In Wake of RAND Study, What's the Future of Bundled Payments in Managed Care?

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So far, the recent failure of a high-profile bundled payment pilot in California has not slowed enthusiasm for the concept from CMS.

In August, the RAND Corporation reported that a second major pilot study of bundled payments had failed. The news sent healthcare reform advocates looking for answers and brought out the critics.

A recent critique, appearing online in Forbes, called bundled payments “price controls by another name” and pointed out potential problems with the concept: incentives to skimp on care, or, conversely, “upcoding” to get more from Medicare if a patient’s condition is marginal or uncertain.

However, as The American Journal of Managed Care reported in July, CMS wants to expand its bundled payment program and anticipated an uptick in the number of healthcare organizations taking part. So far, there appears to be no backtracking from CMS on bundled payments, which are seen as a way to bring savings to government-funded healthcare.

What accounts for the disconnect? Some labeled the particular features of the failed pilot in California, administered by Integrated Healthcare Associates, as “no risk, no reward,” and others pointed to the uniquely difficult features of the state’s regulatory environment. Uncertainty clearly seemed to be a factor in provider dropouts, with hospitals saying they were unwilling to make the administrative or technical investment needed if there was no guarantee of a return.


Both the RAND authors and some of their critics observed that success can come from failure. For example, one commentator observed that payments should start in a retrospective model, then move to a prospective model.

As Jan E. Berger, MD, MJ, wrote in The American Journal of Pharmacy Benefits in June, “We are in a sort of ‘experimental phase’ with many of these new models, and we will not have all the answers from the start.

“What we do need to have is inquisitiveness, transparency, and the willingness to work together to address these issues openly in a way that leads us over time to the best method of meeting the goals of a bundled-payment model.”

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