CMS Center for Innovation Announces Bundled Payments for Care Improvement Initiative

Posted by

David Harlow

First posted 8/24/11 on Health Blawg

Many health care provider organizations that have not been overly eager to jump onto the Accountable Care Organization (ACO) bandwagon, citing high startup costs and uncertain returns on investment given the complexity of the program.  Well, recently, the CMS Center for Innovation has announced the Bundled Payment for Care Improvement initiative.  This initiative incorporates elements of earlier CMS demonstration projects — the gainsharing demos and ACE (acute care episode) bundled payments demonstrations which the HealthBlawger has helped a number of clients around the country qualify for in the past — and builds on the broad authority granted to the CMS Center for Innovation under health reform.

The advantages to proceeding with a Bundled Payment for Care Improvement project include the opportunity to participate in CMS shared savings programs while only providing limited commitment of organizational resources, i.e., limited to one or more discrete service lines or episodes of care.  Of course, investments in a culture of collaboration must be made, but the system-wide investment in IT and other infrastructure at the level called for in order to qualify as an ACO would not necessary be required in order to proceed with this initiative.

There are a number of different models open to participants, and nonbinding letters of commitment are due as early as late September.

From the CMS Center for Innovation announcement:

Applicants would propose the target price, which would be 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 fee-for-service (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.

Applicants for these models would also decide whether to define the episode of care as the acute care hospital stay only (Model 1), the acute care hospital stay plus post-acute care associated with the stay (Model 2), or just the post-acute care, beginning with the initiation of post-acute care services after discharge from an acute inpatient stay (Model 3).  Under the fourth model, CMS would make a single, prospective bundled payment that would encompass all services furnished during an inpatient stay by the hospital, physicians and other practitioners.

The alignment of incentives that can occur under any one of these scenarios is, of course, greater than what obtains under traditional, fee-for-service Medicare.  Health care providers and patients alike may well benefit under this initiative, and it seems to me to make a great deal of sense for providers to jump into initiatives like this.  After all, a wholesale move away from fee-for-service medicine is likely inevitable, and is taking places in fits and starts like this at the federal level, and like the continuing Massachusetts health reform experiment (see also this post on Massachusetts global payments), to use one example at the state level.

David Harlow is a health care attorney practicing in Massachusetts and writing at Health Blawg.

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