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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 with more details avilable at the Innovation Center.

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.

Background on Current Reimbursement Practices


Medicare currently makes separate payments to providers for the services they furnish to beneficiaries for a single illness or course of treatment, leading to fragmented care with minimal coordination across providers and health care settings. Payment is based on how much a provider does, not how well the provider does in treating the patient.

Payment Innovation Sought


Under the Bundled Payment initiative, CMS would link payments for multiple services patients receive during an episode of care. For example, instead of a surgical procedure generating multiple claims from multiple providers, the entire team is compensated with a “bundled” payment that provides incentives to deliver health care services more efficiently while maintaining or improving quality of care.

Providers will have flexibility to determine which episodes of care and which services would be bundled together.

Research, according to CMS, has shown that bundled payments can align incentives for providers – hospitals, post acute care providers, doctors, and other practitioners. The incentives would allow more closely partnering across all specialties and settings that a patient may encounter to improve the patient’s experience of care during a hospital stay in an acute care hospital, and during post-discharge recovery.

The Bundled Payments for Care Improvement Initiative is one more step in an effort across the Department of Health and Human Services (HHS) to help all Americans enjoy better health, improve the quality of health care, and reduce costs by replacing fragmented care with care that is coordinated and that is guided by the patient’s needs and wishes. Other recent activities by CMS and HHS to promote improvement in the health care delivery system include:
  • Creating user-friendly tools for patients and their caretakers to compare the quality of care offered by providers and suppliers in their communities.
  • Launching the Partnership for Patients to encourage hospitals, physicians and other providers to partner with the Department to focus on improving patient safety across all health care settings. The Partnership is expected to save 60,000 lives and more than $35 billion in health care costs, including up to $10 billion in Medicare costs, over the next three years. In the first few months, more than 4,000 organizations, including more than 2,000 hospitals, have taken the Partnership for Patients pledge.
  • Tying payment for services to the quality of care through Pay for Performance, starting with the payment systems for dialysis services and most recently for hospital inpatient care, and laying the groundwork for achieving similar results in other payment systems.

Applicant Requirements


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.

Interested organizations 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. For applicants wishing 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. Final applications must be received on or before October 21, 2011 for Model 1 and March 15, 2012 for Models 2-4.

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