Episode-Based Bundled Payments in Hand Surgery: An Affordable Solution to Overwhelming Health Care Costs

Introduction

Hand and wrist pathologies impose a substantial economic burden on high-gross domestic product (GDP) countries globally.^1,2 In the United States, pathologies to the hand and wrist are one of the most common drivers of emergency department visits and account for a sizable portion of US health care expenditures. ³ Carpal tunnel syndrome (CTS) alone results in nearly 500 000 procedures annually and an economic cost of more than $2 billion per year. ³ The cost of hand procedures extends well beyond the price of care delivery and affects the economy at large via patient productivity loss. Studies have demonstrated that productivity loss following hand and wrist pathologies can account for anywhere between 56% and 96% of the overall costs associated with these conditions.^4,5 These overwhelming health care and productivity costs associated with hand procedures have inspired policy reform in search of new payment models that incentivize high-quality, cost-effective care.

In contemporary health care systems, the concept of episode-based bundled payments has emerged as a potential solution to address the challenges of rising health care costs while ensuring quality patient care.^{6 -8} This payment model, also known as episode-based payment, is one of many alternative payment models developed to reduce health care costs and optimize patient outcomes. The model entails a single payment for all services related to a particular medical condition or procedure within a specified time frame, generally 30, 60, or 90 days postdischarge. ⁹ Proponents of episode-based bundled payments have suggested that a lump sum payment for a single episode of care encourages interdisciplinary collaboration and improves resource utilization, making health care more affordable for both patients and insurers.^10,11

While episode-based bundled payments have been implemented in various medical specialties, ⁶ their feasibility in the realm of hand surgery remains relatively unexplored. Hand surgery encompasses a wide range of procedures, from simple repairs to complex reconstructions, and presents unique considerations in terms of patient demographics, treatment modalities, and postoperative care. This article aims to examine the feasibility of implementing episode-based bundled payments specifically for hand surgery, evaluating its potential benefits, challenges, and implications for patients, health care providers, and payers.

Hand Surgery and Current Payment Models

The predominant payment model for hand surgery is fee-for-service (FFS), where physicians are reimbursed based on the volume of services rendered. ⁸ While FFS may grant physicians more autonomy, offer greater financial incentives, and expand treatment options, it may inadvertently promote resource overutilization and fragmented care.^12,13 Furthermore, FFS offers little incentive for coordination between physicians, hospitals, and post-acute care providers as these parties bill separately and with various methods for the care they provide. As a result, the quality of care and the costs to patients and insurers may vary dramatically even when the same procedure is performed.^6,14 Value-based payment initiatives, such as pay-for-performance and episode-based bundled payments, aim to address these limitations and standardize payments by incentivizing interdisciplinary communication and collaboration, eliminating unnecessary services, and linking reimbursement to quality metrics and patient outcomes (eg, complications within a 90-day period, patient-reported activity levels). ¹⁰

Feasibility and Benefits of Episode-Based Bundled Payments in Hand Surgery

Episode-based bundled payments offer several potential advantages for hand surgery, including enhanced care coordination, streamlined billing processes, and financial predictability. By encompassing the entire episode of care, episode-based bundled payments incentivize physicians to focus on optimizing outcomes and expenditures for the entire duration a patient remains under their care. When incentivized to be judicious in the utilization of health care resources, physicians are less likely to order low-value tests. A 2022 study by Ding et al ¹⁵ demonstrated the prevalence of such low-value tests such as excessive blood work and electrocardiograms in preparation for carpal tunnel release (CTR), a procedure that usually does not require general anesthesia. Furthermore, episode-based bundled payments force surgeons to identify cost drivers and opportunities for clinical improvement, especially for high-volume, low-complexity procedures such as endoscopic and open CTRs. In 1 study, endoscopic CTR was shown to have 44% higher procedural cost compared with open CTR ($2759.70 vs $1918.06).^16,17 The differences in cost between procedures were primarily due to use of the disposable endoscopic blade ($217), increased procedural duration costs (44.8 vs 40.5 minutes), and physician labor. ¹⁷ While several studies have compared the outcomes of open and endoscopic CTRs, results have been mixed and neither technique has been deemed unanimously superior.^{17 -19} Douglas et al, for instance, found that endoscopic CTRs resulted in higher risks of median nerve and vascular injuries, whereas Mackenzie et al reported that endoscopic procedures resulted in faster recovery, improved early comfort, and earlier return to work.^{17 -19} As such, surgical technique should be selected based on surgeon comfort. For surgeons who are equally or more comfortable with open CTRs compared with endoscopic CTRs, open CTRs may be a cost-effective and appropriate alternative to endoscopic CTRs for the properly selected patient population.

