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


Healthcare Shifts from à la Carte to Prix Fixe

Qualitative interviews with patients who had already received treatment showed that their experiences with bundles had been largely positive. Consumers give high marks to bundled care for its clarity about the process, from diagnosis through treatment and rehabilitation. “One-price-covers-all is attractive, but even more attractive is the promise of a coordinated team providing care and treatment,” said one participant, a middle-aged man suffering from prostate cancer. The right plan will clearly attract consumers, once they understand how it works and how it differs from the traditional approach to treatment.

A second survey, of employers, revealed interest as well, but it is generally concentrated among larger companies. Only 5 percent of employers are actively pursuing bundled care programs, and they all have more than 1,000 employees. Many respondents say they are taking a wait-and-see approach to assess results from the current wave of pilot programs. Not surprisingly, the biggest priorities among employers are lower costs, reduced absenteeism from workers requiring treatment, and better outcomes.

Large hospitals are rolling out programs; payors are hedging their bets. We also surveyed providers to gauge their bundled care efforts to date (if any) and their plans for future implementation. Roughly one-third of hospitals surveyed are already pursuing the model, and another 52 percent are interested in exploring it further. As with employers, the larger hospitals and health systems are jumping in first, and nearly all larger systems expect to develop bundles at some point. Of those that already have programs in place, nearly two-thirds reported cost savings. Notably, virtually all of those with programs in place say they are committed to expanding them to include more treatments and/or geographies, and most say this will happen within the next three years.

Finally, we surveyed health insurers, which are perhaps the most crucial link in the future of this concept. Insurers connect hundreds of millions of patients with millions of employers and hundreds of thousands of providers. We detected an undercurrent of skepticism among a number of insurers, who believe that bundles may not be part of a long-term solution for the country, and that another “big idea” will somehow emerge to win the day. This seems unlikely. By improving outcomes and reducing costs, bundled care represents a rare win-win for the demand side (patients and employers) and the supply side (payors and providers) almost regardless of how the ACA plays out. In fact, the underlying philosophy of bundled care—better ways to treat patients, new partnerships, and new approaches to pricing—can function as part of many solutions.

Challenges for the Industry

Despite the promise of bundles, efforts to capitalize on these ideas so far have been limited to a few large employers and a handful of national name-brand hospitals—far short of what is required to truly transform healthcare. Over the next few years, the major challenge will be expanding the concept so that it covers a wider range of conditions and a broader demographic base: the “big middle” of patients and employers. Until most patients in most markets can receive bundled care for most of their needs, the strategy’s potential will remain untapped.

This task falls primarily on payors and providers, who will have their hands full with the challenges of expanding and scaling up bundled care. The devil will be in the details—and there are lots of details. Providers must redesign care, develop standards and protocols, and put the right IT resources in the right hands, while also struggling with new risk management models and pricing mechanisms. For payors, the big hurdle will be coordination, because they will be dealing with hundreds of employers and a few dozen providers in any market or region.

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