In a press release issued August 23, 2011, the Centers for Medicare & Medicaid Services (CMS) invited health care providers to apply to help test and develop four models of bundling payments.
CMS has been working with providers to develop models for bundling payments through the Bundled Payments for Care Improvement Initiative. Medicare currently makes separate payments to providers for services provided to beneficiaries for a single illness or course of treatment. CMS believes that bundling payment for services that a patient receives across a single episode of care will encourage health care providers to better coordinate care for patients, improve patient health, improve the quality of care received, and lower costs.
CMS is seeking applications for the four models of bundled payments. Three of the models would involve a retrospective bundled payment arrangement. In these models, CMS and providers would set a target payment amount for a defined episode of care, which would be proposed by the applicant health care provider. Participants in these models would be paid for their services under the original Medicare fee-for-service (FFS) system, but at a negotiated discount. The separate models will generally operate as follows:
In Model 1, the episode of care would be the inpatient stay in the general acute care hospital. Medicare will pay the hospital a discounted amount based on the payment rates established under the Inpatient Prospective Payment System (IPPS). Medicare will pay physicians separately for their services under the Medicare Physician Fee Schedule. Hospitals and physicians will be permitted to share gains arising from better coordination of care.
In Model 2, the episode of care would include the inpatient stay and post-acute care and would end, at the applicant's option, either a minimum of 30 or 90 days after discharge.
In Model 3, the episode of care would begin at discharge from the inpatient stay and would end no sooner than 30 days after discharge.
In both Models 2 and 3, the bundle would include physicians' services, care by a post-acute provider, related readmissions, and other services proposed in the episode definition such as clinical laboratory services; durable medical equipment, prosthetics, orthotics and supplies (DMEPOS); and Part B drugs. The target price will be discounted from an amount based on the applicant's historical fee-for-service payments for the episode. Payments will be made at the usual fee-for-service payment rates, after which the aggregate Medicare payment for the episode will be reconciled against the target price. Any reduction in expenditures beyond the discount reflected in the target price will be paid to the participants to share among the participating providers.
The fourth model will be a prospective payment arrangement. Under this model, CMS would make a single, prospectively determined bundled payment to the hospital that would encompass all services furnished during the inpatient stay by the hospital, physicians and other practitioners. Physicians and other practitioners would submit "no-pay" claims to Medicare and would be paid by the hospital out of the bundled payment.
Organizations interested in participating in the bundled payments initiative must submit materials to CMS. For those interested in Model 1, a nonbinding letter of intent must be received by September 22, 2011 and a final application must be received by October 21, 2011. For those interested in Models 2-4, a nonbinding letter of intent is due by November 4, 2011 and a final application by Match 15, 2012. If a health care provider wishes to receive historical Medicare claims data in preparation for Models 2-4, a separate research request packet and data use agreement must be filed in conjunction with the letter of intent. A thorough explanation of the bundled payment models, letter of intent and application process can be found here. The application materials can be found here.