Limiting the use of the operating room represents another opportunity for cost savings during the treatment of common hand pathologies such as CTRs. ²⁰ White et al ²⁰ conducted a Time-Driven Activity-Based Costing study in 2021 that compared the costs of CTRs performed in ambulatory surgical centers (ASCs) with those performed in clinics and found that clinic procedures resulted in significant direct cost savings ($151.92 vs $557.07, P < .05), with no significant differences in pain scores during or after the procedure. The US Centers for Medicare and Medicaid Services reported that CTRs performed at hospital outpatient departments were even more costly for insurance companies and patients compared with those performed at ASCs (Medicare cost: $1821 vs $1068; Patient cost: $454 vs $266).^21,22

More recently, the Wide-awake Local Anesthesia No Tourniquet (WALANT) surgical technique, popularized by Canadian plastic hand surgeon Dr Don Lalonde in 2005, has become an increasingly popular avenue for cost savings and workplace efficiency in hand surgery. ²³ The WALANT technique uses lidocaine for pain management and epinephrine to minimize bleeding and has been identified as a safe and reliable alternative for patients with poor access to health care as well as those with congestive heart failure, obstructive sleep apnea, and other comorbidities that might preclude them from traditional hand surgery under sedation.^23,24 Studies have reported that WALANT for distal radius fractures (DRFs) results in higher patient satisfaction, greater patient safety, faster postoperative recoveries and shorter time to return to work, fewer complications, and greater cost savings compared with general anesthesia or Bier’s block. ²³ Prior literature has also demonstrated similar cost savings for soft tissue procedures such as trigger finger releases (TFRs) and CTRs. ²⁴ Maliha et al ²⁴ reported that the cost of an A1 pulley release of a single trigger finger was $3344.46 more expensive when performed in an operating room compared to in a procedure room with WALANT (77% decrease), while Leblanc et al ²⁵ showed that the WALANT technique allowed for twice as many CTRs to be performed for a quarter of the cost by conducting the procedure in an ambulatory setting compared with the main operating room of the same hospital. Furthermore, Rhee demonstrated that compared with treating hand pathologies in the operating room, the use of WALANT in clinic reduced costs for CTR by 85%, A1 pulley release by 70%, and de Quervain release by 84% per procedure. ²⁶ Finally, Billig’s analysis of CTR, TFR, excision of wrist ganglion, and excision of small hand masses found that total costs were 145% greater in hospital outpatient operating rooms and 126% greater in ASCs when compared to doing the procedure in office. ²⁷ Such payment models may reduce overall costs, a helpful indicator for favorable reimbursement.

Challenges and Considerations

Despite these potential benefits, several challenges must be addressed to facilitate the implementation of episode-based bundled payments in hand surgery. Standardizing care for patients undergoing procedures for common conditions such as CTR and TFR may be feasible; however, defining the scope of episode-based bundled services and determining appropriate payment rates still requires careful consideration of patient- and procedure-specific factors as well as resource utilization.

