Solving Surprise Bills

Fixing Misconceptions about Bundled Care

There are no anti-patient antagonists in the fight to protect patients from surprise medical bills. All major stakeholders—patients, hospitals, bipartisan legislators, consumer advocacy groups—agree that patients should not be caught in the middle of payment disputes over their healthcare. The polarization between parties comes from choosing the correct solution: bundled care, cost-setting, arbitration, or network overlay. Of these, only one can address elements of all the others. It is time to reexamine bundled care not in the context of past experiments, but through the lens of new technology.

It is time to dispel myths about bundled care. Thanks to today’s technology, episodic bundling is no longer the administrative nightmare that it was in the days of the 2011 PROMETHEUS Bundled Care Experiment and 2014’s Integrated Healthcare Association Bundled Payment Demonstration in California. These early initiatives labored and ultimately failed under the administrative burden of implementation, stymied by issues like definition of care bundles, contract execution, and regulatory uncertainty.*

Hospital administration is already Byzantine in its complexity. Asking hospitals to also be the “banker of the bundle” is a recipe for failure. This is where technology fills the gap. The only way to make bundled episodes of care administratively feasible is to automate bundle adjudication.

Episodic Bundling is Here, and it Works

In fact, not only are bundled episodes of care possible in a way unimaginable five years ago, they are actively being used in more than 250 hospitals around the country. MDsave is a unique bundling technology that creates automatically adjudicated episodic care bundles that are price transparent and inclusive of procedure-related fees, eliminating many surprise bills from so-called “phantom providers”. The MDsave platform has been successfully building episodic care bundles for hospitals for seven years, and has expanded to 30 states. The infrastructure exists already to take the administrative burden off of hospitals and payers, and has the potential to simplify reimbursement negotiations to a simple software workflow

In the MDsave model, patients prepay one single price for all of the fees associated with their medical service: in the case of colonoscopy, for example, the patient price will include the facility fee that includes operating room, recovery room, and outpatient stay; the professional fee for the physician performing the procedure and postoperative follow-up; the anesthesiology fee for general or local anesthesia; and the pathology fee for specimen examination and diagnosis. This patient will receive a voucher to take to their appointment, and will not have to pay a bill from an anesthesiologist or pathologist who they never saw.

Automated Bundle Definitions

MDsave uses a patented bundling technology called Ozzie™ to crossreference the entire database of procedure (CPT) codes while accommodating geographical price variations and regional market forces, and has more than 1,300 pre-built bundles with the capability to create new bundles as needed.

To build a bundled episode of care, MDsave identifies and groups together all anchor CPT codes relevant to a specific procedure. Next, MDsave adds all incidental CPT codes for services typically performed by physicians as part of intraoperative and post-operative care and all care services performed by other facility staff during the patient stay. The final step in the bundling process is to partner with the providers who perform each service within the episode. Payment is automatically distributed via Ozzie™ to these participating providers within four days of rendering service.

Pricing each episode of care begins with the federal CMS rate database. Payment for each code is then adjusted based on a weighted average of historical payment data and fair market analysis. This adjusted rate will then be customized to each geographical location using our partner hospitals’ wage indices. The final, upfront price for the episode takes this customized rate and applies a percentage markup determined to be the best price for market conditions, including regional patient propensity to pay and competitor prices.

This is where the opportunity lies for a simplified negotiation workflow between providers and payers. The recommended price is calculated inside the Ozzie™ platform, creating a sensible starting point for price discussions.

Automated Contract Negotiations

Via MDsave’s unique Ozzie™ platform, multiple providers can participate in a bundled episode of care, even from separate economic entities (as in the White Paper: Solving Surprise Bills 4 case of hospitals who contract with outside anesthesia groups). This horizontal bundling method allows each participant to set their fee for their part of the service. Just like managed care negotiations, this fee can be expressed as a percentage derived from CMS rates.

The software does the work of compiling the fees into a single, upfront price for the patient and then unbundling the payment into reimbursement for rendering providers consisting of 100% of the contracted fee. Affiliated provider agreements are quickly and securely completed electronically via DocuSign, eliminating the administrative burden of shepherding paper documents.

Patient savings via MDsave episodic care bundles are created from increased administrative efficiency, not by altering or denying care. In a prepaid bundle, there is no incentive to withhold treatment or order unnecessary services.

