Value-based health care leaders Michael Porter and Robert Kaplan argue that bundled payments are the best mechanism for transforming health care toward value.1
“For virtually all products and services, customers pay a single price for the whole package that meets their needs,” Porter and Kaplan wrote.1 “When purchasing a car, for example, consumers don’t buy the motor from one supplier, the brakes from another, and so on; they buy the complete product from a single entity. It makes just as little sense for patients to buy their diagnostic tests from one provider, surgical services from another, and post-acute care from yet another.”
Episode-based bundled payments have worked well for defined surgical and acute conditions, such as with knee replacement. Bundled payments appear to have led to better quality for patients, reductions in Medicare payments, and higher profits for providers. 2-4 Results from bundled payments for medical conditions like CHF and COPD differ, however, and have not been associated with significant changes in Medicare spending or outcomes. This may be due to the comparative complexity of medical care vs surgical care (see table below).5
While not as initially promising as the results from surgical bundles, what we have learned from the comparison of surgical and medical bundles can help inform the future. For example, medical episodes could start in the outpatient environment instead of during a hospitalization to provide better opportunity for coordination. Instead of emphasizing post–acute care that may be both complex and difficult to anticipate in medical care, incentives could focus on outpatient care and pre–discharge plans. Finally, we may just need more time to realize cost savings of medical bundles––other alternative models have required over three years before achieving savings.
Regardless of the type of bundle payment, one potential downside is it is possible providers could try to offset price decreases with volume increases (bundled payments do not limit the number of episodes), which could increase overall spending.
Recent evidence from a study comparing Medicare patients undergoing hip and knee replacements in areas with hospitals that volunteered to join Medicare’s bundled payment program versus areas that did not, found no evidence of an increase in surgical volume.6 However, it is possible the hospitals that volunteered represent a biased sample, since they could theoretically already have been doing a good job of managing bundled payments and that’s why they opted in to this program.
A more robust trial of hospitals randomized either to bundled or standard unbundled payments is currently underway, as of late 2018. A preliminary analysis of the first year of the 5-year trial found modest savings of 3% in post-acute care after knee or hip replacement, but no overall savings to Medicare after accounting for hospital bonuses.6
If anything is clear, it is that the story of bundled payments and how much they can potentially save the health care system is complicated and will require time to fully understand.
The Center for Medicare and Medicaid Innovation, or CMS Innovation Center, is currently piloting a number of bundled payment programs:
Bundled Payment for Care Improvement Initiative (BPCI), which is examining four different bundled payment models for 48 high-volume and/or high-cost conditions
Oncology Care Model, for episodes of chemotherapy
Comprehensive Care for Joint Replacement (CJR), for hip and knee replacements
Read More about Bundled Payments in the Policy Brief from The Department of Veterans Affairs (November 2017)
“A bundled payment system would truly transform the way we deliver care and finally put health care on the right path.”