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Health care pricer: Bundle it

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The Obama administration’s interpretation of a major component of the Patient Protection and Affordable Care Act (PPACA), a premium subsidy provision, has just survived a Supreme Court review.

The Centers for Medicare & Medicaid Services (CMS) have released preliminary data suggesting that another major PPACA component, a reinsurance program, will be able to meet its obligations.

But PPACA critics continue to press another point: That, however relatively stable health care costs have been over the past few years, they are still increasing faster than the overall inflation rate, and PPACA does not seem to be all that well suited to increasing patients’ and insurers’ control over the cost of care.

See also: How Obama’s plan to control health care costs could fail

Elaine Daniels, a network strategy executive at Aver Informatics Inc., is helping to create what she believes will be a big component of the next phase of health system change efforts: putting the payments for related groups of medical services in “prospective payment bundle arrangements.”

Customers of auto mechanics would prefer to pay one well-negotiated bill to “get a carburetor replaced” than to pay itemized, and inflated, fees for all of the separate parts and services that go into replacing a carburetor.

Daniels, who previously was a contract consultant at Blue Cross and Blue Shield of North Carolina, thinks well-thought-out bundling can be as helpful in the health care market as in the auto repair market.

Daniels said agents and brokers in the group market should like talking to her company. ”We can make their lives easier,” she said.

Employers’ experience varies, but many employers can save about 10 percent to 30 percent on many groups of bundled procedures, simply by bundling, Daniels explained.

She said one large employer in North Carolina was able to save $6 million simply by bundling knee and hip replacement surgery. ”The savings are mind-boggling,” she said.

Some health care providers object to aggressive cost-containment strategies, and reports have surfaced of providers leaving the market in response to anger about reimbursement cuts.

See also: Specialist doctors head for exit as U.S. shifts payments

But Daniels said she thinks concern about the supply of providers shrinking is exaggerated, especially in connection procedures that could be handled by putting patients on a plan to other locations.

“There are plenty of providers that are willing to participate,” Daniels said. “Those are the ones that are going to be the leaders in this space. We don’t need all providers to be in this space.”

Many providers like the bundles Aver sets up, because, in exchange for asking for bundling, Aver plans pay providers the fees up front, Daniels said.

Aver tries to keep providers from making deals work by cutting corners by building quality control standards into the bundling agreements.

Aver also tries to protect providers against rare, extremely expensive cases by putting caps on how much expense the providers have to assume. If the expense goes over a certain catastrophic level, the provider gets paid on a fee-for-service basis. 

When it comes to setting the stop-loss triggers, “this is all a work in progress,” Daniels said.

But Daniels said she thinks the work will progress. ”I think we can bundle everything,” Daniels said.

See also: Medicare faces historic overhaul