Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


MedPAC Urges Test of Single Payment for Doctor and Hospital Care

By John Reichard, CQ HealthBeat Editor

April 10, 2008 -- The Medicare Payment Advisory Commission voted late Wednesday to recommend a pilot program testing the feasibility of issuing single payments for episodes of treatment that would be shared by both the hospital and the doctors involved in delivering care.

Hospitals and doctors are now paid separately for treatment involved in caring for a heart attack patient, for example. By issuing a single payment for selected medical conditions, Medicare may be able to spur the two types of providers to figure out new processes of care that lead to less duplication and waste, commissioners hope. Doing so would leave them more money to share from their bundled payment once treatment is completed.

But doctors' offices and hospitals do not have a tradition of teaming up to deliver care, commissioners noted in discussing the bundling option at their meeting in March. Other recommendations approved by the panel for their June report to Congress include starting providers on a "glide path" toward learning the kind of cooperation needed to make effective use of the bundling tactic, commissioners said.

Those other recommendations aim to motivate doctors and hospitals to begin analyzing the health care resources they consume in delivering care, with an eye toward promoting efficiency and reducing hospital readmissions, which are generally seen by analysts as a sign of ineffective care.

One of the other recommendations states that "Congress should require the [Department of Health and Human Services] Secretary to confidentially report readmission rates and resource use around hospitalization episodes to hospitals and physicians. Beginning in the third year, providers' relative resource use should be publicly disclosed."

The other says that "to encourage providers to collaborate and better coordinate care, the Congress should direct the Secretary to reduce payments to hospitals with relatively high readmission rates for select conditions and also allow shared accountability between physicians and hospitals."

The term "shared accountability" is a synonym for "gainsharing," which means allowing doctors and hospitals to share savings from more efficient treatment. Gainsharing is not permitted under current law. A number of medical device manufacturers have opposed gainsharing agreements on grounds that it would lead doctors and hospitals to use cheaper medical devices in order to boost their own profits. The result would be lower quality care, those manufacturers argue.

In addition, the recommendation calls on Congress to "direct the Secretary to report within two years on the feasibility of broader approaches, such as virtual bundling, for encouraging efficiency around hospitalization episodes."

Commissioners regard virtual bundling as an interim step toward actual bundling, but note that it may not be feasible because of its administrative complexity.

Virtual bundling would involve adjusting existing payments to hospitals and doctors based on their levels of resource use, paying them less if they consume resources inefficiently and more if they use them efficiently. Unlike actual bundling that would be tested in the pilot, virtual bundling would not involve reimbursing hospitals and doctors under a single payment.

Actual bundling would involve closer collaboration, MedPAC Vice Chairman Robert Reischauer explained Wednesday. "The virtue of virtual is you don't have to know each other's names and this one you have to be dating each other pretty seriously," he said concerning actual bundling.

Publication Details