Moving the needle on health care transformation
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Rising health care costs are a top concern for Americans today, with 64% of voters in a January 2016 Kaiser Health tracking poll, citing a candidate’s position on the cost of health care, health insurance, and prescription drugs as “the single most important factor” or “a very important factor” in their vote for president.  With health care costs continuing to outstrip inflation, not surprisingly, many Americans are looking to curb their out-of-pocket health care spending.

As former Senate Majority Leaders, we strongly believe that now is the time to find and implement innovative approaches to fundamentally transform our approach to health care.

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Most recently, on July 25, the Centers for Medicare and Medicaid Services (CMS) took a significant step toward addressing one of our health system’s leading problems: paying too much for care without the expected quality outcomes. Building on the recently implemented Comprehensive Care for Joint Replacement (CJR) bundled payment demonstration and the ongoing testing of the Bundled Payment for Care Improvement (BPCI) models, CMS proposed a new bundled payment model for cardiac care and extended the existing CJR model for orthopedic care. The five-year cardiac care model would begin July 1, 2017 in hospitals from 98 randomly-selected metropolitan statistical areas.

What does this mean for health care today?

The joint replacement model, which began in 67 urban geographic areas on April 1, 2016, tests bundled payments for an episode of care associated with hip and knee replacements with an eye toward quality measurement.  Hip and knee replacements are the most common inpatient surgery for Medicare beneficiaries, yet there is significant variation in outcomes, rates of complications and readmissions, and episode costs range from $16,500 to $33,000.  The CJR demonstration seeks to reduce variation, deliver better care, and spend our health care dollars more wisely. 

For the past 25 years, the Medicare program and members of Congress have gradually pursued the development of payment “bundles” to help control costs for inpatient hospital stays and subsequent post-acute care, while enhancing the quality of care provided to Medicare beneficiaries. Under today’s fee-for-service approach, hospitals are provided one payment for inpatient services during hospitalization and another set of payments for outpatient services provided after hospitalization, while physicians receive a separate payment for their professional services delivered during and after a hospital stay. Post-acute care providers (such as skilled nursing facilities, rehab hospitals, and home health agencies) are given their own payments for therapy and rehabilitation services furnished in the time period following the inpatient hospital stay.

This fragmented system provides little incentive for hospitals, physicians, post-acute care providers, and other clinicians to coordinate care and control episode of care costs beyond their respective roles.  

However, by setting a target price for the total care episode, the proposed bundled payment models foster better alignment of payment incentives, reduce wasteful and duplicative services, and encourage care coordination across multiple settings and providers.

And, Medicare is not alone. Private payers across the country are increasingly testing new bundled payment approaches in an effort to incentivize the delivery of cost-efficient and high quality health care. Bundled payment arrangements have already demonstrated the ability to reduce readmission rates and shorten hospital stays, thereby lowering costs.   

Since 2013, our work together at the Bipartisan Policy Center has focused on recommending key delivery system and payment reforms, including bundled payments as one type of alternative payment model. We applaud the administration’s thoughtful approach to expand bundled payment arrangements across the Medicare program. This latest effort presents a real opportunity to better treat cardiovascular disease, the top cause of death and disability in this nation. And, we encourage CMS to further examine new payment and delivery system approaches that can be tested and scaled to improve health and health care, and lower costs.

Over the course of the next year, we will continue our efforts at the Bipartisan Policy Center to find ways to improve Medicare’s offerings to its 55 million beneficiaries.

Working in a bipartisan manner to improve the incentives in health care delivery and payment models holds the greatest promise for improving the sustainability of Medicare and our health care system overall.  It will take the commitment of government, Congress, and all of our health care stakeholders to advance the country’s progress toward a value-driven health care system that ranks next to none. 

Daschle served in the Senate from 1987 to 2005 and was Majority Leader from 2001 to 2003. He is the founder and CEO of The Daschle Group, A Public Policy Advisory of Baker Donelson that represents stakeholders across the health care industry.  Frist, M.D., served in the Senate from 1995 to 2007 and was Majority Leader from 2003 to 2007. He is a nationally acclaimed heart and lung transplant surgeon and partner at the private equity firm Cressey and Company.


The views expressed by authors are their own and not the views of The Hill.