• All About Bundling

    Bundling payments to health care providers for all services provided during an episode of care is one of the ideas for reducing health care costs and increasing quality. This mode of payment is also associated with the accountable care organization (ACO) concept. A reader pointed me to RAND’s thorough, evidence-based brief on bundled payments, which makes for good reading for anyone wishing to understand the related issues or find relevant literature.

    The particular issue that concerns me is how providers will need to organize to manage bundled payments and what the implications–particularly for market power–are of those organizational arrangements. From the RAND brief:

    For example, hospitals are not typically in the position of having to reimburse physicians for services. If hospitals received the bundled payment and had to distribute it, they would have to set up contracting, billing, and reimbursement systems, all of which could require an expansion of current technologic capabilities. Further, mechanisms would have to be in place to guarantee that physicians were not being double paid (via the bundle and separate billing) for their services and that physicians seeing a patient for a problem unrelated to the bundled diagnosis were still paid appropriately.

    Note, RAND has an even shorter overview of bundled payments that might be a good place to start if this is all new to you.

    • Yes, there is so much to consider there that has to be considered in order to make bundled payments work. As of this point, I’m convinced that bundled payments might work in younger commercial populations who primarily get their conditions and diseases sequentially, but in a multi-diseased Medicare population it will be a disaster. Just the coding incentives alone are mind numbing (and remember coding incentives tend to drive whether something really works or not).

    • I would think this would push hospital administration towards physician employment. I doubt this will affect utilization as hospitals will be motivated to do just as many procedures and could provide incentives to physicians. I would think it would act as a price control.