COST SAVINGS AND PHYSICIAN RESPONSES TO GLOBAL BUNDLED PAYMENTS FOR MEDICARE HEART BYPASS-SURGERY

In 1991, the Health Care Financing Administration (HCFA) began the Med icare Participating Heart Bypass Center Demonstration, in which hospit als and physicians are paid a single negotiated global price for all i npatient care for heart bypass patients. During the first 27 months of the demonstration, the Government and beneficiaries together saved mo re than $17 million on bypass surgery in four participating institutio ns. Average total cost per case fell in three of the four hospitals du ring the 1990-93 period as the alignment of physician and hospital inc entives resulted in physicians changing their practice patterns to sho rten stays and reduce costs.