In a single year, one health system saved itself more than $2 million on orthopedic, cardiology, and cardiovascular surgery procedures. Another hospital saved Medicare an estimated $750,000. Supply costs dropped, scores on quality metrics rose, and bonus payments were distributed to participating doctors.
A runaway success? Not so fast.
Encouraging, if early, results from Medicare’s Acute Care Episode (ACE) Demonstration might have strengthened the case for bundling payments around episodes of care as an effective way to rein in spiraling healthcare costs and transition from a volume-based to a value-based payment system. But broad skepticism persists over the wisdom of binding together the fates of hospitals and doctors, and critics are far from ready to drop their argument that bundling will be unworkable across wider, less-well-defined swaths of healthcare.
The current bundling and gain-sharing duo differs only superficially from the despised capitation model of the 1990s, argues Adam Singer, MD, CEO of North Hollywood, Calif.-based IPC: The Hospitalist Company. “It’s capitation in a different dress, except that instead of over a patient population, it’s done over an individual patient’s case,” he says.
Not so, says Lisa Kettering, MD, SFHM, vice president of medical affairs and CMO at Exempla St. Joseph Hospital in Denver.
“I’ve been around in medicine long enough to have been around when there was capitation,” she says. “I think the current bundling project is a vast improvement and I think it’s a very different animal from old capitation … and pivots absolutely critically on the physician involvement at the heart of quality, at the heart of decision-making. That’s never happened before.”
Amid the swirling expectations and apprehensions, what has the ACE demo taught us so far about bundling, and what does it mean for the future of hospital medicine? In essence, bundling lumps Medicare Part A and Part B reimbursements into a single payment aimed at encouraging hospitals and doctors to work together to improve efficiency, maintain high-quality care, and reduce overall expenses. Hospitals participating in the ACE Demonstration provide a roughly 5% discount to Medicare for a specific list of diagnosis-related groups (DRGs), and the Centers for Medicare & Medicaid Services (CMS) passes on half of the savings to beneficiaries who use participating hospitals for the covered procedures.
After submitting their claims, the hospitals receive a bundled Medicare payment, from which they pay doctors 100% of their Part B fees. As an incentive, some providers are eligible for bonus payments in the form of gain-sharing. CMS rules preclude any payments for referrals, cap all payments at 25% of the physician fee schedule, and mandate that any payment be based on reductions in patient care costs due to ACE activities. But participating hospitals are otherwise free to devise their own formulas and specific quality metrics that doctors must meet to gain the bonus.
SHM repeatedly has signaled its support for exploring bundling as a way to better align financial incentives among providers and reward them for quality and efficiency instead of quantity. The 10,000-member society strongly supports further testing of payment bundling methodologies prior to a national rollout, however, and has called for the integral involvement of hospitalists in developing and implementing bundling projects.
With its main focus on cardiologists, orthopedic surgeons, and cardiovascular surgeons, the ACE Demonstration has had little direct impact on hospitalists’ jobs or bank accounts—so far. That could change with an expanded pilot mandated by healthcare reform legislation. Slated to begin by Jan. 1, 2013, the project will redefine covered episodes of care to include all medical services administered three days before a hospital admission through 30 days after discharge.