through offering them a 10 to 20% discount on the average amount the
payer spends on an episode of care for each procedure.
For example, in an inpatient setting, which is where many total joint
procedures are performed, the cost of hospital fees alone — including
implant costs — might be anywhere from $25,000 to $40,000. In an
outpatient setting, the surgery centers fees only amount to $10,000 to
$20,000. That, combined with more efficient post-operative protocols,
let us offer payers a lower bundle cost.
After we determined that we wanted to offer a 10 to 20% discount for
payers, we started building our bundles. Say their bundle to a hospital
cost $40,000 total, including the payments for the hospital fees, sur-
geon, anesthesia, home health care and outpatient physical therapy.
That meant we could offer the payer a bundle option worth only
$32,000. That's a 20% price reduction that would still cover the cost of
what their bundle with the hospital covered.
However, we also knew we had to cover our risk of post-op compli-
cations, such as DVT, stiffness or, in rare cases, infection. For a bun-
dle that size, we could put aside around $8,000. Whatever was left
over following the 90 days would be ours to run the business. We also
decided to create a data analytics platform to track patient outcomes.
That platform gives us a way to show payers exactly how our new
system is valuable.
Negotiating the bundles with private payers has been an eye-open-
ing experience. Once we knew what we were offering and got a
lawyer, we went to some payers who looked at us like we were crazy.
Frankly, they'd never had a group of surgeons offer them not only a
bundled payment plan, but for outpatient total joints, no less.
We eventually signed with Blue Cross Blue Shield, who, after negoti-
ations, liked the idea of spending less on bundled payments for outpa-
tient care. We've agreed to terms with Aetna and we're negotiating
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