Your Salary in A Bundled Fee World

By  |  April 20, 2015 | 

I began to think about doctor fee carve outs in the context of global payments approximately five years ago.  At a meeting I attended where the subject came up, private conversations transpired between a group of us and folks in the know from CMS and the AHA.  We listened.  They talked.

The discourse led me to two conclusions: one, as compensation goes, any new reimbursement scheme will require members of specialties to do their own bidding, i.e., justify their share, and two, respective delivery systems—be they independent practices, IPAs or hospital organizations—will set outlay policy based on values they establish internally.

The government has little interest in venturing into the rate setting game again.  Uncle Sam learned the hard way the last time they tried to codify doctor payment.  The contracted designers of the RBRVS, fee-for-service model did not have a Gordian knot in mind when they implemented the system we have in place today.  Think SGR fix.

Given another opportunity, as experiments evolve, the feds will be more than happy to let the laboratories of democracy within each hospital referral region set their own course.  A transfer of cash won’t give an accepting entity free reign, but they will have more latitude to experiment with customary pay patterns.  That’s if they have the mettle.


If past is prologue, systems may hew to traditional norms and utilize the same factors in formulating reimbursement scales, plus or  minus a few bucks.  I can envision administrators and department heads balking at upending the status quo because culture always  eats strategy for breakfast.  Many doctors don’t want to move from conventional fee-for-service payouts, and practitioners in  lucrative specialties have no interest in ceding their turf.

The biomedical model of care, a misguided vestige of post WWII, winner take all approach to human health—rooted in diseases,  organs, basic science and technology—still drives the payment system we have today. You own a body part and you can write your  ticket.  We continue to define worth in those terms and organizations will have to tread carefully if they wish to transition to a new standard.

With the above in mind, I read with great interest a recent JAMA commentary by BIDMC hospitalist, Ateev Mehrotra, MD, entitled,  Physicians in Bundled Hospital Care Payments.  Time to Revisit an Old Idea?

Congress capitulated to the AMA when they passed Medicare fifty years ago, and in so doing, decoupled hospital and doctor  payment.  Given the current push to incorporate the two funding streams in an integrated manner, the authors give some history  behind how we arrived at our current rate structure and then cite the benefits and barriers to shifting anew.  I consolidated their conclusions below:



1–Including physicians in the DRG payment could lead to better physician engagement in quality.

2–Including physicians in the DRG payment also might encourage delivery innovation for hospitalized patients.

3–Bundled physician and hospital payment also might decrease administrative costs.

4–The documentation burden on physicians also could decrease.


1–The uncertainty about the response from physicians:

a–In hospitals in which physicians are employees, implementation of such a payment change should be straightforward, and administrative savings may be considerable.

b–In hospitals in which physicians are independent, physicians and hospitals will need to negotiate on reimbursement.

c–Specialties relying on E&M codes may benefit, those on procedures may not.

2–Hospital response:  teaching hospitals may require a larger bundle to accommodate the greater doctor to patient ratios.

3–Doctors shifting from per diem payments may impact quality generally and length of stay specifically, due to incentives to save resources.

4–Medicare must proactively decrease the portion of the bundle allocated to physicians to realize savings.  They may not succeed.

5–Finally, there is uncertainty about whether private payers would follow Medicare’s lead.


Each bullet point merits some exploration, but by far, as I alluded to above, those issues concerning physician pay will get outsized scrutiny.  If you remain hospital employed, under whose guise will you receive your portion of the bundle: a multidisplinary committee (consisting of whom, using what evidence?), a CFO, or your department head after a battle royale with the other six down the hall?  If your practice rests outside the sphere of the hospital, then market power and the state of local competition will drive the outcome.  In some cases, subspecialists in shortage areas will call the shots, and in others, practitioners from locales with an overabundance of docs will be in for a rude awakening at the negotiation table.

