‘Bundled Payments’ Can Save Money on Medicare

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Last week the Department of Health and Human Services (HHS) announced its second major move towards “bundled payments” in Medicare. A bundled payment groups all of the normal fees associated with a specific type of medical procedure — in this case, heart attack treatment and bypass surgery — into one payment that covers the doctor, hospital, medical devices and rehabilitation.

Currently, under fee-for-service Medicare, these would all be discrete payments. Bundled payments have shown promise in saving money while maintaining quality of care. Because the bundle tends to be set at a lower cost than if the services were priced separately, it focuses care providers on working together to improve efficiency.

The cardiac care plan follows last year’s announced bundling for hip and knee replacements. These types of procedures were chosen because there is a wide cost variation for them, but no evidence linking cost to quality.

Furthermore, cardiac bundling encourages more coordination and cost-sensitivity in determining what happens to patients in post-acute settings, after their initial hospital procedures. That is important because post-acute care has the widest geographic variation of spending in Medicare.

HHS also proposed that the bundled payment initiatives fit into new payment models dictated by the 2015 legislation to overhaul physician payments in Medicare that got rid of the need for annual “doc fixes.” This will give physicians more access to payment changes and possible quality bonuses without increasing the bureaucratic burden.

External links:
The Hypocritical Opposition to Funding Medicare Payment Reform (Concord)
What to Know About Medicare’s Big Bundled-Payment Expansion (Modern Healthcare)
Variation In Medicare Costs Is Mainly Due To Post-Acute Care (Forbes)

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