Bloomberg View
July 25, 2016
Saving Money on Cardiac Care
By Peter R. Orszag
The federal government's own actuaries are once again pessimistic that America's health-care costs will continue their slow growth. Thankfully, their boss, Sylvia Burwell, the secretary of Health and Human Services, is working hard to prove them wrong.
A key driver of this Medicare spending deceleration has been the health-care market's expectation that the payment system is shifting toward value-based payments -- that is, paying doctors, hospitals and other providers based on how well they treat medical problems rather than on how many services they provide.
At this point, it's crucial to fulfill the market's expectations. If the system now fails to move quickly away from fee-for-service payments, many recent efficiency efforts are likely to be dropped.
A big question is how. The most promising, and practical, path forward is to set up a cascading array of "bundled payments" -- that is, all-inclusive reimbursement for specific episodes of care.
The bundled payments must be mandatory, as is Medicare's bundle for hip and knee surgery -- itself an historic step. Making the shift voluntary for hospitals and doctors leads to watered-down incentives, in an attempt to encourage participation. And weak incentives lead to disappointing outcomes.
Which brings us to Secretary Burwell's important announcement Monday. She is building on the hip and knee bundle, not only by expanding into other forms of orthopedics but, importantly, by introducing mandatory bundles in cardiac care.
Medicare will pay a set fee for coronary artery bypass grafts, a form of surgery that improves blood flow to the heart. The agency will also pay a set fee for the care involved in responding to a heart attack.
The Medicare actuaries may question whether these new bundles can save much money, but that's not too surprising; they've been missing the boat on the changing dynamic in health-care payments for years.
The bundled payments illustrate how the system is changing for the good. Secretary Burwell has just made it vividly clear to everyone in health care that the days of paying for volume are ending.
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Politico Pulse
July 26, 2016
Medicare doubles down on bundled payments
By Dan Diamond
With all eyes on the Democratic convention, CMS on Monday made a key move to secure the party's signature health reform: It introduced its second bundled mandatory payment program, this one focused on cardiac care.
The bundled payment program is the latest big initiative in the Obamacare effort to bend the health cost curve. It's also positioned to play a crucial role as the White House tries to tie 50 percent of Medicare payments to alternative care models by 2018. Liberal experts say they can't get there with accountable care organizations and voluntary models alone, and that mandatory bundled payment programs are proven successes.
The decision to make both mandatory programs eligible as Advanced APMs under MACRA is intended to entice physicians to participate.
For veterans of the White House fight over Obamacare, Monday's news felt like a valedictory. "Finally," said Zeke Emanuel, who served as a White House aide and pushed for mandatory bundled payments to be included in the Affordable Care Act. (Cost controls like bundled payments were left out, in part, to minimize the law's effect on the health care industry.) "I'm glad they drank my Kool-Aid."
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Comment by Don McCanne
The bureaucrats are fixated on the meme that we can reduce spending by paying for the value of health care rather than the volume. They have been disappointed with models such as accountable care organizations, and they are now turning to MACRA and its alternative payment models (APMs), with a renewed surge of interest in bundled payments.
The concept behind bundled payments is that, by assigning a single fee to a given intervention such as a joint replacement, you will motivate physicians to not spend money on portions of the care that are not really necessary. Medicare, as the payer, gets the advantage of a discounted price, and the physicians and hospitals get to keep whatever they save beyond the discount.
Does this really reduce volume? The joint replacement will be done regardless, so what volume will be reduced? Doing only a cursory pre-op exam, missing the ejection murmur and omitting the pre-op cardiac consult? Send a patient home earlier when it is possible that the post-op status might not be fully stabilized? Cut back on rehabilitation, risking a less favorable long term outcome? These might reduce volume, but they certain bring into question quality and thus value.
Now they want to pay a set bundled payment for a heart attack. The clinical course of a heart attack is highly variable and could involve only a few or a great many interventions. Under a bundled payment, the physicians and hospital are bearing the risk of the high costs of a potentially complicated, protracted course. Isn't it the role of the insurer, in this case Medicare, to pool risk? Shifting that risk to the health care delivery system creates the potential for either a reduction in important beneficial health care services, or exposing the delivery system to potential monetary losses and the risk of insolvency - neither of which are desirable.
Perhaps an even more important issue is the fallacy that you can bundle most care and thus make strides in bending the cost curve. Think of the current proposals to bundle coronary artery bypass grafts and to bundle care for a heart attack - one might work some of the time, but the other has outcomes that are too variable. Now think of other hospital admissions - such as workup of a protracted fever, diagnosis and management of an HIV positive patient who has symptoms of a potentially serious but undiagnosed complication, or perhaps a child with fatigue and weight loss. The costs and outcomes are highly variable. How can you bundle those? Or think of the multitude of patients presenting in a ten minute office visit with a set of complex clinical symptoms that would require extensive workups. How do you bundle those?
To get to the goal of fifty percent of Medicare payments being tied to APMs, you are going to have to figure how how to bundle the large numbers of common clinical presentations, like the sore throat that turns out to be due to acute leukemia, or the routine family planning visit in a patient who feels ill that day and turns out to have diabetic ketoacidosis, or the chronic headache patient who has a focal motor seizure in front of you during the visit. What would otherwise be routine medical visits are often not bundable but are better handled on a fee-for-service basis. That makes the point that most health care is provided in a relatively fixed volume. It is really difficult to reduce the volume for patients who actually need care, and that's almost all patients. Besides, in most instances we really don't know how to measure value and convert that into a fixed fee. Volume is relatively fixed, and value is what we all strive for anyway.
Peter Orzag and Ezekiel Emanuel don't listen to others, not even the Medicare actuaries, but they should be able to figure out these obvious fundamentals. Since they haven't, maybe it's them who have been drinking Zeke's Kool-Aid.
Since it's really cost that they are concerned about we should move forward with reform that has been proven repeatedly to slow the rate of health care inflation - a single payer national health program. Peter and Zeke need to abandon their false meme that single payer is "not feasible." What isn't feasible is expecting to fix our dysfunctional health care financing system with "bundled payments."
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