Bundled payments: will they help?

A recent paper in Circulation looked at bundled payments for health care. The focus was on cardiovascular disease which has been a major target of criticism for over utilization. In addition, the cardiovascular service line has probably accumulated more experience in bundled payment than other specialities.

The article, despite making some unwarranted claims and confusing the terminology of health care does make some valid points and is worth the read.

In general, bundling of payments tends to bring costs down. What is most desirable in health care, of course, is adherence to evidence based medicine. The perfect world would be one in which all providers practiced perfect evidence based medicine 100% of the time. The appropriate question then, is, what would perfect adherence to EBM do to health care costs? Despite the claims of many policy experts, we don't know whether it would decrease costs, have a neutral effect or even increase costs. Abundant literature suggests that departure from evidence based medicine comes in the form of both over utilization and under utilization.

The discussion in the article, as do many discussions of health care today, centers around the contrast between fee for service medicine and the various models of bundled payment and characterizes health care in the US as being fee for service. That is simplistic, because inpatient care is under the Prospective Payment System (DRGs) is not fee for service. In the US the situation is complex and we operate under a variety of incentives. The assumption that one incentive is better than another dominates much of the discussion. However, any time someone does health care for a living, no matter the particular incentive, a conflict exists. Fee for service medicine creates a positive cost incentive. Bundled payments provide negative incentives. Who's to say which is better for patients? There's room for vigorous debate.

The first paragraph of the article reads:

Episode-based, “bundled” payments have come to the forefront of the national discussion on combating rising healthcare costs. In the currently dominant fee-for-service model for reimbursement, hospitals, physicians, and postacute care providers file distinct claims and are paid separately for provided services even when they are related to a single episode of care. However, this approach to payment encourages fragmented care, with little incentive for resource stewardship, coordination, or communication across multiple providers. In contrast, bundled payments seek to align the interests of providers..

Aside from the incorrect implication that hospitals are under fee for service reimbursement what about the alignment of interests that bundling purports to achieve? Under fee for service payment individual providers fight with the payer for reimbursement. Under bundled payment the fight is with each other for a piece of the pie. What kind of alignment is that?

The paper addresses the evidence on bundling. In short, it is preliminary. We do have experience to draw on from Medicare's Prospective Payment System but the newer models under discussion today are largely in experimental stages. A few cautions statements can be made. In general bundled systems seem to curb the rate of cost increases. The effect is modest. In the case of Medicare's Prospective Payment System the cost savings have been counterbalanced by a shift to outpatient treatment which is still largely paid on the fee for service model. This can be viewed as an escape valve from the negative cost incentives so that hospitals can survive. It has resulted in shorter hospital stays and that may have caused increased readmission rates.

These concluding remarks from the paper are correct:

Given this mixed picture of the evidence, it is important to place bundled payments in an appropriate context. On one hand, the future of bundled payments remains largely uncertain.

A number of bundled payment models are now under investigation as pilot projects by the Center for Medicare and Medicaid Innovation. Which of these will see mainstream implementation, if any, and when, is unknown.