Bundled Payment Demonstration Project Changes How Labs Would Be Paid

Efforts in the nation’s capital to reform healthcare are still in the formative stage as the new President and the new Congress consider various approaches. Meanwhile, the Centers for Medicare & Medicaid Services (CMS) started the new year by launching pilots for a bundled-service payment scheme. Not only may this be the beginning of the end of the fee-for-service payment system, but it has important implications for clinical laboratories and anatomic pathology groups.

The bundled payment system demonstration projects are a first step to what’s coming next. The Medicare Payment Advisory Commission, better known as MedPAC , released its blueprint for reforming the delivery system to Congress on March 17 in its annual Report to the Congress: Medicare Payment Policy.

Among the recommendations to increase accountability are measures for replacing fee-for-service payments with a pay-for-performance concept, a move MedPAC Executive Director Mark E. Miller contends is essential to reforming the system. He believes pay for care must span across provider types and time. The goals is to hold all providers involved in care jointly accountable for quality and resources used.

High on Miller’s hit list is avoidable hospital readmissions, which cost Medicare billions of dollars each year. Readmissions within 30 days of discharge account for 18% of Medicare hospital admissions and cost $15 billion annually.

The demonstration projects for bundled payment to hospitals and office-based providers are just one step in this reform. MedPAC recommended releasing hospital readmission data to the public and reducing payments to hospitals with high readmission rates for select conditions.

However, these payment reductions will be implemented, along with a change that permits gainsharing. Gainsharing arrangements allow hospitals, attending physicians, (including pathologists) and other Part B specialists to share in savings from reengineering inefficient care processes.

MedPAC hopes a system of reward and punishment will pay off in higher quality care. It believes one payment for bundled services would encourage collaborative innovations. The goal is to create cost efficiencies, better integrate clinical services, improve coordination of care, and increase quality.

Each year, across all patient populations, there are an estimated five million readmissions within 90 days of discharge. The Boston-based Institute for Healthcare Improvement (IHI) believes up to 46% of readmissions could be prevented with discharge planning that provides transitional care.

IHI has developed a transitional care model for congestive heart failure (CHF) patients. CHF is a top diagnosis for readmissions, with one-third of discharged patients returning to the hospital within 30 days. When implemented at St. Luke’s Hospital in Cedar Rapids, Iowa, the IHI program cut readmissions of CHF patients in half, from 12% to 6%.

Across the United States, inpatients are generally discharged and sent home with no follow-up. In fact, in one post-discharge survey, 64% of patients said no one from the hospital even talked with them about managing their care at home!

Part of the problem is hospitals aren’t paid to coordinate care after a patient leaves. But that may change, according to a Wall Street Journal article. Impressed with results of a transitional care model developed by Mary Naylor, a Nursing professor at the University of Pennsylvania, Aetna and Kaiser Permanente are testing it in Chicago, Philadelphia and San Francisco. If successful, Aetna Medical Director Randall Krakauer, M.D., says his company will roll it out nationally.

For clinical laboratories, the implications of a payment system that bridges Medicare Part A and Medicare Part B could be significant. Bundled payment arrangements mean that, because lab test reimbursement is included in the bundled payment total, laboratories would need to be paid directly by providers-not the Medicare program.  – P. Kirk

Related Information:

Keeping Patients From Landing Back in Hospital

Report to Congress: Reforming the Delivery System, September 16, 2008

Medicare Test-Drives a Single-Payment System in Four States