In bundled payments, where once there was so much promise, there is now conflicting evidence.
One reason for pessimism comes from California, where an ambitious bundled payment pilot program convened by the Integrated Healthcare Association in 2010 brought disappointing results and actually little to evaluate three years later.
"In spite of a high level of enthusiasm and effort, the pilot did not succeed its goal to implement bundled payment for orthopedic procedures across multiple payers and hospital-physician partners," as Susan Ridgely and colleagues from the RAND Corporation concluded in a study published in Health Affairs.
A range of barriers evolved, Ridgely and colleagues found. First there was the administrative burden and state regulatory uncertainty, such as whether the arrangements would run afoul of California's prohibition on hospitals employing physicians. Then there were disagreements about bundle definition and assumption of risk.
Two large insurers withdrew, out of six original health plans, over concerns that care redesigns didn't go far enough, and six of eight hospitals that were interested didn't go forward amid concerns with steep investment costs. In the two participating hospitals, the volume was too low to be significant, with only 35 cases younger than 65.
While some insurers were expecting price reductions compared to what hospitals were being paid under fee-for-service, some hospitals were concerned about implementation costs and increased financial risk argued for payments greater than FFS.
"Ultimately, few contracts were signed, which resulted in insufficient volume to test hypotheses about the impact of bundled payment on quality and costs," Ridgely and colleagues wrote.
When the Agency for Healthcare Research and Quality first funded the project, the Integrated Healthcare Association wanted to implement more than 20 payer-provider bundled payment contracts covering more than 500 bundled cases within the first two years of the project.
That vision didn't come to fruition, but there are still lessons to be learned, wrote Tom Williams, the Integrated Healthcare Association's CEO, in a Health Affairs blog.
One thing to keep in mind, he argues, is that while bundled payment is thought of as a payment innovation, the true benefit "derives from reengineering care delivery, not from combining separately paid line items into a single tab."
Bundled payment may be the impetus, "but the work of care redesign must follow if the promise of bundled payment is to be realized: reductions in unnecessary care, reductions in readmissions, lower risk and complication rates for patients, and improved patient function and outcomes."
That requires "strong clinical leadership backed by committed management," a formula that was found in some pockets in California's bundled payment pilot. The Hoag Orthopedic Institute, for instance, invested in both new payment methodologies and care pathways for total hip and knee replacement.
The nation's largest payer -- taxpayers, via the Centers for Medicare & Medicaid Services -- are actually still quite bullish on the prospects of bundled payments. After launching the bundled payment program for Medicare in 2013, with 100 organizations, and this past summer the agency announced plans to expand it.
And, among private payers, bundled payments on a smaller scale than California's are showing promise.
In a three-year pilot with five medical oncology practices covering 810 patients with breast, colon and lung cancers, UnitedHealthcare found significant cost savings without negatively impacting outcomes, by paying oncologists upfront for an entire treatment regimen, regardless of the drugs used.
The pilot based episode-of-care payments on expected costs for standard six- to 12-month treatment regimens as determined by doctors, with chemotherapy medications reimbursed at the average sales price, as a proxy for actual cost.
This change in financial incentives yielded a 34 percent reduction in medical costs compared to predicted spending, UnitedHealthcare and other pilot participants found in a study published the Journal of Oncology Practice.