Tying it together
Bundling projects proceed, with some snags
Bundling payments to hospitals and doctors for episodes of care is gaining momentum in the federal government and in the private sector as a way to increase provider accountability and improve care—but lingering challenges may deter its application on a broader scale.
To help address rising healthcare costs, including the growing tab for medical complications and readmissions, Geisinger Health System, Danville, Pa., came up with a plan in 2006 to package or “bundle” payments for elective cardiac surgical care or coronary artery bypass grafts. The result: improved outcomes and reduced costs, its advocates claim.
Since it started bundling payments for cardiac surgery, three-hospital Geisinger reports that all of its patients are receiving “best care,” based on 40 best-practice steps derived from the American Heart Association and the American College of Cardiology guidelines for cardiac surgery.
As a payer there’s an unpredictability of how much something is going to cost, says Alfred Casale, associate chief medical officer and chairman of cardiothoracic surgery at 172-bed Geisinger Wyoming Valley Medical Center, Wilkes-Barre, Pa. “You wind up with huge variation in payment” that frustrates payers, caregivers and patients alike, he says.
In establishing bundled payments, Geisinger was trying to introduce some predictability for a specific episode of care, in addition to removing variation among these patients in terms of resource usage. In addition, it was transferring the financial risk of complications and readmissions from the payer and handing that responsibility to the providers to affect patient outcomes.
In essence, “You’re throwing the ball into the court of the clinicians and hospitals, and they decide how you divvy up the goodies providing care,” Casale says.
Meanwhile, 490-bed Hillcrest Medical Center, Tulsa, Okla., part of Ardent Health Services, reports a similar success story with bundling.
One of the five sites participating in the CMS’ Acute Care Episode demonstration project, Hillcrest estimates it has saved nearly $730,000 since it began implementing the ACE demonstration in May 2009 (April 6, 2009, p. 32).
Bundling is a “win, win, win” for the hospital, doctor and patient, says Steve Landgarten, CMO of eight-hospital Ardent, headquartered in Nashville.
It allowed Hillcrest “as a community hospital to address patients’ and physicians’ financial needs, so doctors could work with us to maintain high-quality outcomes and reduce the cost of those outcomes. Everybody gets a piece of reduced costs to continue highquality outcomes.”
The concept of “bundling,” which essentially means paying providers a fixed amount per month or year for all covered services, has specifically been tagged by the Obama administration as a cost-saving measure. Last year, the new administration estimated that bundling Medicare payments covering hospitals and postacute care could save as much as $17 billion over the next 10 years.
In addition to the CMS’ ACE demonstration, the federal government plans to do more testing in the future, possibly through a national, voluntary, five-year pilot on bundling payments that was authorized by the new health law and would get under way in 2013.
A number of policy developments have gone into the promotion of bundling payments for episodes of care, says Peter Hussey, a policy researcher at RAND Corp.
“There’s bipartisan agreement into this idea that fee-for-service is a major problem in terms of healthcare costs,” Hussey says. “Medicare currently pays hospital care by admission, but there are strong advocates who say the federal insurance program needs to think even more broadly” when designing payments for episodes of care. The federal government and the private sector are trying to get in front of this, and enthusiasm among the provider groups and employers is building to pay by value rather than volume, Hussey says.
At least in the private sector, the train driving payment bundling seems to be moving along at a steady clip.
In addition to Geisinger, other private-sector organizations, including the Brookings Institution and the Integrated Healthcare Association in California, are testing variations of the payment model. At the state level, Minnesota has a 2008 law implementing “baskets of care.” Early this year the state began bundling payments based on episodes of care, Hussey says.
“The private sector is right not to wait around” for the federal government to take the lead on bundling, says Deirdre Baggot, administrator for cardiac and vascular services at 361-bed Exempla St. Joseph Hospital in Denver. “They want to explore this as a viable payment strategy.”
Two-hospital Exempla Healthcare is another hospital system participating in the three-year ACE demonstration. The others in addition to Hillcrest are 1,275-bed Baptist Health System, with four campuses in San Antonio; 78-bed
Casale: The ball is in the court of hospitals and clinicians.