Improving Incentives Newsletter: Wisconsin Launches Two Episode of Care Payment Projects

Improving Incentives Newsletter: Wisconsin Launches Two Episode of Care Payment Projects

A Quarterly Publication of HCI3 Volume 1, Issue 4  |   January 2012


Wisconsin Launches Two Episode of Care Payment Projects 

By Karen Timberlake, JD

Karen Timberlake, JD, ([email protected]) is the director of the Partnership for Healthcare Payment Reform,, a project of the Wisconsin Health Information Organization.

In Wisconsin, we take pride in running an innovative and effective health care system. For more than two decades, we have been among the early adopters in quality improvement, public reporting of quality measures, and multistakeholder collaboration. Now we are aiming to be on the leading edge again by launching two episode of care payment pilot programs at three sites in January.

Recognizing that it's time to develop new and more effective ways to pay for health care, physicians, hospitals, health systems, health plans, employers, and other health care stakeholders are introducing bundled payment for total knee replacement and a shared savings project (transitioning to an episode of care payment) for patients with diabetes. Both of these projects are under the direction of the Partnership for Healthcare Payment Reform and the Wisconsin Health Information Organization.

As we develop these payment-reform innovations, we are learning as we go and are grateful for the advice we've received from the Integrated Healthcare Association in Oakland, Calif., and HCI3 and for grant funding to the Wisconsin Collaborative for Healthcare Quality (WCHQ) from the Robert Wood Johnson Foundation's Aligning Forces for Quality initiative.

To date, we have put much of the required infrastructure in place, including an all-payer health care claims database. But gathering reliable baseline data has been a challenge. Therefore, what we introduce in the first quarter of 2012 will be continually reviewed and improved over time.

By the end of the three-year knee replacement pilot, we expect to know much more about how physicians, payers, and purchasers can benefit from bundled payment. During the four-year diabetes initiative, we expect that our physicians and health plans will move from sharing savings to managing a risk-adjusted episode of care payment. Best of all, both projects will improve patient care.

We chose a bundled payment pilot program for total knee replacement (TKR) because this procedure is common and our data show that costs frequently vary among providers. In addition, there is evidence that we can improve care quality and efficiency while lowering costs.

In this first year, we expect to pay for several hundred knee replacements. The negotiated bundled payment for one episode will cover the cost of the procedure itself and the post-operative care for qualified patients aged 18 to 64 for a single knee at nine hospitals from seven different health care systems. We also will include a 90-day warranty to cover complications or device failure but not care in a skilled nursing facility. Each provider will work with several of six commercial payers including one self-insured employer-purchasing collaborative. After two years, we will revise the plan design.

The diabetes bundled payment project is similar in that it involves quality reporting and multiple payers, including two commercial plans and a self-insured employer-purchasing group.

This project is different from the knee program because we need a more sophisticated payment model that accounts for comorbidities, such as coronary artery disease, hypertension, and hyperlipidemia. Through this project we aim to fix flaws in the way providers are currently paid for management of patients with chronic disease, while targeting both overuse and underuse of care. Data from the Wisconsin Collaborative for Healthcare Quality show wide variation in the outcomes of diabetes patients.

During this four-year pilot program we will promote higher quality and more affordable care while also reducing avoidable complications with one large clinically integrated multispecialty practice that comprises two different hospital systems and a rural provider organization that includes a hospital and a multispecialty group practice.

Using a clinically driven definition of expected care for patients with diabetes and comorbidities, providers will assume clinical risk and be eligible for 75% of savings over the historic cost trend depending on how well they meet quality measures. Payers will assume insurance risk and retain 25%.

After three years, we plan to implement a total episode of care payment model for all patients with diabetes. Like the TKR initiative, the diabetes pilot program will be for commercially insured adult patients aged 18 to 64 and providers will work with multiple payers. After the first year, we will revise the plan design.

Assuming these two programs are successful, we will consider other conditions for bundled payment, and by applying the lessons we've learned, we will continue to be among the nation's early adopters.


During the total knee replacement pilot project, the Wisconsin Partnership for Healthcare Payment Reform will publicly report results on meeting eight quality measures:

  1. Beta blocker during perioperative period—knees
  2. Surgery patients receiving appropriate VTE prophylaxis—knees
  3. Length of stay
  4. Readmission rates for knee replacements
  5. Revision/re-operations
  6. Complications with total joint replacement, either infection rate or DVT/PEs
  7. Patient satisfaction (HCAPHS)
  8. Patient completed outcomes measure (KOOS or WOMAC).

During the diabetes programs, the partnership will report providers' results against the following Wisconsin Collaborative for Healthcare Quality measures:

  • Good hemoglobin A1C control (target less than 7% or less than 8% for high risk patients)
  • Uncontrolled hemoglobin A1C (more than 9%)
  • Blood pressure control (target is lower than 130/80)
  • LDL cholesterol control (target is 100mg/dL).

Building on Wisconsin's existing health care transparency initiatives, all public reporting will be done on the Wisconsin Collaborative for Healthcare Quality's web site,