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Bundling By Decree

Philip Betbeze, for HealthLeaders Magazine, June 11, 2009
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The current payment system, say many, keeps small hospitals and physician practices in the game. You don't necessarily need any fancy electronic patient record system to play—some bolt-on software from a few vendors might suffice. The problem is that with few exceptions, CMS doesn't reward for high quality or punish for low quality of care. Commercial payers, despite some forays into so-called pay for performance measures inserted into contracts with providers, still largely reimburse in a fee-for-service manner, as well.

But that reality has been changing over the past three years as CMS has expanded the never-event list, and will change dramatically if the president's proposals are adopted.

Essential to the administration's idea to reform healthcare payment is bundling, a way to reimburse disparate players in the healthcare marketplace for a basket of services provided to the beneficiary over a given time frame. In the proposal the president has floated in his budget, which is admittedly short on detail, a hospital might be responsible for a patient's welfare related to the procedure it performed for up to 30 days after discharge. If the patient requires rehospitalization during that time frame due to a condition related to the procedure, Medicare would not pay for it. Sounds good on paper, but implementing such a system is fraught with complexity. For example, if the patient's episode of care involves two, three, or more separate entities with no business relationships, how would one determine whose fault it is that the patient didn't do as well as expected and thus needed additional services? Is it any one provider's fault? Can blame be spread around? If so, how? What if a bad outcome is the patient's fault?

And that's not all. Besides those concerns, Congress and CMS regulators would have to determine comorbidity measures that would not only affect the patient's outcome, but would affect the provider's pay for that patient. Imagine a patient suffering from diabetes and morbid obesity who needs the same heart procedure that an otherwise healthy individual needs. Those patients need the same procedure, but present a vastly different risk profile for the provider. Therefore, how each patient does after the heart procedure is likely to be vastly different regardless of whether both receive equal quality of care. Regardless of how it's done, technology will have to play a big role in trying to level this playing field, as such severity adjustments for the most complex patients, among other mitigating factors, must be computed using what many imagine to be a complex equation.

Bundling a fait accompli?
That doesn't mean bundling in some form isn't going to happen, however.

"A lot of our clients think something along these lines will in fact happen sooner or later, so they're preparing for it," says Rudish. "There may be different alternatives put forth, but the fact is that the C-suite feels that that bundled payments are inevitable. It's at least likely, if not more than likely."

Many other blue-sky attempts to reduce cost and improve quality in healthcare have withered when Congress and lobbyists have gotten involved, but many hospital CEOs who didn't want to be quoted believe the days of fee-for-service payments are numbered, no matter what lobbying efforts their associations might bring against the proposals. Many lobbying organizations, chief among them the American Hospital Association, seem to feel that the current system is indefensible. As a result, they are at least open to the idea of bundling. They will focus their efforts around the margin and try to massage the details to their members' benefit as Congress debates how to construct such a program.

James Bentley, senior vice president of strategic policy planning at the AHA, says that to debate the merits and drawbacks of bundling, we need a clear definition of what bundling really is.

"Most people who talk about bundling talk about combining the physician payment and the hospital payment," but currently, the focus is on combining the acute payment with the postacute payment, he says. Bentley says fundamental questions like this spring up due to the lack of detail in the president's budget proposal, which Congress has already approved in principle. Details are expected to be worked out in conference between the two houses over the summer.

"Our membership is asking a lot of questions that we can't answer," Bentley says, including whether a new system would include all diagnosis-related groups, or just some, or whether the new formula will incorporate the historically wide disparity in Medicare payments per capita by region, for example.

One big potential problem with bundling payments is the assumption that much of the anticipated savings come from the idea that chronic care patients use lots of services and are high cost; but such chronic care services are the hardest to describe for bundling.

"If there are a lot of comorbid conditions, what's the primary condition, where does the bundle start and where does it end?" Bentley asks.

Prior to the release of further details on the healthcare reform proposals that come out of budget legislation, Bentley and the AHA aren't willing to publicly tell legislators what the organization will and won't oppose under healthcare reform. It's not an unusual position in today's health reform environment. No one group with this big a stake in the outcome is willing—at least not without detailed proposals to support or oppose—to make the first move to challenge a popular president and his attempt to enact healthcare reform before more concrete proposals are developed in Congressional bills.

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