Slow Start for Bundled-Payment Pilot Bodes Ill for Reform

November 10, 2011

November 10, 2011 — A new study published in the November issue of Health Affairs throws cold water on the notion that healthcare reform can quickly replace the fee-for-service (FFS) system, and all its attendant problems, with new models of reimbursement that reward the quality of care while lowering costs.

Lead author Peter Hussey, PhD, and coauthors reached that conclusion after studying a private-sector pilot project to bundle payments for a defined episode of care, such as hip replacement, as opposed to reimbursing hospitals, physicians, and other providers on a piecemeal basis that encourages wasteful care. As of May 2011, after roughly 3 years of planning and discussion, the participants in the pilot project had yet to execute any contracts or receive a bundled payment, according to the authors.

What stood in their way, write Dr. Hussey, a policy researcher at RAND, and coauthors, was the sheer complexity of the bundled-payment model, the difficulty of grafting it onto an equally complex FFS system, and the fear of getting the short end of the financial stick.

Bundled payments are one of the reimbursement models to be tested beginning next year under the Affordable Care Act in conjunction with accountable care organizations, which are provider consortiums designed to better coordinate treatment. Dr. Hussey and coauthors advise patience.

"The pilot results suggest that any benefit from bundled payments will take time and effort to materialize," they write.

Even Vocabulary Is Hard to Master

The bundled-payment experiment in question is under way at 3 sites: Priority Health-Spectrum System in Michigan; Employers' Coalition on Health in Rockford, Illinois; and Crozer Keystone Health System–Independence Blue Cross in Pennsylvania. The first 2 sites have focused on care episodes involving chronic illnesses such as diabetes, congestive heart failure, and asthma. The Pennsylvania site chose procedures such as hip replacement. Financial supporters include the Commonwealth Fund and the Robert Wood Johnson Foundation.

The name of the pilot is PROMETHEUS Payment, with the acronym PROMETHEUS standing for Provider Payment Reform for Outcomes, Margins, Evidence, Transparency, Hassle Reduction, Excellence, Understandability, and Sustainability. The no-base-left-uncovered name suggests a spirit of ambition and progress that one might associate with the mythological character Prometheus, who stole fire from Zeus and shared it with mankind. However, Prometheus was punished for his good deed by having his liver forever eaten by an eagle, which is not the kind of outcome that the pilot project's creators had in mind.

The authors of the Health Affairs study report that progress has been torturously slow for hospitals, physicians, insurers, and other PROMETHEUS participants. They struggled to master the very vocabulary of the model — "typical costs," "potentially avoidable complications," "evidence-informed case rates" — and to agree on what the terms mean.

"What seemed like a mere semantic concern contributed greatly to implementation delays," the authors write.

Another problem is that PROMETHEUS has relied on fee-for-service claims data to measure the costs of an episode of care and identify what services should be included in a payment bundle. However, this has proven difficult, as such claims data are not designed with the needs of bundled payments in mind, according to the Health Affairs study.

Participants also have balked at coming to financial terms. They considered a bundled-payment model in which physicians and hospitals could share in any savings achieved in an episode of care; that is, coming under a predefined cost threshold. Shared savings is a key element of the bundled-payment pilot project that Medicare will launch next year.

However, interviewees at 2 PROMETHEUS sites reported that "neither payers nor providers were eager to set aside funds from which to make the bonus payments," Dr. Hussey and coauthors write. "In addition, some payers did not accept the idea that they should share any savings. They expressed skepticism that the 'savings' represented real long-term improvement and not natural variation in costs."

"Keep Things Simple"

Although the PROMETHEUS pilot sites have struggled to shift into bundled-payment gear, some good has come of the project, according to the authors. Participants are talking more about how to improve patient care, and are redesigning care processes as a result, and they are still committed to executing the bundled payment model.

That said, the PROMETHEUS experiment represents a cautionary tale for healthcare reformers. Lessons learned will likely apply to patient-centered medical homes, accountable care organizations, and other experiments in care delivery and payment, according to the authors. They also note that many healthcare organizations that might start a bundled-payment system would be less prepared than the PROMETHEUS participants, which are sophisticated integrated delivery systems. As a consequence, their struggles might even be more prolonged.

To Paul Ginsburg, PhD, president of the Center for Studying Health System Change, PROMETHEUS might be a victim of its own ambition. Instead of limiting itself to perhaps one kind of care episode, it set out to tackle numerous types, Dr. Ginsburg told Medscape Medical News. "What future pilot projects can learn is to keep things simple," he said.

Dr. Ginsburg calls the slow-motion progress of PROMETHEUS discouraging, but he is heartened by the commitment of the participants to keep at it. Fueling that determination, he notes, is the prospect of deep cuts in traditional Medicare rates down the line, which forces providers to earn their livelihood in a new way.

"That's the motivation to get into these types of reform projects," he said.

The authors have disclosed no relevant conflicts of interest.

Health Aff. Published online November 7, 2011. Abstract

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