Friday, January 30, 2009

bundled payments - To Control Hospital-Doctor Procedural Fees, Bundle Them

So say Congressional leaders, Obamanites, and Medicare officials. The idea is to bundle hospital and specialists fees into one pay packet, and to pay a single Medicare fee into a combined hospital-physician entity. This approach is kind of a hospital DRG in drag, namely dragging in the doctors in and putting a ceiling on the fee on the hospital-related fee.

As one who has been there and done that in a community hospital setting, I would like to point out that certain obstacles must be overcome.

• Changing Stark and other laws so doctors in a given bundled specialty can set a fee without being accused of collusion.
• Getting specialists who are skeptical of being controlled by the hospital to go along.
• Setting an equitable agreed upon fee on the part of both the hospital and the doctor group.
• Establishing a fee schedule for other specialists should complications develop and other specialists be called in for consultation.
• Acquiring re-insurance in case the bundled fee is overshot.

To read more on bundling, see January 29 Wall Street Journal “Medical-Payment Fix Weighed” and the January 30 Wall Street Journal Health Blog, which I attach for your enlightment.

January 30, 2009, 8:50 am

Beyond Fee-for-Service: Paying Doctors for ‘Episodes of Care’

Posted by Jacob Goldstein

When you pay doctors for every procedure they do, there’s an incentive for unnecessary treatments. There’s a financial reward for fixing problems that better care might have prevented. And there’s no incentive for doctors to prevent complications.

On the other hand, few people want to go back to capitation — paying a single, annual fee for all of a patient’s care. That’s been criticized for leading to undertreatment.

So a lot of powerful people are looking toward a middle road: Paying a single, bundled fee for an “episode of care” such as a hip implant or a few months of treatment for cancer or a chronic disease.

As a story in this morning’s WSJ notes, Tom Daschle, the man Obama’s picked to lead the health reform push, is a backer of episode-based payments. Max Baucus, a key senator in the health reform puzzle, likes them as well.

Medicare’s piloting a program that pays a lump-sum to be split by the hospital and physicians for acute-care procedures like coronary bypass. Of course, the prospect of the hospital handling a lump-sum payment makes a lot of docs nervous. And poorly designed bundles could encourage cherry-picking healthy patients or denying needed care.

But beyond Medicare, several experiments are looking at different ways of bundling payments.

Later this year, UnitedHealth plans to test bundled payments for oncologists. Under the current system, many cancer docs make much of their income from buying and selling the drugs they administer to patients. UnitedHealth wants to pay a single, bundled fee for a few months of cancer treatment. The fee would be worth about what docs make now from fees and from profit on the drugs.

“What you used to be making on drugs now becomes a patient-care fee that can be redistributed in whatever way you think is right,” Lee Newcomer, the oncologist-turned-UnitedHealth exec, told us.

And Minnesota is making its own big push into bundles. A big health-reform law that the state passed last year will create “baskets of care” for several conditions, including asthma and diabetes. The basic idea is for hospitals and doctors to define and price a package of care, so that patients and payers can see what they’re getting and comparison shop between providers.

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Comment - January 30, 2009 . 9:39 am

As Chairman of a Physician Hospital Organization, I was involved in putting together a series of 50 or more bundled bills for a community hospital. It was doable, but health plans didn’t like the idea because they preferred to negotiate with doctors and hospitals separately - a divide and conquer strategy. Our approach was to discount hospital fees by 10% and doctor fees by 3%, and to set the doctor fees by having doctors in a given specialty sent in their fees, average them, and send it back for doctor’s approval. This worked well, but it takes more than hospitals and doctors agreeing - private payers must go along, too. Specialists, by the way, had no problem with the bundled concept.

Comment by Richard L. Reece, MD, medinnovationblog


Anonymous said...

The Centers for Medicare & Medicaid Services (CMS) recently announced the 5 sites for its Medicare Acute Care Episode demonstration. The demonstration will include 28 cardiac and 9 orthopedic inpatient surgical services and procedures and CMS will make a single payment for both Medicare Part A and B services. See the Medicare Update weblog’s post at

Theodora said...

Thanks for the article, very helpful information.

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