Medicare about 18 months ago started testing bundled payments under its Acute Care Episode Demonstration Program (ACE) with five organizations, but wants 200 to 300 sites ready for a large-scale pilot program launching in January 2013. Whether the pressure is coming from Medicare or other insurers, "bundling is coming at us at breakneck speed," says Robert Minkin, senior vice president at The Camden Group, a health care management consultancy.

Presenting at Health Data Management's Web seminar, "Healthcare Bundled Payments: The Good, Bad and Ugly," on June 28, Minkin walked attendees through the complexities of the emerging payment system to pay one sum for an episode of inpatient treatment, split among the treating providers for all services related to the inpatient stay.

Bundling is coming fast, he notes, because early results show it produces more than twice as many savings as other reimbursement methodologies. ACE is different in many ways, most notable in that gainsharing with physicians is legal and Medicare beneficiaries also share in savings--receiving up to $1,158 to see if financial incentives will change their behavior.

Early results of ACE also show benefits for providers, Minkin says. Exempla Healthcare in Colorado, for instance, saw a 10 percent increase in its volume of cardiac care for one year under the program while actual costs decreased by 10 percent. And a bundled sponsor can pay physicians much quicker than Medicare currently pays.

But bundled payments and figuring out who gets paid what is a complicated endeavor.

Providers participating include those offering laboratory, radiology and EKG tests as well as other pertinent services pre-hospitalization; the hospital where the inpatient stay occurred; and post-hospitalization sites such as rehabilitation centers, skilled nursing facilities and home care agencies.

Any effort to reduce cost must include decreasing utilization, such as eliminating medically unnecessary services or incurring fewer avoidable complications, advises co-presenter Andrew Baskin, M.D., national medical director for quality and performance measurement at Aetna Inc.

Using knee replacement surgery as an example, Baskin explained the myriad of questions that organizations entering into bundled payment programs face. When does the bundle start--the date of surgery, the surgical decision date or 30 days prior to the surgery date? Which patients are eligible to participate? If a program doesn't include the sicker patients, there's far less opportunity for savings, he notes.

Another question: How long is the duration of the bundle--30, 60 or 90 days? Or, 30 days pre-op and 90 days post-op? A duration of only 30 days, Baskin says, doesn't take into account what happens if the knee becomes infected because the infection can't be treated and the knee replaced in that time period.

Still more questions: What happens if a patient is transferred for unavailable emergent treatment--is that in the bundle or not? What about physician claims in the post-operative period? What if a patient needs a pulmonologist because a clot resulted, or a knee develops a rash and a dermatologist is needed?

Walking through many scenarios before a bundling program starts can keep the program from falling apart later, Baskin cautions. "If you don't negotiate these issues and put them in the agreement, at the first incident the agreement unravels."

Insurers, Baskin says, face just as much complexity as providers in bundled payment programs. These claims--comprising all the charges in a single episode of care--must be manually processed and that's a procedure fraught with mistakes, but no auto-adjudication programs have yet been developed for bundled payments.

The Web seminar soon will be archived and available at


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