Guest Editorial by Robert Sorrenti, M.D., Regional Vice President, UniCare State Indemnity Plan


“Three courses for one fixed price”

You may have seen this on a restaurant menu. If you decide you want all three courses, you start adding things up to find out if it will cost you more to get what you want separately or whether you should take this deal. Usually, the deal offers better value.

Health care costs have generally worked like an “a la carte” restaurant menu. Each service and provider is paid separately under a system called fee-for-service.  A doctor performs a service – a test, for example, or a colonoscopy – and gets paid for that service. The more services the doctor does, the more he or she gets paid. Fee-for-service focuses on, and rewards, quantity rather than quality, and it’s one of the main reasons health care costs keep rising.

Like the restaurant industry, the health care industry is looking at ways to bundle services – and payment for those services – into packages that deliver quality and value. The federal agency responsible for Medicare (CMS) has introduced bundled payment methods for the management of common chronic conditions and for a number of common surgeries.  Under the surgery arrangements, providers are expected to maintain high quality standards, while receiving fixed payment amounts to cover the surgery and all the services and charges that go with it.

Bundled Payments for Hip and Knee Replacements

Following the CMS initiative, the UniCare State Indemnity Plan worked with New England Baptist Hospital (NEBH) to establish a bundled payment arrangement for UniCare members needing total hip or total knee replacements. UniCare Basic, Community Choice and PLUS members who have one of these inpatient surgeries at New England Baptist Hospital have no inpatient hospital copay.  In addition, patients participating in the program have no out-of-pocket costs for physical therapy or home health care needed as a result of the surgery. Members also benefit from using a hospital that is ranked number one in specialty and received the highest performing status for hip and knee replacements in the latest U.S. News Hospital Report.

Pay PCPs Monthly Amount for Care

Another bundling approach is to pay a primary care provider, like an internist, a monthly amount instead of paying for each time the patient visits.  This monthly amount is intended to support and encourage management of telephone calls from patients, use of other medical staff like health educators and coaches, coordination with specialists and other providers, and other means of improving the members’ care. 

UniCare is using this approach with Iora Health Care at its practices in Medford and Hyde Park.  Iora provides easy access to appointments, educational and exercise classes, and health coaches in a team-based environment.  UniCare Basic, Community Choice and PLUS members who see Iora primary care doctors get this enhanced level of care, have no office visit copays, and have reduced copays for commonly prescribed drugs.  In other words, members share in the value of the bundled payment approach.  

Reference-based Pricing

An alternative payment approach is called reference-based pricing.  CalPERS, the California Public Retirement System, implemented reference-based pricing for hip and knee replacements in 2011. In this arrangement, a specified amount is paid as the maximum, or cap, for a particular service. Members have no out-of-pocket expenses if they go to providers whose total costs are under the cap. Members are free to go to more expensive providers, but they will then owe the difference between the designated cap and the providers’ actual charges.

All of these bundled arrangements focus on sharing value with members and curtailing interventions that don’t benefit patients.  Importantly, they also keep overall costs under control which leads to keeping premium increases in check for both members and the employers, like the GIC.  As health plans move away from fee-for-service, other opportunities to take advantage of reduced member costs will certainly arise.  When you see one of these opportunities, just remember that restaurant menu – and add things up to determine what delivers value for you. 

Robert W. Sorrenti, MD, MHA, is the Regional Vice President for UniCare, a subsidiary of WellPoint, Inc., one of the largest health benefits companies in the U.S. His responsibilities include oversight for UniCare’s medical management program and its various components. Dr. Sorrenti has an MD from Harvard Medical School and an MHA from Clark University.

This information provided by the Group Insurance Commission.