Bundled Payments for Care Improvement Initiative Fact Sheet

In the August 25, 2011, Federal Register, CMS published a notice announcing a request for applications (RFA) for providers to participate in one or more of four bundled payment models under the Bundled Payment for Care Improvement initiative beginning in 2012.

Background

The Bundled Payment for Care Improvement initiative is based on the premise that beneficiaries can experience improved health outcomes and patient experience when healthcare providers work in a coordinated and patient-centered manner. In line with its commitment to achieve its three-part aim of better health, better health care, and reduced expenditures through continuous improvement for beneficiaries, CMS is interested in partnering with providers who are working to redesign patient care to deliver these aims. CMS believes that episode payment approaches that reward providers who take accountability for its three-part aim at the individual patient care level are potential mechanisms for developing these partnerships.

In order to provide a flexible and far-reaching approach towards episode-based care improvement, CMS seeks proposals from health care providers who wish to align incentives between hospitals, physicians, and nonphysician practitioners in order to better coordinate patient care. The initiative’s RFA will test episode-based payment for acute care and associated post-acute care, using both retrospective and prospective bundled payment methods. The RFA also requests applications to test models centered on acute care, which will inform the design of future models, including care improvement for chronic conditions. Under the initiative, CMS would link payments for multiple services patients receive during an episode of care.

The four models to be tested, three of which would involve a retrospective bundled payment arrangement, are as follows:

• Model 1: Retrospective payment models around the acute inpatient hospital stay only. Medicare will pay the hospital a discounted amount based on the payment rates established under the IPPS. Physicians will be paid separately for their services under the Medicare Physician Fee Schedule, and will be permitted to share gains arising from better coordination of care with hospitals.
• Model 2: Retrospective bundled payment models for hospitals, physicians, and post-acute providers for an episode of care consisting of an inpatient hospital stay followed by post-acute care. The episode of care would end, at the applicant’s option, either a minimum of 30 or 90 days after discharge.
• Model 3: Retrospective bundled payment models for post-acute care where the episode does not include the acute inpatient hospital stay. The episode of care would begin at discharge from the inpatient stay and would end no sooner than 30 days after discharge.
• Model 4: Prospectively administered bundled payment models for the acute inpatient hospital stay only, such as prospective bundled payment for hospitals, physicians, and other practitioners. Physicians and other practitioners would submit “no-pay” claims to Medicare and would be paid by the hospital out of the bundled payment.

CMS notes that in both Models 2 and 3, the bundle would include physicians’ services, care by a post-acute provider, related readmissions, and other services proposed in the episode definition such as clinical laboratory services; durable medical equipment, prosthetics, orthotics and supplies (DMEPOS); and Part B drugs. The target price will be discounted from an amount based on the applicant’s historical fee-for-service payments for the episode. Payments will be made at the usual fee-for-service payment rates, after which the aggregate Medicare payment for the episode will be reconciled against the target price. Any reduction in expenditures beyond the discount reflected in the target price will be paid to the participants to share among the participating providers.

CMS notes the following with regard to proposals:

• Organizations are invited to submit proposals that define episodes of care in one or more of the four models;
• Proposals should demonstrate care improvement processes and enhancements such as reengineered care pathways using evidence-based medicine, standardized care using checklists, and care coordination;
• All models must encourage close partnerships among all of the providers caring for patients during the episode.
• Applicants must also demonstrate robust quality monitoring and protocols to ensure beneficiary quality protection.
• Under all models, applicants must also provide Medicare with a discount on Medicare fee-for-service expenditures.

Length of Agreement

Agreements will include a performance period of 3 years, with the possibility of extending an additional 2 years, beginning with the program start date. The program start date may be as early as the first quarter of CY 2012 for awardees in Model 1.

Gainsharing

In addition to streamlining care through the use of bundles, the proposals for this initiative may include gainsharing arrangements. These arrangements will consist of the hospital or providers distributing gainsharing payments to physician(s) and/or other practitioners. These payments will represent a share of the gains resulting from collaborative efforts to improve quality and efficiency. However, unlike the Medicare Acute Care Episode Demonstration, CMS is not allowing gainsharing with beneficiaries.

