Healthcare Business News

More than 450 provider organizations join payment-bundling initiative

By Jessica Zigmond
Posted: January 31, 2013 - 7:00 pm ET

The CMS on Thursday announced that more than 450 healthcare organizations will participate in the Bundled Payments for Care Improvement initiative, a payment model program created in the healthcare reform law to test whether bundling payments for services in a single episode of care can improve quality and lower costs.

Those selected organizations represent a wide range of healthcare providers—including not-for-profit and for-profit hospitals, academic medical centers, physician-owned facilities and post-acute providers—that were chosen by the CMS either as awardees for Model 1 starting in April, or as participants for the first phase of models 2, 3 and 4 that begins with Thursday's announcement.

Thirty-two awardees were announced for Model 1, where awardees agree to provide a standard discount to Medicare from the typical Part A hospital inpatient payments, and hospitals and providers are able to share any gains that come from their care-redesign strategies. In the weeks ahead, the CMS plans to announce a second opportunity for providers to participate in Model 1 starting in early 2014. Models 2 and 3 follow a retrospective bundled-payment arrangement where expenditures are settled against a target price for an episode of care, while Model 4 involves a prospective bundled-payment arrangement in which a provider receives a lump sum payment for the entire episode of care. In each of these three models, participants can choose up to 48 clinical episodes of care to test.

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Deirdre Baggot is a registered nurse who served as the administrator of the acute-care episode, or ACE, demonstration project at St. Joseph's Hospital in Denver. Developed from the Medicare Prescription Drug Improvement and Modernization Act of 2003, the ACE demonstration tested the bundling of Medicare parts A and B for episodes of care. Baggot was chosen by the CMS as an outside expert to help review applications in models 2, 3 and 4 in the bundled payments for care improvement initiative.

She noted the distinction between the “awardees” announced for Model 1 and “participants” for the three other models. Responding to feedback from applicants, the CMS created a six-month “no risk” period for participants in models 2, 3 and 4 to evaluate claims data, participate in educational sessions, and learn how the process works, Baggot explained.

“So it's a validation period where hospitals have a more clear understanding of what this period will look like,” said Baggot, who currently serves as vice president at the Camden Group, a consulting firm.

Baggot said Thursday's announcement is notable for both the size and scope of the program. “It's a national study. To have more than 400 sites is a really great representative sample to test this on,” Baggot said. And if the initiative works in this testing stage, she added, “I would expect it to go straight to policy.”

The American Medical Association applauded the CMS for providing both flexibility and a range of models in the initiative, and also offered a suggestion on how to tweak the program.

“It is important that physicians in a variety of practice types have opportunities to participate in bundled payment program pilots,” Dr. Jeremy Lazarus, president of the AMA, said in a statement. “The AMA urges CMS to provide opportunities for additional practices, which may not have been ready to apply when the program was first announced, to participate,” he continued. “We encourage CMS to offer additional models as the four existing models all involve an inpatient hospital stay.”

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