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Episode-Based Payment: Perspectives for Consideration

Can EBP reduce health care costs?


As health care reform advocates look for ways to reduce U.S. health care spending, they cite fee for service (FFS), the predominant payment model in the U.S. health care system, as being a key contributor to spending growth and geographic variation unrelated to quality of care. Many advocates believe that a single-bundled payment system, sometimes called episode-based payment, would incentivize hospitals and physicians to better coordinate care, thus improving efficiency and outcomes and reducing costs.

"Episode-Based Payment: Perspectives for Consideration," a new study by the Deloitte Center for Health Solutions, assists industry stakeholders in understanding the rationale, implementation and impacts of episode-based reimbursement. This study:

  • Describes the current payment system and evaluates several alternative approaches
  • Explores practical considerations when evaluating episode-based reimbursement
  • Profiles some prominent episode-based payment efforts
  • Compares current tools used to build episodes of care, and explains how providers and payors can use this bundling technology to align care incentives for better care
  • Examines the impact on multiple stakeholders of episode-based changes to the reimbursement process

The study’s methodology includes a systematic review of literature, demonstration pilots and vendor web sites to assess the impact of episode-bundled payments on health care delivery and financing.

Given proposed changes in hospital payments (starting in 2013) to reward the avoidance of readmissions, and Medicare’s plans to implement bundled payments to hospitals (starting in 2015) for admissions that result in 20 percent of post-acute spending, it is important that all stakeholders in the U.S. health care delivery and payment system understand episode-based payment at a conceptual and operational level.

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