Gainsharing arrangements must meet the following criteria to be eligible for participation in the initiative:

Gainsharing Design

• Applicants must discuss in detail how gainsharing will support care redesign to achieve improved quality and patient experience, and anticipated cost savings.
• Applicants must describe their methodology for the sharing of gains between or among the hospital or other care settings (e.g., post-acute care facility) and physicians and other nonphysician practitioners. This must include a discussion of with whom gains will be shared (e.g., physicians only), with what frequency gains will be shared, and under what criteria gains will be shared (e.g., quality standards).
• Physician and nonphysician practitioners may not reduce or limit services that are medically necessary to a patient entitled to benefits under Medicare.
• Gainsharing arrangements must be transparent and auditable at CMS’s request.
• For all proposals that include gainsharing, physician participation in the gainsharing aspect must be voluntary. Physicians who choose not to participate may not face adverse consequences.

Quality

• Overall quality of care for beneficiaries cared for by physicians and nonphysician practitioners participating in gainsharing must meet minimum quality requirements and then remain constant or improve for the duration of the arrangement.
• Individual physicians and nonphysician practitioners must meet quality thresholds and engage in quality improvement to be eligible to participate in gainsharing. The applicant must propose the following, which will be reviewed and approved by CMS:
  • Minimum quality thresholds;
  • A process for monitoring quality and quality improvement during the project period; and
  • A set of metrics for improving quality of care during the project period.

   

• The applicant must discuss how physicians and nonphysician practitioners may become eligible or ineligible to participate in gainsharing.

Payment Methodology

• Payments may not be based on the volume or value of referrals or business otherwise generated between hospital and physician. Payments based on achieved savings are permitted.
• Payments to physicians and nonphysician practitioners may not exceed 50% of the amount that is normally paid to physicians and nonphysician practitioners for the cases included in the gainsharing initiative.
• The applicant must include a comprehensive plan regarding how they will distribute financial rewards in their application.

Budget Impact

For all payment models, CMS aims to ensure that total Medicare expenditures will decrease relative to what they would have been absent this initiative. Awardees may not operate projects that are expected to reduce expenditures for certain services by increasing expenditures outside the episode of care or within the episode to non-included services or providers. No financial arrangements made among providers and other entities (including states) in connection with this program can be used to increase federal Medicaid matching funds. CMS or its contractor will monitor care provided to include beneficiaries during the episode monitoring period for model 1 and the post-episode monitoring period for all models. This will include determination of a baseline for aggregate Medicare Part A and Part B fee-for-service expenditures based on awardee historical baseline data around episodes of care for the same MS-DRGs. A risk threshold will be set to account for random variation. Awardees will be expected to pay Medicare for expenditures above this threshold. This methodology will be provided to awardees prior to entering a final agreement.

 

Risk-Bearing Capability

Applicants must include information regarding the ability of the proposed awardee(s) to pay Medicare for any spending during the episode in excess of the target price (in retrospective models) and to pay Medicare for any increases in spending in excess of the risk threshold for the trended historical baseline during the post-episode monitoring period (for all models) and episode monitoring period (for Model 1). This must include enforceable assurances of each awardee’s ability to pay Medicare. This assurance could be an irrevocable letter of credit for the full amount of risk undertaken or any similarly enforceable mechanism that covers the full amount of risk.

Additional Information

Providers participating in Accountable Care Organizations are welcome to use this opportunity to improve care coordination and the quality of care. For more information on applicant eligibility, please review the “Conditions of Participation” section of the RFA. Applicants will also be required to plan and implement quality assurance and improvement activities as a condition of participation in this initiative and participate in CMS quality monitoring by reporting appropriate quality measures.

During the demonstration, CMS will carefully monitor the program to ensure improved clinical quality, patient experience, and outcomes of care throughout participation in the initiative. Applicants will be required to propose strong patient protections that preserve beneficiary choice in seeking care from the provider of their choice.

Applicants are asked to submit their own episode definitions and bundled payment proposals. CMS will provide historical Medicare claims data to potential applicants planning to apply for Models 2 through 4. The data are intended to enable potential applicants to develop well-defined episodes and discount proposals based on the experience of providers in the applicant’s area. In order to be considered for receipt of data, applicants must submit a Research Study Protocol along with their letter of intent (LOI) and will later be expected to submit and comply with a Data Use Agreement (DUA). Both of these forms are available on the Bundled Payments for Care Improvement website.

