How Will Medicare Bundled Payments Affect Your Agency & Our Industry?

Better Quality of Care, Resulting in Reduced Costs.

Mandated under the Affordable Care Act, Medicare bundled payments is a major change in how the government pays for medical care. Instead of paying hospitals, physicians, and other providers separately, this initiative would combine the payment over an episode of care for a specific condition. The goal of the program is to offer clinicians’ incentives to work together and provide better quality of care, resulting in reduced costs.

Medicare Officials Announce Four Bundled Payment Programs

This notice announces a request for applications for organizations to participate in one or more of the initial four models under the Bundled Payments for Care Improvement initiative beginning in 2012.

The initiative will bundle payment across provider sites for multiple services given during an episode of care, which is a single hospital stay and/or recovery from the stay. The idea behind bundled payments is to give providers a greater incentive to coordinate care across settings, which would require advanced use of health information technologies.

The initiative follows a Medicare bundled payment demonstration program for heart bypass surgery that saved Medicare $42.3 million–about 10 percent of expected costs–and saved patients $7.9 million in co-insurance costs, and lowered mortality rates, according to CMS.

The four payment models in the Bundled Payments for Care Improvement Initiative are:

  • Model 1: An acute care hospital stay only,
  • Model 2: The acute care stay plus associated post-acute care,
  • Model 3: Just the post-acute care following discharge, and
  • Model 4: A single prospective bundled payment that would encompass all services during an inpatient stay by the hospital, physicians and other providers.

Interested organizations must submit a nonbinding letter of intent by Sept. 22, 2011, for the first model and by Nov. 4, 2011, for the other models. Medicare will provide historical claims data to prepare for models 2-4 and organizations wanting the data must file a separate research request packet and data use agreement with the letter of intent.

This bundled reimbursement initiative is just one of several different payment models about to be rolled out by CMS. Accountable Care Organizations (ACO) will begin contracting with CMS on January 1, 2012, for example. Value-based purchasing is another approach toward paying providers that is part of the ObamaCare legislation.

“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,” according to an explanation from CMS.

Application Submission Deadlines: Applications must be received on or before October 21, 2011 for Model 1 and March 15, 2012 for Models 2 through 4.

FOR MORE INFORMATION CONTACT: for questions regarding the application process of the Bundled Payments for Care Improvement initiative.

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