Medicare may have a hard time shifting to paying for care on an episode-of-care basis, according to officials at the U.S. Government Accountability Office (GAO).

GAO officials looked into health care reimbursement methods at the request of several Republican and Democratic members of Congress who wanted to know what Medicare program managers might be able to learn from private-sector efforts to move away from paying separate fees for each service provided.

The fee-for-service approach in use in the traditional Medicare program gives physicians and hospitals little incentive to coordinate care or avoid unnecessary use of care, James Cosgrove, a GAO director, writes in a report on Medicare and private-sector payment strategies.

“Bundling,” or making a single payment for a group of services related to an episode of care, could help, Cosgrove says.

But Cosgrove says Medicare may face challenges when it tries to move toward bundling.

Efforts to bundle can be difficult even for private-sector insurers, because, away from large hospitals, many physicians practice alone or in small groups, and many facilities, which as rehabilitation centers, may be unwilling to accept bundling-related risk for care they do not provide, Cosgrove says.

The United States does not yet have standard definitions of “episode of care” for many of the types of services that would seem to be amenable to bundling, and private-sector insurers are hoping Medicare will help develop the definitions, Cosgrove says.

Medicare program plan design features could make administering a bundled payment system difficult, and laws requiring Medicare to allowing any willing providers to participate could lead to “leakage” of bundled payments, especially to follow-up care providers, Cosgrove says.

- Allison Bell