CMS Innovations: Bundled Payments for Care Improvement Program

CMS Innovations: Bundled Payments for Care Improvement Program

On August 23, 2011 CMC/CMMI unveiled its most recent tool in its arsenal to reduce cost and impact quality and access to healthcare services for Medicare beneficiaries. Referred to as the Bundled Payments for Care Improvement Initiative, it is a variation on the theme first employed in healthcare financing back in the late eighties and early nineties known at the time as either global payments, episode of care payments or case rates. The difference is that the current CMMI initiative requests providers to submit competitive bids with built in discounted pricing thus putting the burden on the bidder to get the numbers right or suffer the consequences of cost exceeding income. 

As CMS states on its website, “The Bundled Payments for Care Improvement” initiative seeks to improve patient care through payment innovation that fosters improved coordination and quality through a patient-centered approach. The CMS Innovation Center is seeking applications for four broadly defined models of care. Three models involve a retrospective bundled payment arrangement, and one model would pay providers prospectively. Through the Bundled Payments initiative, providers have great flexibility in selecting conditions to bundle, developing the health care delivery structure, and determining how payments will be allocated among participating providers“.

It seems to me that the “Bundled Payments for Care Initiative approach” emphasis once again is less about  improving care  and more about changing the financing for that care. As you will see the focus of the program is to offer four different payment models as described in detail in the RFA.  As I have opined in previous blogs,  substantive reenginnering of how healthcare is accessed and delivered requires fundamental realignment in provider behavior and patient behavior as well as changes to how healthcare is financed. At best this program may be an effective component in the effort to reengineer healthcare, if in fact the program becomes part of a coordinated approach. 

CMMI goes on to explain on the website referenced above that “Applicants would propose the target price, which would be set by applying a discount to total costs for a similar episode of care as determined from historical data. Participants in these models would be paid for their services under the traditional fee-for-service (FFS) system. After the conclusion of the episode, the total payments would be compared with the target price. Participating providers may then be able to share in those savings.

Applicants for these models would also decide whether to define the episode of care as the acute care hospital stay only (Model 1), the acute care hospital stay plus post-acute care associated with the stay (Model 2), or just the post-acute care, beginning with the initiation of post-acute care services after discharge from an acute inpatient stay (Model 3). Under the fourth model, CMS would make a single, prospective bundled payment that would encompass all services furnished during an inpatient stay by the hospital, physicians and other practitioners.”

For detailed information on each model, I suggest interested parties access the website referenced above and click on one of the four links provided for more detailed information. Also available on the website is a link for accessing a copy of the RFA.

As you can see from the deadlines for LOI filings and proposal submission, (see below), there is limited time for providers to create the network, arrive at a bundled price and create the payment schedule for each provider. What may be problematic for more than a few provider systems interested in applying for this program is the reality that in order to submit a discounted bundled price for a specific DRG or episode of care, the system must gain acceptance from all providers involved in the episode of care on the value assigned to each part of the episode of care—in other words agreement to their individual piece of the bundled payment pie. Anyone who tried global or episode of care pricing in the past knows from experience that achieving such agreement from individual providers is not an easy or time efficient task.

So after each potential applicant has filed the requisite Letter of Intent, consideration should be given to the following: prior to filing an application:

• Selection of the DRG or DRG’s that would be considered;
• Selection of the providers that will be involved in the episodes of care identified;
• Development of  participation agreements with selected providers;
• Clear definition of what is included in the episode or care and the associated costs;
• A financial formula that assigns value to each component of the episode or care;
• An analysis of the avoidable costs for the DRG’s under consideration;
• A provider specific fee schedule which rewards for performance, on a consolidated basis is below the discounted rate proposed to CMS and fairly distributes the savings based on quality outcomes and financial efficiency benchmarks.

Per CMS/CMMI, organizations interested in applying for the program must submit a nonbinding letter of intent by September 22, 2011 for Model 1 and November 4, 2011 for Models 2-4 as described in the Bundled Payments for Care Improvement initiative RFA. Those applicants thinking of submitting a proposal for models 2-4 will want to receive historical Medicare claims data in in order to develop benchmark pricing. That will require submitting a separate research request packet and data use agreement along with the Letter of Intent. Final applications must be received on or before October 21, 2011 for Model 1 and March 15, 2012 for Models 2-4.

Let us know your views on this most recent CMS/CMMI initiative. We are here to help whether your needs relate to better understanding the requirements set by CMS/CMMI;  require assistance in filing the proposal, require assistance with establishing financial feasibility or helping in achieving support and participation from select providers.