Bundled payments capitate medical care at the episode level. It is one of the few “value-based” approaches the Centers for Medicare & Medicaid Services (CMS) and the Innovation Center have fielded that works. But it doesn’t work for the taxpayers, at least not yet. If you stop and think about it, the whole Prospective Payment System (PPS) is basically a bundle approach. It tied together a lot of individual hospital services that used to be separately billed and gave hospitals an incentive to be efficient. And were they ever: the average length of stay dropped 17%! The newer approach expands the bundle, in some cases to every part of the episode, including physicians, hospital, post-acute, and home health. Before the Affordable Care Act (ACA), CMS ran some demonstrations that proved the concept, yielding savings a bonus for doctors, and savings for the government and the patient, too, with reduced copayments. A further expansion under the ACA was promising, so the Obama Administration jumped ahead with a mandatory program for hip and knee replacement in 66 localities. The hospitals cried foul, but many had success and enjoyed bonuses. After the 2016 election when Tom Price became Health and Human Services (HHS) Secretary, he pared back that program just as results showed it was successful.
Keep in mind Medicare spends between $16,500 and $33,000 on knee or hip cases. Average charges in total approach $50,000 in the U.S. If you are mobile, you can get it done for less than $10,000 in India!
The Lewin Group delivered a report to CMS this week on the fifth year of the voluntary bundled payment initiative that was started under the ACA’s Innovation Center in 2012. As in earlier years, the great majority of activity was in joint replacement episodes, and while there was little impact on quality for better or for worse, there were savings in spending on the services. Those savings were generated by reductions in post-acute care, both inpatient and home health. Unfortunately, the government didn’t get any benefit, and the providers did because it was an upside-only risk approach. The newer “advanced” Bundled Payments for Care Improvement (BPCI) initiative, which is getting started now, will put providers at risk. Sophisticated providers are ready to play in this new space. This is where health reform is happening – initiatives that align providers’ incentives with the goals of public programs. Health plans and provider groups that stay focused on CMS’ strategy will be the winners going forward.
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