EP434: 5 Surprises About Bundled Payments, With Benjamin Schwartz, MD, MBA

I’ve been in a couple of meetings lately. In one case, a healthcare company came up with a strategy and deployed it; and the strategy didn’t go as planned. The other one, it did go as planned—it worked great. Of course, I’m coming in on the back end like a Monday morning quarterback here; but the plan that failed, I have to say, I wasn’t surprised. Had they asked me ahead of time, I would have told them to save their money because the plan was never gonna work, even though the strategy looked like kind of a straight line from here to there.

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Nor was I shocked by the success of the other plan, even though this one that triumphed had what looked like five extra steps and was slightly counterintuitive if you looked at it cold, without understanding the way the healthcare industry actually works.

Here’s my point: It might feel like the healthcare industry is chaos monkey central and impossible to predict actions and reactions—and, for sure, there’s always unknowns and intersecting variables—but it’s not a complete black box. The trick is, as you know and I know, you gotta understand what other stakeholders are up to. You gotta get a bead on what they’re doing and what their incentives are because then you can better predict actions and potentially reactions.

So, let me state the obvious (that’s why listeners tune in to this show as I just said, and it’s what we aim to shine a light on here at Relentless Health Value): the pushes and the pulls and the forces. What’s going on outside of the organizations or the silos that we work within day-to-day. Because if you’re looking to sell to, partner with, not be obstructed by [insert some stakeholder here], then it’s very vital to be keyed in on what they’re doing or what their customers are doing or what their customers’ vendors are doing. This show should feel like it gives you a measure of control (or at least that’s my hope) or a method to find the measure of control. And I hope you succeed. That’s why I continue to put out these shows. The RHV tribe members want the same thing I want—to fix the healthcare industry for patients and for members—so, thanks for being here and for making actionable the insights that you might find here.

I have been so looking forward to doing a show with Ben Schwartz, MD, MBA, orthopedic surgeon and prolific writer of deeply thoughtful and insightful posts on LinkedIn. In this healthcare podcast, we are talking about bundled payments. And today’s your lucky day if you think you know a lot about bundles, because most people who listen to this show at least know enough to be dangerous. So, that’s our starting point, which is why I asked Dr. Schwartz to talk to me about what most people find surprising about bundles and bundled payments. There are four surprises that we go through in the show today. Listen to the show or read the transcript to find out exactly what they are. So, no spoiler alert alert.

But relative to these surprises, we get into the four types of bundles that may or may not be available. And those four types of bundles are:

1. CMS bundles such as the BPCI (Bundled Payments for Care Improvement) and the CJR (Comprehensive Care for Joint Replacement) bundles, and we talk about the current state of said BPCI bundles, which are being sunsetted probably because so many efficient clinical teams are being penalized for getting too efficient. They become victims of their own success the way the program is currently designed, wherein the goalposts keep shifting.

2. Commercial bundles—ie, a bundle that is offered by a commercial carrier such as a BUCA (ie, Blue Cross Blue Shield/UnitedHealthcare/Cigna/Aetna/Anthem) carrier

3. Direct bundle—a bundle that is paid for directly by a plan sponsor such as a self-insured employer

4. Condition- or diagnosis-specific bundle. These types of bundles do not spiral around a surgical intervention at their core, which most of the current bundles do. This may describe CMS’s recently announced “Making Care Primary” initiative, but we’ll have to see about that.

Speaking about the #3 kind of bundle, the employer-direct bundles, especially for musculoskeletal (MSK), let me share a post by Moby Parsons, MD, that I thought captured the entrepreneurial spirit of some of these orthopedic surgeons who are seeking employers to direct contract with and cut out the middleman, etc (which, by the way, is the main topic of an entire show upcoming with Elizabeth Mitchell from the Purchaser Business Group on Health). But Dr. Parsons wrote:

“When our bundle business has sufficient growth to ensure the absolute sustainability of our practice against declining reimbursements … in a fee-for-service system, I am getting this tattoo. Don’t tell my wife. [And the tattoo is ‘Free Yourself.’]”

My guest today, aforementioned, is Dr. Ben Schwartz. He’s an orthopedic surgeon in the Boston area still in full-time clinical practice. He’s grown very interested in healthcare innovation, healthcare technology, and does some advising and investing. Dr. Schwartz also writes a great Substack called Dem Dry Bones.

After you listen to this show, please go back and listen to the one with Steve Schutzer, MD (EP294) talking about how to create a Center of Excellence and also the one with Rob Andrews (EP415) about how and why if you are a plan sponsor you might want to consider direct contracting with quantifiably amazing provider groups.

Also, if you are an ortho or involved in MSK care, I might suggest following Karen Simonton on LinkedIn, as well as Moby Parsons, MD, and, for sure, of course, my guest today, Dr. Ben Schwartz.

Also mentioned in this episode are Moby Parsons, MD; Elizabeth Mitchell; Steve Schutzer, MD; Robert Andrews; Karen Simonton; Peter Hayes; Al Lewis; and Cora Opsahl.

You can follow Dr. Schwartz on LinkedIn and read his blog on Substack.

Benjamin J. Schwartz, MD, MBA, is a fellowship-trained orthopedic surgeon with over 15 years of experience. He has served numerous healthcare leadership roles on both a local and national level with a focus on developing and implementing evidence-based, high-quality musculoskeletal care delivery pathways. Dr. Schwartz is vice chair of the Practice Management Committee for the American Association of Hip and Knee Surgeons and helps advance knowledge of musculoskeletal conditions as a member of the Hip and Knee Content Committee for the American Academy of Orthopaedic Surgeons and editorial board member/elite reviewer for The Journal of Arthroplasty.

Dr. Schwartz has extensive experience in value-based care, having personally achieved over $400,000 in savings during his first year in the CMS BPCI-A program. He has received awards for clinical care and professionalism and was named a Castle Connolly Top Doctor in 2022 and 2023.

In addition to his clinical work, Dr. Schwartz maintains a strong presence in healthcare technology and innovation as advisor and investor to early-stage digital health companies. He is frequently sought after by clinicians, founders, and venture capitalists for his ability to bridge the gap between real-world medicine and start-ups/entrepreneurship.

Dr. Schwartz’s passion is thoughtful implementation of technology and innovation to improve healthcare quality, accessibility, costs, and outcomes.

06:07 Where are we in the development of the bundled payments space?

08:09 What are the four types of bundled payments?

09:52 How can bundled payments create perverse incentives?

11:04 What are the positives in bundled payments, and how can they help push us toward value-based care?

13:02 What is surprising about bundled payments?

18:50 EP415 with Rob Andrews.

27:03 How do Centers of Excellence connect back to bundled payments?

29:00 EP346 with Peter Hayes.

30:29 EP294 with Steve Schutzer, MD.

33:38 EP331 with Al Lewis.

33:43 EP372 and EP373 with Cora Opsahl.

37:13 What does Dr. Schwartz think the future is for bundled payments?

Recent past interviews:

Click a guest’s name for their latest RHV episode!

Justin Leader, Dr Scott Conard (Encore! EP391), Jerry Durham (Encore! EP297), Kate Wolin, Dr Kenny Cole, Barbara Wachsman, Luke Slindee, Julie Selesnick, Rik Renard, AJ Loiacono (Encore! EP379)