The tables below include features of the four models to be tested:

Model 1: Retrospective Acute Care Hospital Stay Only
Entities eligible to be awardees	Physician group practices Acute care hospitals Physician hospital organizations Health systems Conveners of participating health care providers
Episode definition
Criteria for beneficiary inclusion in episode	Admission to an acute care hospital for a claim paid under the IPPS under any MS-DRG
Episode anchor	Acute care hospital admission at awardee or Bundled Payment participating organization for any MS-DRG
End of episode	Acute care hospital discharge
Types of services included in bundle	Part A inpatient hospital services
Payment from CMS to providers	Acute care hospital: Traditional FFS with a predetermined discount included in prospective payment Physician: Traditional FFS
Expected discount provided to Medicare	Year 1: Minimum 0% for start date through month 6; minimum 0.5% for months 7-12 on all Part A allowed charges Year 2: Minimum 1% on all Part A allowed charges Year 3: Minimum 2% on all Part A allowed charges Exact amount to be proposed
Reconciliation, spending calculation, disbursement, and post-episode monitoring	Episode reconciliation: A discount on Part A payments will be incorporated prospectively. Medicare spending for the inpatient hospital stay will not be reconciled against a set target price. Episode monitoring: Medicare Part A and Part B payment for the inpatient hospital stay that exceeds trended historical aggregate Part A and Part B payment beyond a risk threshold (taking the discount into consideration) must be paid by the awardee to Medicare.  Post-episode monitoring: Medicare Part A and Part B payment during the post-episode monitoring period that exceeds trended historical aggregate Part A and Part B payment beyond a risk threshold must be paid by the awardee to Medicare.
Post-episode monitoring period	30 days post-hospital discharge
Gainsharing	To be proposed
Other payment arrangements between participating providers (i.e., non-hospital care settings)	To be proposed
Quality measures:	All Hospital Inpatient Quality Reporting (Hospital IQR) measures, including both those measures required to receive the full annual payment update and those additional Hospital IQR measures not required for the full annual payment update.  Additional quality measures to be proposed. A standardized set will ultimately be required and agreed upon by CMS and the awardee. These measures will be aligned with other CMS programs to the greatest extent possible.

 

Model 2: Retrospective Acute Care Hospital Stay plus Post-Acute Care
Entities eligible to be awardees	Acute care hospital Health systems Post-acute providers Physician hospital organizations Physician group practices Conveners of participating health care providers
Episode definition
Criteria for beneficiary inclusion in episode	Organized around reason for hospitalization (MS-DRG) Exact identification criteria to be proposed
Episode anchor	Acute care hospital admission at awardee or Bundled Payment participating organization for included clinical conditions (identified via MS-DRG)
End of Episode	Option 1: Minimum 30 days post-hospital discharge; maximum of 89 days post-hospital discharge Option 2: Minimum 90 days post-hospital discharge
Types of services included in bundle	Physicians’ services Inpatient hospital services (episode anchor) Inpatient hospital readmission services Long term care hospital services (LTCH) Inpatient rehabilitation facility services (IRF) Skilled nursing facility services (SNF) Home health agency services (HHA) Hospital outpatient services Independent outpatient therapy services Clinical laboratory service Durable medical equipment Part B Drug
Payment from CMS to providers	Traditional FFS (ultimate reconciliation with predetermined target price)
Expected discount provided to Medicare	Option 1: Minimum 3% discount on included Part A and Part B allowed charges for episodes that include a post-hospital discharge period of 30 days to 89 days. Option 2: Minimum 2% discount on included Part A and Part B allowed charges for episodes that include a post-hospital discharge period of 90 days or longer. Exact discount rate to be proposed under either option.
Reconciliation, spending calculation, disbursement, and post-episode monitoring period	Episode reconciliation: If aggregate FFS payments for included services during the episode are less than the predetermined target price, Medicare will pay the difference to awardee. If aggregate FFS payments for included services during the episode exceed the predetermined target price, awardee must repay Medicare. Post-episode monitoring: Medicare Part A and Part B payment for included beneficiaries during the post-episode monitoring period that exceeds trended historical aggregate Part A and Part B payment beyond a risk threshold will be paid by the awardee to Medicare.
Post-episode monitoring period	30 days following the end of the episode
Gainsharing	To be proposed
Other payment arrangements between Bundled Payment participating organizations	To be proposed
Quality measures	To be proposed, but a standardized set will ultimately be required and agreed upon by CMS and the awardee. These measures will be aligned with other CMS programs to the greatest extent possible.

