Hospitals experiment with bundled payments

Hospitals and insurers across the nation are experimenting with bundled payments to control spending, improve care coordination and reduce cost variation.  In a bundled payment, hospitals and insurers agree on fees for a group of services tied to one procedure, such as a hip or knee replacement, rather than charge patients for each individual service provided during their hospital stay.  In the current system, hospitals and doctors charge separately for each service.

According to the LA Times, hospitals charging dramatically different prices for the same medical procedures have prompted this change. 

Critics argue that while bundled payments may work for procedures with defined outcomes such as joint replacements, they will not be as clear cut for chronic conditions such as diabetes that require ongoing care.  Others believe that bundled payments could actually drive up healthcare costs and insurance premiums by giving hospitals and doctors greater influence over price negotiations with insurers.

(Sources: Advisory Board Daily Briefing, http://advisory.com, April 26, 2010; Las Angeles Times, http://latimes.com, April 24, 2010)