Bundling up

Led by OSI, NOVO changes pricing process

Posted on Jul 1, 2016 :: Health Care
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Posted by , Insight on Business Staff Writer

Orthopedic & Sports Institute of the Fox Valley leaders got the idea to change how they bill for certain medical procedures from two unlikely places: their patients and the manufacturing sector.

Several years ago, OSI began exploring the use of bundled prices — offering a single price and bill for a couple of orthopedic procedures. The experiment was so successful the Appleton-based health care provider expanded those offerings and created a new network with other area independent providers.

OSI CEO Curt Kubiak says the first inspiration for the change came directly from patients. As they left OSI following their procedures, patients expressed in surveys they were very pleased with their experience. But once the bills began to arrive, that positive feeling began to erode.

“We realized the last touch with our patients wasn’t when they left our care, but when they received their bills in the mail,” Kubiak says. “People were confused and didn’t understand who was billing for what and how much things cost. We knew we had to start looking at how to do the billing process differently.”

Kubiak huddled with Aaron Bleier, OSI’s director of finance, to find a solution. Both used their prior experience in manufacturing to develop bundled prices for two orthopedic procedures.

With bundled pricing, each procedure — let’s say a knee replacement — includes a single bill for the facility fee, surgeon fee, anesthesia, an overnight stay in OSI’s skilled nursing facility and physical therapy.

“Patients went from receiving five different bills — one from the doctor, the facility, the anesthesiologist and so on — to just getting one with everything on it,” Kubiak says.

Knowing the price ahead of time was also a win with patients and insurance companies.

To get to that price, Bleier ran historical data from hip and knee replacements — the first two procedures that were bundled — and did some predicting. OSI rolled out its first two price bundles with Anthem Blue Cross Blue Shield in 2011. At the time, it was the only provider offering bundled pricing in the 17 states that Anthem covered.

“There weren’t any models really out there,” Kubiak says. “We paved our own way. We had confidence in our price bundling because we had the ability to manage our processes. We basically took our industry experience and applied it to medicine.”

After offering the bundle prices to insurance companies, OSI went one step further by working directly with employers. In 2012, OSI reached out to U.S. Venture and offered bundled pricing for hip and knee replacements.

“It was successful and the bundled services business just grew organically,” Kubiak says.

Last year, OSI launched NOVO Health, a new independent provider network with Fox Valley Hematology & Oncology, Neuroscience Group and the NeuroSpine Center of Wisconsin. Today, NOVO offers 48 orthopedic and 12 spine procedures or surgeries as bundled packages.

As a provider network, NOVO contracts directly with employers to offer the bundled packages, says Bob Zuleger, NOVO Health’s vice president of business development. Companies sign a no-fee contract with NOVO, allowing employers to use the bundled pricing offerings as much or as little as they want. If a worker uses the bundled service, the employer makes payments through a third party claims processor, which forwards that sum to NOVO.

“We’ve been able to show employers are saving enough using the bundling that they can offer incentives to employees for choosing OSI as a provider,” says Bleier, adding that companies can then provide employees with some money towards their out-of-pocket expenses. “They still come out ahead.”

Zuleger works closely with insurance brokers and third-party administrators to ensure they understand how NOVO works. “Employers really want to control their health costs and NOVO is one way they can do that,” he says.

By partnering with independent physical therapists, NOVO brings flexibility to its offerings, Bleier says. For example, a patient from Fond du Lac can travel to Appleton for the surgery, but then work with a Fond du Lac physical therapist after the surgery.

“We also have the capability to unbundle,” he says, adding that a patient can decide to stick with a therapist he or she has already built a relationship with, but isn’t part of the network. “It’s flexible.”

Other health care providers have taken notice of NOVO’s success.

“We’ve had other orthopedic groups and surgery centers along with hospital systems come to see what we’re doing,” Kubiak says. “I think bundling costs will grow in popularity. Time will be the ultimate measuring stick to see if this process is successful in lowering costs while maintaining quality.”

NOVO is also unique since it markets directly to employers, Zuleger says. Some health providers offer bundled pricing, but market to individuals looking to pay the fee up front without using insurance.

By working with employers, Kubiak says NOVO looks to have businesses think of the health care provider as one of its suppliers.

“Businesses have suppliers, such as for IT, that they evaluate on cost and delivery and we’re looking to be that health care supplier,” he says. “Again, that comes from our manufacturing experience. We’re definitely on the leading edge here.”