Bundled Payments May Save Money in Healthcare

We know that surprise bills are no fun, and that value-based reimbursement may be just what the doctor ordered. But what about bundled payments? There’s talk that bundled payments may be the next big way to save on healthcare costs. Bundled payment arrangements are made between the provider and insurer, and patients benefit from lower overall health care costs. The big question: Is this working North Carolina?

 

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Richard Eisenberg writes in Forbes about the possibilities and opportunities of bundled payments.

“Two of the most upsetting things for patients are the high cost of health care and the surprise — sometimes indecipherable, sometimes nonstop — hospital bills. But something known as ‘bundled medical payments’ might relieve both of those and possibly provide you with better health care.

With bundled medical payments, patients are told before the medical procedure exactly what the whole shebang will cost, and pay a flat fee up front. Think of it as prix fixe health care.

With a bundled payment, you wouldn’t get one bill from the surgeon, one from the anesthesiologist, one from the hospital, one for physical therapy and so on, the way you normally do now. Instead, you get a total fee and hospitals and doctors are incentivized to keep costs down, so they can ensure profits.”

Eisenberg is jumping a little bit ahead of the game – at this point (and probably not any time soon), patients do not know the breakdown of prices of treatments ahead of time even with bundled payments, because the costs have to be calculated with the insurance provider. Prix fixe is misleading, since the patients do not get to choose what they pay for, or know how much that cost is – that’s between the doctor and the insurer. While it would be nice for patients to be told exactly what “the whole shebang” will cost, the reality is that a bundled payment will cover the initial procedure, but won’t cover the additional tests or follow-up visits. This is still a leap in the right direction when it comes to lowering healthcare costs. Eisenberg is right on one point -- hospitals and doctors are incentivized to keep costs down. Bundled payments mean a flat fee for everything. It’s a payment based on the quality of care rather than sheer volume of care. The hospital is then motivated to treat the patient based on their individual needs rather than run a wide gauntlet of tests and multiple visits. If every test is necessary for a patient, the flat fee still remains the same. If a different patient does not require as many tests, the flat fee remains the same. The care becomes the focus, rather than extra payments.

How Bundled Payments Could Help Patients and Hospitals

“Bundled payments are ‘a powerful tool for the health care system,’ Shawn Bishop, vice president for the Controlling Health Costs Program at The Commonwealth Fund, a nonprofit health research group, said at a recent webinar on the topic. They’re being tested to ‘improve the cost of health care and the quality of health care,’ she told me in an interview.

‘It’s a significant departure from the legacy model of health care,’ said P. Marshall Maran, CEO and president of Muve Health, a joint replacement company that works with health systems to bundle payments before hip or knee replacement surgery. ‘We have a 50-year-plus run of a business model and tech and infrastructure with large insurance companies set up for a fee-for-service model, so unwiring that will take time.’"

Hip and Knee Replacement Surgery

“So far, hospitals and doctors are mostly experimenting with bundled medical payments for hip and knee replacements — because those surgeries are typically straightforward. (An average joint replacement costs $26,000, but some cases exceed $125,000, according to The New York Times.) The results for patients charged through bundled payments have been promising, especially for people over 65 who are on Medicare.

‘The bundled-payment trend is very smart and very good for health-care consumers,’ said Leor Catalan, CEO and co-founder of Robin, a new platform that lets consumers know the cost of health care in advance.

Medicare began testing bundled payments in 2012, on a voluntary basis. Then it began making bundled payments mandatory for hip and knee replacements in 67 markets; President Trump has since scaled back the number to 34, but added new, voluntary bundles for some inpatient and outpatient episodes of care.

So far, hundreds of hospitals and thousands of health providers have made millions of bundled payments. Here’s a U.S. map showing places where Medicare has bundled payment arrangements.”

But what about N.C.? Good news: This type of specialty care is already available in North Carolina. Blue Cross Blue Shield is one of the companies that bundles payments for hip and knee surgery. As Patrick Conway, President and CEO of Blue Cross NC, shares, “A good example of bundled payment is a hip and knee replacement. Right now, we have a program that saves 10 percent to 30 percent and it has better quality when you pay for a 90-day episode around the hip and knee replacement.” He also notes that the value-based bundled payment allows the healthcare facility to focus solely on the needs of the patient, not the costs.

“The providers are all incentivized to work together to care for the patient.”

What the Bundled Payment Studies Show

“When The Commonwealth Fund, along with researchers from Harvard University and the University of Pennsylvania, studied the outcomes of some bundled payment surgeries, they found ‘costs generally are lower and contained, and quality is either stable or a little bit better’ than similar procedures billed the traditional way, said Bishop.

In one study published in the Journal of the American Medical Association in 2017, joint-replacement surgery payment bundles for 3,942 Medicare patients saved taxpayers $5,577 or roughly 21% per joint replacement care episode.

Dr. Amol Navathe, assistant professor, health policy and medicine at the University of Pennsylvania, noted during the bundled-payment webinar that research he and his colleagues did found a four percentage point improvement in cost (roughly $500 to $1,000 per joint replacement episode) by bundling hip and knee replacements.

‘There was no effect on increasing or worsening quality,’ he added. Nor was there a significant increase in the number of surgeries performed. And patient satisfaction neither worsened nor improved with bundled payments.

One caveat: The data was based largely on the experience over one year. ‘What we know is that change is hard and takes time,’ Navathe said.”

Eisenberg notes that we’re more likely to see bundled medical payments for hip and knee surgeries, but other types of medical procedures will take time, since treatment plans for conditions are very different than treatment plans for surgeries. (Also, individual plans take time and care that may not fit a bundled checklist.) However, there is hope that bundled plans can be tested and broadened to help save patients and practices as much money as possible, without sacrificing care.

For more on this story, visit Forbes.

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