NEJM: Bundling payments could reduce healthcare spending

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The most promising option for curbing healthcare spending is changing the way doctors and hospitals are paid to provide care, but implementing such a system must overcome significant obstacles to be successful, according to an analysis by the nonprofit research organization RAND that was published Nov. 11 in the New England Journal of Medicine.

The RAND researchers identified eight policy options out of 12 analyzed in Massachusetts that evidence suggests have the potential to reduce spending and are broadly applicable across the U.S. They calculated both a high and a low estimate of the potential savings each strategy might produce over the next 10 years.

According to the researchers, the single most promising approach is bundling payments for medical care. Under such an approach, doctors, hospitals and other healthcare providers would receive one set fee for treating all aspects of a procedure such as a hip replacement surgery or a chronic disease such as diabetes.

“Although there is no consensus on what should be the target for reducing spending,” the authors wrote, “constraining increases in healthcare spending to the rate of growth in the gross domestic product--and so devoting a fixed share of national income to healthcare--offers a reasonable goal. To achieve this goal, spending on healthcare over the next decade would have to be reduced by 6.2 percent from the amount the Centers for Medicare & Medicaid Services estimates the country would otherwise spend.”

While reducing rising healthcare costs has not been a major focus of the ongoing national debate about healthcare reform, the researchers said that finding ways to trim spending is one key to financing programs intended to expand coverage to more Americans.

The authors estimated under optimistic scenarios and with broad use of the Prometheus model of bundled payment for six chronic conditions and four acute conditions or procedures requiring hospitalizations, that U.S. healthcare spending could be reduced by 5.4 percent between 2010 and 2019.

“This estimate assumes that providers can achieve a reduction of 25 to 50 percent in the costs associated with avoidable complications by providing higher-quality, more collaborative care. However, bundling payments only for hospital-based services would reduce spending by 0.1 percent.

“The Congressional Budget Office has estimated that bundled payment would save only $19 billion (0.5 percent) between 2010 and 2019, but it considered only hospital and post-acute-care services paid by Medicare, and since Medicare already bundles hospital payment through the diagnosis-related group system, the saving opportunities are limited,” the authors wrote.

The researchers also said other promising approaches to slow healthcare spending include adoption of EHRs, programs to better-manage chronic diseases, strengthening patients' use of primary care and encouraging wider use of lower-cost providers such as nurse practitioners and retail health clinics.

The authors noted that many reforms "have worked in one place, but we have almost no examples of their successful replication. If we can develop a common set of tools for design, evaluation and assessment, we will be able to move more quickly and effectively to reject or embrace policy situations on the basis of the evidence."

They concluded that it is possible to reduce spending on healthcare services, although numerous political and implementation barriers stand between these policies and actual savings.