Exempla Saint Joseph Hospital Part of Unique Cost Experiment
April 16, 2009
Friday, March 27, 2009
Exempla Saint Joseph Hospital part of unique cost experimentDenver Business Journal - by Bob Mook
Kathleen Lavine | Business Journal
Robert Minkin, president and CEO of Exempla Saint Joseph Hospital, says the bundling approach for Medicare billing benefits hospitals with established specialties.
View Larger Exempla Saint Joseph Hospital in Denver is one of only five hospitals nationwide participating in a pilot program designed to hold hospitals and doctors accountable for how well their patients are while cutting costs for the federal Medicare program — and potentially making more money for hospitals and doctors.
The Centers for Medicare and Medicaid Services (CMS) oversees the program, which will experiment with the concept of “bundling” payments for certain medical procedures. Bundling refers to an arrangement between Medicare and a group of physicians to accept a single fee for specific medical services.
Traditionally, Medicare pays hospitals according to a patient’s diagnosis, age, gender and the nature of the surgical procedure. Medicare refers to the classification as a “diagnosis related group” (DRG).
Ideally, the DRG arrangement makes money for hospitals — providing that the surgeries go well and doctors don’t run up more costs performing associated procedures.
But when Medicare-funded procedures don’t go well and hospitals lose money, they tend to shift the costs to patients who are covered by private insurance, which contributes to the rising premiums that businesses and others pay for coverage.
Meanwhile, Medicare pays doctors under a formula known as a “discounted-fee-for-service schedule,” which means that physicians can be reimbursed for any service the program covers.
“The more [the doctors] do, the more money they make,” said Robert Minkin, president and CEO of Saint Joseph’s Hospital.
Under the bundling concept, which President Barack Obama supports, the physicians group and the doctors agree to accept a single flat fee for a particular kind of surgery and the treatments associated with the procedure.
For example, a group of cardiovascular surgeons and a hospital might take a $30,000 payment for each coronary artery bypass surgery performed. The fee would cover a pre-operative assessment, the procedure itself, any emergency department care, related hospital inpatient care, post-discharge follow-up and rehabilitation.
If the procedure goes well and ends up costing less than the flat fee, the hospital and the physicians can keep the difference and profit from the service.
However, if the patient gets an infection as a result of the surgery and has to return to the hospital, the doctors and hospital would absorb the costs of corrective procedures associated with the initial surgery.
Five hospitals in the states of Texas, Oklahoma, Colorado and New Mexico are taking part in the bundling project.
In Denver, Saint Joseph’s Cardiovascular Institute opted to participate after submitting a proposal to CMS a year ago.
Minkin said he believes the bundling concept is the way acute-care cases for the elderly will be funded in the future.
But Minkin said the bundling approach benefits hospitals with established specialities and discourages hospitals from dabbling with new practices that haven’t passed the test of time.
“There are winners and losers in situations like this,” Minkin said. “Medicare can’t afford to be everything to everybody all the time.”
Minkin estimates the arrangement could triple patient volume at the Cardiovascular Institute in the next three years.
But while Saint Joseph’s cardiovascular unit may benefit over competing specialities in the Denver area, Minkin said other hospitals could benefit from the arrangement if CMS adopts the bundling practice on a more widespread basis.
“There are certain things that Presbyterian-St. Luke’s [hospital] does that we don’t,” he said.
If successful, CMS’s experiment could change the way Medicare reimburses health care providers, and it could have widespread implications for private insurers as well, Minkin said.
Although the pilot project was started under the Bush administration, Minkin said the concept is core to the Obama administration’s commitment to find efficiencies in government-sponsored health insurance programs.
During a March 24 press conference, Obama cited the disconnect in the way that doctors and hospitals are reimbursed as a factor driving up the cost of health care.
“It is going to be an impossible task for us to balance our budget if we’re not taking on rising health care costs,” Obama said.
The president singled out health care costs as one of the biggest drivers of a deepening federal budget deficit.
Donna Lynne, president of Kaiser Permanente Colorado, said the bundling approach is a good way to provide incentives for medical providers that specialize in acute care.
Lynne said the current system is full of disincentives.
“If people get healthy, hospitals lose revenue,” she said.
Lynne said bundling system create a pay-for-performance system for health care, where doctors and hospitals are rewarded for good results.
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