In January, CMS announced site selections for the Acute Care Episode (ACE) demonstration project. ACE is a new, hospital-based demonstration that will test the use of a bundled payment for both hospital and physician services for a select set of inpatient episodes of care. The goal is to improve the quality of care delivered through Medicare fee-for-service. Baptist Health System in San Antonio; Oklahoma Heart Hospital LLC in Oklahoma City; Exempla Saint Joseph Hospital in Denver; Hillcrest Medical Center in Tulsa, Okla.; and Lovelace Health System in Albuquerque, N.M., will participate in the demonstration.
But even when we are just at the beginning of field-testing ideas to improve the delivery of care, all signs point to a major healthcare reform bill coming out of Congress this year. How can they know what will work when the demonstration projects are just starting? How can they anticipate the unintended consequences of wholesale reform? Well, that’s just what Congress can—and does—do. We will all be left to figure out the details on the fly.
The temperature seems to be getting turned up a notch with every healthcare blog and Web posting. When the public and legislators read what Atul Gawande, MD, MPH, wrote in The New Yorker and then it is quoted by the president, suddenly it seems that everyone knows that care is much more expensive in McAllen, Texas, than in nearby El Paso, albeit with worse outcomes. The solution is almost anything that purports to reduce unnecessary variability and ties payment to performance.
Prospective vs. Retrospective Payment
To allow yourself to have a broad context of payment reform, think of “prospective” and “retrospective” payment as two options for a new payment paradigm. Don’t roll your eyes; this stuff is material to how we earn our living.
A prospective system might drastically alter what we have now, by throwing out fee-for-service and no longer paying by the unit of the visit or the procedure, and instead using a global fee (e.g., bundling) that is geared more toward efficiency and effectiveness (i.e., use of resources and better outcomes).
On the other hand, a retrospective system might continue to pay a modified fee-for-service fee (i.e., lower than current reimbursement) with a “significant” bonus for performance (e.g., lower readmission rate, fewer visits to the ED) and improved measureable quality. Of course, this can be “new money” for quality or part of a holdback after upfront fees have been lowered.
In any event, we are probably entering an era in which hospitals and physicians will need to think of themselves as part of a “supply chain” and not just think “I did my job, so pay me.” And during this whole reshuffling of the healthcare deck, there might be calls to remove some of the inequities that have been cobbled onto the Medicare and insurance systems. For example, currently there are significant geographic disparities in Medicare reimbursement (e.g., surgery in Mississippi often is reimbursed at 50% of the same procedure in New York City or Los Angeles). And there are significant payment disparities between medical and surgical specialties and primary-care providers that the Resource-Based Relative Value Scale (RBRVS) system has certainly not corrected.
Integration Hurdles
The small percentage of hospitals, physicians, and patients who currently are in an integrated system probably will have a smoother ride into healthcare’s new future. It is easier for Kaiser or Geisinger or HealthPartners in Minnesota to take on all of the business challenges and risks of accountability for performance and rewards for efficiency. But what about most of the rest of us?