Long Island Business News
LI Hospitals Test Flat-Fee Medicare Payments
by Claude Solnik
March 4, 2013
Some of Long Island’s largest hospitals are taking part in a Medicare test program that pays flat fees for treatment, the biggest change to the federal health program since it was created nearly 50 years ago.
The initiative, known as bundled payments, is a significant departure from the current fee-for-service model, which covers separate charges from hospitals, doctors and other health professionals.
The three-year pilot program, a little-heralded part of the Patient Protection and Affordable Care Act, involves more than 500 hospitals nationwide. The move is in part designed to eliminate the current incentive for unnecessary testing, which critics say is responsible for a surge in Medicare costs.
The government would expand the program in 2016 if it yields results.
“The whole idea is if this works well, it could be beneficial for all,” said Claudia Hinrichsen, a partner in the Lake Success-based health care law firm Greenberg, Dresevic, Iwrey, Kalmowitz & Pendleton. “You have better care at a lower cost.”
Federal health officials are hoping the program can reduce re-admissions and duplicated tests by having a single institution oversee all care, from doctor’s office to hospital to rehab and back to the patient’s home.
Under the program, health-care providers deliver services based on target prices. Once the service is delivered, the provider gets a first payment based on a traditional Medicare fee-for-services, but steeply discounted.
Total costs would later be compared to the target price, and if Medicare saved money the provider would share in the savings.
A bundled payment for a hip replacement, for example, would cover pre-surgical preparation, anesthesiology, the surgical procedure, operating room fees, the hip implant, radiological examinations, lab tests and rehabilitation.
Do it all for less than the target price, and get rewarded. Exceed that price, and the provider eats the difference.
Supporters say bundled care is a long overdue remedy to the current system, which rewards providers for an assembly line of tests and treatments.
“It’s routine that people get sent into the medical technology factory and are put through all sorts of expensive tests,” said John Sardelis, head of the Health Administration program at Saint Joseph’s College in Patchogue. “We pay providers to do stuff and they’re paid by volume. They’re piece workers.”
Conversely, some industry experts fear providers may begin making economic rather than clinical decisions, eliminating necessary procedures to control costs. A 2011 Rand Corp. study of bundled payments also expressed that fear, noting concerns that cost cutting “could reduce the quality of medical care.”
It’s also not clear how well hospitals will be able to manage care beyond their buildings, even if bundled payments cover services following hospitalization.
Janine Logan, a spokeswoman for the Nassau-Suffolk Hospital Council, a trade group, said bundled payments “have to be structured thoughtfully” to minimize financial risk to providers.
“The hospital does have risk,” Hinrichsen said. “It’ll have an arrangement with the physician. For a percent of reimbursement, the hospital is going to have to manage that care.”
Catholic Health Services of Long Island is testing bundled payments for congestive heart failure and joint replacement, while North Shore-LIJ is rolling out the program at four hospitals for an array of services, including stroke and cardiac surgery, chronic obstructive pulmonary disorder and cardiac surgery.
Winthrop-University Hospital in Mineola is also testing bundled payments for major joint replacement.
The goal, said Winthrop CEO John F. Collins, is “to lower costs through improvement for both the hospital admission, as well as 90 days after the patient is discharged from the hospital.”
Outside the federal program, insurers such as Aetna and UnitedHealthcare are also testing bundled payments – but easy does it.
“The health care payment system is enormously complex,” said Aetna spokeswoman Susan Millerick. “It’s important to consider all of the potential downstream effects of making changes.”