Bundled Payments for Care Improvement Initiative
Updated July 31, 2014
The Bundled Payments for Care Improvement initiative is comprised of four broadly defined models of care, which link 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 episodes of care. These models may lead to higher quality and more coordinated care at a lower cost to Medicare.
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.
The Bundled Payments for Care Improvement initiative is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Model 1 focuses on the acute care inpatient hospitalization. Awardees agree to provide a standard discount to Medicare from the usual Part A hospital inpatient payments. The first set 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. Model 4 involves a prospective bundled payment arrangement, where a lump sum payment is made to a provider for the entire episode of care. The first set of participating organizations in Models 2, 3, and 4 were announced in January 2013. Over the course of the three-year initiative, CMS is working with participating organizations to assess whether the models being tested result in improved patient care and lower costs to Medicare.
|Episode||All acute patients, all DRGs||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|
Plans for 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. All may also include proposals for gainsharing among provider partners.
Retrospective Payment Bundling
Model 1: Retrospective Acute Care Hospital Stay Only.
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 continues to pay physicians separately for their services under the Medicare Physician Fee Schedule. Under certain circumstances, hospitals and physicians are permitted to share savings arising from the providers’ care redesign efforts. The first set of participants began in April 2013. An additional participant began on January 1, 2014. Participation includes all Medicare fee-for-service discharges for the participating hospitals.
Model 2: Retrospective Acute Care Hospital Stay plus Post-Acute Care.
In Model 2, the episode of care includes the inpatient stay in the acute care hospital and all related services during the episode. The episode ends either 30, 60, or 90 days after hospital discharge. Participants select up to 48 different clinical episodes. The first set of participants began actively testing on October 1, 2013 and additional participants began testing on January 1, 2014.
Model 3: Retrospective Post-Acute Care Only.
For Model 3, the episode of care is triggered by an acute care hospital stay and begins at initiation of post-acute care services with a participating skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency. The post-acute care services included in the episode must begin within 30 days of discharge from the inpatient stay and end either 30, 60, or 90 days after the initiation of the episode. Participants select up to 48 different clinical episodes. The first set of participants began actively testing on October 1, 2013 and additional participants began testing on January 1, 2014.
In both Models 2 and 3, the bundle includes physicians’ services, care by post-acute providers, related readmissions, and other related Medicare Part B services included in the episode definition such as clinical laboratory services; durable medical equipment, prosthetics, orthotics and supplies; and Part B drugs. A target price is set based on historical fee-for-service payments for the participant’s Medicare beneficiaries in the episode including a discount. Payments are made at the usual fee-for-service payment rates, after which the aggregate Medicare payment for the episode is reconciled against the target price. Any reduction in expenditures beyond the discount reflected in the target price is paid to the participant and may be shared among their provider partners. Any expenditure that is above the target price is repaid to Medicare by the participant.
Prospective Payment Bundling
Model 4: Acute Care Hospital Stay Only.
Under Model 4, 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 paid by the hospital out of the bundled payment. All services furnished during related readmissions for 30 days after hospital discharge are also included in the bundled payment amount. Participants select up to 48 different clinical episodes. The first set of participants began actively testing on October 1, 2013 and additional participants began testing on January 1, 2014.
MODELS 2-4 – TWO PHASES OF IMPLEMENTATION
The Bundled Payments for Care Improvement initiative includes two phases for Models 2, 3, and 4. Phase 1, also referred to as the “preparation” period, is the initial period of the initiative during which CMS and participants prepare for implementation and assumption of financial risk. Those participants in Phase 1 of Models 2, 3, and 4 that are approved by CMS and intend to assume financial risk for episodes may enter into a Bundled Payments for Care Improvement Model agreement with CMS as Awardees and begin Phase 2, also referred to as the “risk-bearing” period.
The initiative currently has 105 Awardees in Phase 2, including 38 conveners of health care organizations, representing 243 Medicare organizational providers. Additionally within Phase 1 of the initiative are 870 participants, including 138 conveners of health care organizations, representing 6,424 Medicare organizational providers. Not all Phase 1 participants will elect to continue to Phase 2, but these newly announced participants demonstrate the strong interest in moving toward aligned payments and quality incentives.
On January 31, 2013, the first set of Bundled Payments for Care Improvement Phase 1 participants were announced. Recently, CMS offered an additional Winter 2014 Open Period seeking submissions from additional entities for participation in BPCI Models 2-4. The period ended on April 18, 2014 and many new participants from this offering were welcomed into Phase 1 in late June 2014. CMS is continuing to review submissions from the Winter 2014 Open Period and may accept additional participants in Phase 1.
Phase 2 began either on October 1, 2013 or January 1, 2014 for current Awardees that entered into Model 2 Awardee Agreements with CMS, at which point Awardees began the risk-bearing phase for some or all of their episodes. The complete transition of all episodes for all Episode Initiators to Phase 2 will be completed by January 2015. During the transition period, Awardees may transition episodes and/or Episode Initiators that have remained in Phase 1 to Phase 2 on a quarterly basis.
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