Arthur J. Fried, a Member of the Firm in the Health Care and Life Sciences practice in the New York office, was quoted in an article titled "The Advantages and Disadvantages of CMS' Bundled Payment Initiative: 8 Responses."

Following is an excerpt:

The healthcare arena has been abuzz with conversations of bundled payments since the Department of Health and Human Services and CMS officially launched its Bundled Payments for Care Improvement initiative at the end of August. The program, which is part of the Patient Protection and Affordable Care Act, looks to align payments for hospitals, physicians and all other healthcare service providers across the entire episode of a patient's care.

Arthur Fried: One of the promises of healthcare reform in general and HHS' bundled payment initiative in particular is the enhanced ability of the healthcare system to deliver quality care in a coordinated fashion, thereby attaining cost savings from the elimination of duplication and unnecessary tests and treatment. This is accomplished by incentivizing provider integration and the increased use of standardized treatment protocols, i.e., evidence-based medicine. While the initiative should succeed, there are some barriers to success, particularly in the near term.

The initiative contemplates a robust and integrated electronic health record system, a costly proposition even with available financial incentives, with the capacity for seamless communication among varying record systems. Providers, especially smaller ones, may feel forced to align with larger players, and many — including physicians approaching retirement age — may lack the motivation or the resources to make the required investment. Patients are not locked in to providers, so "leakage" must be anticipated and kept to a minimum. Payment must be realistically based upon the cost of providing high-quality care. Health systems may be averse to taking risk where they do not control the providers pre- and post-admission.

In many regions of the country, practitioners will have little experience with such hospital-physician alignments, and what experience they do have will be with the failed alignments of the 1990s. The result may be a reluctance to try again, along with a rather lengthy ramp-up period, during which neither the anticipated quality improvements nor cost savings are realized.

Accomplishment of these goals is fraught with legal challenges as well. Providers must structure these new alignments to navigate between the anti-trust, non-profit and fraud and abuse issues on the state and federal levels, which are inherent in addressing their various interests. Whether and how entities devised for the bundled payment initiative will dovetail with the developing requirements for ACOs remains to be seen.

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