ONLINE EXCLUSIVE: Trial by Error: An Oklahoma Hospital’s Bundling Experience

Hillcrest Medical Center in Tulsa, Okla., went live with its ACE Demonstration on May 1, 2009. Over the next 15 months, scores on several quality metrics soared, supply costs plunged, patient volumes shot up, and the hospital saved Medicare $750,000 on 37 diagnosis-related groups (DRGs).

So what’s the problem?

For one thing, handling the bundled payment system required “massive” computer conversions, says Hillcrest CEO Steve Dobbs, and cash payments from CMS were significantly delayed, in part due to glitches over how discharges were handled. And then there was the confusion over processing supplemental Medicare plans.

Hillcrest’s first-year experience with bundled payments for orthopedics, cardiology, and cardiovascular surgery provides an illuminating window into what other hospitals might encounter as the concept of bundling expands beyond the first few pilot sites.

Because Hillcrest didn’t have a way to pay physician claims, it hired a third-party vendor, Texas-based Trailblazer, to manage them. Then Hillcrest set up two LLCs—one for orthopedics and one for cardiology—to receive the bundled payments. CMS required the hospital to establish a quality committee, finance committee, and board within each LLC, and report quarterly about the program. But Dobbs says the hospital has received no written feedback from CMS or any indications of how the ACE Demonstration has worked at two other sites that also started last year.

Through “trial by error,” the hospital has had to learn many of its lessons on its own, he says, explaining that “you just had to go make some mistakes and try something.” For example, the hospital began posting the Medicare rate for each of the demonstration’s 37 DRGs on its website after frequent updates to the rates led to widespread confusion among area physicians. Hillcrest also learned that it needed to set up a dedicated toll-free call center for people to get information about the program.

There have been triumphs, too. Scores on such metrics as antibiotics administered one hour prior to surgical start and antibiotics stopped 24 hours post-surgery have climbed significantly, perhaps by linking them to gainsharing incentives. When one heart valve vendor “wouldn’t play,” Dobbs says, the hospital switched to another, less expensive vendor. By involving its open-heart surgeons in scrutinizing supplies, the hospital saved 10% of the cost of sterile packs in the operating room.

Hillcrest’s orthopedic surgeons—an independent group—also combed through instruments and drugs to look for savings. For their efforts, the six orthopedists netted a combined $130,000 in incentive checks. For the hospital’s own cardiologists and cardiovascular surgeons, the bonus money went back into the practice.

Early in the demonstration project, Dobbs says, hospitalists saw a dip in the number of cases they were getting pulled in on. “Early on they called me and said, ‘What’s up, because we’re not getting as many referrals from orthopedics?’” Dobbs says. “I think it’s leveled out over time, and they really haven’t seen that big of a change.”

The hospital also is reaping the rewards of recent investments, including a new heart hospital, heavy investment in cardiology, and a three-year-old orthopedics unit. In the first year of its demonstration, the hospital saw a 24% gain in its cardiology and cardiovascular surgery volume, and a whopping 37% gain in orthopedics volume.

One facet of the project that has been less fruitful is the Medicare discount given to patients who have their orthopedic or cardiology procedure done at Hillcrest. “People are saying it’s nice to have, but that’s not why they chose the program, especially in cardiology,” Dobbs says. “You don’t have a heart attack and tell the ambulance driver, ‘Oh, by the way, I want to get my incentive check.’ ”

Hillcrest Medical Center in Tulsa, Okla., went live with its ACE Demonstration on May 1, 2009. Over the next 15 months, scores on several quality metrics soared, supply costs plunged, patient volumes shot up, and the hospital saved Medicare $750,000 on 37 diagnosis-related groups (DRGs).

So what’s the problem?

For one thing, handling the bundled payment system required “massive” computer conversions, says Hillcrest CEO Steve Dobbs, and cash payments from CMS were significantly delayed, in part due to glitches over how discharges were handled. And then there was the confusion over processing supplemental Medicare plans.

Hillcrest’s first-year experience with bundled payments for orthopedics, cardiology, and cardiovascular surgery provides an illuminating window into what other hospitals might encounter as the concept of bundling expands beyond the first few pilot sites.

Because Hillcrest didn’t have a way to pay physician claims, it hired a third-party vendor, Texas-based Trailblazer, to manage them. Then Hillcrest set up two LLCs—one for orthopedics and one for cardiology—to receive the bundled payments. CMS required the hospital to establish a quality committee, finance committee, and board within each LLC, and report quarterly about the program. But Dobbs says the hospital has received no written feedback from CMS or any indications of how the ACE Demonstration has worked at two other sites that also started last year.

Through “trial by error,” the hospital has had to learn many of its lessons on its own, he says, explaining that “you just had to go make some mistakes and try something.” For example, the hospital began posting the Medicare rate for each of the demonstration’s 37 DRGs on its website after frequent updates to the rates led to widespread confusion among area physicians. Hillcrest also learned that it needed to set up a dedicated toll-free call center for people to get information about the program.

