September 20, 2011
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Health Law Alert: CMS Launches Bundled Payment Initiative, Opportunities to Participate Begin this Month
The Center for Medicare and Medicaid Innovation (CMMI), at the Centers for Medicare and Medicaid Services (CMS), recently unveiled a new, voluntary bundled payment program: the Bundled Payments for Care Improvement Initiative (the Initiative). The CMMI was created by 2010’s Affordable Care Act (the Act) with the goal of finding innovative methods to pay for health care in a way that rewards quality and the achievement of performance objectives. Under the Initiative, the services that patients receive to treat a specific medical condition during a single hospital stay and/or recovery from that stay will be bundled as an episode of care. The goal of this bundled payment program is to improve the quality of care provided to patients through increased coordination among health care providers, while establishing incentives to reduce costs for the Medicare program.
Medicare has historically made separate payments to providers on a fee-for-service (FFS) basis. The FFS model has long been criticized for rewarding the volume of care provided, as opposed to the quality of care delivered. A central goal of the Act is to depart from FFS reimbursement and move towards forms of reimbursement that reward collaboration across providers at different platforms of care delivery. CMS’ experience with other coordinated payment programs suggests significant cost saving potential exists. In describing the Initiative, CMS noted one example in which a Medicare heart bypass surgery bundled payment demonstration saved $42.3 million, approximately 10 percent of expected costs, and saved patients $7.9 million in coinsurance while improving care and lowering hospital mortality.
How the Bundled Payment Initiative Works
To participate in the Initiative, physicians and hospitals would design their own models of bundled payment under four general types of payment models. Providers then submit bids to CMMI. The bids should propose a target price for an episode of care, such as the services needed to treat a patient who had a fractured hip. Participants would receive discounted payments under the FFS system, and at the end of the episode the total payments for the care would be compared to the target price. Those involved in providing the patient's care could share in any savings generated to Medicare. However, the group can also be held financially liable for missing the target price and would pay back money owed to the program.
Four Available Models
Retrospective bundled payments means the usual FFS payments are made and then the total payment for the episode is compared to the target price. Under the prospective bundled payment model, a negotiated single payment is paid as a lump sum as opposed to paying out the separate FFS payments.
CMS has undertaken similar initiatives in the past, but those projects have focused on inpatient services related to surgeries, particularly orthopedic and cardiac procedures. The new Initiative is much broader. It will encompass both in-hospital and post-discharge care and can include chronic disease and other medical admissions, as well as surgeries.
Application Requirements and Deadlines
To apply, providers for Model 1 must submit a nonbinding Letter of Intent by September 22, 2011, and a completed application by October 21, 2011. Applicants for Models 2, 3, and 4 must submit a nonbinding Letter of Intent by November 4, 2011, and a completed application by March 15, 2012. The anticipated program start date is the first quarter of 2012 for successful applicants of Model 1. CMS has not indicated the anticipated start date for Models 2, 3, and 4.
Is Gainsharing Permitted?
Participation in Multiple CMS Initiatives
If you have questions about the Payment Bundling Initiative, please contact Jesse Berg at firstname.lastname@example.org or 612.632.3374.
This article is provided for general informational purposes only and should not be construed as legal advice or legal opinion on any specific facts or circumstances. You are urged to consult a lawyer concerning any specific legal questions you may have.
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