HealthLawProf Blog

Editor: Katharine Van Tassel
Akron Univ. School of Law

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Monday, February 2, 2009

Payment for an "Episode of Care"

The Wall Street Journal's Health Blog posts an interesting blurb on a new idea of how to pay for health care.  Jacob Goldstein reports on the episodic care payment and writes,

When you pay doctors for every procedure they do, there’s an incentive for unnecessary treatments. There’s a financial reward for fixing problems that better care might have prevented. And there’s no incentive for doctors to prevent complications. On the other hand, few people want to go back to capitation — paying a single, annual fee for all of a patient’s care. That’s been criticized for leading to undertreatment.

So a lot of powerful people are looking toward a middle road: Paying a single, bundled fee for an “episode of care” such as a hip implant or a few months of treatment for cancer or a chronic disease. As a story in this morning’s WSJ notes, Tom Daschle, the man Obama’s picked to lead the health reform push, is a backer of episode-based payments. Max Baucus, a key senator in the health reform puzzle, likes them as well.

Medicare’s piloting a program that pays a lump-sum to be split by the hospital and physicians for acute-care procedures like coronary bypass. Of course, the prospect of the hospital handling a lump-sum payment makes a lot of docs nervous. And poorly designed bundles could encourage cherry-picking healthy patients or denying needed care. 

But beyond Medicare, several experiments are looking at different ways of bundling payments.  Later this year, UnitedHealth plans to test bundled payments for oncologists. Under the current system, many cancer docs make much of their income from buying and selling the drugs they administer to patients. UnitedHealth wants to pay a single, bundled fee for a few months of cancer treatment. The fee would be worth about what docs make now from fees and from profit on the drugs.  “What you used to be making on drugs now becomes a patient-care fee that can be redistributed in whatever way you think is right,” Lee Newcomer, the oncologist-turned-UnitedHealth exec, told us .. . .

This sounds a little like the switch we have begun to see in attorney billing - away from the billable hour and toward alternative billing methods such as a flat fee. 

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