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Medicare Trying Bundled Payments To Save Money, Improve Care

A bundle of U.S. currency.

For all those who say there's nothing in the Affordable Care Act that could reduce health care spending, this one's for you.

Medicare officials have unveiled the latest initiative to spring from last year's overhaul, and it's one some health economists have been lusting after for years: Bundling payments so that hospitals, doctors, and even post-hospital caregivers all have the same financial incentive to both work together and provide cost-effective care.

Currently, Health and Human Services Secretary Kathleen Sebelius told reporters on a conference call, Medicare's payment system is largely based on quantity of care — not quality. "And that leaves us too often with a system that actually can punish the providers that are most successful at getting and keeping their patients healthy," she said.

The new bundling proposal would turn that payment system on its head. Rather than paying hospitals, doctors, and post-hospital caregivers separately, Medicare would provide a single payment for, say, heart attack care. That would give all the providers involved an incentive to work more cooperatively.

That should be good for patients, said Medicare head honcho Dr. Donald Berwick. "You want your doctors to collaborate more closely with your physical therapist, your pharmacist and your family caregivers," he said.

But there's also the hope that it could potentially save money. Much like the current system Medicare uses to pay hospitals by the diagnosis. If providers can treat a patient for less than the specified payment, they can keep the extra money as profit. If it costs them more — for example, if the patient needs to be readmitted to the hospital — the providers will have to make up the difference.

For now the program is voluntary, and providers can choose the level at which they want to participate. Bundles can be constructed consisting of inpatient hospital care only, inpatient care plus post-discharge care for a defined period or post-discharge care only.

That flexibility is welcome, say members of the health provider community. "Health systems are at different points in their journey to deliver coordinated care," said a statement Blair Childs of the , a group that facilitates group purchasing for hospitals and health care systems. "This new alternative to the Medicare shared savings program will provide an on-ramp to those systems beginning the journey to full continuum accountable care, while reinforcing the alternative payment arrangements they may already have underway with private payors."

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Julie Rovner is a health policy correspondent for NPR specializing in the politics of health care.Reporting on all aspects of health policy and politics, Rovner covers the White House, Capitol Hill, the Department of Health and Human Services in addition to issues around the country. She served as NPR's lead correspondent covering the passage and implementation of the 2010 health overhaul bill, the Patient Protection and Affordable Care Act.