Now that the Affordable Care Act has been upheld by the U.S. Supreme Court, the requirement to control costs is critical.  One thing we can learn from the experience of near universal coverage in Massachusetts is that providing access to more citizens without containing costs is a recipe for disaster.  In 2006 Massachusetts achieved coverage for roughly 98% of its residents, however, it did nothing to control the costs incurred by that increased population.  Only now, as a result of the additional population being covered and the experience of runaway costs, is Massachusetts adopting legislation to curtail spending.

Move to Bundled Payments

As we move toward January 1, 2014, when all U.S. citizens with certain exceptions are required to obtain health insurance or pay a penalty, new methodologies for controlling costs are required.  In other words, the fragmented fee for service payment methodology may soon be over.  In the future, payments for health care services may be bundled or based upon an entire episode of care rather than piecemeal.  Specifically, a single fee will be paid to all of the service providers involved in, for example, a knee replacement including the orthopedic surgeon, the anesthesiologist, the facility and the therapy providers.  The challenge will be the manner in which those providers agree upon payment – what percentage of the bundled fee is apportioned to each of them for their respective services.

Managed care has been bundling reimbursements for years.  For instance, when a patient sees a provider for a consult and has treatment on the same date of service, managed care typically bundles the consult into the service and pays one fee.  Those providers that contracted  with such managed care organizations accepted that payment methodology.  We are now seeing the trend moving toward a single payment to be spread among the continuum of providers involved in caring for a patient.  It is the only way that the fragmented, fee for service payment methodology can be controlled.  This bundled or episode of care payment methodology will accelerate the combination of practice specialties involved in particular types of care.  The goal is to become so efficient in providing the treatment for an episode of care so that each specialty provider involved will agree to accept less in reimbursement then they would had they billed their care on a fee for service basis.  It is the only methodology that will permit the control of health care costs.

In recognition of this, the Centers for Medicare and Medicaid Services (CMS) has begun its Bundled Payments for Care Improvement Initiative.  It has proposed 4 models for bundled payments – Inpatient stay only, Inpatient stay plus post-discharge services, Post-discharge services only, and Inpatient stay with a prospectively set payment.

Alternatives to Bundled Payments

Other payment methodologies that will control costs include capitation arrangements whereby a provider group is responsible for rendering all of the specialty care required for a patient population in exchange for a monthly capitated fee regardless of whether the patients seek services or not.  The capitation payment methodology encourages providers to treat patients conservatively and efficiently in order to obtain the most care and treatment out of every health care dollar expended.

CMS is advancing other initiatives as well.  These include Accountable Care Organizations (ACOs), and demonstration projects to improve primary care, reduce avoidable hospitalizations, and better deliver medical services in the home.