The Obama Administration Wants to Overhaul How We Pay for Heart Attack Treatments by Sy Mukherjee @FortuneMagazine July 26, 2016, 5:53 PM EDT E-mail Tweet Facebook Linkedin Share icons The Obama administration is seeking to shake up how the government pays for heart attack-related medical care in a bid to reduce health spending, officials announced Monday. Medicare, the federal health program which covers nearly 57 million American seniors and people with disabilities, has long used a “fee-for-service” model where the government has to reimburse health care providers for every individual test and procedure they perform on patients. The system has been criticized for its potential to encourage doctors to perform unnecessary services for the sake of higher Medicare reimbursements and for generally fostering a wasteful and disorganized approach to treatment. Click here to subscribe to our new Brainstorm Health Daily Newsletter. But the Department of Health and Human Services (HHS) proposed new regulations on Monday that would would overhaul that model for heart attack care by mandating that Medicare make “bundled payments”—which set a fixed overall treatment price for admitting a heart attack patient, treating them with inpatient care, and following up with other services for 90 days after their discharge—to hospitals in 90 metropolitan regions. There’s both a carrot and a stick element to the bundled payment system, which is part of the medical care reimbursement reforms authorized under the Affordable Care Act (aka Obamacare). Care providers which manage to treat the entirety of a heart attack episode for less than the target price get to net the associated savings; the ones that don’t have to pay the difference back to Medicare. “By focusing on episodes of care and rewarding successful recoveries, bundled payments encourage hospitals to coordinate care to achieve the best outcomes possible for patients,” said HHS Secretary Sylvia Burwell in a statement. The theory behind the proposed rules is that such a payment system will encourage the medical sector to become more organized, holistic, and efficient in how it cares for patients. The Obama administration had previously moved toward such a model for hip and knee replacement procedures, and the new regulations would also set universal target prices for treating certain hip and leg fractures. It makes sense that lower joint replacements and cardiac attack care are the first two intensive treatments to be targeted for bundled payments. Hip and knee replacement services are the most common inpatient procedures provided under Medicare, and more than 200,000 beneficiaries of the program were hospitalized due to heart attacks or heart surgery in 2014. The administration aims to shift half of all Medicare reimbursements to alternative models like bundled payments by 2018. If finalized, the new rules are expected to be phased in over the course of five years.