The state of Vermont and its largest hospital are close to reaching a deal that will allow the state to make set payments for state workers’ hip and knee replacement surgeries.
The contract, known as a bundled payment, is being negotiated by Fletcher Allen Health Care and Blue Cross Blue Shield of Vermont, which administers the state employee health plans.
Traditionally, hospitals and doctors bill separately for each component of a procedure. Under this pilot contract, when someone covered by the state goes to Fletcher Allen for a hip or knee replacement, the Burlington hospital would receive a predetermined lump sum regardless of the actual cost of a specific surgery.
“We’ve identified what’s in the bundle,” said Kelly Lange, Blue Cross director of delivery system innovation and contracting, “It’s essentially a list of billing codes.”
The two parties are still negotiating what the actual payment will be, Lange said.
The current fee-for-service payment model is widely viewed by policymakers as incentivizing unnecessary services or treatments — or at least not creating disincentives for them — because they can all be billed separately to generate revenue. A bundled payment creates an incentive for hospitals to make procedures more efficient and less costly.
At the same time, hospitals are interested in bundled payments because they ensure a stable source of revenue.
Bundled payments are one of several initiatives promoted by Vermont’s Health Care Innovation Project, a group of stakeholders and policymakers working with the Green Mountain Care Board to change how health care is paid for in the state.
Vermont received a $45 million federal grant to support similar initiatives statewide, but officials running that project said they were not involved with the hip and knee replacement pilot.
“It’s sort of a middle ground between fee-for-service and a captitated payment for all the services a hospital or provider group offer,” said Anya Rader-Wallack, chair of the Health Care Innovation Project.
In the case of a hip or knee surgery, a bundled payment creates greater impetus to avoid infections or other complications that cause “discomfort and dislocation” for patients, because readmission or additional services can’t be billed to the patient’s insurance, Wallack said.
There are 17,500 active employees and dependents, and 6,700 retirees and dependents in the state health plans, according to figures from the state.
The Department of Human Resources has not gotten involved in the negotiation yet, but will be briefed by Blue Cross once the terms of the deal are negotiated.
“Please know that the Department of Human Resources’ primary priority is to provide employees with quality medical care while being fiscally responsible with taxpayer monies,” said Maribeth Spellman, commissioner of the Department of Human Resources, in an email statement.
Blue Cross officials said they expect the terms of the deal to be set and contracts signed by the end of the year.
