by Tom aka Rusty Rustbelt 

Health care thoughts: Bundling Medical Payments

The Patient Protection and Affordable Care Act (PPACA) is chocked full of pilot programs, mandates, guarantees, prohibitions, penalties, taxes and experiments. One of those experiments may define the future of Medicare funding for surgeons, and then may define the future of most of the physician revenue cycle. Bundling.
Bundling (also known by other names such as episode payment, global payment, global bundled payment or even packaged pricing) allows the insurer to pay one provider for the entire episode of care, requiring the provider then to contract with and pay all of the other required providers. States and private insurers are also moving toward their own bundling experiments.
There have been some tests of this concept for both cardiac and orthopaedic services, but not at a scale to prove the concept. PPACA provides for Medicare pilot programs. Ultimately bundling will only become standard procedure when bundling can provide good outcomes with cost savings, formidable goals.

A commonly cited example in commentaries is a hip fracture in an elderly (therefore Medicare) patient.
In the current system the patient and Medicare would receive billings from the ambulance, the emergency department, the emergency department physicians, the hospital, the orthopaedic surgeon, a nursing facility (rehab bed) the physical therapist, and a pharmacy (during the rehab stay).
Under a bundled system the bundling would likely begin when the patient arrives at the hospital, and would end when the patient is discharged from the rehab center to home, the end of the episode.
The advantages to the government could be very real – the total cost of the episode is controlled and there is a power incentive for best outcomes without any unnecessary care.
The advantage to the hospital is clear, the hospital is now officially the hub of the wheel and has immense power over patient care (the bundling concept will likely be combined with other new wave concepts such as accountable care organizations (ACOs)). The hospital or integrated delivery service might also attempt to simplify the process by owning and employing all of the providers.
The hub organization of the bundle will need very, very sophisticated IT and cost accounting abilities, be able to negotiate contracts with diverse providers, supervise and coordinate the providers, conduct plan of care activities to maximize outcomes while minimizing spending, and move patients toward high quality outcomes or suffer the penalties.
This system will almost certainly cause tension between hub organizations and other providers, both need each other but both have turf and economic interests to protect. Most of the talk now is about revenue sharing, at some point risk sharing will come onto the table, especially when bundling is a part of an ACO or some other integration scheme.
Bundling will likely come on gradually, and there are at multiple models and multiple possible variations with those models. Bundling will get caught up in other schemes, including ACOs, and there may be new models we do not even recognize at this time. The experiment has begun.