Background

By providing a lump sum for the delivery of all services needed to treat a medical condition or perform a procedure, bundled payment creates incentives for physicians, hospitals, and postacute care providers to collaborate to drive down costs and improve quality. Many bundled payment programs have failed to gain traction, however, partly because they require significant physician buy-in and behavior change. The authors of this Commonwealth Fund–supported study describe how Baptist Health System, which comprises five hospitals in San Antonio, Texas, gained physician support for a bundled payment program focused on joint replacement procedures.

What the Study Found

  • To recruit orthopedic surgeons, Baptist protected them from “downside risk” by guaranteeing 100 percent of their professional fees under Medicare rates, with the potential to earn bonuses of up to 25 percent. Baptist hand-delivered bonus checks to medical offices on a monthly or quarterly basis.
  • The health system shared its aggregated cost and quality data with physicians to help identify new opportunities for savings and performance improvement. Over time, physicians pushed for transparency on individual provider performance, creating social pressure to minimize variation and improve quality.
  • The health system used two quality thresholds for gainsharing—one for individuals and another for the bundled payment group as a whole. In this way, high performers had extra incentive to help their peers meet group quality and cost targets, while low performers had inducements to increase their performance and avoid dampening the group’s performance.

Conclusions

Baptist generated $6.1 million in savings and an average of $284 per joint replacement in a demonstration program. The bundled payment program has since been expanded to nonsurgical conditions.