Jason Hwang, MD, co-founder and executive director of health care at the nonprofit think tank Innosight Institute and co-author of The Innovator's Prescription: A Disruptive Solution for Health Care with Harvard Business School Professor Clayton Christensen, discusses bundled payments and the trend extending to ambulatory surgery centers.
Q: Will bundled payments be a viable option for ambulatory surgery centers in the future?
Dr. Jason Hwang: I think it could extend into ambulatory surgical centers. We differentiate between intuitive types of work — which is dependent on the type of people doing the work and their skill — and precise medicine where the care is understood and outcomes are based on the process. Optimize your process and you can plug in different people. In that model, you can price based on outcomes instead of inputs. If we have things done in ASCs down to a science, we should want to price through bundled payments because the outcomes are so predictable. In effect, the bundled payment represents a warranty on our services.
Q: What should surgery center administrators know when considering bundled payments?
JH: You absolutely want to align your incentives properly; make sure all the providers and clinics involved have a strong interest in quality care and aligned interest so there is no overuse or over prescribing. We've seen that dynamic in dialysis centers, so they need to reign in their over prescribing before moving to bundled payments.
Q: What challenges will surgery centers have when taking on bundled payments?
JH: Whenever a provider takes on a bundled payment, you are assuming some level of risk for the outcomes. Providers must make sure it's a situation where they can prepare for outliers, which could eat into their profit margins. One case gone awry could cancel out all the successes they've had up to that point. It has to be a process-based type of care where things are manageable and predictable.
If there is a high level of unpredictability, you are taking on too much risk and could come out unfavorably.
Q: Where do you see the trend of bundled payments heading in the future?
JH: The prevailing trend seems to be bundled payments for discrete services, but it’s part of an overall larger trend of capitation at the systemic level. I think we are going to see bundles of bundles as accountable care organizations get fleshed out. Larger systems may then decide to dole out smaller bundled payments in the outpatient setting. We will see them come out with a high level capitation plan for most people.
The reason for this trend is it's difficult for patients and employers to compare pricing, even when we move to bundled payments. We can try to increase the value of health care, but it's impossible to sort out the price of each and every service that goes into a whole episode of care, much less an entire lifetime of a patient. I think we're going to move increasingly toward capitated plans as the real basis of competition among providers.
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