Dr. Robert Gatewood is ready to move to the forefront of health reform.
Starting this month, the cardiologist and many other doctors affiliated with Kaleida Health will adopt a new payment system for heart surgery in an initiative with BlueCross BlueShield of Western New York that will give them one fee for all the services a patient receives and make them accountable for all the care, including before a procedure and after a patient goes home.
The doctors and hospital get to share in any savings from providing care in a more cost-effective way. Longer term, the new payment method puts them at financial risk for the cost of avoidable medical problems.
This marks a huge change from the predominant fee-for-service method of paying for care by having every doctor and facility separately bill for services.
Significantly, it also expands the definition of what services heart surgery includes, making everyone responsible for what happens in the weeks before patients arrive and months into their recovery.
There is movement nationwide to figure out new ways to pay for value instead of the amount of care provided. When people talk about reforming the way health care is delivered, they talk about efforts like this one.
"With health care costs spiraling out of control, we need to do something to pull in the reins," said Gatewood, of Buffalo Cardiology and Pulmonary Associates in Williamsville. "The change has to come from those who deliver the care. We need to lead the charge."
Indeed, health insurance premiums have skyrocketed 172 percent since 1999, whereas workers' earnings have increased by only 47 percent in the same period, according to the latest health benefits report from the Kaiser Family Foundation.
Gatewood is not a heart surgeon, but like other cardiologists and primary care physicians, he has a stake in the success of the initiative.
One of the key objectives of bundled payments is to encourage better communication among the doctors who send patients to the hospital and the surgeons who perform the operations.
Complications can arise, for instance, when referring physicians don't find out from surgeons in a timely manner what happened in the hospital, what medications the patient took home after a procedure, and what follow-up care is needed.
Likewise, surgeons may lack insights into a patient's condition if they don't speak with a primary care doctor before an operation.
Something as simple as phone calls between doctors before and after a hospitalization is all it takes to keep everyone in the loop, those involved in the project say. But, surprisingly, this often doesn't happen in fee-for-service medicine, a fault that the new payment method attempts to correct.
"We need smooth handoffs of patients," Gatewood said. "We sometimes practice in silos, but we need to think about quality and coordination."
Lack of coordination
The public debate over health reform largely focuses on coverage for the uninsured and new requirements on insurers. But a major portion of the new health reform law, the Affordable Care Act, and much of the attention of the medical community are also focused on how doctors and hospitals should be paid.
Critics of fee-for-service place it at the heart of what's wrong with the U.S. health care system.
The overwhelming thinking goes that fee-for-service medicine encourages physicians to do more procedures and tests, and fails to reward quality or discourage waste.
It also is faulted for contributing to poor communication and costly unintended consequences, such as readmissions to hospitals for complications after a patient is discharged.
The United States spends about $2.5 trillion on health care each year. But an estimated $750 billion of the spending goes to waste - including unnecessary services, excessive administrative costs and inefficiently provided services - according to a report issued this month by the Institute of Medicine.
The influential group, which provides independent advice to the government, placed significant blame on the prevailing approach for paying for health care, saying that if home building were like health care, carpenters, electricians and plumbers each would work with different blueprints, with very little coordination.
It's not clear how best to overhaul the fee-for-service payment system, and the business of health care is so complicated that any changes promise to be filled with pitfalls. However, several projects have started or are planned nationwide to look at different methods, including bundled payments, that may do a better job of controlling costs and improving quality.
The health reform law calls for testing new payment methods in Medicare, the giant federal health plan for those 65 and older. Private health insurers and hospital systems, as well as the physicians affiliated with them, are experimenting with new methods, as well.
"Nobody knows if we are spending the right amount on health care. But we do know that there is a lot of waste and that Americans are not getting the care they need," said Dr. Margaret W. Paroski, chief medical officer for Kaleida Health.
The heart surgery pilot project uses a bundled payment for the approximately 250 heart surgery patients each year at Kaleida Health who have commercial and Medicare BlueCross BlueShield coverage.
The idea is to create an incentive for everyone involved in a patient's care to work together to eliminate unnecessary tests and treatments, coordinate care, base decisions on best medical evidence, measure outcomes and prevent complications that can send patients back into the hospital.
"As a payer, we want to be out of the management of care. We want the hospitals and doctors to be creative and don't want the payment method to hold them back. The bundled payment lets them do that," said Dr. Raghu Ram, senior medical director at BlueCross BlueShield.
For instance, primary care doctors will get a fee for consultations with surgeons, creating an incentive to have conversations before and after a procedure, said Paroski. However, the larger goal of a bundled payment is to demand greater accountability and a team approach to the care of patients, she said.
Studies suggest that a bundled payment may be one of the most promising ideas for controlling health care costs without compromising quality. Other Buffalo insurers and hospitals say they also are interested in the concept.
But bundled payments are unlikely to be the only potential answer to payment reform.
They only work for procedures and medical conditions for which an episode of care can be fairly well defined, such as heart surgery, knee and hip replacements, and diabetes. In many other illnesses, patients see too many physicians at multiple settings over an unpredictable amount of time to set one overall fee.
Bundled payments are so new that there isn't enough information to say definitively how well they work. In addition, there are challenges, such as persuading doctors to adopt the changes, deciding what providers and services should be included in the payment, making sure data systems are sufficient to track patients and the outcome of their care, adjusting for patients whose conditions are unusually risky and figuring the time frame of a payment.
In this project, for example, the physicians' accountability for patients' care covers 30 days before an operation and 90 days afterward.
Bundled payments are complex enough that organizations have arisen that specialize in devising them. BlueCross BlueShield and Kaleida Health are working with a system known as Prometheus created by the Health Care Incentives Improvement Institute in Newtown, Conn.
A study by the Rand Corp. last year of projects in three communities to test Prometheus indicated that bundled payments proved to be difficult to put into place because of technical issues and doctors' concerns, including taking on a financial risk for all the care a patient receives and fears that the method might result in denying needed care.
However, the Rand study concluded that bundled payments remain a promising approach and well worth pursuing, said Peter Hussey, the lead author.
"The question is not whether we're going to replace fee-for-service, but how we will replace it," he said. "The jury is out on bundled payments as one of a handful of approaches that will be used, but they have a lot of potential."