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HEALTH REFORM: The Business of Bundling

I've been doing a lot of traveling, attending meetings about health care quality and payment reform, and I wanted to share a bit of what I learned at the recent Healthcare Payment Reform Summit in Pittsburgh. The topic was "bundling"—paying for an episode of well-coordinated care. In the current system, we pay for quantity of procedures, not quality or outcome.  Everybody at the Pittsburgh summit understood that this procedure-focused system leads to overutilization of care.

Moving from the status quo to bundling will take some careful planning and transitioning, but Francois de Brantes gave a presentation that underscored how worthwhile it can be. He presented data showing that improved management of diabetes and heart disease leads to better quality—as well as a 50 percent drop in costs.

The host of the summit was the Network for Regional Healthcare Improvement, which brought together six leading regional collaboratives: Pacific Business Group on Health, Massachusetts Health Quality Partners, Pittsburgh Regional Health Institute for Clinical Systems Improvement, Minnesota Community Measurement and the Wisconsin Collaborative for Healthcare Quality. These groups are collaboratives of insurers, providers, and employers—stakeholders that are often at odds—all trying to increase the value of health care.

The groups came together around a set of general principles that can help us get to bundling:

  1. New organizational structures among physicians and hospitals are needed to make bundled payments work
  2. Intermediate payment changes should precede creation of such organizations
  3. Bundled payments should be set at a level that rewards efficient providers and punishes inefficient ones
  4. While the types of organizations accepting bundled payments across regions may differ, the incentives and quality measures used nationally should be similar

At this meeting, like most I've attended around the country for the last six months, attendees were representatives of insurers, collaborative organizations focused on value, and health care companies with a business stake in the reorganization of medical care. Some of these coalitions represent the big U.S. employers who pay for more than half the healthcare in the U.S., but I often wish representatives of major corporations would attend themselves, or perhaps send their top benefit managers. Their direct participation, I think, would help.

Any health reform is a complex political undertaking, and there will be winners and losers. MedPAC has recommended that Medicare move toward bundling, and I hope that happens. We also need reforms at the national level. But I often think that much of the implementation will end up being local. Insurers and employers will have to come together to compel changes in the delivery of health care. It's happening in some communities, but not enough.