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4 Proposed Bundled Payment Models Encourage Continuity of Care

A new initiative from HHS is designed to align payments for services delivered during an episode of care, rather than paying for services separately.

The initiative, launched by the Center for Medicare and Medicaid Innovation Center, will bundle care for a package of services patients receive to treat a specific medical condition during a single hospital stay and/or recovery from that stay — what is known as an episode of care. By bundling payment across providers for multiple services, providers will have a greater incentive to coordinate and ensure continuity of care across settings, resulting in better care for patients, says CMS officials. Better coordinated care can reduce unnecessary duplication of services, reduce preventable medical errors, help patients heal without harm, and lower costs.

The bundled payments initiative is based on research and previous demonstration projects; one example, a Medicare heart bypass surgery bundled payment demonstration, saved the program $42.3 million, or roughly 10 percent of expected costs, and saved patients nearly $8 million in co-insurance while improving care and lowering hospital mortality.

In Medicare currently, hospitals, physicians and other clinicians who provide care for beneficiaries bill and are paid separately for their services. This new initiative will give providers the flexibility to determine which episodes of care and which services will be bundled together.

The four models of care are as follows:

  • Model 1: Acute care hospital stay only
  • Model 2: Acute care hospital stay plus post-acute care associated with the stay
  • Model 3: Just post-acute care, beginning with the initiation of post-acute care services after discharge from an acute inpatient stay
  • Model 4: CMS makes a single, prospective bundled payment that encompasses all services furnished during an inpatient stay by the hospital, physicians and other practitioners

According to CMS, applicants propose their target price, which is set by applying a discount to total costs for a similar episode of care as determined from historical data. Participants in these models would be paid for their services under the traditional FFS system. After the conclusion of the episode, the total payments would be compared with the target price. Participating providers may then be able to share in those savings.

Interested organizations must submit a nonbinding letter of intent by September 22, 2011 for Model 1 and November 4, 2011 for Models 2-4.


Source: HHS, August 23, 2011

Case Study in Bundled Payments: The Baptist Health System Experience

This 23-page resource documents the care payment experience of Baptist Health System as a participant in the CMS Acute Care Episode (ACE) demonstration pilot, which aligned payment for services delivered across episodes of care or "bundled" care. ACE focused on the cardiac and orthopedic diagnosis-related group (DRGs), two of the public payor's most frequent and largest cost disease areas.

Case Study in Bundled Payments: The Baptist Health System Experience is available from the Healthcare Intelligence Network for $69 by visiting our Online Bookstore or by calling toll-free (888) 446-3530.

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IMPORTANT NOTICE: This information is designed to provide accurate and authoritative information on the business of healthcare. It is distributed with the understanding that Healthcare Intelligence Network is not engaged in rendering legal advice. If legal advice is required, the services of a competent professional should be retained.

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