In theory, “bundled payments” are supposed to encourage doctors to work together to minimize unnecessary tests and treatments. However, in practice they will have two serious negative consequences.

First, “bundled payments” will create a powerful incentive for providers to skimp on care. The ACO administrator might ask a doctor, “Do you really need to take Mrs. Smith to surgery now for her heart problems — or can she get by with just medications for a little while longer? And does she really need the high-end antibiotic that kills 99% of bacteria? Or can we get away with the cheaper drug that works 85% of the time? We’ve already burned through her fee for this year, so anything else you do for her comes out of our pockets!”

Second, they will create an incentive for providers to avoid the sickest patients. As one physician describes:

Young healthy patients who may need a day or two in the hospital for their pneumonia will be readily admitted as there will be a high likelihood of profitability with the ensuing bundled payment. Pneumonia patients with diabetes or with HIV who will likely need long admissions and expensive medications will become hot potatoes. Community hospitals will find reasons to transfer high utilizers to other facilities. Perhaps they need an endocrinology consultation. Perhaps they need an infectious disease specialist. Bundled payments will create an incentive to avoid treating obese patients, cancer patients, and other patients with chronic diseases.

Dr. Stewart Segal calls such patients “ACO lepers.” Instead of being rewarded for caring for the sickest patients, many doctors will avoid them or send them to other providers as quickly as possible. Bundled payments thus reverse the incentives for physicians, rewarding them for not practicing medicine. And it will be the sickest, most vulnerable patients who will suffer the most under such a system.

Finally, if “global” or “bundled” payments fail to control costs sufficiently, Massachusetts has a backup plan. The Beacon Hill Institute recently noted, “A Special Commission on Provider Price Reform has come up with recommendations that, in effect, put the insurance companies in the business of imposing price controls on hospitals.” One way or another, more price controls are coming to Massachusetts.

In conclusion, Romney’s claim that the Massachusetts plan didn’t include price controls may have been technically true at the time the law was passed. But he helped create an unsustainable system that has quickly and predictably led to price controls — with still more to come. Hence, Romney’s claim is disingenuous if not downright misleading.