Last week the Centers for Medicare and Medicaid Innovation (CMMI) announced “The Bundled Payments for Care Improvement” initiative and published requests for applications to participate in the program. CMMI, a new agency created by the 2010 Affordable Care Act, established the basic parameters for four different bundled payment models but offers flexibility to participants to determine which services will be bundled together and how to allocate payments among participating providers. This means nimble providers—who develop proposals that are accepted—have an opportunity to try structures that otherwise might entail too much legal risk.

The first three bundled payment models are retrospective payment arrangements where providers are paid a discounted Medicare fee-for-service rate. Historical data would be used to set a target price for an episode of care and if the payments are less than the target the providers may share in the savings. Model 4 is based on prospective payments. Providers may choose to implement more than one model. Notably, the proposals specifically contemplate that gainsharing arrangements may be incorporated.