The Lessons Of Medicare’s Prospective Payment System Show That The Bundled Payment Program Faces Challenges

Abstract

Policy makers have been trying to replace Medicare's fee-forservice payment system for years with approaches that pay one price for an aggregation of services. The intent is to reward providers for offering needed care in the most appropriate and cost-effective manner. Medicare's first payment change designed to accomplish such a change was the hospital prospective payment system, introduced during 1983-84. But because it focused only on hospital care, its impact on total Medicare spending was limited. In 2011 Medicare began a new initiative to expand the "bundled payment" concept to link payments for multiple services that patients receive during an episode of care. The goal of Medicare's current bundled payment initiative is to provide incentives to deliver health care more efficiently while maintaining or improving quality. This article provides a detailed analysis of how Medicare implemented the hospital prospective payment system, how hospitals responded to the new incentives, and lessons learned that are applicable to the bundled payment initiative. The lessons include that any Medicare payment reform needs to continuously respond to the many different components of the health system and that payment reform should be coupled with analogous reforms in private insurance payment, so that providers receive consistent signals to alter their behavior.

Bundled Payments in Total Joint Arthroplasty: Targeting Opportunities for Quality Improvement and Cost Reduction

“…Therefore, bundled payments require quality monitoring to assure that providers do not skimp on care and that patient outcomes do not suffer. The experiences of changes in treatment patterns resulting from the Medicare prospective payment system and earlier fixed-fee payment pilots should inform the design, implementation, and monitoring of new bundled payment models [1].…”

Medicare reimbursement and orthopedic surgery: past, present, and future

“…DRG treat hospitalizations as a specific "product" with a predetermined price, incentivizing hospitals to avoid extraneous services that would previously have been profitable under the FFS system. IPPS immediately lowered Medicare spending by reducing the average hospital length of stay [6][7][8][9][10]. The DRG system was subsequently adopted by many states' Medicaid programs and private insurance companies hoping to reap similar benefits [11,12].…”

Integrated Renal Care

“…The bundled payment and pay-for-performance methodologies have already had a dramatic effect on costs and reimbursement while maintaining quality (21,22). With inclusion of anemia management in the bundle, ESA use has fallen (8,9) by as much as 20%, perhaps in part because of changes in Food and Drug Administration labeling.…”