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  • Brian Abraham

Trouble for Bundled Payments? Probably Not

Skeptics of bundled payments, even if they are not proponents of line-item payments, scored a victory last week with the publication of a study in the New England Journal of Medicine that determined no significant difference in costs or outcomes in a Medicare bundled payments initiative.[1] The study showed that as costs decreased incrementally, patients did not fare much better than those who went to providers not participating in the initiative. Does this mean bundled payment programs are doomed to failure?

Is the move from volume to value overblown? What should be included in such bundles? Let’s see what is happening, both with this study, and more broadly.

The authors of the study analyzed Medicare claims data from hospitals participating in the Bundled Payments for Care Improvement (BPCI) program (“participating hospitals,” my term, not whether or not they participate in Medicare), and claims from hospitals that did not participate in the program (“non-participating hospitals,” my term again). They looked at admissions for the conditions that the program covered most frequently, including cardiac and respiratory diagnoses, as well as sepsis.

The study revealed that Medicare payments to participating hospitals were slightly higher than those to non-participating hospitals during the effective timeframes (2013-2015). For both groups, costs decreased incrementally during the “intervention period,” when the participating hospitals took part in the initiative. These incrementally higher payments did not result in improvements in readmissions, shorter rehabilitations, emergency room use, or mortality rates.

While these results may not be thrilling to the Center for Medicare and Medicaid Innovation (CMMI), the arm of the Centers for Medicare and Medicaid Services (CMS) that developed and implemented BPCI, bundled payment programs likely will not go away. Rather, CMMI may decide this program needs tweaking, or the disease states that this program is meant to address may not be appropriate for blanket bundled payments.

The article cites other CMMI bundled payment programs, such as the joint replacement program for hips and knees, that managed to lower costs and maintain positive outcomes. The authors cited differences in patient characteristics (e.g., lower age and fewer comorbidities) as a possible reason for the better results. Another striking reason that there may have been little difference between the participating and non-participating hospitals is that most of the savings would have to come from post-acute care, which, because of the patient characteristics, differed little between the two groups.

So, payment for value in the United States is not going to slow or stop and revert to volume-based payments. Instead, adjustments will be made, new programs will be tested, and other types of value-based payment schemes will emerge.

For biopharmaceutical and medical device companies, staying the course on value could be a good thing. Future programs could present opportunities for health care providers to utilize the most effective (not the least expensive) diagnostic or therapeutic tool available to avoid expending resources on myriad other modalities, thus ensuring they maximize the bundled resources.

[1] Joynt Maddox KE, Orav EJ, Zheng J, Epstein A. Evaluation of Medicare’s bundled payments initiative for medical conditions. NEJM 2018; 379:260-9.

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