There have been triumphs, too. Scores on such metrics as antibiotics administered one hour prior to surgical start and antibiotics stopped 24 hours post-surgery have climbed significantly, perhaps by linking them to gainsharing incentives. When one heart valve vendor “wouldn’t play,” Dobbs says, the hospital switched to another, less expensive vendor. By involving its open-heart surgeons in scrutinizing supplies, the hospital saved 10% of the cost of sterile packs in the operating room.

Hillcrest’s orthopedic surgeons—an independent group—also combed through instruments and drugs to look for savings. For their efforts, the six orthopedists netted a combined $130,000 in incentive checks. For the hospital’s own cardiologists and cardiovascular surgeons, the bonus money went back into the practice.

Early in the demonstration project, Dobbs says, hospitalists saw a dip in the number of cases they were getting pulled in on. “Early on they called me and said, ‘What’s up, because we’re not getting as many referrals from orthopedics?’” Dobbs says. “I think it’s leveled out over time, and they really haven’t seen that big of a change.”

The hospital also is reaping the rewards of recent investments, including a new heart hospital, heavy investment in cardiology, and a three-year-old orthopedics unit. In the first year of its demonstration, the hospital saw a 24% gain in its cardiology and cardiovascular surgery volume, and a whopping 37% gain in orthopedics volume.

One facet of the project that has been less fruitful is the Medicare discount given to patients who have their orthopedic or cardiology procedure done at Hillcrest. “People are saying it’s nice to have, but that’s not why they chose the program, especially in cardiology,” Dobbs says. “You don’t have a heart attack and tell the ambulance driver, ‘Oh, by the way, I want to get my incentive check.’ ”

Hillcrest Medical Center in Tulsa, Okla., went live with its ACE Demonstration on May 1, 2009. Over the next 15 months, scores on several quality metrics soared, supply costs plunged, patient volumes shot up, and the hospital saved Medicare $750,000 on 37 diagnosis-related groups (DRGs).

So what’s the problem?

For one thing, handling the bundled payment system required “massive” computer conversions, says Hillcrest CEO Steve Dobbs, and cash payments from CMS were significantly delayed, in part due to glitches over how discharges were handled. And then there was the confusion over processing supplemental Medicare plans.

Hillcrest’s first-year experience with bundled payments for orthopedics, cardiology, and cardiovascular surgery provides an illuminating window into what other hospitals might encounter as the concept of bundling expands beyond the first few pilot sites.

Because Hillcrest didn’t have a way to pay physician claims, it hired a third-party vendor, Texas-based Trailblazer, to manage them. Then Hillcrest set up two LLCs—one for orthopedics and one for cardiology—to receive the bundled payments. CMS required the hospital to establish a quality committee, finance committee, and board within each LLC, and report quarterly about the program. But Dobbs says the hospital has received no written feedback from CMS or any indications of how the ACE Demonstration has worked at two other sites that also started last year.

Through “trial by error,” the hospital has had to learn many of its lessons on its own, he says, explaining that “you just had to go make some mistakes and try something.” For example, the hospital began posting the Medicare rate for each of the demonstration’s 37 DRGs on its website after frequent updates to the rates led to widespread confusion among area physicians. Hillcrest also learned that it needed to set up a dedicated toll-free call center for people to get information about the program.

There have been triumphs, too. Scores on such metrics as antibiotics administered one hour prior to surgical start and antibiotics stopped 24 hours post-surgery have climbed significantly, perhaps by linking them to gainsharing incentives. When one heart valve vendor “wouldn’t play,” Dobbs says, the hospital switched to another, less expensive vendor. By involving its open-heart surgeons in scrutinizing supplies, the hospital saved 10% of the cost of sterile packs in the operating room.

Hillcrest’s orthopedic surgeons—an independent group—also combed through instruments and drugs to look for savings. For their efforts, the six orthopedists netted a combined $130,000 in incentive checks. For the hospital’s own cardiologists and cardiovascular surgeons, the bonus money went back into the practice.

Early in the demonstration project, Dobbs says, hospitalists saw a dip in the number of cases they were getting pulled in on. “Early on they called me and said, ‘What’s up, because we’re not getting as many referrals from orthopedics?’” Dobbs says. “I think it’s leveled out over time, and they really haven’t seen that big of a change.”

The hospital also is reaping the rewards of recent investments, including a new heart hospital, heavy investment in cardiology, and a three-year-old orthopedics unit. In the first year of its demonstration, the hospital saw a 24% gain in its cardiology and cardiovascular surgery volume, and a whopping 37% gain in orthopedics volume.

One facet of the project that has been less fruitful is the Medicare discount given to patients who have their orthopedic or cardiology procedure done at Hillcrest. “People are saying it’s nice to have, but that’s not why they chose the program, especially in cardiology,” Dobbs says. “You don’t have a heart attack and tell the ambulance driver, ‘Oh, by the way, I want to get my incentive check.’ ”