Major companies are using bundled payments to provide surgeries at no cost to their employees—and they're saving money in the process, Michael Tomsic reports for WFAE.

For example, the home improvement company Lowe's offers free surgeries to all employees.

How bundled payments can protect and grow your margins

"The first question was always, 'Oh, this is just for executives, right?' And I said no, absolutely not," says Bob Ihrie, SVP for compensation and benefits. "This is for any Lowe's employee in the Lowe's health care plans."

However, Lowe's provides the benefit to employees only if they receive care at one of a select number of prestigious hospitals around the nation. Employees can choose to stick with their local surgeon, but more than 700 Lowe's employees opt to use a selected provider. The program has yielded savings for the company— even after paying for employees' travel.

"We were able to get a bundled price, which actually enables us to save money on every single operation," Ihrie says.

Like CMS's bundled payment initiatives, Lowe's pays hospitals one flat rate for all aspects of the procedures within a particular time frame, including the surgery, physical therapy, and potential complications.

The not-for-profit Pacific Business Group on Health (PBGH) negotiates the bundled payment amount with hospitals for Lowe's and several other large employers, including Walmart.

PBGH Associate Director Olivia Ross says her organization secures rates up to 30 percent below what the companies used to pay. That means "savings at the front end," Ross says, but there are also "huge savings on the back end" from higher-quality care, including reduced readmissions, fewer returns to the OR, and a decline in complications.

Documentation improvement strategies: Orthopedic surgery

The program has also reduced costs in another, unexpected way: Almost 30 percent of potential surgical cases for PBGH clients never go forward. Even if an employee's local provider recommends surgery, Ross says, the surgeon at the selected hospital may disagree and recommend other ways to tackle the problem, such as physical therapy.

Lowe's has found yet another way to reduce complications. Initially, many employees had trouble reaching out-of-town physicians with any post-surgery questions or concerns.

"So what we give every patient now is a little card with the doctor's name and direct phone line and the nurse's name and direct phone line," Ihrie says. "And all of a sudden, things were a lot better" (Tomsic, WFAE/Kaiser Health News, 4/22).

Six factors that make or break bundled pay deals

Our 2013 accountable payment survey revealed that the majority of providers expect to implement bundled payment contracts within the next three years. Ready or not, bundled payments are picking up steam and now is the time to prepare for success under this model.

Gain confidence as you consider crafting bundled payment contracts with our guide to contract profitability.

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