Fact Sheets

Bundled Payments for Care Improvement Initiative (BPCI) Fact Sheet

Bundled Payments for Care Improvement Initiative (BPCI) Fact Sheet (Updated on April 18, 2016)

The Bundled Payments for Care Improvement initiative (BPCI) is composed of four broadly defined care models, which bundle payments for multiple services beneficiaries receive during an episode of care. Under the initiative, organizations enter into payment arrangements that include financial and performance accountability for an entire episode. These models may lead to higher quality and more coordinated care for beneficiaries at a lower cost to Medicare.

Bundled Payments
Traditionally, Medicare makes separate payments to providers for each service they perform for beneficiaries during a single illness or course of treatment. This approach can result in fragmented care with minimal coordination across providers and health care settings. It also rewards the quantity of services offered by providers rather than the quality of care furnished. 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.

The Innovation Center
The Bundled Payments for Care Improvement initiative was developed by the Center for Medicare and Medicaid Innovation (Innovation Center). The Innovation Center was created by the Affordable Care Act to test innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid or Children’s Health Insurance Program (CHIP) expenditures while preserving or enhancing the quality of care for beneficiaries.

Initiative Design
Participants in the BPCI initiative can choose from among four episode-based payment models.  

  Model 1 Model 2 Model 3 Model 4
Episode All DRGs; all acute patients Selected DRGs; hospital plus post-acute period Selected DRGs; post-acute period only Selected DRGs; hospital plus readmissions
Services included in the bundle All Part A services paid as part of the MS-DRG payment All non-hospice Part A and B services during the initial inpatient stay, post-acute period and readmissions All non-hospice Part A and B services during the post-acute period and readmissions All non-hospice Part A and B services (including the hospital and physician) during initial inpatient stay and readmissions
Payment Retrospective Retrospective Retrospective Prospective

In Model 1, the episode of care is defined as the inpatient stay in the acute care hospital. 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. Medicare continues to pay physicians separately for their services under the Medicare Physician Fee Schedule. The first cohort of Awardees in Model 1 began in April 2013.

Models 2 and 3 involve a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. Under these payment models, Medicare continues to make fee-for-service (FFS) payments to providers and suppliers furnishing services to beneficiaries. At the time of reconciliation, the total expenditures for all related services during a beneficiary’s episode are compared against a bundled payment amount (the target price) determined by the Centers for Medicare & Medicaid Services (CMS). If the total expenditures are below the bundled payment amount, then CMS shares those savings with the Awardee; if the total expenditures are above the bundled payment amount, then the Awardee pays a recoupment amount to CMS.

In Model 4, CMS makes a single, prospectively determined bundled payment to the hospital that encompasses all services furnished by the hospital, physicians, and other practitioners during the episode of care, which includes the entire inpatient stay and any related readmissions.  In general, physicians and other practitioners are paid by the hospital out of the prospective bundled payment amount.  

Implementation of Models 2, 3 and 4 was divided into two phases. During Phase 1, also referred to as “the preparation period,” CMS shared data and engaged in education and shared learning activities with participants as they prepared for assumption of financial risk under Phase 2, the performance, or “risk-bearing implementation,” period. CMS announced the first set of BPCI Phase 1 participants on January 31, 2013. By October 1, 2013, some BPCI participants entered into Awardee Agreements with CMS, at which point they became Awardees and began bearing financial risk with CMS for some or all of their episodes. CMS required all participants to transition at least one episode into Phase 2 by July 1, 2015 in order to continue participation in the initiative.

As of July 1, 2015, BPCI has 2115 participants in Phase 2. The 2115 participants are composed of 360 Awardees and 1755 Episode Initiators actively involved in care redesign. The breakdown of participants by provider type is as follows:

  • Acute Care Hospitals (423), 
  • Physician Group Practices (441),
  • Home Health Agencies (101),
  • Inpatient Rehabilitation Facilities (9),
  • Long-Term Care Hospitals (1), and
  • Skilled Nursing Facilities (1071).  

The difference between the totals in participants and providers is due to the fact that some of the Awardees are Awardee Conveners are not initiating clinical episodes and are therefore not included in the breakdown of participants by provider type.

Participants by Models (Awardees and Episode Initiators)

  • Model 1 – 11
  • Model 2 – 741
  • Model 3 – 1353
  • Model 4 – 10

Types of Participants in the BPCI Initiative

  • Awardees are entities that assume financial liability for the clinical episode spending and have signed an Agreement with CMS.
  • Episode Initiators are healthcare providers that trigger BPCI episodes of care; they do not bear risk directly (unless they also serve as an Awardee), but participate in the model through an agreement with a BPCI Awardee.
  • Conveners are entities that bring together multiple health care providers. These conveners can participate as either Awardees that enter into Agreements with CMS and bear risk or Facilitator Conveners that do not enter into an Agreement with CMS and do not bear risk.  

Over the course of the initiative, CMS will work with participating organizations to assess whether the models being tested result in improved patient care and lower Medicare costs. All models include provider-led care redesign and enhancements, such as reengineered care pathways using evidence-based medicine, standardized operating protocols, improved care transitions, and care coordination. Awardee Agreements may also include proposals for gainsharing among provider partners.

Beneficiary Choice
Beneficiaries retain full freedom of choice to choose services and providers, and can always choose to receive care from providers not participating in the BPCI initiative. Additionally, BPCI participants and their partnering providers are required to provide beneficiaries with written notification that explains the existence and purpose of BPCI, the beneficiary’s right of access to medically necessary services, and the beneficiary’s right to choose any provider or supplier of items or services.

Evaluation and Monitoring
CMS is committed to ensuring that beneficiaries receiving care from providers participating in BPCI receive high quality care. To that end, CMS is analyzing information available from Awardees’ claims and quality reporting, as well as surveys and patient assessment tools to assess care experience and health outcomes. CMS’ monitoring effort aims to identify quality improvements, including process improvements, changes in outcomes, and reductions in expenditures, and to detect inappropriate practices such as care stinting, patient selection to maximize financial gain, and cost shifting. Participants are required to comply with and participate in evaluation and monitoring activities and data collection efforts. Participants must also continue to meet current standards required by the Medicare program. If a beneficiary believes that his or her care is adversely affected, he or she should call 1-800-MEDICARE or contact his or her state’s Quality Improvement Organization by going to