4 Problems With Bundled Payments

How Will They Affect Your Income?

Kenneth J. Terry

Disclosures

January 19, 2012

In This Article

Problem #1: Will Doctors Lose Some Clinical Autonomy?

With hospitals in charge of bundling, there's a possibility that they'll try to influence how doctors practice. Michael Abrams, managing partner with Numerof and Associates, a St. Louis-based consulting firm, says hospitals will have to begin exerting more pressure on physicians to reduce variations in care in order to do well under payment bundling.

"It's evolving from the doctor being totally clinically independent to something else," he says. "It will never get to the point of the hospital dictating what docs have to do, because it's their license on the line. But just where [hospital pressure] falls on the continuum is going to vary."

Nevertheless, it appears unlikely that hospital managers will cross the line that has traditionally separated administrative from clinical activities in hospitals. While they might lean on physician leaders to do their bidding -- especially in employed groups -- most of them are reluctant to interfere with the practice of medicine.

"Hospitals are very risk averse," notes Giles, who used to be a hospital executive. "They get concerned about malpractice, and most hospital CEOs are going to be uncomfortable dictating anything to do with diagnosis or treatment plans."

Problem #2: Reviewing Doctors' Practice Patterns

To calculate bundled payment rates that will allow physicians and hospitals to share in savings, healthcare organizations must review the practice patterns of physicians, notes Abrams. That isn't an easy task, either logistically or culturally.

Hospitals can analyze their own costs from billing records, but they usually don't have access to the claims data of nonemployed physicians. (Spectrum is the exception because it owns Priority Health, a major insurer in Michigan.)

Even if hospital executives can obtain that data -- or equivalent information from electronic health records -- it's hard for them to discuss their findings with physicians, Abrams notes. Yet they must have these difficult discussions if they are to reduce the large variations in practice patterns, he says.

"If you're going to put a price on the product, you have to understand what the production process is," he points out. "That's your benchmark, and then you have to make sure everybody is producing the product in the same way. If they can produce it any way they want and change their production process at will, you really have no control over your underlying cost."

Giles agrees that hospitals will have to talk to physician leaders about some of these issues. For example, he says, "hospitals will likely ask physicians to standardize the inputs." On the procedural side, that means getting surgeons to agree on which medical devices and supplies they will use. But reaching a consensus on that and other protocols can be challenging.

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