Additional caution must be taken in the approach to episode-based bundled services for patients with complex pathology and significant comorbidities as these factors often influence the cost of an episode of care. While CTR and TFR do not often deviate from expectation, pathologies such as distal radius fractures may vary greatly depending on fracture morphology, dictating operative time, implant selection, and even mode of anesthesia. Likewise, highly medically complex patients may dictate preoperative testing and operative setting in ways in which the average patient would not. Finally, outside of hand surgery, other analyses have suggested that patients with operative risk factors (eg, older age, frailty) may be faced with increased costs even under the episode-based bundled payment model, limiting potential for payer reimbursement. ²⁸ In these cases, the authors suggest that patients or pathologies may sometimes be excluded from episode-based bundled payments as the situation does not allow optimal efficiency.

Successful implementation of episode-based bundled payments in hand surgery necessitates collaborative efforts among stakeholders, including health care providers, payers, and patients. ⁸ Standardizing care pathways, implementing quality improvement initiatives, and leveraging health information technology are essential strategies to optimize care delivery and achieve desired outcomes. Patient engagement and shared decision-making also play a crucial role in ensuring patient satisfaction and adherence to treatment plans. Furthermore, with the recent use of AI to more accurately and efficiently develop billing codes to minimize improper payments, it stands to reason that continued advancements in this field will only improve adoption of the episode-based bundled payments model as well. ²⁹

Case Studies, Evidence for Episode-Based Bundled Payments, and Implementation Strategies

Several health care systems have implemented bundle payment initiatives in various specialties, yielding promising results in terms of cost savings, quality improvement, and patient satisfaction.^6,7 Froemke et al ⁷ evaluated a standardized care pathway for total joint arthroplasty that was characterized by a physician gainsharing program. Following the implementation of the program, the authors reported an 18% reduction in average length of hospital stay (70.8-58.2 hours), increased discharge to home self-care as opposed to discharge to home health or skilled nursing facility (54.1%-63.7%), and a 6% reduction in total allowed claims per case. The gainshare model pooled together savings for each month, calculated as the total claims subtracted from the contracted bundle price, and allowed physicians to earn from the pool assuming that: (1) 95% of cases passed Surgical Care Improvement Project (SCIP) measures; and (2) 26% or less of patients were discharged to a skilled nursing facility (SNF). Each case was then allowed to remain in the savings pool if they met the following criteria: (1) passed SCIP measures; (2) did not result in mortality; (3) patient completed a Western Ontario and McMaster Universities Arthritis Index questionnaire; ³⁰ and (4) had no related readmission. As a result of this model, physicians were encouraged to cross-check each other’s practices and to optimize resource utilization without compromising patient outcomes and quality of care.

Episode-based bundled payment programs have also delivered promising results in spine surgery. In 2018, UnitedHealthcare expanded their Spine and Joint Solution program, an episode-based bundled payment program for spine surgeries as well as total hip arthroplasty (THA) and total knee arthroplasty (TKA), to 37 markets. ³¹ Hospitals that participated in this program reported a 10% reduction in hospital admissions and a 3.4% decrease in complication rates for spine surgeries. Furthermore, employers saved an average of $18 000 per operation compared with median surgical costs in the same metropolitan areas. ³¹

While evidence specific to bundle payments in hand surgery is limited, lessons learned from other specialties can inform implementation strategies and best practices. Post-acute care and readmissions have been identified as two of the major cost drivers and contributors to variations in health care costs in common orthopedic procedures such as total hip and knee arthroplasty. ⁶ Although discharge to a location other than home (eg, SNF) is far less common for patients undergoing hand surgery compared with those undergoing TKA or THA and unplanned readmission in outpatient hand surgery is rare, ³² complications and readmissions following hand surgery may still lead to highly unpredictable health care costs. As such, studies have highlighted the importance of optimizing patients with modifiable risk factors preoperatively and potentially creating a “care coordinator role” to allow for consistent patient monitoring, improve patient care, and to limit the number of unnecessary emergency department visits and readmissions throughout an episode of care. ³³ Practical strategies within hand surgery include implementing routine phone calls and check-ups postprocedure by a member of the care team and improving patient access to a physician. These protocols can then enable early identification of surgical-site issues, proper local wound care, or antibiotic therapy, and prevent more devastating complications such as infections and re-operations, both of which have been found to substantially increase the cost of hand procedures. ³⁴ A 2022 study by Constantine et al ³⁴ found that patients undergoing fracture fixation of DRFs with infection had significantly greater costs of care compared with their non-infected counterparts (+266%, $23 355 vs $6383, P = .005).

