Moving Forward: The Bundled Payments for Care Improvement Initiative

CMS has announced the participants for Models 2 through 4 of the Bundled Payments for Care Improvement Initiative (BPCI). 

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. 

Over the course of the three-year initiative, CMS will work with participating organizations to assess whether the models being tested result in improved patient care and lower costs to Medicare. 

The implementation of these models has been broken down into two distinct phases:

Phase I:   Referred to as the “no-risk” preparation period has just begun and will continue until July 2013.  During this time, CMS and participants prepare for implementation and assumption of financial risk based on the provider’s final submitted list of their episodes.  Participants can select up to 48 different clinical condition episodes. 

Phase II:   Beginning in July 2013, the “risk-bearing” performance period starts for those participants from Phase I that are ultimately approved by CMS and decide to move forward with implementation and assumption of financial risk.

	Model 2	Model 3	Model 4
Episode of Care	Inpatient stay at acute care hospital plus post-acute period for selected DRGs.	Selected DRG’s for an acute care hospital stay will trigger the episode to begin at initiation of post-acute care services with a participating skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency	Inpatient stay at acute care hospital plus readmissions for selected DRGs.
Bundled Services	The bundle will include 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.	The bundle will include 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.	All Part non-hospice A and B services (including the hospital and physician) during initial inpatient stay and readmissions
Service Timeline	The episode will end either 30, 60, or 90 days after hospital discharge.	The post-acute care services included in the episode must begin within 30 days of discharge from the inpatient stay and will end   either a minimum of 30, 60, or 90 days after the initiation of the episode.	Related readmissions for 30 days after hospital discharge will be included in the bundled payment amount.
Payment Calculation	Retrospective: A target price will be set that will be based on historical fee-for-service payments for the participant’s Medicare beneficiaries in the episode and will include a discount. 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 participant and may be shared among their provider partners. Expenditures that are above the target price will be repaid to Medicare by the participant.	Retrospective: A target price will be set that will be based on historical fee-for-service payments for the participant’s Medicare beneficiaries in the episode and will include a discount. 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 participant and may be shared among their provider partners. Expenditures that are above the target price will be repaid to Medicare by the participant.	Prospective: A single, prospectively determined bundled payment to the hospital that would encompass all services furnished during the inpatient stay by the hospital, physicians, and other practitioners. Physicians and other practitioners will submit “no-pay” claims to Medicare and will be paid by the hospital out of the bundled payment. Related readmissions for 30 days after hospital discharge will be included in the bundled payment amount.

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 Bundled Payments for Care Improvement initiative will 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.