Bundled payment ignores healthcare business realities

In today's issue, you'll see a story that outlines Congressional plans to roll out bundled payment schemes for Medicare. The idea is that if you make physicians and hospitals share a single payment for an episode of care, you'll force them to offer more efficient care at a lower price.

Excuse me? Did I hear that right? The folks on the Hill believe that if you simply tighten up the budget for costly procedures, our creative providers will somehow squeeze the costs out of the system, while never skimping on a necessary test, exam or procedure through financial fear, greed or peer pressure?

Pardon me, but I think this notion is simply ridiculous. Don't get me wrong, there may be situations in which bundled payment schemes make sense, but the idea of instituting the notion wholesale is a terrible idea:

* Capitating physicians and hospitals for an episode of care (and yes, this is a capitation no matter what you call it) is a questionable strategy, as it pits them against one another for shares of the pie.

* You can build any mechanism you like to adjust the payment for patient acuity, but providers will still feel that you haven't accounted for the acuity of their particular patient.

* Bundled payment does nothing to help providers curb many underlying cost drivers within the system, notably the cost of drugs. In essence, it assumes that providers have leverage to address such costs, but they usually don't.

* Most providers are far from ready to collect and respond to quality data on the level required to be successful with flat payments. And if they're working from competitive bids, which create a race to the bottom, they're not going to have the margin to buy new health IT systems to solve the problem.

Certainly, it's great to see people on the Hill thinking about healthcare costs in creative ways. But let's hope Congress doesn't move too quickly on bundled payment. Right now, this approach could create more problems than it solves. - Anne