Bundled Payments

Who is Talking About Bundled Payments?

"There is nothing more powerful than an idea whose time has come."


— Victor Hugo

It seems that more and more people are talking about bundled payments these days…

We think that's a good thing - since in our opinion bundled payments represent the largest structural shift in the healthcare industry since the HMO Act of 1973. Though it may be difficult at first to understand the five-year and ten-year affect this new payment
method will have on the healthcare industry, it's important to note what thought leaders, visionaries and healthcare executives are saying along the way.

Former CMS* Administrator and prominent patient advocate, Dr. Don Berwick, MD says:

“This Bundled Payment initiative from the CMMI responds to the overwhelming calls from the hospital and physician communities for a flexible approach to patient care improvement. All around the country, many of the leading health care institutions have already implemented these kinds of projects and seen positive results. From a patient perspective, bundled payments make sense. You want your doctors to collaborate more closely with
your physical therapist, your pharmacist and your family caregivers. However, that sort
of common sense practice is hard to achieve without a payment system that supports coordination over fragmentation and fosters the kinds of relationships we expect 
our health care providers to have."


— Dr. Don Berwick, MD

Peter Orszag, an economist respected by both Democrats and Republicans for his objective opinions, is the former director of the Office of Management and Budget under President Obama. This role put him in a place to understand the looming threat healthcare costs had on the financial security of our country. During his tenure, he repeatedly drew attention to the role rising health care expenditures are likely to play in the government's long-term fiscal problems—and, by extension, the nation's long-term economic problems. He once said,

"I have not viewed the Congressional Budget Office's job as just to passively evaluate what Congress proposes, but rather to be an analytical resource, and part of that is to highlight things that are true and that people may not want to hear, including that we need to address health-care costs."

During his time at the CBO, he added 20 full-time health analysts (bringing the total number to 50), thereby strengthening the CBO's analytical capabilities and preparing Congress for health-care reform. Today, Peter Orszag is Vice Chairman of Investment Banking, Chairman of the Public Sector Group, and Chairman of the Financial Strategy and Solutions Group at Citigroup.

Given his track record as a rigorous, pragmatic, empiricist - at Remedy we like to read quotes from him that highlight bundled payments and the role they should play in society:

“If I had to pick out a few things to do immediately (in Obamacare), I would pick the acceleration towards bundled payments and non fee-for-service payment. We already have the structure in place, the challenge is to kind of ramp it up and accelerate it.”

“Last week, the CBO reported that many Medicare pilot projects that were designed to reduce costs actually haven’t done so. But the CBO suggested there may be promise in a “bundled-payment” approach, under which insurers pay a single comprehensive fee for treating a particular disease, rather than many fees for specific doctor visits and therapies. The health-care law includes provisions to expand bundled payments, and they should be aggressively adopted. This is exactly how health care reform should work: We try various approaches to generate better value from health care, many of which don’t pan out, and pursue the ones that seem to be working."

— Peter Orszag

At Remedy, we hope to hear about and read more quotes from Peter Orszag, since he clearly is a passionate subject matter expert - having been an architect of Obamacare.

Ezekiel Emanuel is likely best known to the public as the older brother to Chicago Mayor (and former Obama Chief of Staff) Rahm Emanuel and Hollywood talent agent Ari Emanuel, who is portrayed as Ari Gold in the hit HBO show 'Entourage.' However, within the healthcare industry Ezekiel "Zeke" Emanuel is recognized as a physician thought leader
who understands the macro-economic and cultural needs of our time. During the creation
of Obamacare, Emanuel acted as Special Advisor for Health Policy to Peter Orszag,
who was Director of the Office of Management and Budget at the time.

As Obamacare is rolled out, Emanuel has helped people understand the nuanced implications of the new law and often focuses his writing on the benefits of bundled payments programs.

In the New York Times, Emanuel wrote an opinion piece and was quoted saying:

"It is impossible to deliver high touch medicine in a fee-for-service system that emphasizes quantity over quality. In fact, most specialists and hospitals lose money if they keep the chronically ill healthy.


To change these incentives, we must introduce “bundling” — which, as the name implies, means paying for a patient’s entire care episode rather than every single test and treatment he gets. Imagine, for example, a patient who comes to the hospital for a hip replacement. That patient and his insurer (whether it’s Aetna or Medicare) will be billed separately for the X-rays, laboratory tests, the surgeon’s fee, the anesthesiologist’s fee, the rehabilitation services, the hospital bill and the visits to the doctor after he’s discharged.


In a bundled payment system, all the bills are rolled into one standard hip-replacement charge. The idea is to force all of a patient’s care providers to work together. They have a strong incentive to eliminate unnecessary tests and treatments and use less expensive implants, drugs and devices that don’t compromise quality, and to prevent infections and other complications that could land the patient back in the hospital.


The Affordable Care Act (aka "Obamacare") requires Medicare to run pilot programs with bundled payments, and recommends expanding the program to the whole country after Jan. 1, 2016, if doing so would reduce costs or improve quality."


— Ezekiel Emanuel, source

At Remedy, we are happy to be the largest operator of bundled payments programs under CMMI's BPCI initiative. Like Emanuel, we believe the healthiest future for the healthcare industry lies in effective 'bundling.'

In another Op-Ed for the New York Times, Emanuel highlights the case study of Arkansas - which has attempted a state-wide bundling effort, where a lot can be learned.

"Bundled payments for hip and knee replacements, which have similar costs for all patients, have been previously tested. But for other conditions, not every patient’s needs are the same. Some pregnant women are healthy while others have diabetes. The state and insurers will have to provide “risk adjustment” payments — in which providers are reimbursed more for treating sicker patients — and some patients with especially complicated illnesses may need to be excluded from the bundling system.


Even some low-cost conditions, like upper respiratory infections, are treated at widely varying costs, mainly because physicians prescribe different tests, numbers of office visits and medications (in 14 Arkansas counties, over 50% of patients with upper respiratory infections receive antibiotics, even though national guidelines say they
should rarely be prescribed because most infections are viral).


But this is exactly what the new program will work to change, by providing standards for appropriate care linked to the costs of treatment and the quality of the doctor’s performance compared with that of other doctors."


— Ezekiel Emanuel, source

We're always keeping an eye out for great quotes that put some context around the philosophy of bundled payments, so if you see or hear quotes in the wild out there - please send them along!


*The statements contained in this document are solely those of the authors and do not necessarily reflect the views or policies of CMS. The authors assume responsibility for the accuracy and completeness of the information contained in this document.


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