Containing Medicare Healthcare Costs: Bundled payments (Case-mix/DRGs) alternative approach

Will bundling include doctors? Medicare looking for alternative payment plans

CMS is testing bundled payments to hospital-physician groups for inpatient episodes of care. Expanding to post-acute care may be the next step.

By Geri Aston, amednews correspondent. Posted Jan. 4, 2010.

The Medicare fee-for-service payment system is failing. It encourages too many patient visits and discourages care coordination and quality improvement. These misplaced incentives are helping to fuel unsustainable growth in health care spending.

So goes the primary argument in Congress and other policy circles behind a proposed new approach to paying physicians and hospitals under Medicare: bundled payment. Already it has led to a Medicare demonstration program. Both of the health system reform bills under consideration in Congress would expand the project.

In a bundled model, physician and hospital payments are lumped together in a "global" payment. Instead of being paid for each visit or procedure, doctors and hospitals are paid for all services to a patient in an episode of care for a particular condition. Depending on how a project is structured, an episode could be defined several ways -- a period of hospitalization, hospitalization plus a period of post-acute care, a stretch of care for a chronic condition, or even all inpatient or outpatient care.

Read further?: The print version of this content appeared in the Jan 11, 2010 issue of American Medical News.

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 ADDITIONAL INFORMATION: 

A bundle of savings

Out of eight options, RAND Health researchers concluded payment bundling is the most promising way to save money. Because Medicare already bundles hospital payments through the DRG system, hospital-only bundling would save only 0.1% over 10 years. But bundling payments to all payers for treating chronic diseases could save the system more than 5% over the decade.

Reform concept	Projected range in national health spending change (2010-19)
Bundling payments	-5.4% to -0.1%
Regulating hospital rates	-2.0% to 0.0%
Implementing health information technology	-1.5% to 0.8%
Launching disease management	-1.3% to 1.0%
Creating medical homes	-1.2% to 0.4%
Increasing retail clinics	-0.6% to 0.0%
Expanding scope of practice	-0.5% to -0.3%
Changing benefits design	-0.3% to 0.2%

Note: "Expanding scope of practice" refers to nurse practitioners and physician assistants
Source: "Controlling U.S. Health Care Spending -- Separating Promising from Unpromising Approaches," New England Journal of Medicine, Nov. 26 (content.nejm.org/cgi/content/extract/361/22/2109)