Bundled payments could cut Medicare fraud, experts say

WASHINGTON — Health and policy experts are pushing for a system that pays doctors a lump sum for medical care or allows them to share in savings, saying it will save millions of dollars over current fee-for-service payments that can lead to fraud and over-use of medications.

In the new system, doctors would not be entitled to extra pay should they prescribe costlier medication.

Earlier this month, Sen. Elizabeth Warren, D-Mass., raised the issue of lump sum – or "bundled" – payment plans at a hearing for the nomination of Sylvia Mathews Burwell to become secretary of Health and Human Services. A bundled payment demonstration project at Bay State Health in Massachusetts saved $2,000 per Medicare patient for things like hip transplants, she said.

"CBO projects that applying bundled payment models like Bay State's nationally could save Medicare about $46.6 billion over the next seven years," Warren said.

Burwell said she would try to expand those efforts.

In another bid toward payment changes, Rep. Diane Black, R-Tenn., and Rep. Richard Neal, D-Mass., introduced a bill last year, the Comprehensive Care payment Innovation Act, that would allow a voluntary bundled payment system for providers offering services like hip replacement or angioplasty.

Another approach allows medical providers to work together in "accountable care organizations" that share the proceeds of cost savings they achieve.

But don't expect everyone to cheer a faster move to ACOs or bundled payments, said Ezekiel Emanuel, a University of Pennsylvania bioethicist and a key architect of the Affordable Care Act.

"I think it's definitely something that makes the pharmaceutical companies nervous," Emanuel said. "They set the price at $125,000, and the government pays. They like that."

Health experts and the pharmaceutical representatives say doctors need to have access to medications that allow them to individualize treatment.

"There are a lot of challenges and a lot of issues around how ACOs and bundled payments get structured," said Randy Burkholder, vice president for policy and research at Pharmaceutical Research and Manufacturers of America (PhRMA). In some cases, the new, more expensive medications can be the most effective, he said.

The conversation comes after the government released provider payment data last month that showed Medicare paid more than $6 billion for medications and vaccines administered by health professionals through Medicare Part B, a USA TODAY analysis of the data showed.

Some specialties, particularly oncology, have wide variations in the prices of doctor-administered injectable drugs that are virtually the same. A $1,000 cancer drug may achieve the same results as a $100,000 cancer drug. But health care providers are often paid a percentage of the cost of the drug they prescribe, meaning that $100,000 drug brings them a bigger paycheck.

"I think, in oncology, you do have a financial incentive to prescribe the high-cost drugs," Emanuel said. If doctors are paid more for using costlier drugs, then they will use them, he said.

Already, the Centers for Medicare and Medicaid Services began an Accountable Care Organization pilot program last year as part of the Affordable Care Act. So far, 114 ACOs have signed up for the Medicare program, and last year, they saved $380 million.

And Baptist Health South Florida created a cancer-specific ACO. Before the ACO, they spent 27% of their budget on injectable medications. After the switch, injectables dropped to 22% of the budget–for a savings of $250,000 for 226 patients, according to a presentation at the 2013 Cancer Center Business Summit in October.

And, in some cases, insurers and the government have moved toward bundled payments, where the provider receives a set amount per patient, such as for dialysis treatment. The provider earns more if he or she cuts back on procedures and medications while still meeting quality measures.

Peter Ubel, professor of business administration and medicine at Duke University's Sanford School of Business, said a third method may also work well: He suggested changing the payment structure so that a doctor receives the same payment no matter what he prescribes, rather than receiving a percentage.

"I"m saying, 'We'll give you the same markup no matter what," Ubel said. "So what doctor wouldn't use the $1,000 drug?"

The pharmaceutical industry, which is one of the biggest lobbyist clients in Washington, has lobbied against changing the system.

In April 2011 the lobbying firm Skadden, Arps, Slate, Meagher & Flom warned drug and medical device companies that ACOs would create pressure to reduce drug spending because the organizations create incentives "to earn shared savings for their members from the Medicare program through charge reduction measures that will negatively impact sales of drugs and devices."

PhRMA's Burkholder said the concern is not that bundled payments and ACOs could hurt the pharmaceutical companies, but that patients have would not access to medications that represent the best advances in care.New payment methods need to be "appropriately structured" to ensure doctors and their patients can choose medications that are best for specific situations, he said.

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