Primers on key health care business topics Vol. 14, Issue 5,  Sept/October  2011
Social Media and Readmissions: Roles, Limits, and Opportunities
Sponsor Message
Today's Topic

Bundled Payments for Care Improvement Initiative

The Centers for Medicare & Medicaid Services (CMS) has announced a new Bundled Payment Initiative for Medicare, provided for under the Affordable Care Act, that is designed to address quality of care and required resources during and post hospitalization.. The program involves aligning provider payments for services delivered across an episode of care, with the intention of serving as an incentive for hospitals and physicians to coordinate and improve the quality of care while delivering services more efficiently.

Primer

Overview

CMS is partnering with selected providers to develop models of bundling payments through the Bundled Payments initiative. On August 23, 2011, CMS invited providers to apply to help test and develop four different models of bundling payments. CMS states the Bundled Payments initiative will allow providers flexibility in selecting conditions to bundle, developing the health care delivery structure, and determining how payments will be allocated among participating providers.

Three of the four models involve retrospective bundled payment arrangements with a target price for a defined episode of care, the fourth is a prospective model:

Model 1 defines the episode of care as the inpatient stay in an acute care hospital.

Model 2 addresses an inpatient stay and post-acute care ending either a minimum of 30 days or 90 days after discharge (at the applicant's option).

Model 3 defines the episode of care as beginning at discharge and ending no sooner than 30 days after discharge.

Model 4 involves a single prospective payment to encompass all services furnished during an inpatient stay by a hospital, physicians and other health care practitioner

Applicants and Timeline

Eligible awardee applicants for any of the models can include: Physician group practices; Acute care hospitals paid under the IPPS; Health systems; Physician-hospital organizations; and Conveners of participating health care providers. In addition, applicable post-acture providers can participate in models 2 and 3. Providers may apply to participate in more than one model.

CMS will give preference to applicants who are meaningful users of HIT 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 look favorably on applications that indicate a higher historical rate of physician participation in the Physician Quality Reporting System. CMS will also 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.

The timeline for providers to apply to participate varies by the model.  For Model 1, a nonbinding Letter of Intent  was due on September 22, 2011 and the Application is due on October 21, 2011. For Models 2-4, the nonbinding LOI is due on November 4, 2011 and the Application is due on March 15, 2012. CMS is making historical Medicare claims data available to applicants for Models 2-4. Applicants that wish to receive such claims data must complete a Research Request Packet by November 4, 2011. Applicants for Models 2-4 also must execute a Data Use Agreement limiting the applicants' use of CMS provided data. That Agreement is also due November 4, 2011.

Bundled Payments Defined

CMS provides this general definition of Bundled Payments: "rather than paying separately for each item or service, a single payment is made for a defined group of services. 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. The bundled payment may cover services furnished by a single entity (hospital or other provider). 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."

Retrospective Payment Bundling

Models 1-3 involve retrospective payment bundling, in which CMS and providers would set a target payment amount for a defined episode of care. 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 Original Medicare fee-for-service (FFS) system, but at a negotiated discount. At the end of the episode, the total payments would be compared with the target price. Participating providers may then be able to share in those savings.

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

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. 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 will be discounted from an amount based on the applicant's historical fee-for-service payments for the episode. Payments will be made at the usual fee-for-service payment rates, after which the aggregate Medicare payment for the episode will be reconciled against the target price. Any reduction in expenditures beyond the discount reflected in the target price will be paid to the participants to share among the participating providers.

Prospective Payment Bundling

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.

Gainsharing Arrangements

In addition to streamlining care through the use of bundles, the proposals for this initiative may include gainsharing arrangements. Gainsharing refers to payments that may be made by hospitals and other providers to physicians and other practitioners as a result of collaborative efforts to improve quality and efficiency. These payments can further align incentives for health care providers to coordinate care, improve quality and efficiency of care, and partner in the improvement of care delivery.

  For More Information
Fact Sheet: Bundled Payments for Care Improvement Initiative
CMS, August 23, 2011

Affordable Care Act initiative to lower costs, help doctors and hospitals coordinate care
Press Release, CMS, August 23, 2011

Bundled Payments for Care Improvement Initiative: Request for Applications
Notice, Federal Register, August 25, 2011

Bundled Payments for Care Improvement initiative Frequently Asked Questions
CMS Innovation Center, Updated September 9, 2011

Stakeholder Conference Call Transcript: Bundled Payments for Care Improvement initiative
CMS Innovation Center, August 23, 2011
 
HealthcareWebSummit Events

Upcoming Webinars: 

Successfully Deploying Social Network Analytics to Enhance Predictive Modeling Efforts in Combating Health Care Fraud, September 21, 2011
PwC Health Insurance Exchange Research and Strategies, September 22, 2011
Social Media and Readmissions: Roles, Limits, and Opportunities, September 27, 2011
Patient Satisfaction, Outcomes And Your Bottom Line, September 29, 2011
Medical Home Web Summit, November 3, 2011
 

Check out CD-ROMs of past HealthcareWebSummit events on Medicare and a wide range of other key topics at www.healthwebsummit.com/cdroms.htm

 

MCOL - Positioning you for change in health care
1101 Standiford Ave., Suite C-3
Modesto, CA 95350
www.mcol.com

 


MCOL respects your privacy.
Please read our online Privacy Policy.