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Bundled payments might cut hospital costs without reducing quality of care

Medicare savings in such plans were 10 percent higher than expected. Most came from shorter stays in the hospital and in the intensive care unit and from lower pharmaceutical costs. The mortality rate was also lower in the demonstration hospitals.

Interviews with doctors and hospital managers during this project were revealing.

The hospital staffers were surprised how quickly the physicians were able to reduce the length of stay, substitute generic for brand-name drugs and reduce unnecessary testing. The surgeons worked as a team with nurses to implement standardized protocols and checklists. At one demo hospital, the surgeons resisted any attempts to change their usual patterns; that hospital did not see equivalent reductions in cost.

Patients in the demonstration project expressed greater satisfaction with their hospital experience than patients in non-demonstration project hospitals.

I believe the best way to have doctors and hospitals work efficiently together is to pay them together. The widely admired Mayo Clinic, Geisinger Health System, Kaiser Permanente and Intermountain Health can boast of low-cost and high-quality care because most of these hospitals have salaried physicians, unlike my hospital or most others in America.

Doctors' objections

A majority of U.S. doctors earn their income through fee-for-service payments, and most adamantly oppose a change in this system. Some worry that in a bundled system they would become "slaves to the hospital." One internist at my hospital said, "Who will look after the patient's best interest?" It's true that a hospital-paid doctor might be tempted to put the hospital's best interest first. But professionalism and fairly simple quality-control measures, I believe, could keep performance up to par.

Also, some doctors complain that bundled payment is reminiscent of the capitation fees that many HMOs implemented in their short-lived boom in the 1970s.

But there is a difference. Capitation fees were fixed sums paid to physicians, usually in advance, to provide all the needed care for an individual. It was difficult to adjust these lump sums to the varying level of illness among patients. And some doctors took the payments, then just delivered less care.

Bundling would avoid these pitfalls by paying doctors and hospitals after treatment was complete and by including predetermined quality safeguards -- for example, monitoring rates of in-hospital infections and readmissions due to incomplete treatment.

Bundled payments could be implemented fairly simply for common diagnoses such as pneumonia, heart attack and congestive heart failure. They would be more challenging to use with outpatient physician services, such as those that I offer my HIV patients. Outpatient care often requires multiple doctors, laboratory and radiology services. Bundling payments for all of them is difficult. To move the idea of bundled payments forward, Congress must act.

More than half my income comes from Medicare or Medicaid programs, and I'm not unusual; if Congress requires Medicare to bundle payments, many of us will have to figure out how to work in that system.

A bill that the House passed in November recently mentions pilot programs involving accountable care organizations (ACOs), a structure where hospitals, physicians and others work together and are paid together in bundles for both outpatient and inpatient care. ACOs not only reduce the cost per procedure but also the total number of procedures. The Senate addressed ACO programs in the comprehensive health-care reform bill whose future is currently unclear.

Bundled payments would almost certainly limit my income and, more important, reduce my autonomy. But health care should be about patients, not how doctors want to be paid. Sadly, the payment system is the tail that wags the dog in health care.

Jain is an infectious-disease specialist in Memphis and an adjunct assistant professor at the Rollins School of Public Health at Emory University in Atlanta.


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