There is broad consensus that fee for service medicine as practiced the United States is not cost effective nor does it produce good health outcomes.

There is also broad consensus that the oil spewing out of a failed wellhead 5,000 feet under the surface of the Gulf of Mexico is not a good thing.

Fixing either one is not easy or quick.

Bundled, now what?

The Patient Protection and Affordable Care Act (PPACA) recognizes the problem and proposes a variety of strategies to promote some of the ideas already in play.  I wrote about two of those strategies recently, accountable care organizations and patient centered medical homes.

Episodes of care as hybrid

If there were a continuum leading away from fee for service reimbursement toward a global payment methodology, then the accountable care organization is furthest removed from fee for service reimbursement .  The patient centered medical home brings us closer to fee for service only because it does not encompass inpatient hospital care.

Episodes of care is a hybrid.  It combines physician care, in-patient hospital care along with related ancillary service, but only as they relate to a specific in-patient hospital admission.  It is an expansion of the DRG model.

Remember DRGs.  In 1983 the Healthcare Financing Agency (HCFA) turned away from cost based reimbursement of hospitals and adopted a prospective payment system labeled Diagnostic Related Groups.  By combining all hospital activity centered around a signal diagnosis, the Medicare Prospective Payment system revolutionized hospital reimbursement.

Episodes of Care in PPACA

Section 3003 of the PPACA calls for development of an episode of care grouper that sounds very similar to the DRG methodology.    Instead of limiting the payment amount to hospital  charges, the episode of care grouper will encompass all services related to a specific inpatient admission, including physician, laboratory and imaging services.

The stories about unknown physicians sticking their head into a patient’s hospital room and then charging the insurance company for a consultation would not be possible under this model.

The advantage of the episode of care approach is that it is an incremental improvement on the current system.  It is not far removed from the DRG approach.  But it is far enough removed to present some challenges to concepts of professional collaboration in a traditional fee for service environment.

The NEJM and episodes of care

The New England Journal of Medicine opined on the topic.

Given the dispersion of care across physicians and practices, fragmentation of the health system, and lack of continuity in physician–patient relationships, extensive evaluations of these new payment methods are warranted. A cautious move toward a more rational payment system, with opportunities to fine-tune payment as experience is gained, shows the greatest promise of avoiding unintended consequences. This caution, however, must be balanced against the urgent need to address the financial stresses from ever-rising costs of health care.

“Lack of continuity in physician-patient relationships.” That is a drum that I have pounded.  Until we streamline how patients enter the delivery system, that lack of continuity will plague efforts to reform the care delivery system.

“Caution balanced against urgent need”  We want to plug the leak at the bottom of the Gulf of Mexico, but we also don’t want to make it worse.

Episodes of care as baby step

Some argue that episodes of care need to adjust for sicker populations.  That’s how Adam Searing, blogger for the Progressive Pulse sees it.  In fact, the episode of care ducks that very issue. With a more global reimbursement method, such as the patient centered home or the accountable care organizations, there are clear incentives to keep people out of the hospital and their success or failure should be judged with consideration of the illness burden of the population.

Episode of care reimbursement  may help stabilize the costs of such episodes, but there is no inherent reason to think it will reduce the incidence of the episodes.

In that sense it is still fee for service reimbursement; just a larger package of services.