The Center for Medicare and Medicaid (CMS) announced that medical cost bundling may be a valuable tool for reducing medical costs. The announcement was based on first-year findings from the Medicare Acute Care Episode (ACE) demonstration study.
CMS defines the objective of the study as to test the use of a “global payment for an episode of care as an alternative approach to payment for service delivery”. (CMS Fact Sheet). Payment will cover Medicare Part A and B services, including physician services, for inpatient stays associated with certain cardiovascular and orthopedic procedures.
The following hospital systems were selected to participate in the study (click the links to learn more about how each site is implementing the program): Baptist Health Hospital LLC (Oklahoma City, OK), Exampla Saint Joseph Hospital (Denver, CO), Hillcrest Medical Center (Tulsa, OK), Oklahoma Heart Hospital, LLC (Oklahoma City, OK), and Lovelace Health System (Albuquerque, NM). Medicare reimbursement rates were based on participating hospital competitive bids for each DRG listed for the cardiovascular and orthopedic procedures under study. The applicable discount was expressed as a discount off the entity’s base DRG payment amount.
CMS established two incentive programs for study participants. Patients are motivated to think economically when choosing hospital care providers as they can share up to 50 percent of any Medicare savings realized. These payments are designed to offset patient cost-sharing. Hospitals may also offer rewards to clinicians and other hospital study who meet certain measures of clinical quality and service efficiency. For example, physicians at Tulsa’s Hillcrest Hospital are guaranteed their regular surgical fees and receive a 25% bonus from Medicare to keep costs down and reduce infection and readmission rates. (USA Today)
While a recent Annuals of Internal Medicine study indicates that surgeons express reservations about bundled payments (Internal Medicine News), the system is already being implemented in the private insurance sector. Aetna, Cigna, Blue Shield of California and Health Net have signed contracts with a number of hospital systems, including Cedars-Sinai Medical Center and UCLA. Payors will be charged global fees for the services associated with hip and knee replacements. Payments will cover hospital care, physician services, tests, and most other aspects of medical care from admission through 90 days after discharge. Any savings realized in these contracts will be shared by the hospital facility and clinicians.
Geisinger Health System may have the most extensive experience with a bundled payment system. Their experience has been cited by the Obama administration. By managing patient compliance and rewarding staff high quality, Geisigner is being recognized as a possible model. Geisinger has reduced hospital readmissions by 25%.
Verity Reports 