Most new product introductions have a life cycle that is dictated by the pace of the industry in which it is placed – For electronic and communications products, the life cycle goes from introduction to mainstream adoption in a matter of months, sometimes weeks. Clothing often takes a little longer. Healthcare takes forever, or at least it seems that way. The time span from early pilot stage to high adoption takes about seven years. Think about past innovations in benefit design or insurance products, or even add-ons like disease management and pharmacy formularies. And typically, after seven years, the innovation goes full mainstream and that can take another two to three years. The latest example of this life cycle is contained in a Bailit report that we will publish next week. The report highlights the progress, the lessons learned and some remaining challenges in implementing bundled payment programs. Like many changes in the industry, the deployment of bundled payments has been greatly boosted by the ACA. When we first launched the PROMETHEUS Payment model in 2007 in several pilot sites across the country, very few providers understood the concepts, and no payer was willing to take this on. After a few years of hardscrabble farming, several BCBS health plans were inspired by the prospects and decided to launch some pilots. Then came the ACA's implementation, including the announcement of a wide scale bundled payment program, as well as the demonstration of proof of concept within the walls of the early adopters.
What this means to you – When the RWJF-funded PROMETHEUS Pilots ended, several hastily wrote the obituary of bundled payments. It's too complicated; it's not practical; it doesn't solve all the problems. As one of the founders was fond to say: what's complicated is in the back room, not the front room, so just get over it. And it appears the country has. The complexity, as we have always known, can be solved by software programs, and what's left is pretty simple: incentives to manage patients for the condition or procedure that ails them at that point. The providers understand the incentives, and they can quickly reap the benefits or costs of their actions. The distance between what they do and its financial impact is pretty short, and that matters when you're trying to change behaviors. Four years ago, when the premature obituary was written, the nail in the coffin was the lack of contracts between providers and payers. Today there are thousands of such contracts and more being written. Why such a change in a few years? Because innovation takes time to take root in this industry. You have to constantly weed out the false claims and obstacles placed by those who benefit from the status quo, and keep at the hardscrabble farming until the innovation can blossom on its own. The new Bailit report certainly shows how this innovation has blossomed and we can now all safely say that the news of its demise were premature. We also think there's a lot of growth left, and the potential coupling of related innovations – reference pricing and episode of care pricing transparency – with bundled payments has the potential to truly shake up the industry. Perhaps we'll see some of that in next year's update, and the authors of the obit will be eating a little more crow.