Medicare Bundled Payments a New Money-Saving Tactic

The Centers for Medicare and Medicaid Services (CMS) is implementing a new bundled payment structure for medical providers as part of the Affordable Care Act, a tactic which could save Medicare money. The strategy incentivizes providers to work together, shifting the focus from payments based on the quantity of care to one focused on quality. Currently, physicians have no financial incentive to help patients to quick recovery; in fact, the more office visits a patient makes, the more money the physician earns. CMS introduces bundled payments

Bundled payments will also force providers to work collaboratively to effectively manage patient care. Instead of a per-visit sum, a predetermined fee will be paid for, say, heart attack care, and nurses, specialists and various care settings must coordinate their care across settings to treat the patient. Electronic health records management will become essential in the success of this initiative, according to an article on GovHealthIT.com.

Called “Bundled Payments for Care Improvement Initiative,” the program could potentially revamp the way patients are cared for. Currently, each provider, such as the physician, hospital, skilled nursing facility and surgeon, sends a separate bill to Medicare. In essence, this is a really inefficient and scattered method, but it’s the one providers are accustomed to. Because only a set fee will be paid for an “episode of care,” providers will earn more by treating patients quickly and more effectively. An episode of care is a specific illness requiring a period of care, such as a hip replacement, and would include the initial evaluation, hospital stay, treatment and any post-operative care.

Bundled payments will most certainly force providers to offer a better continuum of care and reduce unnecessary duplication of services, such as repeat tests in different settings. In order to ease the transition, CMS has opened an application process for providers willing to participate in a testing phase. Participating providers will be able to choose from four broad bundled payment structures and will have input into what classifies as an episode of care and what services are included, which will help customize the program for providers of different sizes and capabilities.

GovHealthIT.com reports on a demonstration project which showed the potential for bundled payments to save money: “For example, a Medicare heart bypass surgery bundled payment demonstration saved the program $42.3 million, or about 10 percent of expected costs, and saved patients $7.9 million in co-insurance payments while improving care and lowering hospital mortality.”

The approach makes a lot of sense for patients and will result in a smoother transition across settings. Patients will have greater confidence that their providers are well informed of their condition, prior testing and treatment. Providers may struggle with the increased coordination required and the initial shift in thinking from a quantity-based to a quality-based approach as a financial incentive, but it’s precisely this financial incentive that will force practitioners to act in ways that make the most sense for the patient.

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