On January 31, 2013, CMS announced the organizations that will be participating in its Bundled Payments for Care Improvement (BPCI) initiative. Established under CMS’s innovation authority provided for in the Patient Protection and Affordable Care Act, the BPCI initiative seeks to change the traditional Medicare fee-for-service reimbursement methodology to a bundled payment reimbursement methodology for a single episode of care. This bundled payment reimbursement methodology is expected to increase provider accountability, improve coordination of care, and lower costs.

The BPCI initiative proposes four models of bundled payments. Model 1, scheduled for implementation in April of this year, defines an episode of care as an inpatient stay in an acute care hospital. Hospitals will be reimbursed at a rate discounted from the traditional Inpatient Prospective Payment System (IPPS) for the episode of care, while physicians will be reimbursed separately under the traditional Medicare Physician Fee Schedule. Model 2 provides for an episode of care that includes an inpatient stay in an acute care hospital, as well as care provided for up to 30, 60, or 90 days after discharge. Under Model 3, the episode of care will begin after a patient’s discharge from an acute care hospital and will cover post-acute care services provided by participating skilled nursing facilities, home health agencies, long term care hospitals, or inpatient rehabilitation facilities. Under Models 2 and 3, participating organizations will be reimbursed by reconciling interim payments against a target price per episode of care that is based on historic data. Interim payments will be at regular rates with frequent retrospective reconciliation up or down to the negotiated target rates. Model 4 requires CMS to make a single, bundled payment to hospitals for all services, including physician services, provided during an inpatient stay and related readmissions for up to 30 days after discharge. Physicians and other practitioners will be paid by the hospital, rather than by submitting claims for reimbursement to Medicare. Implementation of Models 2, 3, and 4 will begin in July of 2013.

The BPCI initiative covers 48 specific episodes of care, such as stroke, diabetes, and chest pain. For a detailed list of all 48 episodes of care and the 450 participating organizations, please click here.

Reporter, Paige Fillingame, Houston, +1 713 615 7632, pfillingame@kslaw.com.