I do not envision a world in which we have full hospital employment–and as a result we will get a lot of variation, nor do I envision an overnight transformation in how we receive our pay.  The evolution will occur as experienced in the boiling frog metaphor—and like the frogs, without us knowing it.  Salaries will both shift and reduce, subtly and over time, and those smaller hospitals without the means to implement their own remedy will struggle and eventually crib from larger systems.  Through trial and error, the big boys will most probably build a better mousetrap–just like they always have.  I am also not aware of any system overseas we can model in toto given the unique manner we Yanks do things here (look up exceptionalism).

Until then, hospitalists–and all docs for that matter–must contemplate how much more (or less) we contribute to an episode of care—in myriad settings and levels of acuity.  The answer won’t emanate from CMS.  Like an automobile GPS navigation database badly in need of an update, we can use their old map to chart north from south—but not to get us reliably to the destination.  For that, we will need to engage in our own fact-finding pursuits and meticulously follow ongoing bundled experiments.  This stuff is difficult, painful and I don’t know what comes next, but I suspect a lot of folks will muck things up before we get it right.  Dr. Mehrotra finishes his piece on a somewhat sanguine note.  Let’s see.



  1. Avatar
    Rupesh Prasad April 23, 2015 at 1:06 pm - Reply

    Thanks for an overview of the advantages and the barriers in implementation of bundled payments, along with your thoughts on their impact on hospitalists.

    I think one of the key issues would be quality of care be it length of stay, readmission rates and so on. Am not sure about the impact on innovation in health care as a whole, feel this this system might limit innovation and research. Also it might not effect the documentation requirements for the providers, which as you know have become more complex and held to a higher standard.


  2. […] Flansbaum offers his perspective on the impact of reimbursement changes on physician compensation, while Joe Paduda has short piece about whether private insurance or Medicare/Medicaid does a better […]

  3. […] Flansbaum offers his perspective on the impact of reimbursement changes on physician compensation, while Joe Paduda has short piece about whether private insurance or Medicare/Medicaid does a better […]

  4. […] Flansbaum offers his perspective on the impact of reimbursement changes on physician compensation, while Joe Paduda has short piece about whether private insurance or Medicare/Medicaid does a better […]

Leave A Comment

About the Author: Bradley Flansbaum

Bradley Flansbaum
Bradley Flansbaum, DO, MPH, MHM works for Geisinger Health System in Danville, PA in both the divisions of hospital medicine and population health. He began working as a hospitalist in 1996, at the inception of the hospital medicine movement. He is a founding member of the Society of Hospital Medicine and served as a board member and officer. He speaks nationally in promoting hospital medicine and has presented at many statewide meetings and conferences. He is also actively involved in house staff education. Currently, he serves on the SHM Public Policy Committee and has an interest in payment policy, healthcare market competition, health disparities, cost-effectiveness analysis, and pain and palliative care. He is SHM’s delegate for the AMA House of Delegates. Dr. Flansbaum received his undergraduate degree from Union College in Schenectady, NY and attended medical school at the New York College of Osteopathic Medicine. He completed his residency and chief residency in Internal Medicine at Long Island Jewish Medical Center in New York. He received his M.P.H. in Health Policy and Management at Columbia University. He is a political junky, and loves to cook, stay fit, read non-fiction, listen to many genres of music, and is a resident of Danville, PA.


Related Posts

February 11, 2020 |  1
I am feeling discouraged. Actually, I am pretty frustrated. I truly believed that if we could “choose wisely” and cut out the nearly $1 trillion of waste in health care that we would make a real dent in costs in health care. Not only that, I even thought that decreasing these total costs of care […]
September 24, 2019 |  0
Look up from your stack of journals lately? You will note DNA analysis has gotten awfully popular. Mom, dad, and the rest of the clan want in and the temptation to obtain the blueprint that makes you, you has an almost hypnotic-like draw. You are curious if what grandma told you—half of your “G, C, […]
June 10, 2019 |  0
Public and private payers incentivizing providers (P4P) to coax desired clinical behaviors have failed. Both CMS derived measures and those used by commercial insurers, many of which overlap, fail to pass Good Housekeeping standards and lack the reliable characteristics indicators must possess. Whether those indicators are valid, attributable, or meaningful makes all the difference in […]