CMS Launching Bundled Payments for Care Improvement Initiative

The Centers for Medicare & Medicaid Services and the CMS Innovation Center have invited providers to apply to help test and develop four different models of bundling payments. A notice announcing a “request for applications” (RFA) for acute care and associated post-acute care, using both retrospective and prospective bundled payment methods, was published in the Aug. 25
Federal Register (76 Fed. Reg. 53137).

The models to be tested based are as follows:

• Model 1: Retrospective payment models around the acute inpatient hospital stay only.

• Model 2: Retrospective bundled payment models for hospitals, physicians, and post-acute providers for an episode of care consisting of an inpatient hospital stay followed by post-acute care.

• Model 3: Retrospective bundled payment models for post-acute care where the episode does not include the acute inpatient hospital stay.

• Model 4: Prospectively administered bundled payment models for the acute inpatient hospital stay only, such as prospective bundled payment for hospitals and physicians for an inpatient hospital stay

In the retrospective models, 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 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.

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 and other practitioners would submit “no-pay” claims to Medicare and would be paid by the hospital out of the bundled payment.

A side-by-side comparison of key features of the four models is found below.

Gainsharing

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.

Letter of Intent

Interested organizations must submit a nonbinding letter of intent by Sept. 22 for Model 1 and Nov. 4 for Models 2-4 as described in the Bundled Payments for Care Improvement initiative RFA (see below link).

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 Oct. 21 for Model 1 and March 15, 2012, for Models 2-4.

Additional Materials

CMS has provided the following links for additional information:

• For a General Fact Sheet on the Bundled Payments for Care Improvement initiative, http://www.innovations.cms.gov/documents/pdf/Fact-Sheet-Bundled-Payment-FINAL82311.pdf;

• For Bundled Payments for Care Improvement initiative Frequently Asked Questions http://www.innovations.cms.gov/areas-of-focus/patient-care-models/bundled-payments-for-care-improvement.html;

• For the Bundled Payments for Care Improvement initiative Request for Application, http://www.innovations.cms.gov/documents/payment-care/Request_for_Applications.pdf;

• For Bundled Payments for Care Improvement initiative application information and materials http://www.innovations.cms.gov/areas-of-focus/patient-care-models/Bundled-Payments-%20Care-Improvement-Application.html.

Comment

Please note the due dates for letters of intent, which are nonbinding.

Are bundled services an alternative to Accountable Care Organizations (ACOs)? ACO material implies extremely prescriptive rules. It is still early to determine if bundled services may offer a more flexible and less restrictive system to enhance service outcomes.