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commentary

(Health Affairs Blog)

August 29, 2014

The Winding Path to Effective Bundled Payment

Photo by Catherine Lane/iStock

by M. Susan Ridgely and Peter S. Hussey

Tom Williams and Jill Yegian's excellent blog post makes a great companion to our recent paper on the evaluation of the Integrated Healthcare Association (IHA) Bundled Payment Demonstration. Williams and Yegian offer lessons from their experience implementing a demonstration project that failed to meet its original objectives. This type of analysis is essential.

It's not unusual for a demonstration to fall short of its original objectives. Learning from such cases is part of the innovation process. This is especially worthwhile for bundled payment, which has many potential benefits for patients, providers, and payers.

None of the barriers encountered in IHA's demonstration signal a “death sentence” for bundled payment. However, the demonstration clearly shows that bundled payment is difficult to implement.

The lessons Williams and Yegian offer future implementers of bundled payment are consistent with our findings. Because the demonstration participants we interviewed didn't raise these specific issues, we can't say whether these are the most critical factors, or whether a future demonstration addressing them would be successful.

The first lesson offered by Williams and Yegian is the choice between prospective and retrospective payment. Starting with retrospective payment in future bundled payment demonstrations would simplify some aspects of the implementation and administration of the payment system. However, it might not address other barriers, such as high rates of patient exclusion from eligibility for bundled payment, leading to low overall volume.

Another lesson discussed by Williams and Yegian is the importance of care redesign. This is indeed the heart of bundled payment: All potential gains from bundled payment rely on improving delivery of care. But there's a “chicken-or-egg” problem that remains unsolved: Will care redesign happen without bundled payment, or will bundled payment take off without significant care redesign? This problem is not unique to bundled payment — for example, it has been flagged in the Pioneer Accountable Care Organization program as well.

Finally, Williams and Yegian point to the unique characteristics of the California market and the importance of following the lead of the Centers for Medicare and Medicaid Services. Context is important to health care delivery reform, and it's difficult to predict where particular reforms will be most effective. Certainly, the large-scale bundled payment pilots conducted by CMS could change the landscape considerably.

While Williams and Yegian and others are interested in fostering productive discussions about bundled payment, some who disagree with our findings prefer to engage in ad hominem attacks. Francois de Brantes of the Health Care Incentives Improvement Institute, Inc. (HCI3) questioned our motivations and credibility in a recent email “news update.” HCI3 also criticized us following our 2011 evaluation of the PROMETHEUS bundled payment pilot, which they developed and implemented.

We conducted this evaluation in the interest of improving the health care delivery system. We believe objective evaluation is central to innovation in health care. We conducted this research with the support of a grant to IHA from the Agency for Healthcare Research and Quality, with a subcontract to RAND as an independent evaluator. RAND is a nonprofit, nonpartisan research organization committed to the public interest.

Ad hominem attacks on independent evaluators are counterproductive and do nothing to transform the health care system. On the contrary, independent evaluation of the implementation and effects of payment and delivery innovation is critical to identifying lessons that enable that transformation.

As Health Affairs Editor-in-Chief Alan Weil emphasized, evidence, research, and analysis play critical roles in moving us down the “winding path to effective policy.” Efforts to tap the great promise of bundled payment through rigorous, independent evaluations are no exception.


M. Susan Ridgely is a senior policy analyst and Peter Hussey is a policy researcher at the RAND Corporation.

This commentary was first published on August 28, 2014 on Health Affairs Blog. Copyright ©2014 Health Affairs by Project HOPE — The People-to-People Health Foundation, Inc.

Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.