Bundle Up for the Changes Ahead

MEDICAL TECHNOLOGYDorsata’s CMO talks about how bundled payment models will affect medtech

By Scott Nelson, Group Director, WCG, Founder, Medsider

This article is edited from an interview by Scott Nelson with Dr. Dan Mazanec, Chief Medical Officer of Dorsata

In the 1980s, there were no significant cost controls in the U.S. healthcare system, and there had been major cost increases over just a few years. They’ve been rising ever since, moreso than in other industrialized countries. In response, CMS (the Centers for Medicare and Medicaid Services) began to develop bundled care models that would control costs by limiting reimbursement for procedures. How has this affected the medtech sector? In our conversation with Dr. Dan Mazanec, CMO of Dorsata, these are the key things he believes medtech companies need to consider right now:

• Bundled care involves the whole continuum of providers—physicians, physical therapists, etc.

• Care is being reshaped along value and quality

• Having robust, smart and physician-friendly IT is critical to meeting the standards of the new bundling paradigms Below are some of the details and insights we uncovered in our interview.


The history: In 1983 Medicare said they were not going to pay per item, but by diagnosis. They came up with 500+ diagnoses, and applied a fixed reimbursement amount to each. This forced hospitals to bundle charges so that they could make a profit. In the 90s Medicare started paying a set amount for surgical fees, a global fee for all the care associated with a procedure. Each episode of care was incorporated in a single figure. This took the risk away from Medicare and shifted it to the provider.

The other major change was the definition of an episode of care. Now it’s not just a single period in a hospital, but begins with admission and extends into discharge and rehab, up to 90 days—the whole continuum of care. Now outpatient care is bundled as well. This forces providers to coordinate care within these bundles, while also maintaining quality of care.

CCJR: We asked Dr. Mazanec for insights into the Comprehensive Care for Joint Replacement (CCJR) program and the potential ramifications for medical device companies. This act covers knee and hip replacement surgery. All the care, from admission up to 90 days—the surgeon, hospital, physical therapy, home care, rehab—is bundled together, and a targeted price is set, based on historical data. So if the hospital comes in under the target, they get the additional money. If not, they have to give money back. This controls costs and drives better coordination of care. Reducing readmissions becomes important, because that’s an expensive event. The health organization has to make sure complications are addressed. This addresses the post-acute phase of care, where much of the cost inflation happens, up to 40 – 50% (sometimes called the “area of uncoordinated care”). Hip replacement may need some home care, but rehab is more costly for knee replacement. Also, previously six different orthopedic surgeons may have preferred six different kinds of hardware at varying costs. Now hospitals are negotiating harder, using brand A rather than brands A, B, C and D.

You may have PTs who don’t work at the hospital, you may have a rehab facility that isn’t part of the hospital system. This is where the information highway becomes important, with the post-acute people needing to maintain contact with the surgeon. The new parameters will hold together the various components. You have to have all the providers in the loop, so you can track and record data, and provide clinical decision support within the hospital and afterwards. This will keep down complications, like blood clot events.

And the EMR has to be able to guide the post-acute phase, rehab and home care, in maintaining continuity of care, so co-morbidities like hypertension have to be managed to avoid visits to the ER and/or potential re-hospitalization. The EMR has to have a user-friendly interface that engages the clinicians to collaborate and cooperate. There’s likely to be a significant role for telemedicine in the post-acute phase, to provide better care and to save money. For instance, when people get discharged after a heart attack, a myocardial infarction, this can have a significant effect in terms of reduced hospitalization, reduced ER visits, which could be an almost million-dollar savings according to one study, based solely on telemedicine intervention.

CCJR is going to drive better communication between hospitals and surgeons and all other participants in the post-acute phase. In this era of value-based care, these things will be increasingly important.

MACRA: Another influencing factor is the Medicare Access and CHIP Reauthorization Act (MACRA), which includes two different reimbursement models for physicians (MIPS vs. APMs). This is part of the trend of moving away from fee-for-service toward value-based care. The focus is shifting to performance, and starts us moving toward integrated practice. One model is MIPS, the Merit-based Incentive Payment System, which applies to 85-90% of doctors. Reimbursement is based on four categories: quality, resource use, clinical practice improvement, and meaningful use of certified EHR technology. Efficient, high-quality practices will succeed under this program, but smaller ones may struggle to meet its requirements:

The other option is the Alternative Payment Model , which is more of a pilot. This reorganizes care where there are multiple touchpoints—social workers, behavioral specialists, nurses, coordinated care—for reduced costs and improved quality.

CMS (the Centers for Medicare and Medicaid Services) estimates that 80% of solo practices will face negative adjustments in reimbursement. They’re going to have to acquire the technology to meet the requirements. They may stop seeing Medicare patients, and this will have major implications for these smaller practices.


Dan also offered that his favorite nonfiction business book is Redefining Healthcare by Michael E. Porter and Elizabeth Olmsted Teisberg*. And he left us with this advice: wherever you are in the healthcare system, bundling of care is where we’re going, and smart healthcare IT is the glue in this process that will help meet the demands for efficiency and quality.

Dr. Dan Mazanec Chief Medical Officer Dorsata

Board certified in internal medicine and rheumatology, Dan has been a leader in the development of the emerging specialty of spine medicine. A frequent lecturer at international and national meetings, he has authored more than 70 book chapters and papers and is an active member of the North American Spine Society, with a particular focus on the development of evidence-based clinical guidelines. Prior to joining Dorsata, Dan was the Associate Director of the Center for Spine Health at the Cleveland Clinic. He led the development of the Cleveland Clinic Spine CarePath, which merges evidence-informed clinical management of spine disorders with patient-entered clinical outcome data.


Dorsata gives healthcare providers the tools to streamline the way they document their encounters. Clinicians can quickly build and modify encounter-specific workflows that facilitate robust, accurate documentation, guide decision-making, and automate order entry.

Scott Nelson Group Director, WCG Founder, Medsider

Scott is a self-described medtech enthusiast and currently serves as Group Director for WCG, a W2O company. Prior to his work with WCG, Scott held sales and marketing leadership positions for some of the largest medical device companies in the world, including Covidien, Boston Scientific, C.R. Bard, and ConMed. In addition, Scott is the Founder of Medsider, which helps ambitious doers learn from proven medtech thought leaders. His work with Medsider has been featured in publications like Forbes, Mass Device, MedCity News, and MD+DI. Scott is also an advisor to the Medical Devices Group, which includes over 300,000 members worldwide.


*A sampling from Redefining HealthcarePrinciples of Value-Based Competition

1. The focus should be on value for patients, not just lowering costs.

2. There must be unrestricted competition based on results.

3. Competition should center on medical conditions over the full cycle of care.

4. High quality care should be less costly.

5. Value is driven by provider experiencescaleand learning at the medical condition level.

6. Competition should be regional and nationalnot just local.

7. Information on results and prices needed for value-based competition must be widely available.

8. Innovations that increase value must be strongly rewarded.

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