As health-care costs climb ever upward, controlling expenses without sacrificing high-quality care becomes increasingly important. Payment systems based on the value of care are emerging as a way to combat rising costs.

Many researchers like Jason Wang, an associate professor of pediatrics and a Stanford Health Policy core faculty member, have found that bundled payment systems may help health-care institutions achieve better value of care.

In a new study in the Journal of the American Medical Association Oncology, Wang and his co-authors show that a value-based bundled payment system is associated with cost containment and improvement in care, even improving chances for survival.

The study examined Taiwan’s bundled pay-for-performance (PFP) system for breast cancer. Instead of the traditional fee-for-service (FFS) system that is typical in the United States — in which every test, surgery and exam is billed individually — this system includes all aspects of treatment in a single established cost, or bundled payment.

Based on guidelines set by Taiwan’s National Health Insurance Administration (NHIA), the pilot program reimbursed health-care institutions’ costs for breast cancer treatment based on the patient’s cancer stage, 0 to IV. Institutions that exceeded the NHIA’s standards received a financial bonus as an incentive for better performance.

The study followed 4,215 patients in the bundled-care system over a five-year period, comparing the quality of their care, the cost of their treatment and the outcomes of their treatment to 12,506 similar patients in the traditional FFS system.

The authors found that patients in the bundled-payment system received better care throughout treatment, were more likely to survive, and contained medical costs over time, compared to their peers in the FFS system.

Costs for patients in the bundled payment system remained about the same throughout the study. However, the cost of treatment for those in the FFS system steadily increased throughout the study period. By the end, even health-care institutions receiving the maximum bonus incentive would incur lower costs than those in the FFS system.

Yet even though their treatment was cheaper, patients in the bundled system experienced better results. Patients using the bundled system had significantly higher survival rates for cancer stages 0 to III, and they were more likely to receive higher quality care based on quality indicators.

This is largely due to the better coordination of care made necessary by the bundled system, according to Wang.

“When you play in an orchestra, the whole group needs to play together, so it plays the right tune,” said Wang. “Focusing on value for the patient and the health-care system forces people to play the same tune.”

Wang believes the lessons learned from Taiwan’s program could be applied in other parts of the world, including the United States, which is currently moving toward bundled cancer care.

Though the U.S. already bundles care for conditions like appendicitis and chemotherapy — in which costs are fairly predictable — many hospital administrators fear that broadening the use of bundled payments for more complex conditions is too risky, financially.

Wang does not share their misgivings.

“People say, ‘We can’t do this for a very complex disease.’ It’s not true,” he said. “When we went outside of the U.S., we started to find systems that work.”

Wang found that when institutions can coordinate care for patients — that is, when a single institution manages all aspects of a patient’s care — the patient is more likely to have better outcomes.

“If institutions take the leadership of providing the infrastructure to coordinate care, they can really deliver better care with the same or lower costs.”

There are benefits for the institutions, too. Right now, because health insurance providers may accept or reject particular costs in an unpredictable way, care institutions never know how much they’re going to get paid for a service. But in a bundled payment system, costs are much more stable and revenue easier to predict.

Considering the benefits, Wang hopes the Taiwan breast cancer study will show institutions in the United States and around the world that bundled payments for cancer can be done on a broad scale.

The value, he said, is worth the risk.