What We Do and Don't Know About CMS' Bundled Payments Program

It is now February 2013, and CMS' "no-risk" Bundled Payments for Care Improvement program has begun; how much more (or less) do we know about this program than we did almost a year ago when CMS first issued its Request for Applications? This paper will list what we know and highlight the remaining uncertainties about the Medicare BPCI program.


CMS has released some information about the data to be provided to BPCI applicant awardees.  

We do know that the historical claims data for price determination/validation will be sent out in March. The data will include claims for beneficiaries who would have initiated episodes at the applicant's hospital.

We do know that the data will include actual patient identifiers, enabling the applicant to track and perform root cause analyses on specific episodes. All applicant awardees will need to submit a new DUA to CMS for this research-level data, which rises to the level of PHI under HIPAA.

We do know that, because that this data only includes claims for the specific applicant, it will not be usable for computation of benchmarks, validation of outlier limits or anything else beyond validation of a specific applicant's payment rates.

We do know that CMS will filter the historical data to only include claims that would have been included in the episode; a separate exclusions file will list the inpatient claims that did not initiate episodes. The data will only reflect episodes for the contracted DRG families of each hospital. In other words, the bare minimum of data will be provided, nothing extra.

We do know that the historical data will cover the three year period between July 2009 and June 2012.

We do know the format of the data and that the claims will be tagged with episode identifiers, which should facilitate analyzing the episodes.

We do know that in May, CMS will release six months of more current data to allow applicants to review/analyze their performance during the no-risk period. One CMS document suggests that this data will be sent monthly; however subsequent comments by CMS have not confirmed that timing.

We don't know what period will be covered by no-risk data, but it's likely to be for claims incurred beginning October 2012 and paid through March 2013. If this is the case, these claims will not sufficiently overlap the no-risk period nor provide for a meaningful analysis of the applicant's performance during that period. This is because the episodes require between 30 and 90 days to complete, an additional 30 days for the post-discharge period, at least an additional 30 days for claims run-out and probably another 30 days to produce the data file. This situation will be continuous throughout the BPCI implementation period, meaning that participating organizations will need to develop processes that work with incomplete episode data, such as allowances for claims incurred but not yet processed and reported .

Episode bundle definitions

CMS has provided detailed descriptions and details the MS-DRG-based bundles.  

We do know that there will be a prescribed list of excluded diagnoses, procedures and DRGs for each episode family. The notion of allowing providers to define their own episodes has been completely forsaken. The allowable episode lengths have also been prescribed at either 30, 60 or 90 days, nothing in between. In effect, the BPCI episodes will resemble super-DRGs.

Episode price determination

CMS has provided a first look at its pricing methodology but has indicated that there are several issues yet to be resolved. CMS will be sending data to applicants on its price calculation in March (see discussion on data above).

We do know that CMS wants to set a prospective episode price that provides a guaranteed savings to the Medicare program vis-à-vis the current fee-for-service program. Providers will then keep (or be reimbursed for) any savings beyond the CMS discount.

We do know that CMS is concerned about setting a price, based on historical data, for episodes with small volumes (e.g., a provider may not provide a significant amount of care for one or two MS-DRG(s) within a family). CMS suggested a methodology that would blend the provider's data with claims from a larger population (e.g., region or nation), in order to smooth out variability caused by small sample sizes. CMS may also be exploring a few alternatives for accomplishing this blend.  

We don't know which alternative CMS will choose, or what larger population(s) they will use for price blending. Our best guess at this point is that CMS has included three years of data to increase the sample sizes sufficiently that these adjustments will not be necessary.

We do know that CMS is considering allowing for the exclusion of episode costs that exceed defined outlier limits as part of the price-setting, payment and reconciliation process. CMS is considering allowing applicants the option of accepting or declining these outlier adjustments.  This decision will depend upon the provider's analysis of and attitude towards the potential risks and opportunities affected by the outlier limits.

We don't know how CMS will utilize the historical data for price setting. Will CMS average all three years equally or will the more recent year be given more weight? In addition, there are many changes in Medicare fee-for-service payments from year to year, beyond the marketbasket update. How much of this will CMS incorporate into their methodology?


There are two reconciliation issues to consider under the BPCI demonstration program. First is the reconciliation between FFS payments and the episode price; second is the reconciliation of payments for the 30-day post episode period.

We don't know how often the episode reconciliation process will take place, nor how lagged the claims data will be. Generally 2-3 months of claims run-out are necessary to get a reasonably complete set of claims.

We don't know how the budgeted vs. actual payments/repayments between CMS and the awardee will be implemented.

We don't know what CMS will use as the basis for the 30-day post episode reconciliation or what parameters will be applied.  

DataGen and Singletrack Analytics have been working together for the past year to closely monitor the proposed BPCI demonstration program and its changes, develop models to evaluate the effects of these changes, and provide applicant awardees with the information they need to continue to assess their participation opportunities. For more information, contact Gloria Kupferman at gkupferm@hanys.org or (518) 431-7968 or Jonathan Pearce at jon@singletrackanalytics.com or (856) 762-0605.

More Articles on Bundled Payments:

The Bundled Payments for Care Improvement Program: A Hospital Analysis
How Bundled Payments in Orthopedics Can Help Build the Foundation for a Center of Excellence

CMS Announces Bundled Payment Initiative Participants

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