CMI Offers New Methods to Test Bundled Payments; Allows Physicians Greater Flexibility in Defining Episodes

August 25, 2011


The Centers for Medicare and Medicaid Innovation (CMI) within the Centers for Medicare and Medicaid Services (CMS) have introduced this week the Bundled Payments for Care Improvement (BPCI) initiative. The BPCI is a voluntary program designed to improve care coordination and quality while saving costs. The program is one of the first of many CMI approaches that will experiment with bundled payments.

Under the BPCI, providers—physicians, hospitals, and health systems—will define episodes of care and describe the services to be bundled. Providers also will propose a bundled price, determine how the bundled payment is to be allocated among participants, and select the model they wish to use (participation in more than one model is allowed):

Model 1: The acute care hospital stay only

Model 2: The acute care hospital stay and post-acute care associated with the hospital stay

Model 3: The post-acute care associated with the hospital stay only starting after discharge

Model 4: A single prospective bundled payment encompassing all services furnished during an inpatient stay by the hospital, physicians, and other providers

The first three models involve retrospective payment, which means that payments to physicians would be made using the current fee for service system after participants propose a target price set by applying a discount to total costs from similar episodes of care determined from historical data. Participants would be able to share in savings between the target price and total payments made, but would also assume losses if costs exceeded the discounted price.

The fourth model is prospective. The hospital would receive a negotiated single payment for all bundled services and physicians would be paid by the hospital—rather than directly paid by Medicare.

Applicants interested in participating in this initiative must submit a letter of intent by September 22, 2011, for the first model, and by November 4, 2011, for models 2–4.

More information on the proposal can be found in the request for applications and at the CMI's website.