Fee-for -Service or Bundled Bills: Not-An-All-Or-Nothing Or All-Size-Fits-All Proposition

The March 22 WSJ features a debate between Paul Ginsburg, director of public policy at the University of California, and Richard Amerling, MD, nephrologist and president of the Association of American Physicians and Surgeons (“Should The U.S. Move Away from Fee-Service-Medicine?”)

It is a lively debate. Ginsburg emphasizes reimbursing physicians on basis of value, prevention, outcomes, and total care. Doctor Amerling stresses FFS is not the problem. The problem is high costs caused by 3rd parties, resulting in high administrative costs, insensitivity to real costs, and greater volume of tests and hospitalizations.

The article contains a chart showing these leading cost drivers – hospital care, 34.0%, physicians and clinical services, 21.0%, and prescriptions, medical products, and personal care, 13.5%- accounting for 68,5% of all costs.

What is missing in the debate are these obvious facts:

-- Bundled bills make sense for big ticket bills for major hospital operations , procedures or illnesses - for cancer, heart disease, and common operations for which data exists. I know this because in the 1990s as chairman for a PHO, our hospital and its medical staff created bundled bills for over 100 hospital-based illnesses by giving 10% discounts for hospitals, 3% discounts for physician fees, with prepackaging the two into one bill backed by reinsurance if the bill were exceeded. These kinds of bundled bills are doable and acceptable for hospitals and physicians alike.

-- nBundled bills do not make sense for much of the population seeking care for episodic problems outside hospital settings. These are short-term situations which do not require data gathering or total patient care. They are routine episodes that do not need to be factored in or entered into some massive data base.

-- Bundled bills are already a fact-of-life in many out-of-hospital market transactions. Concierge direct-cash practices offer monthly or annual retention fees that include bundled fees covering the visits, on-line or phone consultations, and routine tests. Ambulatory surgical centers generally bundle surgeons', anesthesiology, nursing, and short-term rehab fees. Retail clinics feature bundled evaluation fees.