analysis, the effect of different staffing ratios on anesthesia costs could be predicted. Results: Costs for each of the procedures were determined. Process time and costs are linearly related. Personnel represented 79% of overall cost while drugs, supplies, and equipment represented the remaining 21%. Changing staffing ratios shows potential savings between 13% and 28% across the 11 procedures. Conclusions: TDABC can be used to estimate the costs of anesthesia care. This costing information is critical to assessing the anesthesiology component in a bundled payment. It can also be used to identify areas of cost savings and model costs of anesthesia care. Certified Registered Nurse Anesthetist (CRNA) to anesthesiologist staffing ratios profoundly influence the cost of care. This methodology could be applied to other medical specialties to help determine costs in the setting of bundled payments.

Keywords: Cost; Insurance; Health Care and Treatment; Insurance Industry; Health Industry;

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French, Katy E., Alexis B. Guzman, Augustin C. Rubio, John C. Frenzel, and Thomas Feeley. "Value Based Care and Bundled Payments: Anesthesia Care Costs for Outpatient Oncology Surgery Using Time-driven Activity-based Costing." Healthcare: The Journal of Delivery Science and Innovation 4, no. 3 (September 2016): 173–180.

Since its establishment in 2005, Hamburg's Martini Klinik had single-mindedly focused on prostate cancer care with a commitment to measure long-term health outcomes for every patient. A wholly owned subsidiary of the Hamburg University Hospital, Martini was a "hospital in a hospital" in close proximity to other hospital departments and services. By 2013, Martini Klinik had become the largest prostate cancer treatment program in the world with 5,000 outpatient cases and more than 2,200 surgical cases annually, with patients coming from all over Germany and from other countries. However, German private insurers were cutting reimbursement for prostate cancer by 15 percent, and denying extra payment for some new procedures, while reimbursement by public health plans was not covering costs. Dr. Hartwig Huland, Martini's founder and Medical Director, was considering how to respond.

At one point or another in our life, we all become consumers of the health care industry. Indeed, health care affects everyone and encompasses a diverse set of services from childbirth, to illness prevention, to the management of chronic disease and end-of-life care. Health care in the United States is executed through a complex set of interrelationships between three distinct parties: payers, providers, and consumers. Each group has its own perspective accompanied by a set of unique incentives, which complicate the adoption of a value-based health care system. To transform the American health care delivery system, all participants including patients, physicians, employers, insurance companies, and the government need to recognize that value is best defined as “a given health outcome per dollar of cost expended.” In this article, we examine some of the challenges to creating and implementing a value-based health care system against the backdrop of a turbulent industry and consider the implications for the anesthesiologist.

Article | NEJM Catalyst | November 8, 2018

Transitioning Payment Models: Fee-for-Service to Value-Based Care

Thomas W. Feeley and Namita Seth Mohta

In a survey of the NEJM Catalyst Insights Council in July 2018, 42% of respondents say they think value-based reimbursement models will be the primary revenue model for U.S. health care. Indeed, this transition is already happening. Respondents report that a quarter of reimbursement at their organizations is based on value, on average. While three-quarters of their revenue remains fee-for-service, we see a remarkable change to a reimbursement system that was static for decades. In particular, survey respondents’ organizations are pursuing two value-based strategies: accountable care organizations, which often use capitated payments, and bundled payments. Nearly half (46%) of respondents say value-based contracts significantly improve the quality of care, and another 42% say value-based contracts significantly lower the cost of care. The survey identifies the leading barriers to implementing value-based reimbursement models. Infrastructure requirements, including information technology (indicated by 42% of respondents), and changing regulation/policy (34%) are the top two. There is strong consensus on the broad metrics that are most important for measuring value-based care. Outcome measures top the list, with 60% of respondents saying they are extremely important. This survey suggests that many in health care see value-based reimbursement as a real solution to the nation’s current health care crisis.

Keywords: payment methods; value-based healthcare reimbursements; Health Care and Treatment; Value; Transformation;

Citation:

Feeley, Thomas W., and Namita Seth Mohta. "Transitioning Payment Models: Fee-for-Service to Value-Based Care." NEJM Catalyst (November 8, 2018). View Details

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Value Based Care and Bundled Payments: Anesthesia Care Costs for Outpatient Oncology Surgery Using Time-driven Activity-based Costing

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