Medicare tests payment system it hopes will cut costs

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Medicare is now soliciting applications for the program. Theyll be awarded through a competitive bidding process.

Nancy Foster, vice president for quality and patient safety at the American Hospital Association, said hospitals want to see better coordination of Medicare payments. Foster was still reviewing the details of what Medicare proposed, but she said its encouraging that the agency is allowing applicants to design their programs to meet local needs rather than establishing a single, nationwide model.

Thats an appealing notion, Foster said.

Hospitals and other providers have raised significant concerns about another effort to better coordinate healthcare services — accountable care organizations. Like bundled payments, ACOs are an attempt to pay for outcomes and give providers a financial incentive to make the switch.

Hospitals will have to weigh the financial upside of accepting bundled payments, Foster said, adding that its too early to know whether the incentives are strong enough.

Hospitals face a critical decision between investing in more integrated systems or adding new products and services under the existing Medicare payment structure, she said.