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Freshmen senators spending too much time on issues, not enough time chasing headlines

nejm-reduce-health-costs.jpg

Though there haven't been any impressive coalitions of Republicans and conservative Democrats coming together to improve the bill's cost savings, Sen. Mark Warner (D-Va.) has rallied his fellow freshmen behind a set of common-sense improvements to the delivery system side of things. You can download the full list Frosh Package Section-by-Section (12-6-09).pdf (pdf), but I want to focus on Section 10004: "Revisions to National Pilot Program on Payment Bundling."

This section would modify the new CMS pilot on Medicare bundled payments created by the Patient Protection and Affordable Care Act. It would expand the number of health conditions tested under the pilot and give the Secretary authority to expand the duration or scope of the pilot after January 1, 2016 if the CMS Chief Actuary determines it would reduce Medicare program spending while maintaining or improving the quality of care.

In other words, this helps the Medicare bundling pilot become a policy. And that's a big deal: The bundling efforts might be the most unjustly neglected element of health-care reform. The graphic above comes from the New England Journal of Medicine (pdf), and shows the consensus of most experts I've spoken to: Bundling has more potential to lower costs and improve care than any other delivery-system reform in the bill.

Lots of people say they want to move past the fee-for-service paradigm, in which hospitals are paid for selling you more procedures just as Best Buy salesmen are paid for selling you more televisions, but bundling is the bill's most direct step in that direction. The way it works is simple enough: If I come down with something or other, the hospital that treats me gets a lump-sum payment for, say, 60 days of treatment for all issues related to something or other. If they treat me, and 15 days later, I'm back in for complications relating to something or other, they don't get more money.

"It's a big deal because you're trying to take a fragmented delivery system and force it to work together," says health economist Kenneth Thorpe. "In today's world, hospitals don't need to worry about re-admissions. It's just more revenue for them. When the patient leaves the hospital, the hospital’s job is to wait for the next person to come in."

"But this says if you're readmitted, we're going to ding you. So one thing to lower re-admissions is to have a transitional nurse working with the patient to implement the care plan. Right now, the hospital isn't linked to that nurse. This gives the hospital an incentive to pay more attention to what happens to the patient when they leave the hospital." Accelerating this transition is a good idea, and props to Warner for taking the reins on it. Health-care reform needs more legislators interested in bearing down on the dull guts of the policy, the stuff that doesn't get you quotes in the paper but will decide the success of the policy.

By Ezra Klein  |  December 7, 2009; 5:52 PM ET
Categories:  Health Reform  
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Comments

This is why I read you Ezra, you bring the policy wonk that others don't. And make it at least slightly understandable for dweebs like me. Bravo!

Posted by: arnold104 | December 7, 2009 6:08 PM | Report abuse


Bundling is a good start toward moving away from fee for service. Of course, people have to realize that such a system requires an upfront cost, and bundling could be hard to implement.

But the problem could be a public relations one... if people realize that bundling is a lot like capitation 2.0, then there would be backlash much like what was seen in the late 90s toward HMOs.

Posted by: RandomWalk1 | December 7, 2009 6:15 PM | Report abuse

We already have a pilot project for bundling--it's called DRGs and it's worked for 25 years. I'm not clear on whether expanding the number of conditions tested under the pilot is significant, but if Blanche Lincoln is involved you can pretty much bet it's not.

The NEJM figure also highlights some other important points, namely that administered rates for hospitals saves money (2.0%) and benefit design (aka junk insurance) doesn't save money.

Posted by: bmull | December 7, 2009 6:32 PM | Report abuse

We'll see how this works. One could easily imagine this creating a system where there are significant disincentives to take on complicated cases, patients with rare diseases, or patients with complicating factors that make readmissions likely. I also wonder how widely this is defined after point of diagnosis. If you get cancer and then have to come back for several months of outpatient chemo, presumably that would not be covered. But what if the chemo's side effects make you sick enough for a readmission? What if you're readmitted due to noncompliance with discharge instructions? What if you're readmitted b/c of a nominally separate but actually related condition?

At the same time, this kind of value-based direction promises some good public health benefits. There is a lot of avoidable suffering out there due to medical errors. Tort law handles some of these cases, but the vast majority of applicable plaintiffs don't file suit or anything -- they just suffer in silence and get readmitted a ton of times. Hopefully this will bring quality back into the equation as a formal consideration.

Posted by: NS12345 | December 7, 2009 7:30 PM | Report abuse

There's frankly enough data existing in established Integrated Delivery Systems to know that the savings will be there. Kaiser. Projects between Partners HealthCare (Harvard) and BCBS. Mayo. Intermountain Health Care. We know what the benefits of integrated care are-- at least to the same degree that will come out of the pilots. Do you know what networks will be part of the pilots? Kaiser. Partners. Mayo. They're the only ones capable of participating! So we're just going to replicate the data they already have! The tough part is getting self-autonomous physicians to give up their practice and become employees of a hospital-centered network. No one is doing that for a pilot. So in 2016, we'll see data confirming what we already know, and we'll then have the tough problem of pushing the health care system to integrate in ways they don't know want. So we're just simply punting the tough issue-- forcing actual structural change to the system-- down the road another 7 years.

Real cost control reform? Legislating that Medicare payments will only be eligible to ACOs in 2016. THAT drives reform a lot faster than pilot projects.

Posted by: wisewon | December 7, 2009 8:01 PM | Report abuse

dude... not cool. I totally put this graph in my blog a month ago.

http://dcprogressive.org/2009/11/14/graph-of-the-day-how-to-contain-costs-in-health-care-reform/

If you didn't go to a public university I would be so mad at you right now.

Posted by: emmas | December 7, 2009 8:02 PM | Report abuse


bmull,

the pilots they're talking about are similar to DRG's but with an outcome component and a bit more condition-specific. They've got either "Comprehensive Care Payments" or Episode-Based Payments, which hover somewhere between DRG/fee-for-service and capitation. The outcome component will hopefully remove the incentives DRG's have for early discharge/multiple readmits. In the comprehensive care payment model, the lump payment is annualized (i.e., patient w/diabetes costs $x per year given to the provider); Episode based payment isn't as long a timeframe but still has the quality component.

Posted by: ThomasEN | December 8, 2009 10:46 AM | Report abuse

Having worked at Best Buy after college, I'm pretty sure they don't pay based on commission. I think stores like Sears used to (and may still), but most big box stores these days (Walmart, Best Buy, Circuit City when it existed, etc.) just pay their employees an hourly wage, usually a few dollars above minimum wage. I think Guitar Center may pay based on commission.

Not that it undermines your points about fee for service, but most people really don't understand that buying a big tv doesn't equal a big pay day for most salesmen. It's a pat on the back, or maybe some prize if there's a sales incentive program being run by their manager. The profit margin on electronics also isn't nearly as large as some people seem to think. "The more expensive, the bigger the margin" is a pretty good shorthand, but stores make most of their money from the service plans. If I remember correctly, most computers had at or below 10% markup over cost. TVs could be more, and speakers had a fairly sizable margin, but the store makes almost nothing on CDs, DVDs, and video games.

Posted by: MosBen | December 8, 2009 12:20 PM | Report abuse

i'm impressed that it seems an increasing number of legislators must be reading up on this subject. kinda sad that i'm having to be impressed by that though. :-/

Posted by: schaffermommy | December 9, 2009 4:27 AM | Report abuse

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