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    Replace Fee-for-Service With Bundled Payments in Medicare

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    Center for American Progress
    David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro explain why Medicare payments should be bundled together for multiple providers.

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    Replace Fee-for-Service With Bundled Payments in Medicare

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    Center for American Progress
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    David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro explain why Medicare payments should be bundled together for multiple providers.

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    Replace Fee-for-Service with Bundled Payments in Medicare

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    David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro explain why Medicare payments should be bundled together for multiple providers.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    177 views2 pages

    Replace Fee-for-Service With Bundled Payments in Medicare

    Uploaded by

    Center for American Progress
    David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro explain why Medicare payments should be bundled together for multiple providers.

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    Replace Fee-for-Service with Bundled Payments in Medicare

    David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro October 2011

    Since up to one-third of medical spending is excessive and unnecessary,1 reforming how Medicare pays for health care is essential to reducing health-care costs and improving the quality of care. Rather than paying a fee for each specific service separately, payments should be bundled together for multiple providers. This would create strong incentives for providers to coordinate care and eliminate unnecessary costs. For fully integrated providers that form accountable care organizationsteams of providers that coordinate carepayments will be bundled to cover all of a patients care. But for most providerswhich are not integratedpayments must be bundled for an episode of care, with providers dividing the payment among themselves. For instance, a bundled payment for a hip replacement would cover pre-surgical preparation, anesthesiology, the surgical procedure, operating room fees, the hip implant, radiological examinations, laboratory tests, and rehabilitation. Bundled payments must be adjusted for the quality of care and health status to prevent providers from skimping on care or avoiding high-risk patients. The Affordable Care Act requires a five-year pilot program for bundling payments for episodes of care around hospitalization for 10 conditions, with voluntary participation by providers. The secretary of health and human services is authorized to expand the program in 2016 if doing so would reduce costs and improve quality. This transition to bundled payments should be broadened and accelerated.

    Recommendations
    Expand the Acute Care Episode, or ACE, bundling program for cardiac and orthopedic procedures nationwideand include related post-acute care such as rehabilitative and home health servicesby January 2013. Building on over a decade of testing, in

    Center for American Progress | Replace Fee-for-Service with Bundled Payments in Medicare

    2009 Medicare introduced the ACE program, which operates in only 11 hospitals. The bundled payment covers all Part A and B costs around hospitalization for 29 cardiovascular (such as coronary bypass and cardiac pacemaker) and eight orthopedic (such as hip and knee replacement) procedures. While the program has not undergone a definitive evaluation, preliminary results indicate that it improves quality and saves 1 percent to 6 percent of costs.
    Require bundled payments for other specialists and primary care physicians by January 2016. For specialists, bundled payments would be modeled after the ACE pro-

    gram. For primary care physicians, a portion of payments would be a fee for each service and the rest would be a capitation paymenta fixed payment for each beneficiary. Beneficiaries would be able to designate a primary care physician, who would receive the capitation payment. The capitation payment would be adjusted based on patients health status and the quality of care, but would not increase with the quantity of care. By reducing their reliance on fee-for-service, primary care physicians would not be penalized for spending more time visiting with patients and coordinating their care. David M. Cutler and Ezekiel J. Emanuel are Senior Fellows at the Center for American Progress. Topher Spiro is the Managing Director for Health Policy at the Center for American Progress.

    Notes
    1 The Institute of Medicine, Roundtable on Evidence-Based Medicine, The Healthcare Imperative: Lowering Costs and Improving Outcomes: Brief Summary of a Workshop (2010).

    Center for American Progress | Replace Fee-for-Service with Bundled Payments in Medicare

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