dominates the national landscape remains. Magno echoes Bertko’s thoughts in reviewing the work of CMS in launching demonstration projects on bundled payments. Among the lessons that Magno shared from these experiences are the need to bundle strategically because savings are most likely to be realized from targeting complex, high-cost inpatient procedures that involve significant but standardized services. Furthermore, she describes how bundled payments can realign service and utilization incentives and lead to savings beyond the discounted rates of the bundles.

Shifting the focus to physician engagement, George J. Isham of Health-Partners offers some thoughts on building support among physicians and other practitioners based on his experiences in Minnesota. He indicates that current reform efforts have been layered on top of existing delivery systems where care is fragmented, administration is manual, and fee for service still characterizes the majority of payment. Isham specifically discusses the significant time and resource needs for designing and implementing bundles. He further states that physicians need to be involved in the design of bundles and require support during implementation. Based on these lessons, he offers several concrete policy recommendations that include supporting more pilots of bundled payment systems; providing technical assistance for providers in managing these systems and in improving quality; and developing a national strategy for overall delivery system reform that includes support for bundled payment systems.

Closing this session, Nancy Davenport-Ennis of the National Patient Advocate Foundation addresses the perspectives of patients in the discussion of bundled payments. Stressing the importance of including active patient engagement in decision making even in a new payment system, she raises the importance of educating patients about what these reforms mean for patients’ out-of-pocket expenses; where the cost savings are going to go; and how a new payment system would impact patient access to the latest developments in medical treatment.

BUNDLED PAYMENTS: A PRIVATE PAYER PERSPECTIVE

John M. Bertko, F.S.A., M.A.A.A.

The Brookings Institution


Bundled payments are proposed as one possible solution for changing the incentives in fee-for-service (FFS) payment systems. Ideally, bundled payments for hospitals and physicians would provide financial incentives to use appropriate levels and types of services and to increase care coordination. The Medicare Payment Advisory Commission (MedPAC), among other bodies, has investigated the potential use of bundled payments for the traditional Medicare program. Private insurers have experimented and used



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