On January 31, The Centers for Medicare and Medicaid Services (CMS) officially rolled out the Bundled Payments for Care Improvement initiative, announcing the healthcare organizations who will participate and the four payment models. The goal of the initiative is to encourage collaboration between providers and reduce the cost of care by aligning incentives for hospitals, post-acute care providers, physicians, and other practitioners. Traditionally, Medicare has made separate payments to providers for each of the individual services they furnish to beneficiaries, creating a fragmented payment system that rewards quantity of services provided and not quality of care. The Bundled Payments for Care Improvement initiative will link payments for multiple services provided by multiple providers via one of the following models:
- Model 1 pays organizations and physicians the same way Medicare does under the current system but at an agreed-upon, reduced rate. The hospitals and physicians have the opportunity to share gains made from any efforts to improve care coordination. (3 participants)
- Model 2 pays hospitals and physicians for inpatient and post-acute care the same way it does under the current program. The total cost is then compared to a target price, and any savings are shared by the hospital, physicians, and other practitioners. (55 participants)
- Model 3 pays post-acute providers the same way Model 2 does, but it does not include inpatient care, and the total cost is compared to a predetermined target price. Any savings are shared by the providers. (14 participants)
- Model 4 makes 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. It does not include post-acute care. (37 participants)
CMS will implement Models 2, 3, and 4 in two phases. Phase one is a “no risk preparation” period that will allow participants to get accustomed to the new payment method. The “risk-bearing implementation” is scheduled to begin in July, during which participants will assume the full financial risk associated with the models. Model 1 is tentatively scheduled to begin in early 2014. Payment reforms such as bundled payments and Accountable Care Organizations are major components of the Affordable Care Act and may very well be the future of Medicare payments going forward. It’ll be worth keeping an eye on how quality of care is affected by these new payment models and what savings, if any, they produce.
