Pulse
Learning from Experience
The government is exploring bundled billing—a practice long used in organ transplantation—as a strategy for reducing health care costs.
By Carmen Peota
In January, a Government Accountability Office (GAO) report to Congress on the feasibility of using bundled payments to reduce escalating Medicare costs noted that bundling payments had been the “industry norm” for organ transplantation for two decades. Bundling is a billing/payment strategy that results in a single payment being made for a group of services related to an episode of care, potentially involving several providers. The bundled payment approach has been suggested as a way to contain costs in both state and national debates about health care reform. Minnesota’s 2008 health care reform legislation proposed a bundled-payment approach called “baskets of care.” The federal government is piloting bundled-billing projects for Medicare.
The GAO investigators interviewed representatives from five of the nation’s largest payers—Aetna, Cigna, Humana, UnitedHealth Group, and Wellpoint—and from physician groups about their experience with bundled payments to learn how the process works. The payers reported that they typically signed contracts with hospitals that met their criteria for volume of surgeries done and outcomes. And they typically bundled claims for hospital, physician, and ancillary services provided before, during, and after a transplant. The payers pay the hospitals, which then pay the physicians.
The payers told the GAO group that bundling works for transplants for a number of reasons: They are high-cost procedures, which increases the potential for savings; they have clearly defined start and end points, which aids in defining an episode of care; and they have well-established care protocols and outcome measures.
How It Works
To better understand the ideas behind and mechanisms required for bundled payments, I spoke with Sidney Fiergola, J.D., who negotiates organ and tissue transplant-related contracts for the University of Minnesota Medical Center, Fairview.
Fiergola says bundled billing emerged as organ transplantation became more common and insurance companies sought ways to contain costs. Insurers decided to contract with transplant centers that met certain criteria through special networks. The idea behind that contracting arrangement was that payers would pay lower rates in exchange for the network driving traffic to the transplant center.
About a dozen networks currently mediate the contracts between the nation’s transplant centers and payers, which range from traditional insurers to companies that self-fund health coverage. Cigna’s LifeSOURCE Transplant Network, for example, has contracts with more than 500 transplant programs at more than 120 facilities.
Fiergola says that initially the payment bundles covered the period from the time a patient was identified as a potential transplant candidate through the year following transplantation. But hospitals quickly realized that a single payment for the care delivered over such a long period of time put them at significant financial risk. “In some parts of the country, a kidney patient can wait six to seven years for a transplant. Managing a patient that long would be burdensome,” Fiergola explains. Now, the transplant bundles are for a defined (and shorter) period of time, usually a period of weeks rather than years.
Billing for transplants done through the University of Minnesota starts with the medical center, which has a system for flagging charges as soon as a patient is identified as a transplant candidate. The physician group that provides the medical and surgical services submits claims to the hospital, which bundles those with its own claims and submits them to the payer. To stay on top of this, the hospital has three staff members who track claims for the 600 or so solid-organ and blood and marrow transplants it does a year. “It’s extraordinarily complicated,” Fiergola says.
Feasible for Other Procedures?
Although the GAO report’s authors didn’t rule out the feasibility of using bundled payments for other services, they noted factors that might hinder wider adoption: the fact that it requires a manual claims process (all five payer representatives said processing claims for bundled payments was too complex for their automated systems), that standard definitions for an episode of care do not exist, and that patients’ choice of providers is limited.
Fiergola is also somewhat skeptical that the bundling strategy can be widely applied. She believes the administrative burden would be too great if bundling were used for higher-volume procedures such as knee replacements. “The payment systems are not set up to align that way currently,” she says. “If you do 5,000 of some procedure, getting the people power to monitor this manually would be costly.”
She notes that although Fairview will continue to bundle claims for transplant services “because that is where the market is currently,” the organization places more stock in a “total-cost-of-care” approach to cost-containment, which she describes as managing a patient, not just one problem.
Julie Sonier, who worked on the baskets-of-care idea for the Minnesota Department of Health and is now deputy director of the State Health Access Data Assistance Center, says bundling is probably most workable in a system that is more integrated. For one thing, less integrated groups of providers will struggle to decide who will take the lead in administrating the process. “Maybe one reason bundling is common for transplants is because the only people who do them are large integrated services,” she says. “They can figure out how to do it.”