Compare this process to the 2011 PROMETHEUS Experiment’s bundling method, in which providers and payers were expected to set aside funds to contribute to a shared savings fund to reward savings on care delivery.* Bonuses based on reduced spending over the course of the care episode could potentially incentivize withholding services.

Provider Incentives Through MDsave

• Prepayment eliminates risk of bad debt

• Reimbursement within 4 days of service

• Payment automatically distributed via Ozzie™

Provider Incentives Under Prometheus

• Shared savings bonus payments from joint withheld funds

• Reimbursement rendered after claims analysis against agreed-upon threshold

Reducing Existing Administrative Burden

Automated bundle adjudication prevents hospitals from taking on the additional burden of managing bundled fees and distributing payments to participants, but it also alleviates existing administrative burdens caused by traditional healthcare billing: insurance claim filing and bad debt collection.

In a prepaid bundle, there is no risk of bad debt or need to follow up on unpaid services, no risk of claim denial, and reimbursement is rendered within a week of service. The opportunity for upcoding, billing fraud or abuse is dramatically curtailed by reducing the number of line items from hundreds to just one for each participating provider. Overhead is reduced, and collections increase.

Partnering With Providers To Alleviate Financial Risk

An episodic bundling technology solution takes the administrative burden of preventing surprise bills off of providers. In the current healthcare system, surprise bills result from the lack of a negotiated contract between the payer and the provider rendering care. Understandably, providers are concerned that bundled episodes of care could shift financial risk and the responsibility of creating comprehensive provider network coverage solely onto the shoulders of doctors and hospitals.

MDsave operates on the idea that the providers should never have to assume financial responsibility for gaps in coverage. The Ozzie™ horizontal bundling technology helps ensure broader coverage by allowing bundling across providers from multiple groups and alleviates financial risk by distributing all payments to bundle participants through MDsave.

Expect The Unexpected: Retroactive Bundling

A common criticism of episodic care bundling is that bundles cannot accommodate unexpected episodes.

This is wrong on two counts:

1. MDsave’s Ozzie™ platform allows bundles to be built at the point-ofservice, by constructing a “shopping cart” of services.

2. The Ozzie™ platform allows hospitals to customize care by department, creating a bundle from the level of service complexity rather than a specific procedure in cases where a CPT code exists to accommodate it

Point-of-service bundling, or retrospective bundling, gives the patient the same benefits as the pre-built, pre-purchased bundles:

• Upfront payment means fewer “phantom provider” surprise bills

• One single, easy-to-understand price

• Pre-negotiated rates

A retrospective bundle allows a provider to collect payment in full for services already rendered or in progress. Hospital staff can create this bundle in 30 seconds by adding services to the patient’s “shopping cart,” resulting in a custom bundle adjusted for multiple services purchased during a single episode of care.

Like CMS and commercial payers, MDsave uses Multiple Procedure Payment Reduction Rules. When eligible procedures are performed at the same time by the same physician, MDsave will reimburse the highest-paying procedure at 100%, and then reduce subsequent payments by 50%. This protects patients undergoing multiple bundled services from having to pay the same fees twice, like two anesthesia fees during a multi-procedure surgery.

The Bundled Care Solution Means Compromise

Bundled episodes of care can support and incorporate elements of the other proposed solutions to surprise bills: cost-setting, arbitration, and network overlay.

Cost-Setting

The cost-setting plan suggests that the states set a cap on patient financial responsibility and predetermine the amount required of health plans, or else default to a federal cost formula in cases where the state has not established an amount.*

All of this work is already done as part of the Ozzie™ horizontal bundling technology. Historical cost data, geographical variations and market forces are all calculated in each bundle. Cost-setting in the context of episodic bundling is effective and is working right now in more than 200 hospitals across the country. Offering bundled episodes of care provides patients the added benefit of transparent prices to factor into their budget.

Arbitration

An arbitration solution prohibits patients from being charged more than in-network prices for out-of-network providers when receiving emergency care. Differences would be settled in arbitration between providers and payers, taking its cue from salary negotiations in Major League Baseball.*

There is a major difference between baseball and healthcare: baseball has an off-season. If administrative burden is already an obstacle facing hospitals today, adding an additional layer of arbitration poses a very real risk of slowing down an already cumbersome process of reimbursement. Hospitals will have to wait on arbitration to receive payment for services, and payers could be incentivized to draw out negotiations.

