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CMS Trials Bundled Payments for Episodes of Care

Cheryl Clark, for HealthLeaders Media, August 24, 2011

The new bundling concept, which includes four models that hospitals and other providers would have to choose to apply for, will be run through the recently constructed Center for Medicare Innovation

CMS officials said they "expect hundreds of organizations" will apply, but not all will be selected for participation. The various models allow providers to have "flexibility to determine which episodes of care and which services would be bundled together," HHS said in a statement.

"Several of the models actually include services that hospitals are not being reimbursed for today," Acting Innovation Center Director Richard Gilfillan, MD, said during the briefing.


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In an interview after the briefing, Gilfillan said, "these approaches are going to create space and opportunities for doctors and hospitals to come together and jointly, together, redesign care in ways that imbed the best evidence-based care that we know of..."

He added, "Hospitals have long wanted to do this but often doctors haven't had the chance or the ability to take time out of their busy schedules. These opportunities give doctors and hospitals the ability to come together, to work hard to identify the best evidence-based care for particular services for patients whether they are in the hospital or after they leave."

Three of the four models involve retrospective bundled payment arrangements negotiated between CMS and providers that would include a target price, based on a discount of total costs for a similar episode of care as determined from historical data. Participating providers may be able to share in the savings, which is the difference between original Medicare fee-for-service system and the negotiated discounted bundled payment.

Model 1
The episode of care would be defined as the inpatient stay in a general acute care hospital. Medicare will pay the hospital a discounted amount based on Inpatient Prospective Payment System payment rates. Physicians would be paid separately for their services under the Medicare Physician Fee Schedule, but hospitals and physicians will be permitted to share gains arising from better care coordination.

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