Episode-of-care physician payment: A study of coronary artery bypass graft surgery

Paying physicians for an episode of care is a possible alternative to current fee-for-service payment. We studied physician billing patterns for 512 Medicare beneficiaries who received coronary artery bypass graft (CABG) surgery in 1983. Relatively elaborate decision rules had to be created to exclude services that were not part of a routine CABG. We found that 72% of charges for an episode were associated with services provided on the day of surgery. Forty-seven percent of charges were by the primary surgeon, 15% by the assistant surgeon(s), and 9% by the anesthesiologist. Our results suggest that episode-of-care payment is a complex, and somewhat costly, alternative to other methods of prospective payment to physicians, although selective contracting by a health insurer for an episode of care for certain procedures might both reduce costs and improve quality.