We need more bundled payments--fast

There's always been grave concern that the U.S. healthcare system might become too much like Europe's, even though its foundation for billing has long been a French creation (gasp).

That would be the Internal Statistical Classification of Diseases and Related Health Problems or ICD.

ICD was the 19th century creation of demographer Jacques Bertillon. His brother Alphonse helped create the use of fingerprinting for criminals and criminal suspects--a practice the U.S. was initially slow to adopt in part because it was a French creation.

The ICD was originally used to classify how people died, created at a time when far more people expired more suddenly and at much younger ages.

But ICD evolved into classifying virtually every health problem and America adopted it in a unique way. Our system atomized absolutely every detail of care and created thousands of related points of payment, helping it make healthcare delivery far more market-based and expensive than in any other part of the world. The 10th iteration of ICD will finally debut in the U.S. next year. It will multiply the available number of codes for inpatient providers by more than five-fold.

This sort of reminds me of what happens at U.S. law firms, where every day of the week tens of thousands of highly educated professionals pause every 15 minutes to make notations about their hourly billings. Their place in the pecking order is not necessarily based on the outcomes of their cases, but on the ability to spend 80 hours a week creating 50 hours worth of billing.

The cost of American healthcare delivery has been the center of debate for a couple of decades now, and has slowly moved toward incremental fixes, such as bundled payments for some--but not most--episodes of care. Meanwhile, the practice of upcoding adds billions of dollars a year in extra costs to healthcare delivery.

The fractured process for paying bundled payments will have to progress more rapidly in order to keep up with the coming explosion of codes as a result of the ICD-10 implementation. Otherwise costs will continue to accelerate at a greater rate than the U.S. economy can absorb them. And the structure of bundled payments must become a little less flexible and fungible.

Despite the clinical complexity of a procedure such as a heart bypass, the medical community has made it a fairly predictable operation: About 97 percent of patients survive. Although I don't know for sure all the complications related to the procedure, I suspect the biggest one is infections. That means we can affix a fair payment to the procedure itself: say, $50,000. The hospital, which might get anywhere between $15,000 and more than $40,000 from Medicare (not including fees paid to the clinician), would receive $16,000. The surgeon would receive $25,000; the anesthesiologist, $4,000. If there are no complications, the hospital gets another $3,000 and the surgeon, $2,000.

No doubt, there would be howls about affixing such a rigid price and payment system. But at some point, the U.S. healthcare system will have to decide that it's perfectly fine for everyone to be merely well-compensated for the services they provide, and push back against the efforts of hospitals and other providers to extract every dollar possible. On the face of it, it sounds mighty French--but it's also sensible. - Ron (@FierceHealth)

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