CMS Says Bundling Initiative Will Help Docs, Hospitals Coordinate Care, Lower Costs

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The Centers for Medicare & Medicaid Services Aug. 23 announced a new bundled payment initiative under the Patient Protection and Affordable Care Act to help improve care for patients while they are in the hospital and after they are discharged.

CMS said the initiative will align payments for services delivered across an episode of care, such as heart bypass or hip replacement, rather than paying for services separately. Bundled payments will give doctors and hospitals new incentives to coordinate care, improve the quality of care, and save money for Medicare, the agency said.

The initiative, which is slated to be published in the Aug. 25 Federal Register, will allow providers to apply to help test and develop four different models of bundling payments, CMS said. Providers will have flexibility to determine which episodes of care and which services will be bundled together.

Organizations interested in applying to the Bundled Payments for Care Improvement initiative must submit a Letter of Intent (LOI) no later than Sept. 22 for Model 1 and Nov. 4 for Models 2, 3, and 4, CMS said.

The initiative is being launched by the Center for Medicare and Medicaid Innovation, which was created under PPACA to carry out the task of finding new and better ways to provide and pay for health care to a growing population of Medicare and Medicaid beneficiaries. “Payments [currently] are based on the quantity of care, and not on the quality of that care,” Health and Human Services Secretary Kathleen Sebelius said during an Aug. 23 call with reporters. “There is little financial incentive for the kind of care coordination that can help patients from returning to the hospital.”

Currently, Medicare makes separate payments to providers for the services they furnish to beneficiaries for a single illness or course of treatment, leading to fragmented care with minimal coordination across providers and health care settings, CMS said. Payment is based on how much a provider does, not how well the provider treats the patient. Under the new initiative, CMS said it would link payments for multiple services patients receive during an episode of care and eliminate incentives for multiple readmissions.

Four Models

CMS said the initiative is seeking applications for four broadly defined models of care, three of which would involve a retrospective bundled payment arrangement, with a target price (target payment amount) for a defined episode of care.

In Model 1, the episode of care would be defined as the inpatient stay in the general acute care hospital. Medicare would pay the hospital a discounted amount based on the payment rates established under the inpatient prospective payment system (IPPS). Medicare would pay physicians separately for their services under the Medicare Physician Fee Schedule. Hospitals and physicians would be permitted to share gains arising from better coordination of care, CMS said.

In Model 2, the episode of care would include the inpatient stay and post-acute care and would end, at the applicant's option, either a minimum of 30 or 90 days after discharge, while in Model 3, the episode of care would begin at discharge from the inpatient stay and would end no sooner than 30 days after discharge, CMS said.

In both Models 2 and 3, the bundle would include physicians' services, care by a post-acute provider, related readmissions, and other services proposed in the episode definition such as clinical laboratory services; durable medical equipment, prosthetics, orthotics and supplies (DMEPOS); and Part B drugs. The target price would be discounted from an amount based on the applicant's historical fee-for-service payments for the episode.

Payments would be made at the usual fee-for-service payment rates, and any reduction in expenditures would be paid to the participating providers to share.

Under Model 4, CMS would make a single, prospectively determined bundled payment to the hospital that would encompass all services furnished during the inpatient stay by the hospital, physicians, and other practitioners. Physicians and other practitioners would submit “no-pay” claims to Medicare and would be paid by the hospital out of the bundled payment.

Provider Comments

Blair Childs, senior vice president of public affairs at the Premier healthcare alliance, in a statement said the group commends the new bundled payment initiative.

“Health systems are at different points in their journey to deliver coordinated care. Some are prepared to accept population-based risk, while others require more time, resources, knowledge and experience,” Childs said. “These demonstration projects provide the flexibility and payment innovation needed to step away from our broken fee-for-service system toward alternatives that can reward quality and cost effective care.”

By Nathaniel Weixel

A fact sheet on the initiative is at . A prepublication copy of the Federal Register notice is at .