Bundled payments, Episodes of Care and Accountable Care Organizations appear to be part of your future.  They were initially promoted by MedPAC as the only opportunity to realize any real cost savings supported by Rand research, and now it has been taken up by Congress in their health care reform bills.  The Senate Bill, America’s Health Future Act of 2009, calls for the Department of Health and Human Services to develop and evaluate bundled payments for acute inpatient hospital services and post-acute care for an Episode of Care that begins three days before hospitalization and spans 30 days following discharge.  The House Tri-Committee on America’s Affordable Health Choices Act of 2009 also asks that Accountable Care Organizations, bundled payments and medical homes be adopted on a large scale if pilot programs prove they are effective at reducing cost.

CMS has already moved forward with efforts to assess the impact of bundled payments on reducing cost, improving efficiency and improving quality and patient health through their Acute Care Episode bundled payment initiative.  The hospitals provided a bundled charge for certain orthopedic and cardiovascular procedures and associated care, and any savings generated by their ability to provide care for that sum, below the standard DRG payment, will be shared by CMS, the hospital and the patient.  The ACE demonstration is currently limited to inpatient stays but they are looking at expanding the project to post acute care and to address hospital readmissions.  The ACE Demonstration was slated to begin in 2009, but only three of the five selected facilities began their participation in 2009. 

Baptist Healthcare was one of the first ACE hospitals to begin the program and they are already seeing results from their roll out of the program.  Baptist was able to enlist the participation of doctors by ensuring that they would be paid, at a minimum, their full part B benefits, yet allowing them to share in any hospital bonuses.  In the first month, Baptist only paid monthly bonuses to a few of the 150 or so eligible doctors.  Over time, however, that number has grown to bonus payments to 90 doctors.  They have found that their savings are in the seven figures, largely driven by standardizing options for expensive medical devices, but they have also seen an increase in their quality scores and they have been able to reduce patient lengths of stay and post surgical infection rates.

If Baptist’s results are shared with the other demonstration facilities, than a broader adoption of a bundled payment could create significant cost savings for Medicare.   In general, however, most agree that any real quality improvements and cost savings can only be gained through addressing the entire continuum of care for a patient and making sure that all providers of care have the same motivations and goals.  Since not all providers work within the hospital structure, other payment models are needed to address these gaps in care.  Some private programs, such as the Prometheus Project, are addressing those gaps by looking at chronic disease management bundles.  Medical homes and other state and private initiatives are also underway, so the actual structure of any future bundled payment model remains undefined.