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Bundled Payments: Toward A Challenging Yet Better Place



June 1st, 2012

‘But I don’t want to go among mad people,’ Alice remarked.

‘Oh, you can’t help that,’ said the Cat. ‘We’re all mad here. I’m mad.

You’re mad.’ ‘How do you know I’m mad?’ said Alice.

‘You must be,” said the Cat, ‘or you wouldn’t have come here.’

Can we stipulate that the way we have collectively chosen to pay for health care is mad?  Would you mind too much if we just agreed that our fee-for-service approach is unsustainable?  Perhaps it made some sense to someone at some time in the past, but those quaint days are over.

Megan Burns and Michael Baillit, authors of a new Health Care Incentives Improvement Institute issue brief on the status of bundled payments, note that their interviewees agreed on that point.  We can no longer rely on the predominant way we pay for care.  It leads to perversely high service volume and inexorably rising health care costs.  Our task now is not to stay put or go back, but rather to decide which way to proceed.

In some ways we are fortunate.  We have the urgency of now on our side.  Our ongoing health reform debate, as well as national attention to our ballooning federal deficit and the central role that rising health care costs plays in that deficit problem, all are prompting us to, as they say, “bend the health care cost curve”.  How should we do that?

At the Robert Wood Johnson Foundation (RWJF) we, like many, have been working for years to help in just such a national moment.  We have devoted enormous resources to our centerpiece effort, an initiative called Aligning Forces for Quality, in which communities across the nation learn how to improve both the cost and quality of their health care.  In that nearly 10 year effort, local consumer, employer, health professional, and health plan leaders have been working together to improve the value of their health care. They are doing many things to make that happen — including, importantly, experimentation with new payment reforms like bundled payments.  Burns and Baillit included several of these Aligning Forces communities in their bundled payment study.

A few years ago, RWJF and the Commonwealth Fund helped develop and refine the promising PROMETHEUS payment project.  RWJF supported the project’s efforts to build evidence-informed case rates or episodes and manage several local pilot payment projects.  The Burns and Baillit bundled payment report includes interviews from those PROMETHEUS pilots.

RWJF also funded a RAND study recently published in Health Affairs regarding progress in three PROMETHEUS pilots.  That study found, not surprisingly, that pilots attempting to launch a fairly radical and complicated bundled payment reform like PROMETHEUS in active, dysfunctional and fragmented health care settings would obviously encounter significant delays and major challenges.  The RAND authors also, though, correctly noted that virtually any payment or delivery system reform applied to our current dysfunctional health care settings would encounter similar challenges.

The question then is not whether a payment reform can avoid major implementation challenges.  The question should be:  Do we have promising payment alternatives that help us save health care dollars?   If we do, how can we quickly and practically address the predictable challenges?  What have we learned about implementing promising payment models like bundled payments?  Arguably, we now have sufficient experience to understand that, at least in certain limited care settings, bundled payment approaches can take hold and can help garner precious savings.

The Burns and Baillit bundled payment report provides a helpful snapshot of the current real world state of bundled payment attempts in the United States. The authors reviewed all 19 of the first bundled payment arrangements.  Their report discusses the medical conditions these efforts address, the way they define bundles, how they parse risk and, importantly, how they make payments.

American health care and our nation are at a pivotal, difficult time.  Most now understand that we cannot go back; that way leads to more cost escalation, fragmentation, and unaffordable mediocrity and waste.  That way is madness.  We must press into unknown and challenging yet better territory.  This new issue brief provides some practical mapping of the bundled payment part of that new place.

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