HCFA is considering expanding its successful "centers of excellence" project by paying physician-hospital organizations a bundled payment for all services.
The proposal is in its infancy, and it will be some time before federal officials solicit PHOs for participation, according to Kathleen Buto, HCFA's associate administrator for policy. However, HCFA hopes to build on the success of the bundling demonstration project for coronary artery bypass graft surgery. That project saved about $40 million at the seven participating hospitals during its four-year run, according to federal estimates.
For the most part, the hospitals involved in the initial project also have given it favorable reviews. According to a study by the accounting and consulting firm Ernst & Young, those hospitals did not increase the number of procedures performed, but they did make more money on each case by becoming more efficient.
Earlier this year, HCFA announced it was expanding the bundling project to include other cardiac procedures as well as hip and knee replacements. More than 500 hospitals applied to enroll in those projects, which HCFA hopes to have up and running later this year.
Under the bundling plans, hospital and physician compensation for a given treatment are combined into one payment. The aim is to streamline the payment system and reduce costs.
HCFA now wants to expand the bundling framework to all services, but Buto acknowledged that some services may not lend themselves to the payment structure. One thing still being hashed out is whether post-acute services would be included in the bundled payment. But Buto said, "We would probably want to bring those services in if they are all part of the same (integrated) system."
The program would likely be open to PHOs and other types of integrated provider networks that include both physicians and hospitals.
Meanwhile, another Medicare pilot project that is further along in its development, the group volume performance standard program, has fallen behind schedule and is unlikely to start Jan. 1, 1997, as HCFA had hoped.
Under that proposal, HCFA would give physician groups cost targets for specific populations of Medicare patients that use the groups for care. The beneficiaries would remain in the fee-for-service sector and wouldn't have to enroll in a managed-care plan.
If the group practice is able to keep the overall costs for the Medicare beneficiaries below the target, the group will receive a bonus that will be prorated to reflect the percentage of total beneficiary expenses incurred by the group practice.
If the group practice exceeds the target, a penalty will reduce any future bonuses.
According to Buto, HCFA now hopes to begin soliciting group practices to participate in the project by year-end. HCFA had hoped to have the program running in time for the annual calender-year Medicare payment updates, but that is now unlikely, Buto said.