CMS Announces More Bundled Payment Opportunities: Are We Moving Back to Capitation?


CMS recently announced that it accepted over 500 participants into the Bundled Payments for Care Improvement initiative, which seeks to provide financial incentives for high quality coordinated care across provider types and care settings. Under this CMS Innovation Center initiative, providers propose a set price for a single episode of care and then receive a predetermined amount if financial and quality targets are met. The program currently includes four models:


What does it apply to? How are payments handled?

Model 1

Retrospective acute care hospital stays between physicians and hospital

Hospitals and physicians will be paid separately but may be able to gainshare in certain situations.

Model 2

Retrospective acute care stays along with post acute care

The episode will end either 30, 60, or 90 days after hospital discharge. Participants can select up to 48 different clinical episodes.

Model 3

Retrospective post acute care only

This is triggered by an acute care hospital stay and begins at initiation of post-acute care services with a participating skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency. Services must begin within 30 days of discharge from the inpatient stay and will end either a minimum of 30, 60, or 90 days after the initiation of the episode. Participants can select up to 48 different clinical condition episodes.

Model 4

Prospective acute care hospital stays only

A single upfront payment to hospital that encompasses all services furnished during the inpatient stay by the hospital, physicians, and other practitioners. Hospital, instead of Medicare, pays the other providers. Participants can select up to 48 different clinical condition episodes.

CMS emphasized its inclusion of a broad mix of providers in the initiative, including outpatient settings and long term care providers. Future models may include the management of chronic care, such as diabetes and asthma, as well as additional prospective (or upfront) payments for care settings other than hospital stays.

The program is in Phase 1, which includes an emphasis on the coordination of care for a specific episode of care. During Phase 2, participants can opt into taking on financial risk for an episode of care. CMS believes that Phase 1 participants are likely to participate in Phase 2. Phase 2 is currently under review by CMS and is likely to start in July 2013. CMS shortly will seek applications for additional Model 1 participants and may open up additional models for applications.

Ober|Kaler’s Comments

The Affordable Care Act specifically lays out two models for payment and quality testing: ACOs and bundled payments. Although ACOs may join the bundled payment program, the Act also provides an opportunity for those providers who want to test a narrow episode of care for a specific population rather than be responsible for the all of the care provided to beneficiaries under the ACO program. Both programs share similarities in that beneficiaries still have freedom to seek care as they choose and CMS is looking at program data that may be used to move to a capitated model for Medicare reimbursement. This movement towards capitation for episodes of care is already happening in the commercial market. Future models may address prospective payments that include post acute care providers, but for now CMS is focused on aligning hospitals and physicians for inpatient stays prior to expanding to the post acute care setting.

For additional information, please see "CMS Bundled Payment Initiative: An ACO Alternative?" from a previous issue of Payment Matters.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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