One of Obamacare’s big experiments to lower costs is working surprisingly well

[Aegon]

https://www.vox.com/policy-and-politics/...s-research

A few years ago, under the authority of the Affordable Care Act, the federal government started an experiment: It would pay hospitals a single amount for surgeries to replace joints like knees and hips instead of paying them for each individual service. The hope was that hospitals could lower costs while maintaining or even improving the quality of care.

The program was called “bundled payments,” and it was voluntary under the Obama administration — hospitals could opt in or out. Almost immediately, it seemed to be working. Costs per procedure were going down, and quality seemed to stabilize or even improve. Hospitals didn’t have to worry about squeezing every dollar they could out of Medicare and could start focusing more on the care itself.

But some health economists had two outstanding fears: Would hospitals start performing more surgeries, which would erase any savings to Medicare? And would they start becoming more selective about their patients to avoid particularly costly ones?

According to new research led by Ezekiel Emanuel and Amol Navathe at the University of Pennsylvania published Tuesday in JAMA, the answer to both is: no, not really. The volume of procedures isn’t going up, and for the most part, the kind of patients receiving replacements isn’t changing, either.

Bundled payments got started in earnest under Obama, and now the Trump administration is embracing them too. If hospitals can lower costs while still improving the quality of care under them, then bundled payments could be a potent tool in bending the health care cost curve.


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The Trump administration is expanding bundled payments, including for knee and joint replacements. The government, in pilots started under Obama, has also begun to test bundled payments for certain kinds of cancer care and for heart stents. The next frontier is more delicate medical conditions, like congestive heart failure or pregnancy.

Obamacare opened the door for a lot of experiments in containing health care costs. Emanuel, who helped craft the law at the White House’s Office of Management and Budget, is a big believer in bundled payments. He told me his original hope was for the feds to be paying for five different procedures by bundle by 2015, though that proved too ambitious for federal officials, who worried that hospitals and doctors wouldn’t be ready.

So instead, the law created a new office within the Centers for Medicare and Medicaid Services to test some of these innovative ideas.

The evidence suggests that bundled payments have been perhaps the most successful cost experiment run under the ACA, in comparison to accountable care organizations (which pay doctors and hospitals collectively for all of a patient’s treatment and for which current evidence is more mixed) and other proposals.

Bundled payments, Emanuel said, encourage hospitals and doctors to find more efficient ways of performing these procedures. Because they receive a flat amount, any savings they achieve go right into their pocket. But bundled payments don’t require providers to “boil the ocean” in the way ACOs might, because the latter requires a much broader overhaul to find savings in treating the full range of a patient’s medical needs.

In other words, it’s easy for hospitals to figure out how to do one procedure more cost-effectively. Figuring out how to treat an entire patient more cheaply is much harder.