By Ezekiel J. Emanuel
The New York Times, September 5, 2012
(Arkansas) is moving toward ending “fee-for-service” payments, in which each procedure a patient undergoes for a single medical condition is billed separately. Instead, the costs of all the hospitalizations, office visits, tests and treatments will be rolled into one “episode-based” or “bundled” payment.
This is how it will work: Medicaid and private insurers will identify the doctor or hospital who is primarily responsible for the patient’s care — the “quarterback,” as Andrew Allison, the state’s Medicaid director, put it. The quarterback will be reimbursed for the total cost of an episode of care — a hip or knee replacement; treatment for an upper respiratory infection or congestive heart failure; or perinatal care (the baby’s delivery, as well as some care before and after).
The quarterbacks will also be responsible for the cost and quality of the services provided to their patients, and will receive quarterly reports on those metrics from the state (for Medicaid patients) or private insurers. If they have delivered good care based on agreed-upon standards, and if their billings come in lower than the agreed-upon level, they can keep a portion of the difference. If their billings come in above an acceptable level — usually because they have ordered too many unnecessary tests, office visits or inappropriate treatments — they will have to pay money back to the state or insurer.
Still, it will be a challenge. Bundled payments for hip and knee replacements, which have similar costs for all patients, have been previously tested. But for other conditions, not every patient’s needs are the same. Some pregnant women are healthy while others have diabetes. The state and insurers will have to provide “risk adjustment” payments — in which providers are reimbursed more for treating sicker patients — and some patients with especially complicated illnesses may need to be excluded from the bundling system.
Even some low-cost conditions, like upper respiratory infections, are treated at widely varying costs, mainly because physicians prescribe different tests, numbers of office visits and medications.
But this is exactly what the new program will work to change, by providing standards for appropriate care linked to the costs of treatment and the quality of the doctor’s performance compared with that of other doctors.
http://opinionator.blogs.nytimes.com/2012/09/05/the-arkansas-innovation/
And…
Is ‘Bundled’ Medical Care a Good Idea?
Letters, The New York Times, September 12, 2012
Despite Ezekiel J. Emanuel’s implication, Arkansas isn’t the only state to plan to substitute “bundled” medical payments for fee-for-service. Vermont, Massachusetts and Oregon have similar intentions. But without basic changes in the organization and delivery of care, it is doubtful that “bundled” payments can be successfully distributed among all the providers of care.
A stifling supervisory bureaucracy interfering with medical care and endless disputes among providers and between providers and payers are almost certain to develop. Physicians are unlikely to accept such an arrangement, and nothing can succeed without their agreement.
Eventually, they will accept a different health system in which a single public payer guarantees comprehensive care for all, and pays accountable multispecialty physician groups not by reimbursement for specific services but through prepaid budgets on a per capita basis.
Arnold S. Relman
Cambridge, Mass., Sept. 7, 2012
The writer, professor emeritus of medicine and social medicine at Harvard Medical School, is a former editor in chief of The New England Journal of Medicine.
http://www.nytimes.com/2012/09/13/opinion/is-bundled-medical-care-a-good-idea.html?ref=opinion
Comment:
By Don McCanne, MD
What a simple idea. Instead of paying a fee for each itemized service – a payment model that supposedly encourages the delivery of excess services – a lump (bundled) fee would be paid for each episode of care. That episode might be as simple as a common cold, or as complex as extensive, prolonged care of a major trauma victim. But because of the single fee no excessive services would be provided, so the theory goes.
This does bring up a few questions. How many distinct episodes of care are there? How is each one defined? How is an appropriate bundled fee determined for each of these episodes? Which individuals and entities would share in each fee? Would the various providers be bundled together just as the fee for each episode of care is bundled? How many variations of bundled providers would you have? How many bundled groups would each individual provider belong to? How complex would the administrative task be to distribute the bundled fee within the bundled group of providers? Could an accountable care organization (ACO) serve as a single bundled group of providers that could care for each and every episode of care? Would each ACO include providers of tertiary services such as advanced cardiac or oncological surgeries? Would each ACO want to contract for bundled payments for common colds and other brief, single contact services? Would one ACO be the only bundled entity in a community, or could the community support multiple competing ACOs? Could the community support providers outside of the ACO and how would they be bundled? Would each payer – Medicare, Medicaid, and a multitude of private insurers – contract separately with each bundled group of providers for each separate episode of care? If instead the bundled payments were standardized, then why would you want the inefficiency of multiple payers when a single payer would simplify at least that part of the process? But then, why make it this complicated in the first place?
Arnold Relman is right. The bundling concept adds much more administrative complexity to a health care system that already has the world’s worst administrative excesses. Instead of playing more games with a dysfunctional, fragmented financing system, we should convert to a single payer national health program. Under such a system costs can be budgeted – whether it’s through global budgets for hospitals, capitation payments for integrated multispecialty physician groups, physician-hospital organizations, community health centers, or through fee-for-service when appropriate such as for solo, rural practices.
Our own public administrators of an improved Medicare for all would be free to cooperate with the health care professionals and institutions to establish the best payment arrangements to see that everyone receives the highest quality of care under a system that would provide the nation with greatest health care value attainable. One giant bundle for all of us.