HHS Announces New Bundled Payment Initiative

The Department of Health and Human Services has introduced a new program, Bundled Payments for Care Improvement, to improve healthcare for patients while they are in a hospital and after they are discharged, according to a CMS news release.

Bundled Payments for Care Improvement, which was created by the Patient Protection and Affordable Care Act, will align payments for services across the entire episode of a patient's care instead of paying for services separately, the release said. For example, instead of a surgical procedure creating multiple claims from several different providers, the entire team of providers is compensated with a shared, bundled payment. HHS expects the program to improve the quality of care, incent physicians and hospitals to coordinate care and save money for Medicare.

There are four different models CMS will be testing and developing for these bundled payments: Models 1, 2, 3 and 4.

In Model 1, the episode of care would be defined as the inpatient stay in a general acute-care hospital. Medicare will pay hospitals a discounted amount based on the Inpatient Prospective Payment System, and Medicare would pay physicians separately under the Medicare Physician Fee Schedule. Hospitals and physicians will then be able to share gains that result from better care coordination.

In Models 2 and 3, the bundle payments would include physicians' services, post-acute providers, related readmissions and other services such as clinical lab services. However, in Model 2, the episode of care would include the inpatient stay and post-acute care and would then end either a minimum of 30 or 90 days after discharge. In Model 3, the episode of care only beings at discharge from the inpatient stay and would end no sooner than 30 days after discharge. Payments for both Models 2 and 3 will be made at the usual fee-for-service payment rates, and any reduction in expenditures will be paid to the participating providers to share.

In Model 4, CMS would create a single, prospectively determined bundle payment to the hospital that would encompass all services provided by the hospital, physicians and other practitioners during the inpatient stay. Those physicians and practitioners would submit "no-pay" claims to Medicare, and the hospital would then pay them out of the bundled payment.

Healthcare organizations interested in applying to the Bundled Payments for Care Improvement initiative must submit a letter of intent by Sept. 22, 2011, for Model 1 and by Nov. 4, 2011, for Models 2, 3 and 4.

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