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Bundling By Decree

Philip Betbeze, for HealthLeaders Magazine, June 11, 2009
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Better to reward or to penalize?
Perhaps that approach is smart, as hospitals and health systems, rather than trying to craft a new payment system to their advantage, should be more interested in focusing on ways to take out variability and poor quality, says Francois de Brantes, CEO of Bridges to Excellence, a Connecticut-based nonprofit group funded by employers that seeks better quality and lower cost in healthcare.

"The core issue is cash flow and how you divide the money," he says.

For example, consider a case in which a hospital discharges a patient to a rehab facility it doesn't own, which, due to the rehab facility's poor quality of care or negligence, causes that patient to be readmitted to the hospital within the 30-day window.

"This leads to mind-numbing conversations about contracts that most people can't deal with," says de Brantes. "Once you get out of the large integrated system world, people's minds kind of shut down on the supreme complexity."

Instead, he believes an appropriate way to structure a payment system based on bundling and paying more for higher-quality work should be retrospective, rather than prospective.

In speaking with Congressional staffs, de Brantes says BTE's message is that "instead of worrying about prospective payment, why don't you implement prospective budgeting, which means you can still create prospective budgets for an episode but do it at the patient level."

This way, he says, the government could continue to pay on a normal fee-for-service basis and then add a significant bonus, for lack of a better word, for avoiding readmissions. That's an area of huge costs for Medicare, as one in five Medicare patients discharged from the hospital is readmitted within one month, according to a recent study in the New England Journal of Medicine.

De Brantes says Medicare could then avoid cutting current payments to hospitals, but reward the ones that demonstrate better quality. That could be a use for the $630 billion reserve account, also in the president's budget, the purpose of which has not been determined. Regardless of whether new money is involved or whether Medicare does a "hold back" of at-risk payment based on a 30-day readmission measure, for example, some reimbursement will be at risk based on quality of care, which is the ultimate goal.

"You can do a back-end reconciliation," de Brantes says. "It's possible that during the course of the year, the doctor will want his patient to see a cardiologist who's not a part of their group. You can create financial risk by keeping 10% as a withhold to look at quality of care, for example. The key is getting the hospitals to think about themselves as being part of a value chain."

Winners and losers
Clearly, very few hospitals or health systems have the level of integration that Geisinger has. Among other subsidiaries, it has a health plan, hospitals, and clinics, and substantially all of its admitters are employed physicians. They wouldn't have to change much. Even its rehab clinic, which is a joint venture between Geisinger and HealthSouth, depends on Geisinger for the vast majority of its patient load, meaning Geisinger can easily influence how the care is provided and work to maximize its quality of care.

"We don't own it, but it's a functionally owned equivalent. Because we have some influence over that facility, it's included in the bundling program," Paulus says. Bundling payments at the federal level would "encourage hospitals to form preferred relationships as a way of working together to form an innovative coordination of care."

Such relationships are not the case for the majority of hospitals and health systems across the country, whose leadership in recent years have preferred a business model that focuses on "core competencies," in other words, inpatient hospital care, for the most part.

Deloitte's Rudish sees a contractually-based relationship structure as the model for a future under bundled payments, because for most, creating an integrated delivery system is cost prohibitive, at least in the short term.

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