Health Care’s Largest Private-Sector Program Tying Payment to Value Delivers Better Care, Lower Costs

NEWTOWN, CT — The triple aim of the health care industry—improving patient health, raising the quality of care, and lowering costs—is no small challenge. A five-year experiment by New Jersey’s largest health insurer points to a solution: bundled payments.

The bundled payment model is a system that encourages provider collaboration, deters avoidable complications, and rewards efficiency in delivering care. Horizon Healthcare Services of New Jersey used bundled payments for nine conditions and procedures, and saw unmistakable advantages. There were quicker average recovery times following orthopedic surgeries, lower rates of unnecessary C-sections, lower costs for hip replacements, and fewer readmissions after knee arthroscopy. Under the program, costs were contained enough for Horizon to pay out $3 million in shared savings to 51 specialty medical practices that participated.

“The Horizon experience shows us that large-scale payment transformation is possible,” said François de Brantes, executive director of the Health Care Incentives Improvement Institute (HCI3). “They had more than 900 physicians participate in the bundled payment program, and it can be done in other places, too. The tools for implementation are ready for the next innovator.”

Horizon relies on HCI3‘s PROMETHEUS Payment software to implement its program, for bundled payment systems require analysis of complex data. A bundled payment sums up the cost of delivering quality care to a patient over an entire “episode of care.” An episode encompasses all the services and devices within the full spectrum of care for a patient’s condition or other medical need, like a hip replacement. By the end of the five-year period studied, more than 12,000 episodes of care had been completed under Horizon’s program.

Instead of payments going piecemeal to separate providers for individual services, which is how it’s done under the traditional fee-for-service system, a bundled payment is shared among all providers serving the patient during the episode of care. It brings them together to coordinate care, reduce complications, and eliminate unnecessary procedures. But it also requires defining the parts of each episode of care; calculating a fair, evidence-based and clinically sound payment for the entire episode; and monitoring the quality of care delivered. The PROMETHEUS Payment model makes this possible.

“We chose to use HCI3‘s PROMETHEUS Payment model for a number of episodes because HCI3 had the most sophisticated set of bundled algorithms in the marketplace,” said Lili Brillstein, director of episodes of care at Horizon Health Care Services. “Without that our ability to actually implement would have been severely hampered and delayed.”

More findings from the Horizon experience are summarized in HCI3’s case study, “Nation’s Largest Commercial Value-Based Health Care Program Delivers on Triple Aim” can be found online.

About HCI3: Health Care Incentives Improvement Institute, Inc: (HCI3®) is a not-for-profit organization that aims to create significant improvements in the quality and affordability of health care through evidence-based incentive programs and support of payment reform models. Its nationally recognized programs, Bridges to Excellence® and PROMETHEUS Payment® have been at the forefront of payment reform, and the new PROMETHEUS Analytics® offers transformational insights for payers and providers.