DePuy Synthes Jumps on “Bundle” Train

DePuy Synthes is jumping on the “bundled payment” train by entering into an exclusive alliance with Value Stream Partners, a company specializing in knee and hip replacement bundled payment program development and implementation.

On March 2, 2016, Juan-Jose Gonzales, the president of DePuy Synthes said the company is focused on innovation and offering total solutions “that go beyond the implant and make a real difference both inside and outside of the operating room.”

After the recent American Academy of Orthopaedic Surgeons (AAOS) annual meeting, Needham & Company analyst Mike Matson, said he thinks that bundled payments mean new value creation opportunities for orthopedics companies. His initial view of the Centers of Medicare and Medicaid (CMS) Comprehensive Care for Joint Replacement (CJR) bundled payment program was that it would hurt hip and knee pricing. “While we still see this as a risk, we now think that there is also a positive aspect to bundled payments. We think that bundled payments can allow the orthopedics companies a new way to provide value to hospitals by enabling faster recovery, reducing complications, and shortening post-acute care. This actually meshes well with the trend of procedural, rather than implant, innovation.”

Beginning April 1, 2016, Medicare is implementing the CJR at acute care hospitals in 67 regions. The new model compensates hospital providers for an entire episode of care, from the knee or hip replacement procedure through 90 days after discharge, rather than just the surgery. Hospitals may have to repay Medicare for a portion of the spending for care if performance metrics, including quality and spending performance, are not met.

Data from a three-year pilot program at NYU’s Langone Medical Center reported that bundled payments improved care for Medicare patients, reduced stay length and lowered readmission rates. For instance, there was a decrease in average hospital stay from 3.58 to 2.96 days and a 16% drop in the number of discharges to inpatient rehab care facilities.

Langone’s data also indicated drops in the average number of readmissions with the bundle program. The rate fell from 7% to 5% at 30 days, from 11% to 6.1% at 60 days and from 13% to 7.7% at 90 days. The average cost to CMS of the episode of care decreased from $34, 249 to $27, 541 from the first to the third year in the program.

“Bundled care payment programs benefit everyone—our surgeons, the health care system, and most importantly, our patients. As we shift towards this quality over quantity based system of care, providers will adapt and implement protocols to ensure every joint replacement patient is given the same resources to have the most successful outcome, ” Joseph Zuckerman, M.D., of NYU Langone said in a press release.

Well, not quite everyone since almost all of the initial cost savings will focus on post-acute care, not inpatient care. The biggest variation in the price to CMS of a joint replacement is the path patients take through post-acute care, particularly since post-acute care represents approximately 50% of the bundled costs for an acute patient incident or encounter. Whether patients go home after surgery or to a skilled nursing facility (SNF) or other intensive care facility can swing the cost of the episode wildly.

But there is an opportunity for device makers to help hospitals reduce inpatient costs. In announcing the alliance with Value Stream Partner, DePuy Synthes cited a study from Truven Health Analytics reports that the primary driver of cost variation for major lower joint replacement are tied to hospital cost and length of stay, attributing $1, 944 per additional day in in total cost variation due to facility costs.

“As providers and payers begin to consider bundled payment programs for these procedures, it is increasingly important to understand the cost implications of each additional inpatient day, as well as post-acute care and readmissions. Once claims-based, actual patterns are recognized and understood, guidelines and standard best practices can be put in place to guide discharge planning and post-acute care based on patient risk for readmission and other factors contributing to a successful recovery, ” stated the study.

As Matson said, the bundle is creating new opportunities for device companies. DePuy Synthes is jumping on board.