The Centers for Medicare and Medicaid Services (CMS) announced a new plan that would pay interested doctors, hospitals, and other providers bundled Medicare payments.
According to a recent article from MedPage Today, “bundled payments, which are a part of the Affordable Care Act, refer to paying for a patient’s entire episode of care rather than just each stop in the medical system.”
For example, instead of a heart attack generating multiple claims from different healthcare providers, Medicare would give the entire team who treated the patient one bundled payment after all the care on the heart attack patient was completed. The providers would then be responsible for determining how the money is allocated among doctors, hospitals, and others.
The bundled payment may cover services furnished by a single entity (hospital or other provider) or it may be used to pay for items and services furnished by several providers in multiple care delivery settings. In this context, bundled payment refers to a single negotiated episode payment of a predetermined amount for all services (physician, hospital, and other provider services) furnished during an episode of care. This could be paid prospectively or retrospectively.
For example, Medicare and the awardee would agree to a bundled payment target price for acute care hospital services for an inpatient stay plus professional services and post-acute care related to the principal reason for the hospitalization, rather than paying separately for each physician visit and procedure provided during the episode.
Under the Bundled Payments for Care Improvement Initiative announced, providers — which could include doctors’ groups, hospitals, physician-hospital organizations, nursing homes, and others — can apply to participate in one of four models, which all group different services together for bundled payments.
The new, voluntary payment approach is aimed at getting medical providers to collaborate to improve the health of patients, Health and Human Services Secretary Kathleen Sebelius told reporters on a conference call.
According to CMS, the “Bundled Payments for Care Improvement initiative seeks to improve patient care through payment innovation that fosters improved coordination and quality through a patient-centered approach.” CMS also published a Fact Sheet on the Bundled Payment Program and a Frequently Asked Questions page.
The model sets the groundwork to move away from Medicare’s fee-for-service system that pays providers more money for performing many tests and procedures, but doesn’t pay attention to whether patient’s health is improving.
Groups interested in receiving bundled payments would apply to CMS and bid on a target price for a given medical service. Participants in the models would initially be paid at a discounted rate under the traditional Medicare fee-for-service system, but after the “episode” (a heart attack, surgery, etc.) was concluded, total payments would be compared to the target price and the groups could share in Medicare’s savings.
The CMS Innovation Center is seeking applications for four broadly defined models of care. Three models involve a retrospective bundled payment arrangement, and one model would pay providers prospectively. Through the Bundled Payments initiative, CMS stated that providers have great flexibility in selecting conditions to bundle, developing the health care delivery structure, and determining how payments will be allocated among participating providers.
Applicants would propose the target price, which would be set by applying a discount to total costs for a similar episode of care as determined from historical data. Participants in these models would be paid for their services under the traditional fee-for-service (FFS) system. After the conclusion of the episode, the total payments would be compared with the target price. Participating providers may then be able to share in those savings.
Applicants for these models would also decide whether to define the “episode of care” in one of four ways:
- Model 1: Hospital services provided to a beneficiary during an acute inpatient stay, where physicians work together to improve care
- Model 2: Hospital, physician, post-acute provider, and other Medicare-covered services provided during the inpatient stay and during recovery after discharge to the home or another care setting
- Model 3: Hospital, physician, post-acute provider, and other Medicare-covered services beginning with the initiation of post-acute care services after discharge from an acute inpatient stay
- Model 4: Inpatient hospital and physician services and related re-admissions in which a prospective payment would be sent to the hospital, which would decide how to distribute it among providers
CMS noted that the initiative is seeking innovative proposals that will build on the success of previous CMS demonstrations and private sector initiatives. In all models contained in the Request for Applications (RFA), CMS is seeking proposals that:
- affect broad categories of conditions;
- reach many beneficiaries;
- offer significant savings to Medicare;
- are designed to be scalable and replicable by similar health systems around the country; and
- are able to be implemented on aggressive timelines.
Applicants are anticipated to have experience with cross-provider care improvement efforts of this type, and either have already begun to redesign care or are prepared to redesign care and enter into payment arrangements that include financial and performance accountability for episodes of care.
Accountable Care Organizations (ACO) are also eligible to apply for Bundled Payments.
Additionally, for all models, CMS will give preference to applicants who are meaningful users of health information technology or who have a minimum of 50% of their providers meeting the standards for meaningful use. For Models 2 and 3, CMS will give preference to applicants proposing an episode definition longer than 30 days.
CMS will also look favorably on applications that indicate a higher historical rate of physician participation in the Physician Quality Reporting System (PQRS) as well as describe plans to encourage greater physician participation in PQRS for the duration of the initiative.
Finally, CMS will view favorably applications that include governing bodies with meaningful representation from consumer advocates, patients, and all participating provider types/organizations, and applications that include functional status in the proposed quality measures.
Interested organizations must submit a nonbinding letter of intent by September 22, 2011 for Model 1 and November 4, 2011 for Models 2-4 as described in the Bundled Payments for Care Improvement initiative RFA.
For applicants wishing to receive historical Medicare claims data in preparation for Models 2-4, a separate research request packet and data use agreement must be filed in conjunction with the Letter of Intent.
Final applications must be received on or before October 21, 2011 for Model 1 and March 15, 2012 for Models 2-4.
Federal health officials told reporters that they expect hundreds of groups to apply.
While groups may receive extra payment if they provide care that is much more efficient in the new model, there’s no guarantee that any group would see significantly higher reimbursements under a bundled approach.
When asked what the incentive would be for hospitals and doctors to opt for bundled payments, Valinda Rutledge, director of patient care models for the CMS Innovation Center, said the incentive is that doctors and hospitals “want to work together to provide care,” but that the current system doesn’t reward collaboration.
“As a former CEO at a hospital that implemented something similar … there is excitement that is around when you talk about eliminating the barriers set up by having separate payments,” she said on the conference call.