Healthcare providers will be able to apply to participate in one or more of the initial four models to test the use of bundled payments and their incentives for improving patient care and their outcomes, according to the Centers for Medicare and Medicaid Services.
The effort is designed to encourage physicians, nurses and specialists to coordinate care across settings and offer incentives to clinicians and hospitals that do so. In the process, Medicare will save money, CMS said in an Aug. 23 announcement.
Health IT tools, such as electronic health records (EHRs) and standards for information exchange, are critical components to enable the coordination of care and reporting quality measures that are part of the bundled payments effort. Those health IT tools are also a foundation for meaningful use of EHRs.
The Bundled Payments for Care Improvement Initiative, launched by CMS' Innovation Center, will align payments for the medical services delivered to treat a condition, termed an episode of care, such as heart bypass or hip replacement. Currently, Medicare separately pays hospitals, physicians and other clinicians who provide care for beneficiaries for their services.
The Innovation Center, which was created by the Affordable Care Act, is searching for and testing better ways to provide and pay for health care to a growing population of Medicare and Medicaid beneficiaries.
Under the bundled payments effort, CMS will combine care for a package of services that patients receive to treat a specific medical condition during a single hospital stay and/or recovery from that stay, known as an episode of care.
By bundling payment across providers for multiple services, providers will have a greater incentive to coordinate and assure continuity of care across settings, which can reduce unnecessary duplication of services, reduce preventable medical errors, help patients heal without harm, and lower costs.
Under the request for applications released in the Federal Register, CMS outlined four broad approaches to bundled payments. Providers will have flexibility to determine which episodes of care and which services will be bundled together to make it easier for providers of different sizes and readiness to participate in this effort, CMS said.
Hospitals and physicians have called for a flexible approach to patient care improvement, said Dr. Donald Berwick, CMS administrator.
"All around the country, many of the leading health care institutions have already implemented these kinds of projects and seen positive results," he said in the announcement.
The Bundled Payments initiative is based on research and previous demonstration projects that suggest this approach has tremendous potential. For example, a Medicare heart bypass surgery bundled payment demonstration saved the program $42.3 million, or about 10 percent of expected costs, and saved patients $7.9 million in co-insurance payments while improving care and lowering hospital mortality.
From a patient perspective, bundled payments make sense, Berwick said. "You want your doctors to collaborate more closely with your physical therapist, your pharmacist and your family caregivers. But that sort of common sense practice is hard to achieve without a payment system that supports coordination over fragmentation and fosters the kinds of relationships we expect our health care providers to have," he said.
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CMS outlined the four models for episodes of care as:
• Model 1, for inpatient stay in general acute care hospital, in which hospitals and physicians may share gains arising from better care coordination
• Model 2, for inpatient stay and post-hospital care, ending 30 to 90 days after discharge
• Model 3, from discharge as hospital inpatient, ending no sooner than 30 days after discharge
• Model 4, CMS makes bundled payment to hospital, which would pay physicians and other practitioners involved in the episode of care instead of them making individual claims to Medicare.
In Models 2 and 3, CMS will compare the aggregate Medicare payment for the providers against a targeted, discount price. Any reduction beyond the target price will be paid to the participants.
Healthcare organizations must send a letter of intent to CMS to participate by Sept. 22 for Model 1 and Nov. 4 for the other three models. Organizations can also request to receive historical Medicare claims data to prepare for the latter three models. Applications for Model 1 are due by Oct. 21 and for the other three models by March 15, 2012.