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 / Winter 2013 / Issue 73(originally published by Booz & Company)


Healthcare Shifts from à la Carte to Prix Fixe

A bundled approach to treatment offers higher quality, lower costs, and a better experience for patients.

To understand what’s wrong with the current approach to healthcare in the United States, consider the experience of a typical patient with chronic knee pain. He goes to his general practitioner (for a referral), who then sends him to an orthopedist (for an initial diagnosis), who then sends him to an imaging facility (for an MRI). If the patient needs a knee replacement, he’ll have the operation done at a hospital (with a new set of specialists, including an anesthesiologist and nursing staff), and once he’s discharged, he’ll visit a physical therapist (for rehab). Five separate facilities, five sets of “new patient” forms. Months later, the patient will be back at the office of his general practitioner—who will have had almost no involvement since signing the original referral—and the doctor will ask, with genuine curiosity, “How’d it go?”

This is not a well-oiled machine for delivering quality care. It is, however, a very effective way to rack up charges, with little relationship to patient outcomes or experience. In fact, healthcare is a kind of à la carte hell for most patients (along with their employers and insurers). The system is extremely fragmented, because it’s structured around the way providers offer services—each focused on one small part of the procedure—instead of the way patients actually receive care. No one has an overarching view of the entire process, with an eye toward improving customer service, quality, or costs. Equally problematic is the fact that patients often become passive players in their own care—uninformed about the process, the course of treatment, or the expected outcomes.

But some innovative hospitals and health plans are working on a new approach: bundled healthcare. A “bundle” is a procedure or service that includes every step of the process for a specific treatment, in one package, at a set price. Bundled knee replacements, for example, typically cost somewhere between US$20,000 and $30,000. There’s even a guarantee regarding results: If something goes wrong, the doctors fix it and don’t charge anything extra (unlike the current system, where a follow-up operation costs just as much as the first one). Conceptually, bundles are akin to switching from an à la carte menu to a prix fixe menu. They involve hospitals, doctors, employers, and insurers all working together to improve outcomes, reduce fragmentation, streamline care, and reduce costs, while making the entire experience more consumer-friendly. They typically work best for acute conditions that have fairly standard treatments—such as joint replacements or coronary surgery—because as those procedures are repeated over time, the providers can learn what works best and wring inefficiencies out of the process.

Bundled care is still an evolving concept, with most programs in the pilot stage, but the early results are already drawing notice. Baystate Medical Center, an academic hospital in southern Massachusetts, launched a knee-replacement bundle and found that outcomes improved markedly. Patients had fewer complications and experienced fewer hospital readmissions—an indication of fewer post-operative problems. Costs went down (Baystate set a target of $24,600 per procedure and beat that, getting total costs down to $22,900), and Baystate simultaneously improved its quality ratings among patients.

Similarly, Geisinger Health System, a facility in Pennsylvania that is widely recognized as a model for integrated care delivery—it was cited on numerous occasions by President Barack Obama and others during debates over the Affordable Care Act (ACA)—launched a bundle program for coronary bypass surgery, which has yielded strong results. Post-op infections fell by 63 percent, and hospital readmission rates decreased by 30 percent. Meanwhile, total costs for bypass surgeries dropped 5 percent, and hospital profits improved by nearly $2,000 per case. Geisinger has since expanded its bundles to include hip-replacement surgery.

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