Real-World Bundling

It's essentially legal gainsharing, says Minkin, invoking Joane Goodroe, senior vice president of innovation for VHA Inc., an Irving, TX-based healthcare national network.

"There's a component of bundling that you can put gainsharing into," says Goodroe, who adds: "Even though I've done so much of the work on gainsharing in this business, I don't like the word. What you really want is hospital-physician alignment."

Exactly, says Minkin, who argues that closer hospital-physician cooperation is going to happen no matter the scheme that's used to encourage it.

He essentially guaranteed his physicians that if they participate in the project, "they will not see any fees less than Medicare fee-for-service."

Goodroe believes that elements of the bundling philosophy will help hospitals reallocate resources away from "doing everything" to focusing on niches where they have a strategic advantage over competitors.

"Healthcare can be more profitable if every hospital isn't doing everything," Goodroe says, adding that competition in healthcare doesn't necessarily cut costs like it does in most other industries.

Competitive positioning
Though it's obviously too late for others to enter into the ACE Demonstration Project, perhaps what Exempla St. Joseph is doing can be instructive to hospitals that still are reimbursed traditionally by Medicare.

With a huge emphasis on generating value for the payer and the beneficiary, by positioning themselves to offer bundled payments to commercial payers, they'll be better able to compete no matter how the healthcare reform debate ultimately is decided.

Participants in CMS's ACE Demonstration Project will likely reap big benefits outside the scope of the program. Because Medicare will drive patient volumes to Exempla St. Joseph's heart program to the detriment of smaller providers, market trends will likely be solidly in place at the end of the three-year demonstration.

"The patterns will be set," says Robert A. Minkin, president and CEO of Exempla St. Joseph. "From a business development perspective, we will have already had an impact on the marketplace and going backward is unlikely."

Doctors don't want to practice medicine in multiple settings if they don't have to, he says, adding that if Exempla St. Joseph achieves the volume levels it expects, competitor hospitals will have probably made decisions to close some of their heart programs.