4 Problems With Bundled Payments

How Will They Affect Your Income?

Kenneth J. Terry


January 19, 2012

In This Article


Bundled payments are coming to the fore as the Centers for Medicare and Medicaid Innovation (CMMI) prepare to launch a new 5-year bundling demonstration in 2012.

As this activity heats up, physicians face a quandary over whether to accept bundled payments. Because hospitals and healthcare systems are taking the lead on bundling contracts, some independent physicians worry that most of the financial benefits will accrue to the hospitals. Other doctors are more concerned about losing some of their clinical autonomy.

This article explores 5 issues that payment bundling raises for physicians. Bear in mind that hospitals will take different approaches and that your potential involvement in bundling will vary with your specialty.

Be Aware of 3 Types of Payment Bundling

There are 3 main types of bundled payment structures:

  • Bundling of hospital and physician payments for inpatient procedures;

  • Bundling of inpatient and post-acute care for a time-limited episode; and

  • Bundling of chronic disease care for a specific condition, usually for a year.

The 3-year Acute Care Episode (ACE) demonstration addresses only the first type of bundling for selected orthopedic and cardiac procedures. The new CMS pilot offers 4 options, including inpatient only and inpatient plus post-acute care, with different reimbursement methods. The bundling of chronic care payments is a focus of Prometheus (which also covers procedures) and the Minnesota program.

The inpatient-only programs require the participation of surgeons, while disease management bundling emphasizes primary care. Michael Zucker, Senior Vice President and Chief Development Officer at San Antonio's Baptist Health System, which is participating in the ACE pilot, believes bundled payments are appropriate mainly for high-volume, high-cost procedures and post-acute care. Kent Giles, an Atlanta-based consultant, says he's seeing more and more hospitals look at those kinds of bundling programs.

But Spectrum Health, a big system based in Grand Rapids, Michigan, is focusing on 4 chronic conditions in its pilot of the Prometheus model, which begins in January. Joe Fifer, Chief Financial Officer and Vice President of Finance for Spectrum's Grand Rapids hospitals, says the organization sees opportunities to reduce costs for treating asthma, diabetes, heart failure, and chronic obstructive pulmonary disease, mainly by preventing hospitalizations and emergency department visits.


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