CMS Unveils New Bundled Payments for Care Improvement Initiative

In an effort to achieve greater health care savings and quality, the Centers for Medicare & Medicaid Services (CMS), through the Center for Medicare & Medicaid Innovation (CMMI), has unveiled a trial system that allows providers to participate in bundled payments for episodes of care.  A bundled payment combines payment for physician, hospital and other provider services into a single payment of a predetermined amount to cover all services furnished during a particular episode of care.  Under the current fee for service system, CMS generally issues separate payments to each provider for services rendered.  
 
The initiative includes four models; three retrospective payment bundling models and one prospective payment bundling model.  As an incentive, participants may be entitled to a share of the monetary difference between the bundled payment and what would have otherwise been paid had they followed the fee-for-service system. 
 
The three retrospective payment bundling models:
1)  Acute inpatient hospital stay only where hospitals may share gains beyond the predetermined MS-DRG payment discount that accrue due to efficient or higher quality care delivery
2)  Acute and  post-acute setting where the episode of care is extended beyond the acute care inpatient hospitalization to include post-acute care
3)  Post-acute care where the bundle does not include the acute inpatient hospital stay

The prospective payment bundling model:
4)  One prospectively (determined by analyzing historical data for this episode of care and applying a discount) bundled payment to the hospital to include all likely services furnished during an acute inpatient hospital stay only
  
A more detailed explanation of the bundled payment system including a side-by-side comparison by the Centers for Medicare and Medicare Services may be found here.

The initiative was not issued as a proposed rule seeking public comment, but rather a Request for Application (RFA) soliciting participation from the health care community.  For those wishing to participate, letters of intent are due by September 22, 2011 for Model 1, and November 4, 2011 for Models 2-4.  Final applications are due by October 21, 2011 for Model 1, and March 15, 2012 for Models 2-4.  The applications are available here.