One of Obama's big ideas for reforming health care failed a test in California

◼ In President Obama’s June 2009 speech to the American Medical Association (now infamous for containing the most emphatic articulation of his promise that people who liked their health care plan could keep it), he described how his legislation would reform the way medical providers are paid. - Philip Klein/Washington Examiner @philipklein

“We need to bundle payments so you aren't paid for every single treatment you offer a patient with a chronic condition like diabetes, but instead paid well for how you treat the overall disease,” Obama told the crowd of physicians.

Obama was articulating what would become one of the key payment reforms in his health care law — a proposal aimed at giving incentives to providers to control costs by rewarding them for providing less expensive care.

But a study published in the journal Health Affairs looked at an ambitious three-year pilot program of bundled payments in California that was funded by a $2.9 million grant from Obama’s 2009 economic stimulus package — and found that the program was such a massive failure, it could hardly get off the ground.

“In spite of a high level of enthusiasm and effort, the pilot did not succeed in its goal to implement bundled payment for orthopedic procedures across multiple payers and hospital-physician partners,” the study reads. “An evaluation of the pilot documented a number of barriers, such as administrative burden, state regulatory uncertainty, and disagreements about bundle definition and assumption of risk. Ultimately, few contracts were signed, which resulted in insufficient volume to test hypotheses about the impact of bundled payment on quality and costs.”

...This one study doesn’t necessarily disprove that bundled payments could work under different circumstances, and the authors write that the study resulted in “hard-won lessons” that could be useful in future pilot programs.

But its also worth noting that its failure comes on top of other issues raised about the bundled payments approach.

For instance, a May 2012 study reported in the New York Times found that bundled payments were having dangerous consequences for dialysis payments, because clinics were prescribing fewer prescription drugs, and blood transfusions spiked. Scott Gottlieb of the American Enterprise Institute has argued that this incentive for doctors to prescribe fewer drugs could be particularly harmful for cancer patients who rely on expensive medications.