Bundled Payments and Concierge Care

A new Medicare initiative will reimburse physicians for episodes of care, rather than individual procedures. A hybrid concierge model could preserve income.

The Bundled Payments for Care Improvement (BPCI) Initiative from Medicare will have a significant impact on specialists and primary-care physicians who deliver services that are bundled. It is a vehicle for compressing compensation that is not based on the number of procedures but rather on the cost per procedure. Unlike the reduction of fees in a fee-for-service approach, this risk mechanism offers the possibility of an upside if costs are dramatically contained, yet it still will have the global effect of reducing compensation, most likely on the physician side. As physicians who are affected by this payment model look for ways to recover some of the lost revenue, models like hybrid concierge care will become more attractive. This will be true particularly in certain specialties like cardiology, which is heavily impacted by this compensation mechanism.

The diagnosis-related group (DRG) payment system for hospitals has been a way to shift the variable costs involved in patient care to the provider hospital since the mid-80s. By paying a flat rate regardless of the number of days in the hospital, the expense risk of longer hospital stays is transferred to the hospital. As a result, patients are shuttled out of the hospital as soon as possible. The benefit to the hospital is to stay "ahead of the curve" and potentially benefit from shorter stays. This payment method has reduced hospital stays dramatically. It only impacts medical facilities, not physicians.

Now, the Bundled Payments for Care Improvement (BPCI) Initiative from Medicare is an extension of that approach to pay associated physicians and healthcare facilities for services that are related to one episode of care for a period of time. While the mechanisms of disbursement of payment to disparate entities may be part of the issues to be worked out, it is largely about reducing costs by shifting utilization responsibilities. There is no doubt that those physicians who provide services that are bundled will be under significant pressure to adapt as their incomes are now at risk.

Hybrid concierge care, particularly in cardiology, is a growing model for specialists who want to offer patients the option to pay for certain enhancements of their services. It is a premium service and is for noncovered services only. Many cardiologists have a close personal connection with their patients that is similar to that with internists and primary-care physicians. This program takes a very small portion of the physician's time, but it taps into private revenue to augment practice revenue at a rate per hour of services that exceeds current rates.

The dramatic change in physician compensation and the uncertainty that comes with the introduction of the BPCI has led cardiologists to look for ways to rebalance their practices. Unlike full models of concierge, the hybrid approach is the only viable model for cardiologists who wish to continue to participate in third-party plans and government plans; and for those who take care of a wide variety of people from varying economic backgrounds.