Payment Reform Proposals Take Shape


Medicare’s experiment with bundling episodes of care is finding some encouraging signs of life after fee-for-service (see “A Bundle of Nerves” in the November issue of The Hospitalist). But beyond orthopedics, cardiology, and cardiovascular surgery, what diagnosis-related groups (DRGs) should be bundled, and how should such bundles be fairly divided?

Some healthcare administrators say the system might work best in areas with high device costs, such as spine surgery. SHM supports provisions in the Affordable Care Act establishing a voluntary national pilot program on bundling payments to healthcare providers, and in 2009 backed pilot programs for high-risk medical populations with COPD or congestive heart failure. Cynthia Mason, project manager with the CMS Medicare Demonstrations Group, says the latter is definitely on the list of resource-heavy conditions Medicare will be scrutinizing. “But, obviously, looking at chronic conditions is more challenging because the service is not as standardized as, say, a surgical procedure,” she adds.

That concern, in fact, is driving some of the pessimism from other healthcare experts.

“I think it’s not at all clear that there are very many conditions amenable to bundling,” says Robert Berenson, MD, a senior fellow in the Urban Institute’s Health Policy Center and vice chair of the Medicare Payment Advisory Commission (MedPAC). “Once you get down to the cases that everybody agrees lend themselves to bundling, it may be you're dealing with too small a percentage of spending to really want to go this route."

Emerging efforts to calculate how bundled payments should be fairly divided, however, also might provide more clarity on the best bundling candidates. The experimental PROMETHEUS payment model, developed by the Newton, Conn.-based Health Care Incentives Improvement Institute, is one example. It uses what are called evidence-informed case rates, or ECRs, to assign a budget for an entire episode of care. According to the nonprofit organization, ECRs are adjusted based on the severity and complexity of each patient’s condition, and an algorithm figures out how to divide the check.

There are limits, of course, in dealing with multiple comorbidities right off the bat. Even so, Stuart Guterman, vice president of the Washington, D.C.-based Commonwealth Fund's Program on Payment and System Reform, thinks a big chunk of our healthcare system's costs could be addressed with a limited number of well-defined but high-expense categories.

Click here to listen to Dr. Berenson and Guterman further discuss Medicare payment reform.

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