The Beginning of Bundling

The roughly $9 billion that CMS spends on dialysis treatments each year is relatively insignificant when compared to the trillions the U.S. spends on healthcare. But dialysis reimbursements may soon become the key to healthcare’s future when CMS begins a new bundled payment system and quality incentive program for dialysis services.

Beginning next year, CMS will provide a single, bundled payment for outpatient dialysis treatment, supplies, related clinical laboratory tests, and certain related drugs (some oral drugs won’t be included until 2014). The year after next, CMS wants to begin a value-based purchasing system that would tie reimbursement to performance on three quality measures related to end-stage renal disease.

This isn’t just another pilot program. It is a first step in what will most likely be a long transition to a new payment system where bundled reimbursements and pay-for-performance are the norm.

“For the first time in any of our payment systems, the quality of care facilities furnish to patients will be reflected in their payment rates,” says CMS Administrator Donald Berwick, MD. CMS can reduce facility’s payment rates by up to 2% if it fails to meet performance benchmarks.

For a while now, there have essentially been two healthcare systems affecting how hospital leaders make decisions and think about the future. There is the current system--plagued by rising costs, misaligned incentives, and reimbursement pressures—which affects day-to-day operations.

But hospital leaders have also been mindful of a future, hypothetical system. It features bundled payments and rewards quality instead of volume; it encourages coordination and cooperation between providers. It doesn’t yet exist, but it might as well. Its seeming inevitability already influences strategic planning.