Expert: Bundled payments a better model than accountable care organizations

A former advisor to President Barack Obama is warning healthcare providers to embrace bundled payments as accountable care organizations fall behind in reaping savings from value-based payment models.

A former advisor to President Barack Obama is warning healthcare providers to embrace bundled payments as accountable care organizations fall behind in reaping savings from value-based payment models.

According to Ezekiel Emanuel, MD, and Topher Spiro, accountable care organizations, the much-hoped-for drivers of delivery and payment transformation, aren’t working so well.

In an op-ed in the Wall Street Journal, the duo point to mixed results among Centers for Medicare and Medicaid Services ACO models. For example, 13 of 32 participating Pioneer ACOs have dropped out. In the Medicare Shared Savings ACO program that awards savings for care ratings and penalties for overspending, the number of participants is falling and around half may not continue.

“The fundamental problem with a voluntary program is that to attract participants, Medicare needs to make it easy for the ACO to be rewarded. Paradoxically, this makes it hard to achieve substantial savings,” said Emanuel, a former Obama healthcare advisor and now a University of Pennsylvania provost, and Spiro, health policy VP at the Center for American Progress..

“Time is running out,” they said. “A cost-control strategy that relies on expanding the number of ACOs won’t be successful.”

Before time runs out, “the Obama administration must focus on a reform that can be scaled,” Emanuel and Sprio argue. Bundled payments, according to them, are the answer. “Medicare should lump together physician services, hospital costs, tests, medical devices, drugs and rehabilitation services related to common ailments—such as broken hips, heart stents and cancer treatments—into a bundle. It could then pay a medical provider a discounted amount for the whole array of services.”

Bundling is an approach that has seen some uptake among private insurers and hospital systems. Our Lady of the Lakes, in Louisiana, is participating in the CMS bundled payment program for both total joint replacement and coronary bypass surgery—the only Medicare bundled payment pilot with both upside and downside potential.

In Texas, UnitedHealthcare and the MD Anderson Cancer Center are piloting a bundled payment model for patients with head and neck cancers, and UnitedHealth is bullish on using bundling for oncology broadly.

Emanuel and Spiro are optimistic about bundled payments because they see it as a way to broach the cost variation problem, where Medicare payments to hospitals for common surgeries such as hip replacement and heart bypass can differ.

“First, the discount means that savings are immediate and guaranteed. Second, private payers, i.e., employers and insurance companies, can also adopt the Medicare bundle as their payment method, amplifying the incentive. Finally, this reform is not just for big health systems that think they will do better financially by participating. It can work in rural areas and for smaller hospitals and practices and become the standard method of payment nationwide.”

Twitter: @AnthonyBrino