CMS announced the long-awaited start of demonstrations intended to show the value of bundled Medicare payments in reducing hospital admissions and readmissions as well improving care quality.
 
As described by CMS in a Jan. 31 release, the “bundled payments for care improvement initiative” authorized by Affordable Care Act (health care reform) will involve more than 500 provider organizations and some 100 providers partnering with them will test four bundling models intended to improve patient care and lower costs to Medicare.
 
A large number of home health agencies are included among the participants in models 2 and 3 of the demonstration. To see the list of participants, go to: http://innovation.cms.gov/initiatives/bundled-payments.
 
Here's a breakdown of the different models:
 
  • Model 1 includes an episode of care focused on the acute care inpatient hospitalization. Awardees agree to provide a standard discount to Medicare from the usual Part A hospital inpatient payments. The 32 initial awardees in Model 1 will begin testing bundled payments for acute care hospital stays as early as April 2013.  In the coming weeks, CMS will also announce a second opportunity for providers to participate in Model 1, with an anticipated start date of early 2014, CMS said.  
  • Models 2 and 3 involve “a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care.” 
  • Model 4 involves a prospective bundled payment arrangement, where a lump sum payment is made to a provider for the entire episode of care.
 
Participating provider organizations agree to provide CMS a discount from expected payments for the episode of care. Provider partners will work together to reduce readmissions, duplicative care, and complications to lower costs through improvement, CMS said. Phase 1 participants generally are expected to become participants in Phase 2, in which approved participants opt to take on financial risk for episodes of care starting in July 2013, pending contract finalization and completion of CMS’ standard program integrity reviews. 
 
Under Model 1, the episode of care is defined as the inpatient stay in the acute care hospital. Medicare will pay the hospital a discounted amount based on the payment rates established under the Inpatient Prospective Payment System used in the original Medicare program. Medicare will continue to pay physicians separately for their services under the Medicare Physician Fee Schedule. Under certain circumstances, hospitals and physicians will be permitted to share gains arising from the providers’ care redesign.