The New Health Dialogue

In my last post, I introduced four of my grad school classmates: four future health leaders that roughly represent a political cross-section. We recently held a small focus group on certain aspects of the two health reform bills; specifically, the delivery system reform proposals.

Richard, Tim, Jane, Michele and I mostly discussed bundling. (Sorry, but we're all grad students in health administration, and we enjoy talking about bundling.) Simply put, bundling is where Medicare (or any payer) makes one payment to a group of providers for a defined episode of care that could span several care settings. In contrast, under the current "no bundle" system, numerous doctors, hospitals, rehab centers, etc. all get paid separately and there isn't a lot of incentive to coordinate, be efficient, or do a great job with follow up care. That fragmentation can in turn boost costs and harm quality. In the Senate bill, bundled payments would cover acute inpatient care, physician services, outpatient hospital care, and post-acute care from three days before a hospital admission through 30 days post discharge. Bundling is explained and discussed in more detail here and here; we were working off a Kaiser Family Foundation side-by-side document found here. (We've linked to this before, but this article by Phil Galewitz at Kaiser Health News is a good illustration of bundling, and you don't have to understand Medicare payment jargon to get it.)

Richard, an Obama voter, said that if a hospital received Medicare money, then the government has a right to mandate how the care is organized. But Michele, a McCain voter, had a problem with bundling. The government rule-setting didn't bother her as much as her concern about whether hospitals would dominate bundling agreements, strong-arming the physicians and particularly the post-acute care facilities. She felt the balance of power was tilted too much toward the hospitals or the organization receiving the bundled payment. Michele also wondered what the hospital/physician relationship would look like in organizations using an open medical staff model (i.e. when the doctors aren't full time employees of the hospital and everyone would have to agree on how to carve up the bundled payment). 

Tim, a McCain voter, worried about utilization. He understood that the current health care fee for service system encourages overutilization (this was echoed by Richard). But Tim worried that these bundled, capitated-like payments would go too far in the other direction and lead to underutilization of care. Tim thought it would be important to consider how to deal with outlier cases (i.e. unusually expensive or complex patients) and he thought you might need an outside party to monitor quality. Meanwhile, Jane, an Obama voter, was concerned about changes in the local markets where these bundling demonstrations are occurring.  She worried that these advantageous payment policies will favor better equipped -- either financially or by skill set -- hospitals compared to smaller hospitals that don’t have the same capacity. Additionally, Jane argued that the bundling demonstration might focus too much on acute care, not on the chronic conditions which make up the vast majority of health care spending.

My classmates reached a general consensus that hospital/physician bundling was a good thing, but they remained concerned about post acute care organizations (such as inpatient rehabilitation facilities, or IRFs) getting the short end of the deal. That's not what I expected to hear from students in a hospital administration program. Michele had the last word, though. She questioned whether it was premature to expect bundling to work outside of a few small demonstration projects, because if hospitals don’t employ physicians, how will they exert influence over them?

I explored that exact topic in an October post that discussed the Medicare Acute Care Episode (ACE) Demonstration Project. Using financial incentives, a hospital and its affiliated (read: not employed by the hospital) physicians are improving quality, reducing costs to the Medicare program, and getting bonuses for themselves. The patient even gets some money, which helps drive volume to the demo.

As the reform debate continues, we’ll check back in with the focus group to see what they think of Washington’s progress.