Can bundled payments cut medical costs?

A recent article in USA Today highlighted an experimental Medicare program for a 'bundled' payment to doctors and hospitals.  In a bundled payment system, Medicare makes a single reimbursement for all the hospital and doctor care for heart and joint procedures, rather than making separate payments to the facility and physicians.  Bundling payments moves medical charges away from the traditional fee-for-service system that pays providers separately for individual services — an arrangement critics of the current system say leads to doctors and hospitals delivering more care, but not better care.

According to the USA Today article, health care bills being debated in Congress would promote bundling by calling for more Medicare pilot projects such as the one at Hillcrest and allowing Medicare to expand the concept if they are successful. Any success in the Medicare arena could have far-reaching implications because the health program for the elderly makes up 20% of the nation's total health spending.

The incentive payment is supposed to help drive higher admissions to the hospitals in the program, and the pilot is designed to test whether paying Medicare beneficiaries from $250 to $1,157 sways their choice of facilities.

(SOURCES: Advisory Board Daily Briefing,, October 27, 2009; USAToday,, accessed November 6, 2009)