Bundling Up for Health Care Spending

By Meg Reid, Undergraduate Research Fellow, January 17, 2012 at 11:00 am

One of the proposed solutions to exploding health care spending included in the Affordable Care Act is the bundled payment. Instead of separate payments for tests, procedures, and visits to the doctor, a group of practitioners referred to as a “care group” is given a sum of money that will cover the entire episode of care. The price tag is determined by clinical guidelines—standards for treatment—and tailored to each condition.

Bundled payment is quite promising on paper. By separating the quantity of services from the dollar amount, bundling removes the incentive for providers to give unnecessary tests and procedures to increase profits. Ideally, practitioners will work to ensure that each patient is given the exact amount of care he or she needs. Bundling encourages care groups to coordinate treatment in a way that improves communication and cooperation among providers.

This plan could even result in fewer hospital-based infections and fewer readmissions. This is true for ProvenCare, a surgery program that uses episode-based payments. ProvenCare saw a 10% reduction in readmission rates over one year, and up to 44% reduction after 18 months. If implemented correctly, bundling could mean huge improvements in spending and quality of care.

That’s a big “if,” though. There are a lot of potential problems with bundled payments. The incentives for providers under bundling would be to maximize patient volume and minimize cost per patient. If proper regulations weren’t in place, patients could be refused expensive, necessary treatment, and providers would be pushed to avoid those patients whose conditions were complicated enough to require extra treatment.

The effects of episode-based payment have not been extensively studied. Many pilot programs are still in their beginning stages, and there hasn’t been enough time to show that care and costs are both positively affected by the new payment system. After three years, PROMETHEUS Payment is still facing challenges due to the complexity of the health care system, the existing fee-for-service payment system, and the nuanced cases of real patients. None of the three project sites had made contracts or bundled payments as of May 2011.

Though the bundled payment method faces difficulties, it is still a promising step towards better care financing. Payment programs need energy, dedication, and thorough testing so that we can implement bundled payment schemes that provide the benefits of cooperative, smart care without risking patient mistreatment.

Posted in Health Care | Related Topics: Health Insurance  Health Care Reform