Although a bundled payment pilot program spearheaded by private Medicare payers ran into significant obstacles early in its implementation, other similar experiments likely will get a boost from the launch of a national Medicare bundled payment program, supporters of payment reform say.

Besides encouraging development of the technology necessary to facilitate bundled payments, the launch of a national bundled payment pilot program by the newly established Center for Medicare and Medicaid Innovation also is expected to foster greater participation by payers and providers, who have resisted the change, the experts say.

After three years of piloting a bundled payment model in three markets—southeastern Pennsylvania; Rockford, Ill.; and Grand Rapids, Mich.—Prometheus Payment Inc. has yet to achieve its goal of providing bundled payments to health care providers for treating certain chronic conditions. This differs from traditional fee-for-service payments, where providers bill for each procedure, as well as capitation, where providers receive a monthly stipend for providing all care a particular patient needs.

According to recent study of the Prometheus system by Washington-based RAND Corp., the primary reason the organization was unable to achieve its goal of making bundled payments to providers despite three years of work was “the complexity of the model and the fact that it builds on existing complex health care systems.”

However, researchers found the effort prompted significant changes in the way participating providers practice medicine. In particular, it made providers aware of their ability to re-engineer health care delivery to reduce costs while not sacrificing quality, according to RAND's study, which was published in the Nov. 9 edition of the journal Health Affairs.

Lack of suitable technology has hindered another private-sector bundled payments pilot project in California led by the Oakland-based Integrated Healthcare Assn., said Weslie Kary, director of the IHA's bundled payment program.

“We've been trying to encourage the development of these administrative solutions,” she said, but “the technology wasn't there yet.”

But with the passage of the Patient Protection and Affordable Care Act, which requires developing episode of care technology by 2012 for the Medicare pilot, that technology is being developed and eventually will become available to private payers, Ms. Kary said.

“Claims administration products coming to market is huge,” she said.

Despite RAND's disparaging report on the progress of Prometheus, “it's possible that future bundled payment implementations could proceed more quickly due to technical advances and lessons learned from early experiences,” said Peter Hussey, a lead author of the Prometheus study and a policy researcher at RAND. He also is studying IHA's Bundled Episode Payment Pilot, which began in 2009 and will run through 2013. In fact, IHA already has made its first bundled payment, he said.

“I think a lot of the resistance really stems from the fear of innovation, that in health care we pretty much have done the same old thing for many, many years. We tweak around the edges and once every 30 years, we do something interesting. Thirty years ago, it was capitation, and since then we haven't done anything in terms of payment change,” said Donna Marshall, executive director of the Colorado Business Group on Health, which launched its own Prometheus pilot in 2010.

“We seek to utilize the lessons learned from the earliest pilots,” she said, but so far “we're also finding lack of technology to be a barrier. To that end, we've put more resources into the Colorado pilot to make sure that claims data is better,” Ms. Marshall said.

Cyndy Nayer, president and CEO of the Center for Health Value Innovation in Estero, Fla., likened the slow employment of bundled Medicare payments to the adoption of value-based insurance design, which encourages the use of high-value health care services, such as prevention.

“It's another disruptive force in the universe of health care. It takes awhile for people to understand the enormity of what it takes to get it going. Sometimes the frustration and complication weigh you down. We have to give it a little more time,” Ms. Nayer said.

Francois de Brantes, executive director of the Health Care Incentives Improvement Institute Inc. and charged with overseeing the Prometheus project, said he views the pilot as an entrepreneurial endeavor.

“You've got to test it before coming up with proof of concept. Well, we tested it and, after three years, we now have proof of concept,” he said. Since RAND researchers' last site visit in May 2010, Prometheus has launched fully operational statewide pilots in North Carolina and New Jersey, he said.