BestPractice
March 1, 2016

Imagine you work for Lowe’s in Presque Island, Maine, as a loader. You need a knee replacement. You could get it done in Bangor, two and a half hours’ drive to the south. But thanks to Lowe’s arrangement with Johns Hopkins HealthCare, you and a companion will fly to Baltimore, get the surgery at Johns Hopkins Bayview Medical Center, and stay several days for recovery and rehabilitation — with zero out-of-pocket expenses.

Wanting to improve the medical care their employees received while also reducing costs, employers, including Lowe’s, Walmart and McKesson, joined the Pacific Business Group on Health Negotiating Alliance to launch a National Employers Centers of Excellence Network (NECEN). The network covers more than 1.5 million employees and their dependents enrolled in their companies’ medical plans. Under the arrangement, employees of the enrolled companies can receive knee and hip replacements performed at Johns Hopkins Bayview and three other hospitals: Kaiser Permanente Orange County - Irvine Medical Center in California; Mercy Hospital in Springfield, Missouri; and Virginia Mason Medical Center in Seattle. Eligible employees along the East Coast are automatically referred to Johns Hopkins Bayview.

The payment model for these procedures is known as bundled pricing: one flat payment for a specific procedure and recovery over a set time period. The employers are, in effect, the payers, rather than insurance companies. The program has been in place for two years.

For knee and hip replacements, bundled pricing has delivered value — for patients, for the health system and for the patients’ employers. Patients get premium care, and travel, lodging and food costs are covered for them and their companion. Johns Hopkins Medicine earns important out-of-state revenue. And the employers get more predictable health care expenditures and avoid the cost of unnecessary surgeries.

Patients in the program have shorter lengths of stay compared with regular patients getting the same procedures. One factor is that program patients tend to be healthier than regular patients. The hospitals in NECEN agree on selection criteria for program participation. For instance, prospective patients who are smokers must quit; if they are obese, they must achieve a certain weight before they can undergo surgery.

“There are a number we turn away because they are not yet candidates for a procedure. This saves employers money because they are not paying for unnecessary surgeries, and of course it is better for the patient,” says Harpal “Paul” Khanuja, chief of the Department of Orthopaedic Surgery at Johns Hopkins Bayview.

Johns Hopkins Medicine earns incremental revenue from program patients that is not subject to the revenue cap created by the Maryland Medicare waiver. “For us, this is great,” says Charles Reuland, executive vice president and chief operating officer of Johns Hopkins Bayview. “A contract that brings in patients from outside the state is very welcome.”

And for employers, “we’re a known quantity. We perform a lot of these procedures, so our outcomes are better,” says Khanuja. Better outcomes translate to healthier employees and earlier returns to work.

When an employee at one of the participating companies is referred to Johns Hopkins Bayview as a candidate for a hip or knee replacement, Johns Hopkins USA reaches out to the patient and obtains a release to receive the patient’s medical records. If the patient is indeed a candidate for surgery, the patient and a companion fly here on the employer’s dime.

Johns Hopkins Medicine receives a lump-sum payment. The aim of bundled pricing is to encourage efficient care. Should the patient suffer complications and require a longer hospital stay or an extended period of follow-up care, Johns Hopkins Medicine absorbs the expense for additional days beyond the time period covered by the payment.

Orthopaedic surgeons who provide care in the bundled pricing program can receive additional payment if they meet certain quality criteria.

Trish Frick, director of bundled rate contracting, says there is potential to expand the program to other procedures. “We want to gear up to go after the market with similar arrangements,” she says. “Patients are very satisfied and feel they’ve gotten the best care at a top hospital. They also feel valued that their employer would pay for them to get these procedures.”