Bundling By Decree

Philip Betbeze, for HealthLeaders Magazine , June 11, 2009
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"How closely these entities will be aligned? You could have a totally owned operation, an end-to-end organization that will own everything, but more likely you will have contractual relationships," he says. "Technology will support the information available for people to get at that. The ability of one company to influence another company will have to happen."

Patient responsibility?
Depending on patients to take care of themselves properly following discharge is a huge wild card in the equation. All the positives about cost savings with payment bundling can easily be undone if patients don't follow guidelines the physicians provide them in order to have a positive outcome. Certainly, the one in five Medicare recipients readmitted to the hospital within 30 days can't all be laid at the feet of poor quality or poor coordination of care among providers.

Geisinger's guarantee is invalid if patients decide to use outside providers following discharge, for example. Certainly, Geisinger might have to change its model to reflect an "any willing provider" component to healthcare reform.

"If someone had their heart surgery here and developed a complication and then went to Philadelphia for care, that's not included in the bundle," says Paulus. "When people talk about accountable systems, it's not just the healthcare provider, it's the patient."

Under a federal bundled payment regime, the question of patient responsibility must be addressed. De Brantes says while individual patients might be irresponsible with their follow-up care, as a group those outliers should even out. The key question is "how do you get the various parts of a delivery system that aren't together to function together?" he says. Would the reform package include more stringent requirements on the patient, who, if he doesn't comply, might have to pay some penalty, whether financial or otherwise? It's another difficult question, the answer to which might determine to what degree reform would actually cut healthcare costs.

A possible outcome of bundling payments would be setting up geographic zones of Medicare beneficiaries where even independent practitioners have an incentive to track patient compliance. Physicians who provide services to a number of Medicare beneficiaries, for example, would be given a "quality dividend" for the region's overall performance on quality of care.

"We're trying to avoid putting this type of global fee or episode of care payment into a box," he says. "Don't limit this so it can only be procedures and can only be paid prospectively. Make it so you can reconcile retrospectively. Make it as open as you can, so any willing provider can participate."

Philip Betbeze is senior leadership editor with HealthLeaders Media. He can be reached at pbetbeze@healthleadersmedia.com. Michelle Ponte, senior finance editor for Health Leaders Media, contributed to this story.
Consolidation: A Problem or Solution?

One of the consequences of a large-scale reform effort in how CMS pays for medical services could be pressure to consolidate among providers. Bundling payments could cause hospitals that don't have ownership in a health plan, imaging center, rehab facility, or other ancillary services to want to acquire them or be acquired themselves if they don't have the financial firepower to compete in the new landscape.

Some say that such consolidation in healthcare is long overdue. After all, the argument for the creation of so many integrated delivery systems in the early '90s was that economies of scale could be achieved. The urge to merge could be even greater under a bundled payment system as providers seek to control all aspects of the value chain. If the rehab center, through negligence or poor quality care, causes a patient to be readmitted to the hospital for no extra reimbursement, well, multiply that outcome on a large scale and you see the potential problem.

But some say consolidation as a result of payment reform simply won't solve the healthcare cost problem.

"If you create a system that will consolidate providers, it will worsen the cost crisis," says Francois de Brantes, CEO of Bridges to Excellence. "You can mitigate that by not limiting this to accountable care organizations."

He fears that consolidation will simply lead to monopoly situations in the private sector, and even though regional monopolies won't affect government payers, as they dictate price, it will affect private sector insurance contracting, for example. De Brantes says such a problem could be mitigated by rewarding quality for even smaller organizations that might not meet all the patient tracking criteria that larger organizations might need to muster to receive a quality bonus, for lack of a better term.

Others don't share the view that payment bundling would necessarily encourage vertical integration. "I don't believe these things can be owned across an organization simply because it's too costly," says Deloitte & Touche's Russ Rudish, vice chairman and U.S. healthcare providers sector leader. "An end-to-end solution would be too complicated, at least right now, for most providers."

Unless they're already consolidated, and several systems nationwide are, it would be difficult for all but the most financially pristine of large healthcare organizations to quickly move in that direction because of problems in the debt markets, sharply lower returns on hospital investment portfolios, and the moribund state of the economy.

"It's hard to say you're going to generate a billion dollars worth of capital to make that happen. Getting money is so expensive, they're just not doing it."

Rudish concedes, however, that over time, under bundled payments, and as the economy normalizes, it makes sense strategically.

"Over the next 20 years this may happen."

Philip Betbeze

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