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Interest surges in Medicare bundled payment initiative

Interest surges in Medicare bundled-payment initiative


By Melanie Evans
Posted: July 31, 2014 - 9:00 am ET
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Medicare will nearly triple the number of hospitals and medical groups that are candidates to test bundled payments, one of the health reform law's efforts to revamp healthcare financing.

The CMS announced it will add roughly 4,100 providers to about 2,400 already exploring the possible use of bundled payments for some or all of four dozen medical conditions and procedures, such as diabetes, joint replacements and pacemaker implants. Providers have to apply to become candidates.

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These roughly 6,500 candidates will analyze Medicare spending data to decide whether or not to enter into bundled-payment contracts, which must reduce Medicare costs by 2% to 3.5% before providers are rewarded, with some exceptions.

Medicare launched the payment bundles in January 2013 under the healthcare reform law So far, the CMS has signed 243 providers to bundled-payment contracts, which began in October and January.

CMS officials said in a statement that they were pleased with the growing list of candidates and expect to see some eventually enter into contracts. “Through the Bundled Payments for Care Improvement initiative, CMS is taking another step forward in identifying models that will provide better quality of care and improved health for Medicare beneficiaries, at lower costs for our nation’s taxpayers,” the statement said.

The initiative, launched in January 2013, is one attempt under the Patient Protection and Affordable Care Act to test incentives for providers to more closely control costs. Bundled payments and accountable care, another financing experiment under the law, have proliferated even though providers have limited experience with them and previous demonstrations have shown mixed results.

The initiatives amount to sprawling market tests of new incentives that hold potential but also pose risks, health policy experts say. Bundles and accountable care may reduce waste and fragmentation under existing financing, which pays providers for each procedure, visit or service, creating an incentive to do more regardless of need. But the incentive to control spending may also entice providers to reduce necessary care or avoid costly patients.

Because the model “bundles” payments for multiple services connected to an episode of care, participating providers profit when their spending on that care falls below Medicare’s savings target. Hospitals and doctors can test any of four bundles that include some or all medical expenses for care provided throughout a hospital stay; one to three months after patients leave; or both.

Follow Melanie Evans on Twitter: @MHmevans


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