Bun­dled pay­ments fol­low a pre­dictable script

Modern Healthcare - - COMMENT -

Re­gard­ing the Oct. 26 ed­i­to­rial “A bun­gled bun­dle” (Mod­ern Health­care, p. 24), bun­dled pay­ments are noth­ing new. They have been around since the 1970s when Congress cre­ated the End Stage Re­nal Dis­ease re­im­burse­ment pro­gram, a fixed bun­dled pay­ment for kid­ney trans­plants and dial­y­sis. Here’s what hap­pened then, and what will hap­pen with all the new bun­dles.

Pri­vate groups backed by ven­ture cap­i­tal­ists cre­ate spe­cialty providers that can eas­ily cut prices, since they do not have to carry any of the big over­head that a hospi­tal does (such as a 24/7 emer­gency depart­ment). In the early years, the spe­cialty fa­cil­i­ties make a bun­dle, since the start­ing rates are based on hospi­tal ex­pense data. Then, as ex­pected, Medi­care starts to cut rates. The pri­vate providers re­spond ac­cord­ingly, Medi­care cuts again, and around and around it goes.

Af­ter about four it­er­a­tions, hos­pi­tals drop out, leav­ing only a few pri­vate providers. Medi­care cuts some more, and when the cor­po­rate providers see the re­turn on in­vest­ment fall be­low ex­pected in­vestor re­turns, the cor­po­ra­tions sell off or drop out.

In time, the sys­tem is left with two or three pri­vate providers and they cut spe­cial deals with not-for-profit hos­pi­tals, and the pro­grams re­turn to the orig­i­nal fa­cil­i­ties at maybe break-even rates. And here we go again.

Frank Pog­gio Pres­i­dent and CEO Kel­zon Group Bar­ring­ton, Ill.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.