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CMS Continues Bundled Payments Initiative

Feb 04, 2013

The Center for Medicare and Medicaid Services on Thursday announced that more than 450 healthcare organizations will participate in the Bundled Payments for Care Improvement initiative, a payment model program created in the healthcare reform law to test whether bundling payments for services in a single episode of care can improve quality and lower costs.

Those selected organizations represent a wide range of healthcare providers—including not-for-profit and for-profit hospitals, academic medical centers, physician-owned facilities and post-acute providers—that were chosen by the CMS either as awardees for Model 1 starting in April, or as participants for the first phase of models 2, 3 and 4 that begins with Thursday's announcement.

Thirty-two awardees were announced for Model 1, where awardees agree to provide a standard discount to Medicare from the typical Part A hospital inpatient payments, and hospitals and providers are able to share any gains that come from their care-redesign strategies.

In the weeks ahead, the CMS plans to announce a second opportunity for providers to participate in Model 1 starting in early 2014. Models 2 and 3 follow a retrospective bundled-payment arrangement where expenditures are settled against a target price for an episode of care, while Model 4 involves a prospective bundled-payment arrangement in which a provider receives a lump sum payment for the entire episode of care. In each of these three models, participants can choose up to 48 clinical episodes of care to test.

Deirdre Baggot is a registered nurse who served as the administrator of the acute-care episode, or ACE, demonstration project at St. Joseph's Hospital in Denver. Developed from the Medicare Prescription Drug Improvement and Modernization Act of 2003, the ACE demonstration tested the bundling of Medicare parts A and B for episodes of care. Baggot was chosen by the CMS as an outside expert to help review applications in models 2, 3 and 4 in the bundled payments for care improvement initiative.

She noted the distinction between the “awardees” announced for Model 1 and “participants” for the three other models. Responding to feedback from applicants, the CMS created a six-month “no risk” period for participants in models 2, 3 and 4 to evaluate claims data, participate in educational sessions, and learn how the process works, Baggot explained.

“So it's a validation period where hospitals have a more clear understanding of what this period will look like,” said Baggot, who currently serves as vice president at the Camden Group, a consulting firm.

Baggot said Thursday's announcement is notable for both the size and scope of the program. “It's a national study. To have more than 400 sites is a really great representative sample to test this on,” Baggot said. And if the initiative works in this testing stage, she added, “I would expect it to go straight to policy.”

Bundled Payments for Care Improvement (BPCI) Initiative: General Information

Traditionally, Medicare makes separate payments to providers for each of the individual services they furnish to beneficiaries for a single illness or course of treatment. This approach can result in fragmented care with minimal coordination across providers and health care settings. Payment rewards the quantity of services offered by providers rather than the quality of care furnished. Research has shown that bundled payments can align incentives for providers – hospitals, post-acute care providers, physicians, and other practitioners– allowing them to work closely together across all specialties and settings.

The 4 Models
The Bundled Payments initiative is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Model 1 includes an episode of care focused on the acute care inpatient hospitalization. Awardees agree to provide a standard discount to Medicare from the usual Part A hospital inpatient payments.

Models 2 and 3 involve a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. Model 4 involves a prospective bundled payment arrangement, where a lump sum payment is made to a provider for the entire episode of care. Over the course of the three-year initiative, CMS will work with participating organizations to assess whether the models being tested result in improved patient care and lower costs to Medicare.

Episodes of Care
Under the Bundled Payments for Care Improvement initiative, organizations will enter into payment arrangements that include financial and performance accountability for episodes of care. These models may lead to higher quality, more coordinated care at a lower cost to Medicare. There are 48 episodes that participants were able to choose from. See details on the health care facilities and the episodes they will be testing here.