How Baptist Health prospers using bundled payments

Embracing the future: This is the second in a series of blogs highlighting hospitals that are experimenting with new models of health care delivery, while risking the loss of revenue.

The fragmented nature of our health care system, in which patients get passed along from provider to provider, is one of the big reasons why U.S. care is both deficient and expensive. Thankfully, a few hospitals have had a vision for a more coordinated approach.

Baptist Health System in San Antonio was one such hospital. Baptist became an early adopter of “bundled payments.” Starting with joint replacement surgeries, Baptist received a lump sum from Medicare for an episode of care—from hospital admission to surgery to rehab—covering all expenses for the entire team of providers over some time period. The hospital was charged with coordinating the team’s efforts.

The incentives for the experiment made perfect sense: Collaborate to drive down costs and improve quality, and you share in the savings. In a recent study, Baptist saved $6.1 million in costs, or $284 per joint replacement surgery. At the same time, patient stays in the hospital were shorter and the use of expensive nursing facilities after surgery was lower.

Getting the physicians on board

At the beginning, it wasn’t easy. Many experiments with bundled payments collapse because the doctors don’t buy in. Here’s how Baptist Health got surgeons on board:

Baptist Health began by recruiting orthopedic surgeons using a strategy that protected them from downside financial risk. The healthcare system ensured 100 percent of their fees under Medicare rates while rewarding surgeons with the opportunity to earn bonuses up to 25 percent. …


The health system also sent summaries of cost and quality data to physicians to show them more opportunities for cost savings and quality improvement. …


Two standards for quality care benchmarks were used: one for individual physicians and another for the entire group. This gave high performing physicians a stimulus to help their teammates in improving the quality of care and meeting cost reduction benchmarks.

Finding where cost savings can be had

Where do cost savings come from? Baptist surgeons learned that almost half the expense of joint replacement can come from physical therapy, home nurse visits and nursing home stays. Today, surgeons are more likely to order home therapy when possible.

Baptist also discovered large price variations for replacement joint hardware itself. They stopped ordering knees and hips from the most expensive providers, and prices started dropping.

Joint replacement surgeries are ideal for a bundled payment experiment, since they are scheduled in advance and since much of the care is standardized and predictable. Baptist is now expanding its program to treat additional medical conditions. We’ll have to see if they can succeed in similar fashion with heart attacks or pneumonia.

In any case, Baptist Health System has proven that bundled payments can work. As Healthcare Finance News described it a few years ago, “Baptist made money doing what used to be industry heresy: reducing patients’ use of the medical system.” Sometimes the courage to tackle a problem before others pays off.

Leave a Reply

Your email address will not be published. Required fields are marked *