Cost-Saving Effort in Health Care Falls Short of Goals, Study Finds | Healthcare Informatics Magazine | Health IT | Information Technology Skip to content Skip to navigation

Cost-Saving Effort in Health Care Falls Short of Goals, Study Finds

August 5, 2014
by John DeGaspari
| Reprints
Bundled payment demonstration provides lessons for future

A pilot program intended to implement and test a cost-saving strategy for orthopedic procedures at hospitals in California failed to meet its goals, succumbing to recruitment challenges, regulatory uncertainty, administrative burden and concerns about financial risk, according to a study by the RAND Corporation.

The outcome represents a disappointing effort to widely adopt bundled payments, a strategy that is is seen as one of the most-promising ways to curb health care spending.

Researchers evaluated a three-year effort coordinated by the Integrated Healthcare Association beginning in 2010 to adopt bundled payments for orthopedic procedures such as a total knee replacement surgery among commercially insured people under age 65.

The project had such a low volume of cases that there was not enough information to draw conclusions about how bundled payments affect health care quality or costs, the initial goals of the study. The findings are published in the August edition of the journal Health Affairs.

At the outset of the California bundled payment project, participants included six of the state's largest health plans, eight hospitals and an independent practice physicians' association. Eventually, two insurers dropped out because they believed the bundled payment model in this project would not lead to a redesign of care or lower costs, according to the study. Another decided that bundled payment was incompatible with its primary type of business, which is health maintenance organizations using capitation payments. Just two hospitals eventually signed contracts with health plans to use bundled payments. Hospitals that dropped out cited a lack of need to participate, as well as concerns about the time and effort involved. However, two ambulatory surgery centers signed contracts with one health plan.

The volume of orthopedic procedures in participating hospitals was extremely low—just 35 cases in three years. Ambulatory surgery centers had higher volume (111 cases), but health plans have been slow to contract with such centers despite their lower costs compared to hospitals. The project was hurt by delays in regulatory approvals of contracts, a lack of consensus about what types of cases to include under bundled payment and defining which services belonged in the bundle. In the end, most stakeholders agreed that the bundle definitions were probably too narrow to capture enough procedures to make bundled payment viable.

Recommendations for future bundled payment projects include ensuring sufficient volume, keeping the definitions of bundles simple and findings ways to manage the financial risk for health care providers. “Bundled payments have great promise for controlling health care costs, but thus far efforts to put the strategy in place on a wider scale have struggled,” said Susan Ridgely, the study's lead author and a senior policy analyst at RAND, in a statement. “We've learned lessons from the early setbacks, but more work still needs to be done to realize the potential of this model of payment.”

 

Get the latest information on Finance and Revenues and attend other valuable sessions at this two-day Summit providing healthcare leaders with educational content, insightful debate and dialogue on the future of healthcare and technology.

Learn More

Topics

News

NewYork-Presbyterian, Walgreens Partner on Telemedicine Initiative

NewYork-Presbyterian and Walgreens are collaborating to bring expanded access to NewYork-Presbyterian’s healthcare through new telemedicine services, the two organizations announced this week.

ONC Releases Patient Demographic Data Quality Framework

The Office of the National Coordinator for Health IT (ONC) developed a framework to help health systems, large practices, health information exchanges and payers to improve their patient demographic data quality.

AMIA, Pew Urge Congress to Ensure ONC has Funding to Implement Cures Provisions

The Pew Charitable Trusts and the American Medical Informatics Association (AMIA) have sent a letter to congressional appropriators urging them to ensure that ONC has adequate funding to implement certain 21st Century Cures Act provisions.

Former Michigan Governor to Serve as Chair of DRIVE Health

Former Michigan Governor John Engler will serve as chair of the DRIVE Health Initiative, a campaign aimed at accelerating the U.S. health system's transition to value-based care.

NJ Medical Group Launches Statewide HIE, OneHealth New Jersey

The Medical Society of New Jersey (MSNJ) recently launched OneHealth New Jersey, a statewide health information exchange (HIE) that is now live.

Survey: 70% of Providers Using Off-Premises Computing for Some Applications

A survey conducted by KLAS Research found that 70 percent of healthcare organizations have moved at least some applications or IT infrastructure off-premises.