Health Policy$ense

New Study Details Savings from Bundled Payments

But will politics get in the way?

This is the way it is supposed to work. You develop policy and processes to drive innovation. You design and test innovative ideas in a small, efficient way. You learn and adapt. Successful innovation drives new policy. Rinse and repeat.

And this is the way it appears to have worked, in the case of Medicare bundled payment. Start small with a pilot. Expand in reach and scope if promising. Scale up if successful.

A new study by Amol Navathe and colleagues provides important information about the success of Medicare’s bundled payment models for joint replacement. It also represents a remarkable collaboration between researchers and providers to understand the financial and quality impact of bundled payments over time.

In the study, one hospital system reduced its costs by 20% at a time when national costs rose 5%, without any decrease in quality. The five-hospital Baptist Health System saved $11 million over seven years. Even more importantly for policy and replication, the study explores how these savings were achieved, providing a road map for others. The authors have an excellent commentary on their collaboration and its policy relevance in Modern Healthcare.

Last year, the Centers for Medicare and Medicaid Services (CMS) expanded the bundled payment program for joint replacement and made it mandatory in many urban areas. It is launching a five-year demonstration to test bundled payments for heart attacks, bypass surgery, and surgical hip and femur fracture treatment, to begin July 2017. It will be mandatory in randomly selected hospitals.

Navathe and colleagues note that value-based care and reforms have long had bipartisan support. But bundled payments have their foes in the new Administration. Rep. Tom Price, nominated to head the Department of Health and Human Services, has stated objections to mandatory bundled payments, saying that they “commandeer clinical decision-making” and “experiment with thousands of patients’ lives.”

We now have evidence that these payment models are saving money, at least in the health system studied, without putting patients at risk. We now have evidence that the models incentivized hospitals and surgeons to work together to define acceptable implants and products. Innovation is driving policy, and that’s the way it is supposed to work.