NJ's Horizon BCBS Pays $3M in Shared Savings for Episodes of Care; Readmissions, C-Sections Reduced


The shared savings payments were for specialists in hip and knee replacements, knee arthroscopy, and pregnancy. These areas have been among CMS' top targets for savings, while New Jersey has been focused on reducing its high rate of C-sections.

Horizon Blue Cross Blue Shield of New Jersey paid $3 million in shared savings to 51 specialty practices through its Episodes of Care program, an alternate payment model designed to improve quality while containing costs, according to a statement released this week.

Episodes of Care (EOC), also referred to as bundled payments, are models that pay providers to manage an event from start to finish, including a prescribed time of aftercare. Because providers will be paid a set fee no matter how many services a patient uses, there is more incentive to coordinate care, ensure good follow-up after discharge, and keep the patient from returning to the hospital.

Providers who meet certain quality and cost targets receive bonuses, or “shared savings.” Some of these models only call for bonuses for achieving goals, while others also feature penalties for failing to achieve benchmarks. The federal government is moving toward these “two-sided” risk models. Horizon's EOC model is a hybrid that pays shared savings after fee-for-service reimbursement, but it follows the alternate payment model philosophy.

For 2016, CMS has set a goal that 30% of all Medicare reimbursements will be based on alternate models, such as bundled payments.1 Horizon spokesman Thomas Vincz said in an email that the insurer has a seat on the CMS advisory committee working on several bundled payment models.

The federal government is especially focused on avoiding readmission within 30 days of a hospital stay. Interest in reducing readmission soared after a landmark 2009 paper in the New England Journal of Medicine, which found that unplanned 30-day hospital readmissions cost Medicare $17.4 billion in 2004.2

Horizon’s shared savings distributions were based on 2014 treatments for: hip replacements, knee arthroscopy, knee replacement, pregnancy, and colonoscopy, according to the statement.

To compute distributions, Horizon used claims data, comparing beneficiaries who received care at an EOC practice with members who received the same procedure at a non-EOC practice. Reduced hospitalizations and procedures for more than 8000 patients enrolled in Horizon’s commercial or Medicare Advantage plans included:

· 100% fewer hospital readmissions for knee arthroscopy

· 37% fewer hospital readmissions for hip replacement

· 22% fewer hospital readmissions for knee replacement

· 32% reduction in C-sections in pregnancy.

Hip and knee procedures have been among CMS’ highest priorities for deploying alternate payment models, while reducing C-sections in pregnancy has been a concern of New Jersey health officials and quality care advocates.

In November 2015, CMS finalized a bundled payment model for knee and hip replacement with the Comprehensive Care for Joint Replacement model, which is set to take effect April 1, 2016.3 Under this model, hospitals in 67 markets will be paid bonuses if they meet quality and savings targets—if not, they may have to repay Medicare part of their fee. CMS put this reform in place after spending $7 billion on 400,000 hip and knee replacements in 2014, with costs ranging from $16,500 to $33,000.

Reducing C-sections is notable given New Jersey’s high rate relative to other states. The 2014 rate of 28.1%, based on data reported by the Leapfrog Group, was down from 32.9% in 2009 but still higher than the national target of 23.9% set by Healthy People 2020.4 New Jersey’s high C-section rate has been attributed to demographic factors, such as the higher average age of mothers, and cultural factors, such as fear of malpractice suits.

“For the last 6 years, Horizon has been collaborating with doctors and hospitals across the state to change the way healthcare is delivered and financed in New Jersey,” said Allen Karp, senior vice president of Healthcare Management for Horizon BCBSNJ. “The results of our EOC program show how we can work together to make New Jersey’s healthcare system more coordinated and cost-efficient while raising the bar on quality.”

According to its website, Horizon’s EOC program also captures treatment for breast cancer, heart failure (HF), and coronary artery bypass graft (CABG). Results for HF and CABG require reporting for an entire claims year and are not yet available, Vincz said in the email. Full data for Horizon’s EOC initiative will be presented at a peer conference at a later date, he said.


1. Better, smarter, healthier: in historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value [press release]. Washington, DC: HHS Newsroom; January 26, 2015.

2. Jencks S, Williams M, Coleman E. Rehospitalizations among patients in the Medicare fee-for-service program [published correction appears in N Engl J Med. 2011;364(16):158]. N Engl J Med. 2009;360(14):1418-1428.

3. CMS finalizes bundled payment initiative for hip and knee replacement [press release]. Washignton, DC: HHS Newroom; November 16, 2015;

4. Effort to reduce NJ’s high C-section rate could be aided by new report. NJSpotlight. Published October 8, 2015.

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