Bundled payments are not the answer
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The cost of health care in the United States is the highest in the world. Yet, by most metrics, it falls short when compared to other leading nations. The American health care system was built on a fee-for-service model, which has led to incredible innovations, as well as tremendous waste, duplicity of care, poorly indicated treatments and procedures, and incentives to perform as many procedures as possible.
Alternative payment models have been created to incorporate quality and cost into the reimbursement process. In some cases, an opportunity for additional compensation was provided as an incentive for high-value, cost-effective care. One example of such a model is the bundle payment method for a diagnosis-related group-based episode of care, such as joint replacement. However, the bundled payment model is fatally flawed, and by itself will not stand the test of time as it does not inherently prevent unnecessary or non-evidence-based care.
Bundled payments
While bundle payment encourages behaviors and decisions to reduce cost and provide the provider with increased revenue, it can place patients at the margins of the decision process into challenging environments. It is likely these patients will not achieve their best potential outcome, although current patient-related outcome scores will suggest the result was good enough. It is difficult to understand how incentives built into a bundled payment program truly drive care to the highest value to the patient when the focus of management is toward lowering expenses to increase remaining revenue in the bundle.
Bundled payments have a finite ability to encourage increased efficiency from providers. Over time, the margin for increased revenue is continuously reduced by resetting the benchmarks that led to the original agreement. As the overall cost of providing care is reduced, payers then adjust the benchmark downward, restricting opportunity for revenue beyond cost. Bundled payments have the tendency to squeeze out every level of efficiency and cost-cutting measure possible, followed by lowering the benchmarks and eliminating the margins. All the while, payers continue to increase the cost of health care annually despite programs such as bundled payments, with an average cost of health care premiums for patients increasing 54% during the last 10 years.
For providers to be incentivized to lower cost through high-quality care and to be committed to the value-based reimbursement model, they need to share in both the revenue along with the risk. To do so, they need to partner with the insurance company or become the insurance company, which requires the ability to accept and manage the risks related to providing health care. If a system is set up whereby the provider accepts risk yet does not build a system around that responsibility to monitor, modulate and resolve risks, the financial consequences can be devastating.
Risk management
Managing risk allows for more sophisticated models of reimbursement, including professional fee capitation, and ultimately, full capitation for the musculoskeletal care of the population included in the program. With a population health model such as capitation, providers can participate in the savings and continued growth of the premium.
One area of risk management that remains poorly realized by payers, health care systems and providers is the need for structured, evidence-based quality assurance programs to monitor and correct poor value choices by providers. Despite numerous high-quality studies that demonstrate duplication of care, variations in care based on geography or payment models, and medical errors have a tremendous impact on cost, the ability to objectively monitor and remedy care variation and errors among physicians has been limited to inadequate measures such as reported complications and readmission rates.
Unfortunately, on any given day, thousands of orthopedic procedures performed may be questionable in indications or may not meet the criteria of minimally clinically important difference from preoperative status at the conclusion of care. Any successful payment model needs to address these discrepancies in value choices.
A better way forward
Now more than ever, the digital information transformation of musculoskeletal health care requires surgeon engagement and leadership to ensure we ask the right questions and analyze data critical to patient care. Then we need to use these insights to ensure improvement in the value of health care provided while reducing overall cost.
The ideal future model for payment will control costs while monitoring and managing risk. It will align all stakeholders — providers, insurers, and health care systems — in a data-driven, evidence-based ecosystem that provides surgeons with clinical and surgical care pathways and promotes outcomes that meet clinically relevant differences. A population-based approach of capitated care has the potential to allow the management of the full scope of medical economics related to musculoskeletal care while engaging providers in self-awareness, continued improvement, cost containment and higher value care.
- References:
- Lyu H, et al. PLoS One. 2017;doi:10.1371/journal.pone.0181970.
- www.kff.org/health-costs/report/2019-employer-health-benefits-survey
- For more information: <li">Anthony A. Romeo, MD, is the Chief Medical Editor of Orthopedics Today. He can be reached at Orthopedics Today, 6900 Grove Road, Thorofare, NJ 08086; email: orthopedics@healio.com. </li">
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