Episodic bundling takes care of the arbitration process on the front-end; consider bundled care implementation the proverbial “off-season.” Retrospective bundles can be built at the point-of-service to accommodate emergency care, using pre-negotiated bundles based on level of complexity whenever needed. Insurers and providers can do their negotiating once, upfront, and then enjoy the efficiencies of automated bundle adjudication’s streamlined reimbursement. Meanwhile, patients can rely on simple, transparent prices regardless of network.

Network Overlay

Like arbitration, network overlay takes aim at out-of-network charges. This solution would require that hospitals inform patients whether or not the hospital and the providers rendering care are in-network and how much the patient’s out-of-pocket financial responsibility will be. In cases of same-day emergency care, or in cases where a patient cannot be given at least 24 hours notice and their consent for services obtained, hospitals would be limited to in-network charges.*

Predefined care bundles make it easy for hospitals to quote prices like these quickly and accurately, and prices can easily be derived from in-network rates during price setting and negotiation. Bundled services have meaningfully transparent prices, meaning that the patient’s total financial responsibility is addressed and not just the fee for the procedure itself

Technology-Empowered Episodic Bundling:
Benefit, Not Burden

It is possible to solve the surprise bills problem in a way that benefits both patients and providers, and the advent of new technology creates new, simplified workflows that benefit payers as well. Since bundled payment experiments began back in 2011, industry leaders saw the potential to improve efficiencies, but until the capability to automate bundle adjudication, the administrative burden outweighed any benefit.

Now, MDsave and the Ozzie™ platform are proving that episodic bundling can be streamlined and successful, and are doing so in hundreds of hospitals across the United States. Bundled care already gives patients a meaningful understanding of their financial responsibility and allows them to incorporate healthcare purchase decisions into a budget. Now, this technology can be used to close the gaps in coverage that lead to surprise bills.

Payers and providers can come to the negotiation table armed with sensible, data-driven bundle price recommendations generated through MDsave’s software, establish price agreements that increase coverage and access for patients, and then leave care episode administration to the automated bundle adjudication software. Neither party need fear assuming financial risk for these care bundles, as payment distribution is handled entirely within the Ozzie™ platform. Under an episodic bundling system, providers can prescribe the most medically necessary treatments without being influenced by incentives to overprescribe or withhold services. Most importantly of all, episodic bundling gives all stakeholders, from payers to patients, a meaningful, upfront understanding of their financial responsibility—and that empowers all parties to make informed healthcare decisions.

References

1. Hussey, P.S., Ridgely, M.S., Rosenthal, M.B. “The PROMETHEUS Bundled Payment Experiment: Slow Start Shows Problems In Implementing New
   Payment Models.” Health Affairs, Vol. 30, No. 11, November 2011. https://doi.org/10/1377/hlthaff.2011.0784

2. Ridgely, M.S., de Vries, D., Bozic, K.J., Hussey, P.S. “Bundled Payment Fails To Gain A Foothold In California: The Experience Of The IHA Bundled
   Payment Demonstration.” Health Affairs, Vol. 33, No. 8, August 2014. https://doi.org/10/1377/hlthaff.2014.0114

3. Hussey, P.S., Ridgely, M.S., Rosenthal, M.B. “The PROMETHEUS Bundled Payment Experiment: Slow Start Shows Problems In Implementing New
   Payment Models.” Health Affairs, Vol. 30, No. 11, November 2011. https://doi.org/10/1377/hlthaff.2011.0784

4. Luthra, S. and Huetteman, E. “Bipartisan Support Builds for Limits on Surprise Medical Bills.” NPR Shots. https://www.npr.org/ sections/healthshots/2019/02/05/691374149/bipartisan-support-builds-for-limits-on-surprise-medical-bills

5. Kliff, S. “A spinal surgery, a $101,000 bill, and a new law to prevent more surprises: How New York state fought surprise medical bills - and won.”
   Vox. March 19, 2019. https://www.vox.com/health-care/2019/3/19/18233051/surprise-medical-bills-arbitration-new-york

6. Luthra, S. and Huetteman, E. “Bipartisan Support Builds for Limits on Surprise Medical Bills.” NPR Shots. https://www.npr.org/sections/ healthshots/2019/02/05/691374149/bipartisan-support-builds-for-limits-on-surprise-medical-bills