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Bundled payments with co-pay waivers creates surgical cost savings

Providing patients discounts for using medical providers that agree to charge one set price for expensive procedures, such as bariatric surgery, can result in savings for both patients and payers, according to a RAND Corporation research. Studying three types of major surgical procedures for patients who had commercial insurance, researchers found that a bundled payments programme reduced total surgery costs by an average of US$4,229 (10.7% relative reduction).

As an incentive for patients, cost-sharing payments were waived for the 21% of patients who went through the programme - and following implementation - patient payments decreased by US$498, a 27.7% reduction. The study analysed a programme that negotiates preferred prices with selected providers that cover the procedure and all related care within a 30-day period after the procedure, waiving cost sharing for patients who receive care from these providers. The study, ‘An Employer-Provider Direct Payment Program Is Associated With Lower Episode Costs’, was published in the journal Health Affairs.

"Our results demonstrate that direct payments programmes that use bundled payment mechanisms can have financial benefits for employers and patients," said Dr Christopher M Whaley, the study's lead author and a policy researcher at RAND, a non-profit research organisation. "Whether these results remain localized to a small number of 'big ticket' procedures or expand to broader patient populations and procedure types remains to be seen."

As a strategy to reduce costs for complicated procedures, health care payers have been turning to bundled payments where doctors, hospitals and other health providers share one fee for treating all aspects of a procedure. The approach is intended to encourage health providers to work together to eliminate unnecessary care and improve quality.

Although bundled payment for elective surgical care has demonstrated some success among Medicare recipients, its impact among commercially insured populations remains understudied.

The RAND study evaluated a direct payments programme developed by a private health care company that was implemented among self-insured employers between 2016 and 2020. Under the programme, prospective bundled payment contracts are negotiated with participating providers, including academic medical centres, large for-profit health systems, faith-based non-profit health systems and surgeon groups.

The bundled payment contracts covered a range of procedures. Researchers analysed results for the three most-common procedures - bariatric surgery, total knee and hip replacement, and spinal fusion surgery. A total of 2,372 procedures were evaluated by the study and they researchers reported the biggest savings for spinal fusion surgery, followed by joint replacement surgery and bariatric surgery. After implementation, 23% of spinal fusion, 16% of joint replacement and 30% of bariatric procedures were administered through the programme.

Researchers added that the impact of the programme increased over time, potentially as both patients and providers learned about the programme. Because employers bear the largest portion of costs, employers effectively saved US$7 for every US $1 in patient co-payments they waived.

"Bundled payments are gaining popularity in the Medicare system, but have not been adopted as widely by private insurance plans," added Whaley. "The wide variation in prices among the commercially insured population presents a meaningful opportunity to use similar incentive structures to move patients toward lower-price providers."

Support for the study was provided by the National Institute on Aging.


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