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How Will Bundled Payments Affect Innovation?

By November 24, 2014Commentary

Fee-for-service reimbursement has been blamed for excessive utilization and health spending, and so it follows that a number of alternative methods are being created and put into use.  The Network for Excellence in Health Innovation has produced a brief examining the impact of these new reimbursement methodologies on innovation.   (NEHI Brief)   Bundled payments typically pay a set fee for an episode care.  They obviously work best for a clearly defined episode, such as a surgery.  Other methods, such as value-based purchasing, may look at the larger scope of care for a patient and adjust payment depending on outcomes and cost.  And capitation typically gives a provider a set monthly fee to be responsible for all the health needs of a patient.  Bundling or episode of care payments are designed to limit spending by defining what appropriate care and cost for that care should be.  They are by definition an average, although some may be risk-adjusted for a patient.  The brief addresses the often-expressed concern that these bundled payments may focus providers too much on saving money and therefore lead to avoidance of care that could help a patient, and may thwart the development and adoption of new technologies and procedures that could provide better outcomes for patients.  For some of its reimbursement methods, CMS has addressed these concerns by providing add-on or pass-through payments for certain new products.  While the concern may be legitimate, one ongoing problem in our health system is that many new “innovative” products may have a high price tag but do little to improve quality.  Me-too brand name drugs are an obvious example, along with minor modifications, such as extended release, to extend patent protection for a drug.  Medical devices face similar concerns, with many new products providing only incremental benefit at a large price.  Robotic surgery comes to mind as an “innovation” that has raised costs with research increasingly suggesting that outcomes no only aren’t better, but may be worse.  In general, payers should not have to pay more for an innovative product or procedure than they would for the usual care unless and until the new product or procedure has been clearly demonstrated to significantly improve meaningful patient outcomes.  At that point, its cost can be negotiated, but cost should not inhibit the delivery of the best possible care to patients.

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