Home Analysis Sounding an alarm on bundled payments

Sounding an alarm on bundled payments

October 2009

Published in the October 2009 issue of Today’s Hospitalist

IN THE FIERCE DEBATE over health care reform, a new type of reimbursement being considered in several drafts of reform legislation could have a major impact on hospitalists.

The innovation is bundled payments, a payment methodology in which insurers would bundle together what are now separate payments for hospitals and physicians. The idea behind bundled payments is to give both doctors and hospitals an incentive to better coordinate care and reduce the costs of preventable readmissions.

Many hospitalists think bundled payments can be a major business opportunity. Yet a hospitalist think tank that includes many of the nation’s biggest private hospitalist practices has major concerns. In August, the Phoenix Group released a white paper that warns that “bundled fees may result in a slowdown or even a reversal” of compensation for hospitalists.

Felix Aguirre, MD, is vice president of medical affairs for IPC The Hospitalist Company, the country’s largest hospitalist provider. (IPC is a founding member of the Phoenix Group.) While Dr. Aguirre acknowledges that bundled payments could improve inpatient care, he’s concerned that Congress may decide to fast track what is now only a demonstration project before results are fully vetted.

“The jury is still out on bundled payments,” says Dr. Aguirre, who notes that final legislation for bundled payments is slated for 2014. “We want to make sure the trigger is not pulled too early before the true benefits and pitfalls can be evaluated.”

A five-site demonstration
This year, the Centers for Medicare and Medicaid Services (CMS) began testing bundled payments with a demonstration project in five sites around the country. One site is the Baptist Health System in San Antonio, a five-hospital system served by more than 30 IPC hospitalists.

In the current demonstration, bundled payments apply to several dozen cardiac and orthopedic procedures, including stent placement and hip-fracture repair. Will hospitalist reimbursement suffer in the rush to save health care dollars? Hospitalists are involved in the tight medical management and discharge for “every one of these cases,” says Dr. Aguirre, and they’re being paid 100% of Medicare rates.

In this demonstration, hospitalists are not eligible to share in any cost savings that may result. Only the interventionalists ” the doctors actually performing the services related to the primary DRG covered by the project “can participate in possible gainsharing and benefit financially. Dr. Aguirre points out, however, that expanding this demonstration to a pilot program that would extend bundled payments to strictly medical patients and to post-acute care settings is “highly anticipated.”

While the demonstration just kicked off in June, Dr. Aguirre says that hospitalists have already seen a change in practice. Proceduralists are hewing much more to evidence, he explains, particularly as it pertains to shorter lengths of stay, and they’re working more closely with hospitalists on timely discharges.

Dr. Aguirre expects this three-year project to yield substantial savings and even fewer readmissions. But he cautions that success at five testing sites won’t necessarily mean any advantage for hospitalists.

Shifting savings to primary care?
For one, Dr. Aguirre wonders how well results will translate to thousands of facilities across the country. Test sites that host demonstration projects, he says, are usually ahead of the curve with billing and data-collecting systems, and additional education and case management.

And there remains little in the way of details on how bundled payments will be distributed and who will share in the cost savings that result.

“We won’t benefit financially on the upside of this current demonstration” says Dr. Aguirre, “but we want to make sure we don’t lose anything on the downside either.”

A major concern is that inpatient savings generated will simply be shifted to primary care. One possible reform gaining significant attention is the medical home model, a system in which primary care physicians would be paid more to provide more comprehensive care coordination.

According to Dr. Aguirre, many worry that higher reimbursements for outpatient general medicine may come from inpatient cost savings produced through projects such as bundled payments.

While some have proposed legislation to find “new” money for primary care, “that’s still pie in the sky,” Dr. Aguirre argues. “In reality, there is a Part A and a Part B, and if we have to pay more for primary care, that reduces the amount of money on the inpatient side.”

Concerns over payment distribution
Another huge unknown is how bundled payments would be distributed. For hospitalist and subspecialty practices that aren’t hospital-owned, some policy-makers are pushing physicians and hospitals to form physician-hospital organizations or independent physician associations to make it easier to split bundled payments.

But Dr. Aguirre and others fear that payments will be sent instead to hospitals for distribution. “People would like to see some standard methodology for payment,” he says, “and sending payments out to hospitals for each to decide how to distribute is probably not the best solution.”

If hospitals do end up controlling payment distribution, for example, they may find it easier to work with hospital-owned groups. That could give hospitals a disincentive to contract with private companies.

Dr. Aguirre points to another possible repercussion for private groups. Hospitals determining a hospitalist group’s share of a payment bundle may attach conditions to that reimbursement, such as limiting the number of patients hospitalists can see per day.

“Under the private practice model, we may not be able to break even. We could be left without the potential to earn more money or incentive to work harder,” he says. That could result in private companies needing more support in the form of stipends, which would in turn make them less competitive against hospital-employed groups.

To protect hospitalist reimbursement, Dr. Aguirre thinks the CMS should distribute any bundled payments. The only way to standardize payments, Dr. Aguirre explains, is to have one umbrella organization over and above any individual hospital or IPA. “The CMS,” he points out, “has that role right now.”

And while he would prefer to retain fee-for-service billing, “if we need to migrate into a bundled payment system, then I would advocate for a physician DRG payment” to be set by the CMS for those not involved as proceduralists. With such a DRG, hospitalists would still be incentivized to provide high quality, efficient care.

“If we end up keeping patients longer” and providing more services, he says, “we would still just receive the one payment for their care.”

Perhaps most importantly, Dr. Aguirre says he wants the current demonstration expanded to include more sites, more medical DRGs and post-acute care to fully gauge the impact of bundled payments on readmissions. Despite the dire need to save health care dollars, bundled-payment demonstrations or pilots need the chance to “fully run their course,” Dr. Aguirre says, and not be fast tracked for legislation before 2014.

“We think this can be a business opportunity, but the big question is how the payment methodology could affect hospitalists,” he says. “Could they suffer from it? And will physician-hospital organizations or hospitals control what physicians get?”

Phyllis Maguire is Executive Editor of Today’s Hospitalist.