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Replace Fee-for-Service with Bundled Payments in Medicare

Replace Fee-for-Service with Bundled Payments in Medicare

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David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro explain why Medicare payments should be bundled together for multiple providers.
David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro explain why Medicare payments should be bundled together for multiple providers.

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Published by: Center for American Progress on Oct 26, 2011
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10/26/2011

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1Center for American Progress | Replace Fee-for-Service with Bundled Payments in Medicare
Replace Fee-for-Service withBundled Payments in Medicare
 David M. Cutler, Ezekiel J. Emanuel, and Topher Spiro October 2011
Since up to one-third o medical spending is excessive and unnecessary,
1
reorming how Medicare pays or health care is essential to reducing health-care costs and improvingthe quality o care. Rather than paying a ee or each specic service separately, pay-ments should be bundled together or multiple providers. Tis would create strongincentives or providers to coordinate care and eliminate unnecessary costs.For ully integrated providers that orm accountable care organizations—teams o pro- viders that coordinate care—payments will be bundled to cover all o a patient’s care.But or most providers—which are not integrated—payments must be bundled or anepisode o care, with providers dividing the payment among themselves.For instance, a bundled payment or a hip replacement would cover pre-surgical prepa-ration, anesthesiology, the surgical procedure, operating room ees, the hip implant,radiological examinations, laboratory tests, and rehabilitation. Bundled payments must be adjusted or the quality o care and health status to prevent providers rom skimpingon care or avoiding high-risk patients.Te Aordable Care Act requires a ve-year pilot program or bundling payments orepisodes o care around hospitalization or 10 conditions, with voluntary participation by providers. Te secretary o health and human services is authorized to expand theprogram in 2016 i doing so would reduce costs and improve quality. Tis transition to bundled payments should be broadened and accelerated.
Recommendations
Expand the Acute Care Episode, or ACE, bundling program for cardiac and orthopedicprocedures nationwide—and include related post-acute care such as rehabilitativeand home health services—by January 2013.
 
Building on over a decade o testing, in

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