Bundled Payments – Boon or Bust?

Public Policy Contributor Eric Siegal, MD, FHM (Chair of SHM’s Public Policy Committee) writes…

About a year ago, I spoke to a statewide assembly of nursing home medical directors who were unanimously concerned that hospitals, discharging increasingly sick patients to their nursing homes, were pushing the limits of what they could safely handle.  From their perspective, shortening acute lengths of stay meant that the burden and cost of caring for seriously ill patients was being transferred from well-resourced hospitals to under-resourced nursing homes.  Needless to say, they didn’t see this as a positive step for patient outcomes.

Cost shifting is one of many predictable negative consequences of a healthcare reimbursement system that rewards provincialism and discourages global accountability. Even hospitalists, arguably the most system-oriented physicians in healthcare, are not immune. When a SNF bed opens up for a patient (especially one who’s been in the hospital for a while) how many of us consider whether or not that facility is the best option?

Legislators and CMS are also concerned about this lack of global accountability and its impact on healthcare delivery.  To that end, they are proposing bundling payments; essentially offering a shared global fee to physicians and facilities for an entire episode of care.  The definition of an “episode” varies; it might be an elective hip replacement with post-discharge rehab or a hospitalization for decompensated heart failure with 30 day follow up.  If the cost of care exceeds the bundle, the involved parties will presumably have a very strong incentive to do better the next time.

Bundling is a radical change, and radical changes bring radical consequences.  In a bundled payment environment, physicians could be held financially accountable for mistakes that are beyond their control (e.g. hospitalists might get dinged for something that occurs during an outpatient visit).  A shared hospital-physician payment could encourage unhealthy collusion between hospitals and their medical staffs and create financial incentives for restricting appropriate care.  And the infighting among physicians over how to equitably distribute a global payment could make Braveheart look like a Disney movie.

But the potential upsides of bundled payments are equally positive.  Bundling would mandate unprecedented care coordination and collaboration between healthcare silos.  Physicians would have strong incentives to align to streamline care and improve communication.  Hospitals, accountable for what happens post-discharge, might be less inclined to push patients out the door as soon as possible and more inclined to invest in improving post-acute care.  And most importantly, for the first time we could actually be rewarded for good stewardship of healthcare resources.

The bottom line is that we don’t know enough about bundling to tell if it will be a boon or a bust.  A bundle that works beautifully in some environments might bomb in others.  That’s why we need robust testing and deployment of demonstration projects to test the concept and a commitment to deploying bundles that have been appropriately vetted.  Tinkering at the margins of the reimbursement system won’t be enough to transform our healthcare system.  We need to think bigger.

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