Patient-Centered Outcomes and Registry Formation

The success of bundle payments in hand surgery ultimately hinges on their impact on patient-centered outcomes, including functional recovery, pain management, and overall satisfaction. Patient-reported outcome measures (PROMs) provide quantifiable insights into patients’ perspectives compared with traditional, nondescript lines of questioning in follow-up. ⁸ Although studies have consistently demonstrated the value of PROMs in various surgical subspecialties, the widespread collection of PROMs has still been particularly challenging, especially for hand surgery. ³⁵ While upper extremity and hand registries have been established in several countries including Germany, the United Kingdom, Norway, Sweden, Australia, and the Netherlands, the United States does not currently have an upper extremity and hand registry of this scale.^{36 -38} Furthermore, even for the countries that do have such a registry, the types of hand surgeries included are limited.^8,39 Establishing a national upper extremity and hand registry would promote standardization of outcome measures, enable continuous quality improvement efforts, and provide a benchmark for patient, physician, and payer expectations.

Physician and Payer Perspectives and Policy Implications

Hospitals, hand surgeons, and other health care professionals play a pivotal role in the success of bundle payment initiatives. To successfully implement episode-based bundled payments, hospitals need to invest in institutional data collection resources, care coordination support teams, technological upgrades, as well as financial incentives to foster physician buy-in and engagement. ⁷ Surgeons are oftentimes shareholders in ambulatory care facilities, so there is frequently a financial disincentive to perform procedures in a clinic setting where they would be reimbursed far less. However, with the proper financial incentives (eg, surgeons receive a portion of overall savings for a procedure performed in clinic vs in an operating room), physicians could be encouraged to invest in practice transformation efforts, participate in and provide support for care coordination, and be able to provide more value-driven care for their patients.

Health care payers and insurers are essential for shaping the reimbursement landscape for hand surgery. By aligning financial incentives with quality metrics and patient outcomes, payers can drive the nationwide adoption of value-based payment models, including bundle payments, while ensuring sustainable health care delivery. Although the United States Centers for Medicare and Medicaid, private insurers, and hospital systems alike have adopted, adjusted, and improved programs to make episode-based bundled payments more viable,^11,40 there remains substantial room for improvement in the delivery of hand surgery and the optimization of our health care system.

Regulatory frameworks and policy initiatives with proper incentives are critical for facilitating the adoption of bundle payments in hand surgery. ³¹ Standardized guidelines, reporting requirements, and collaboration between regulatory agencies and health care stakeholders are essential to overcome regulatory barriers and promote widespread adoption. While establishing such guidelines pose tremendous upfront investment, clear guidelines and reporting requirements will help to eliminate unnecessary and unpredictable variations in care costs and pathways, and ultimately lead to greater shared savings and better outcomes in the long term for patients, physicians, and insurers.

Conclusions

The feasibility of bundle payments in hand surgery hinges on addressing unique challenges while capitalizing on potential benefits. By fostering collaboration among stakeholders, leveraging data-driven insights, and prioritizing patient-centered care, episode-based bundled payments have the potential to enhance the value and efficiency of hand surgery services while improving patient outcomes. The current literature regarding episode-based bundled payments in hand surgery highlights various avenues for cost savings, including alternative sites of service, surgical approaches, use of anesthesia, and the elimination of low-value preoperative and postoperative tests, and demonstrates that there is sufficient evidence to proceed to a trial phase for episode-based bundled payments in hand surgery.