Is managing care via bundled payments the way forward?

It’s hard to get any traction on the twin goals of improved care and reduced costs when every aspect of the U.S. health care system is so entrenched. But perhaps some hybrid of existing health care delivery models is staring us in the face.

That’s what Thomas Wilson and Sohrab Gollogly argue in Health Economics and Outcome Research. The authors lament what they call the “systemic inefficiency” of our system and the paralysis for a solution.

The ambition to achieve transparency, innovation, choice and lower cost seems, initially, too lofty a goal. Healthcare is a juggernaut—a legacy system, with massive infrastructure, bureaucratic inertia, and, as a public necessity, no freedom to fail. We propose a new framework for efficiently delivering a broad spectrum of procedures based on ‘outpatient bundling’, what could be thought of as collections of procedures or “health packages.”

What is a Health Package? Primarily, three things:

  • outpatient care
  • bundled payments
  • home recovery.

Importantly, all three provide incentives for providers to work at improving delivery of excellent care at a more affordable price. Let’s take a closer look.

Outpatient care costs less

Most patients have learned over the past few years that the cost of care frequently depends on the facility at which they receive care. Hospital-owned facilities are the most expensive. Ambulatory surgery centers are generally the least costly. High-deductible health plans, now commonplace, can cause the cost variation among facilities to make patient out-of-pocket expenditures mushroom.

Bundled payments cost less

What is a bundled payment? It’s a fixed price paid to a team of providers for an episode of care. In a knee replacement, for example, the bundled payment includes surgery, assistants, anesthesia, labs, rehab, primary care follow-up—anything necessary for about a three-month period. Patients, thus, know how much they’re paying and what they’re getting for that payment.

If the health care team manages the episode of care well, it shares in the savings. This video, from the Advisory Board, is a few years old, but is still be simplest explanation of bundled payments I’ve seen.

Home recovery costs less

The post-surgery default for many years has been rehab at a skilled nursing facility. But is that costly care always necessary? Absolutely not. Oftentimes, individual circumstances will allow a quicker, more affordable rehab with a combination of home therapy visits and broader use of smart phone monitoring apps.

As Wilson and Gollogly conclude,

Packaged procedures can recalibrate the healthcare system through open market forces. The new framework has the potential to increase competition hold providers responsible for outcomes, introduce transparency, incentivize innovation and decrease costs.

What are we waiting for?

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