Everything You Need to Know About Bundled Payments

27722f2v1xolxxp-resized-600Traditionally, healthcare service providers have, as much as possible, charged patients separately for each of the services and supplies provided. It is not only appropriate, but also essential, for providers to assure that they are being optimally reimbursed for the services they render.  However, this has at times led to an over-utilization of services by some resulting in efforts by third-party payors and CMS to look for further reduction of reimbursement based on fee for services and evaluate alternative methods to reimburse providers for the care.

The idea of “bundling” payments is not new. CMS, and other third-party payors have implemented bundled and global payment structures for a long time now, as orthopedic and other surgeons are well aware. Trying to “unbundle” payments for some procedures and bill specific elements of them separately can lead to an outright denial of the claim requiring resubmission and a delay in payment. It is counter-productive to say the least.

This is different from the Bundled Payment for Care Improvement (BPCI) initiative that has been rolled out by the CMS as a provision of the Affordable Care Act (ACA, PPACA, Obamacare). This new bundled payment initiative was piloted by the Centers for Medicare and Medicaid Services beginning January 31, 2013. It is based on the belief by the CMS that the current system of payment can result in fragmented care with minimal coordination across providers and health care settings.” Additionally, they state that “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.

What is the Bundled Payment for Care Improvement initiative?

The BPCI initiative can be thought of as a halfway house between total “fee for service” and the strict “capitation” payment system of the HMOs. This initiative stands in the middle between paying the hospital or physician, for all the services provided, on the one hand, or paying a specific amount based on the number of members (heads) in a particular plan, on the other. Instead it attempts to control spending and also improve the quality of care by providing a specific payment for the “bundle” of services provided to the patient in a specific “episode of care”.

Four models to choose from:

Model 1 is a retrospective payment system and defines an episode of care as the inpatient length of stay in an acute care hospital. Under this model Medicare pays the hospital a discounted amount based on the payment rates established under the Inpatient Prospective Payment System used in the original Medicare program.” Further, “Medicare continues to pay physicians separately for their services under the Medicare Physician Fee Schedule.”  This particular model “includes most Medicare fee-for-service discharges for the participating hospitals.” Under this model physicians will continue to be paid separately according to the Medicare Physician Fee Schedule, however, both hospitals and physicians may be able to share in gains resulting from cost savings in certain circumstances.  So far there are 16 participants/awardees all of which are in New Jersey, except for one in Wichita, Kansas.

Model 2 is also a retrospective payment program, but differs from model 1 in that it includes all related services during the episode of care which extends up to 30, 60, or 90 days after discharge from the hospital. Under this model the related services would include the post-discharge services such as home care, rehab services, skilled nursing facility services and extends to 48 different clinical conditions that the participant can choose from. There are now 2,150 participants in this initiative, mostly in the eastern half of the country, but also includes facilities in Hawaii and Alaska.

Model 3 is a retrospective payment program as well, but only relates to post-acute care services. The episode of care requires a preceding inpatient hospital stay and must begin within 30 days following discharge from the hospital. It can be for 30, 60, or 90 day period and includes up to 48 different clinical conditions.  So far there are 4,617 participants with, essentially, the same geographic distribution as model 2.

Model 4 under this model CMS makes a single, prospectively determined bundled payment to the hospital that encompasses all services furnished during the inpatient stay by the hospital, physicians, and other practitioners.” Physicians and other practitioners are not paid separately, instead they are to submit a “no-pay” claim to Medicare. They will be paid out of the bundled payment that is provided to the hospital. The episode of care is the inpatient length of stay in the acute care facility, but includes any readmissions within 30 days post-discharge. Again, there are 48 clinical conditions to choose from. This model has just 18 participants with roughly ⅓ of them in New Jersey and the rest spread throughout the remainder of the contiguous US.

Other related articles:

Interest surges in Medicare bundled-payment initiative

Failed regional bundled payment program


Image courtesy via David Goehring