Physicians certainly have had concerns about the hospital being in charge of administering their payment under a bundling approach. I think as long as you have a formal structure in governance that can accept payments, like a physician-hospital organization, this model could work, Wolter says.
Of the five selected sites, three are in the final stages of getting started on the project this spring. The other two will be implementing the demonstration at a later date, once various administrative issues related to Medicare payment contractors are addressed, she says.
One of those is Exempla St. Joseph, whose participation in the demo will likely be delayed until December, while the hospital undergoes final preparations to form its physician-hospital organization.
Minkin is confident the bundling model will provide incentives for physicians to improve clinical outcomes, which will also have the effect of increasing the value received by Medicare beneficiaries compared to the former program, he says. Patient-care quality will increase, length of patient stay will be reduced and total costs will be lower for Medicare, so society wins and especially the patient wins, he adds.
Advocates of this approach, however, should be aware it may run into legal snags once it is put into practice, says Lisa Ohrin, a partner with the healthcare practice at Sonnenschein, Nath & Rosenthal in Washington.
Demo projects have limitations in that they generally waive fraud-and-abuse laws, says Ohrin, who previously served as director of the division of technical payment policy at the CMS. Once a bundling methodology like this goes outside the world of the demonstration, some fraud-and-abuse laws, in particular the Stark regulations, may need to be modified to implement this, she says.
Under these regulations, a physician cannot refer the patient for certain designated health services to any entity with which the physician has a financial interest. Because it involves some type of compensation arrangement between the physician and hospital, the bundling system that the CMS is pilot-testing has the potential to conflict with the Stark rules, Ohrin says.
So, when fraud-and-abuse laws prohibit this type of connection, they may need to be modified to allow for more flexibility in a situation like bundling, she says.
Modifications to the statute could come from either Congress or HHS. But because HHS is limited to working within the statutory framework of the physician self-referral law and the other fraud-and-abuse laws, a change at the congressional level might be of greater utility, Ohrin says.
Bundling as a concept continues to grow within the healthcare community, with testing coming in small increments. Billings Clinic, for example, is a participant in the Program of All-Inclusive Care for the Elderly, or PACE, program, which is financed by Medicare and Medicaid for frail older adults and uses a bundled payment format. Under this arrangement, all necessary care from doctors, hospitals and nursing homes is covered by a fixed amount for the year for each patient.
Because of how the PACE program is structured, it may not be subject to the fraud-and-abuse problems Ohrin describes. Thats because PACE qualifies as a managed-care organizationor a similar entity that receives a fixed payment. There are specific exceptions to the fraud-and-abuse laws for financial relationships between designated health services and physicians where services are provided to enrollees of a managed-care plan, Ohrin says.