Understanding the Bundled Payment Initiative

bundled payments hisThe Bundled Payments for Care Improvement initiative of the Centers for Medicare and Medicaid Services is a new initiative designed to determine whether or not a bundled payment approach will actually result in decreased costs.  The bundled payment will be for a specific "episode of care".  This is a three year trial program, which includes specific selected healthcare organizations as participants in the program.  It may begin as early as April of this year, but no later than next January.  The Bundled Payments initiative is courtesy of the Affordable Care Act.

Currently, Medicare makes payments to individual providers for their different services, which provides very little coordination across providers and health care settings.  Payments are made based on the quantity of procedures performed, not the quality of the services provided to the patent.  Under the Bundled Payment initiative, CMS brings together different payments for different services that patients receive during their care.  Research has shown that this initiative could promote incentives for providers to work more closely across different specialities and settings that patients deal with to improve the quality of service that the patient receives through their entire stay at a hospital.  This initiative is an effort by the Department of Health and Human Services to help all Americans have access to better health care.

The Centers for Medicare and Medicaid Services (CMS) are working with different hospitals and healthcare systems to develop ways of bundling payments through this initiative.  The Bundled Payments initiative has four different models of care.  Three of these models are retrospective, while the fourth model is prospective.  With these different Payment Bundling models, CMS and providers will set a payment amount for specific care.  Participants would then take a look at the target price, which is set by applying a discount to total costs for a similar type of care as determined by looking at data.  Participants would then be compensated under Medicare's system, but at a reduced amount.  At the end, the total payments would be analyzed. 

The first model, care would be looked at as the inpatient stay in the general hospital.  The hospital would be paid an amount determined by the Inpatient Prospective Payment System.  Medicare will compensate doctors separately under the Medicare Fee schedule.  Participation will include most Medicare service fee discharges for the hospitals participating in the initiative.

The second model, Retrospective Acute Care Hospital Stay Plus Post Acute Care, would include the inpatient stay and post-discharge care.  Using models 2 and 3, the bundle would include a number of different services defined in the model, such as laboratory services and medical equipment.  Payments will be made at the fee for service rates.  Any reduction in expenses beyond the outlined discount in the set price will be shared among participating providers.

The third model, Retrospective Post Acute Care Only, will be used if a patient has a hospital stay and will start at the initiation of post acute care.  Services must start within a month of discharge and end within 30, 60 or 90 days.  There are many different clinical condition episodes patients may select.

The fourth model, Acute Care Hospital Stay Only, is a prospective payment approach in which CMS makes a payment to the hospital that would cover all projected services including physician fees.  Doctors would then submit a no pay claim to Medicare and would be compensated by the hospital out of the bundled payment.

All of these models are designed to lower costs, and improve health care.  This three year study will, hopefully, determine if such is the case.