CMS announces bundled payment models, providers must respond
Jason Bezozo, Senior Program Director, Government Relations
In late August, the Centers for Medicare and Medicaid Services (CMS) announced its new Bundled Payments for Care Improvement Initiative. Under this Initiative, a team of providers will receive bundled payments for services that patients receive across a single episode of care. The goal of payment bundling is to encourage coordination, reduce costs and improve quality across providers through the continuum of care.
CMS has defined four models of care for this project. Models 1 through 3 are retrospective payment bundling; Model 4 is prospective. Under the first three models, CMS and providers will set a target payment amount for a defined episode of care. Applicants will propose a target price, which would be set by applying a discount to the total costs for a similar episode of care based on historical data. Providers will be paid under the Medicare fee-for-service system less a negotiated discount. At the end of the episode, the total payment would be compared with the target price. Providers would be able to share in any savings.
Episodes of care under Model 1 include inpatient stays only. Model 2 applies to inpatient stays and post-acute care, ending either 30 or 90 days after discharge, as decided by the participating provider. And Model 3 episodes of care begin at discharge from a hospital and end no sooner than 30 days after discharge.
Model 4 will apply to inpatient stays only. However, CMS will make a prospectively determined bundled payment to hospitals that would cover all services provided during the inpatient stay by the hospital, physicians and other practitioners. Under this model, physicians and other practitioners would submit “no-pay” claims to Medicare.
Providers can determine which episodes of care and which services should be bundled together. Proposals for payment bundling may include gainsharing arrangements between hospitals and other providers. And providers may participate in more than one model.
Applicants must identify the clinical conditions through MS-DRGs, define the time period for the episode of care and identify the services included in the bundled payment. Quality assurance and improvement activities will also be required. Model 1 applicants must submit a nonbinding letter of intent to CMS by September 22, 2011 and a completed application by October 21, 2011. Applicants for Models 2 through 4 must submit a nonbinding letter of intent by November 4, 2011 and a completed application by March 15, 2012.
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