The march is on for bundled prices in health care, at least in the private sector.
Pepsi announced recently that its 250,000 employees will be able to avoid payments if they travel to Baltimore and take advantage of bundled prices at Johns Hopkins. This deal between these giant organizations is a break-through that proves pricing reform is possible in health care.
The current bills are a jumble of line items that not even a CFO can understand. A bundled price, say $25,000 for a knee replacement, is totally transparent and usually way below what opaque, traditional billing would amount to.
For the employer/payer, it means no more extra charges for anesthesia, towels, imaging – whatever. For the employer, it means no deductible charges, no co-pays or coinsurance, travel and lodging expenses covered. Such a deal.
Obviously, the all-in prices offered by Hopkins are low enough that Pepsi can offer these heavy incentives and still come ahead on total costs. The new model covers joint replacements and cardiac surgery.
Smaller companies, like Serigraph, have been achieving bundled prices through brokers for several years, but the Pepsi-Hopkins deal will get the attention of the big boys on both the payer and provider side.
The screwed-up pricing model that is pervasive in the U.S. – payment by procedure – is a Frankenstein creature of the federal government. But there is no reason why the private sector needs to be bound by those archaic methods. It could be a decade before the federal government gets beyond the pilot stage for payment reform.
Manufacturing got rid of piece rates decades ago. It’s time to get rid of them in health care. Thanks for leading the way, Pepsi.