Bundled Payments Bomb. Why?

Tom Emerick

Posted 11/10/11 on Cracking Health Costs

We all know the biggest shortcoming of our current fee-for-service  health care system — the incentives are all wrong.  One reform idea has been to move toward bundled fees in which all expenses for a procedure are paid in one global fee. That is theoretically an excellent idea. While that is working very well in some care centers for specific procedures, it may not be scalable.

The PROMETHEUS Payment project was kicked off about three years ago to test bundled payments.  A recent press release by the Rand Corporation reports the test did not succeed…  “Researchers say that adoption of the bundled payments approach was slowed by both technical and cultural difficulties.”

At one time Medicare thought DRG payments to hospitals would curb spending.  It didn’t work obviously.  Problem is that form of payment lead to DRG creep, i.e., ratcheting up the diagnosis to get higher payment.  in short, one of the problems with this style of payment reform is diseases and diagnoses are subjective in the extreme.

One of the biggest problems is that doctors are mainly still paid for each procedure.  How do you divide the pot?

What is certain is that the best care around is in clinics where doctors are paid salaries, not fee-for-service.  See Mayo Clinic, Kaiser, Cleveland Clinic, the veterans health system, and a few more.  (Yes, that’s right the VA system is one of the best today.)  The same principle is true globally too.

Anything we can do to boost salaried doctors will make major strides in the right direction.

Employers can and should drive as much business as possible to centers whose doctors are salaried, especially for major complex cases.  As you’ve seen in my previous posts, that can save money and save lives too.  The more of that employers do, the more other clinics will  reform themselves.

Tom Emerick writes at Cracking Health Costs, and consults with large employers on approaches to more effectively manage the care and cost associated with high risk patients. He is the former VP of Benefits for Walmart.

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