 

Model 3: Retrospective Post-Acute Care Only
Entities Eligible to be awardees	Physician group practices Acute care hospitals Health systems Long term care hospitals (LTCH) Inpatient rehabilitation facilities (IRF) Skilled nursing facility (SNF) Home health agency (HHA) Physician hospital organizations Conveners of participating health care providers
Episode definition
Criteria for beneficiary inclusion in episode	Organized around reason for hospitalization (MS-DRG) Exact criteria to be proposed
Episode anchor	Initiation of SNF, IRF, HHA, or LTCH services with awardee or Bundled Payment participating organization within 30 days following discharge from an acute care inpatient hospital for an included MS-DRG
End of episode	Minimum 30 days following the episode anchor Exact duration to be proposed
Types of services included in bundle	Physicians’ services Inpatient hospital readmission services Inpatient rehabilitation facility services (IRF) Long term care hospital services (LTCH) Skilled nursing facility services (SNF)  Home health agency services (HHA) Hospital outpatient services Independent outpatient therapy services Clinical laboratory services Durable medical equipment Part B drugs
Payment from CMS to providers	Traditional FFS (ultimate reconciliation with predetermined target price)
Expected discount provided to Medicare	To be proposed
Reconciliation, spending calculation, disbursement, and post-episode monitoring period	Episode reconciliation: If aggregate FFS payments for included services during the episode are less than the predetermined target price, Medicare will pay the difference to awardee. If aggregate FFS payments for included services during the episode exceed the predetermined target price, awardee must repay Medicare. Post-episode monitoring: Medicare Part A and Part B payment for included beneficiaries during the post-episode monitoring period that exceeds trended historical aggregate Part A and Part B payment beyond a risk threshold will be paid by the awardee to Medicare.
Post-episode monitoring period	30 days following the end of the episode
Gainsharing	To be proposed
Other payment arrangements between Bundled Payment participating organizations	To be proposed
Quality measures:	To be proposed, but a standardized set will ultimately be required and agreed upon by CMS and the awardee. These measures will be aligned with other CMS programs to the greatest extent possible.

 

Model 4: Acute Care Hospital Stay Only
Entities eligible to be awardees	Acute care hospitals Health systems Physician group practices Physician hospital organizations Coveners of participating health care providers
Episode definition
Criteria for beneficiary inclusion in episode	Organized around reason for hospitalization (MS-DRG) Exact criteria to be proposed
Episode anchor	Acute care hospital admission at awardee or Bundled Payment participating organization for included clinical conditions
End of episode	Acute care hospital discharge
Types of services included in bundle	Physicians’ services Inpatient hospital services (episode anchor) Inpatient hospital readmission services
Payment from CMS to providers	Acute Care Hospital: Prospectively-established bundled payment for identified MS-DRGs. Physician: Paid by acute care inpatient hospital. Claims for included services are submitted to Medicare as “no-pay.”
Expected discount provided to Medicare	The prospectively-established bundled payment will incorporate a minimum 3% discount on included Part A and Part B allowed charges; more for ACE MS-DRGs To be proposed.
Reconciliation, spending calculation, disbursement, and post-episode monitoring period	Episode reconciliation: The Bundled Payment participating acute care hospital where the beneficiary is treated will be paid a single prospectively established bundled payment for the episode, including related readmissions. Professional services furnished during the episode and covered under Part B would be billed to Medicare as “no-pay” claims and paid for through the bundled payment made to the hospital. If any Part B claims for professional services furnished during the episode, any claims for Part A for a related readmission, or any claims for related part B professional services furnished during any readmission (related or unrelated) are submitted and paid separately by Medicare, the awardee must repay Medicare for those expenditures.  Post-episode monitoring: Medicare Part A and Part B payment for included beneficiaries during the post-episode monitoring period that exceeds trended historical aggregate Part A and Part B payment beyond a risk threshold (taking the prospectively established bundled payment with the discount into consideration) will be paid by the awardee to Medicare.
Post-episode monitoring period	30 days post-hospital discharge
Gainsharing	To be proposed
Other payment arrangements between Bundled Payment participating organizations	To be proposed
Quality measures	To be proposed, but a standardized set will ultimately be required and agreed upon by CMS and the awardee. These measures will be aligned with other CMS programs to the greatest extent possible.

 

Submission Deadlines

• Interested organizations must submit a nonbinding LOI by October 6, 2011, and a final application by November 18, 2011, for Model 1.
• Applicants for Models 2 through 4 must submit a nonbinding LOI by November 4, 2011, and final applications must be submitted by no later than March 15, 2012.
• Applicants who wish to receive historical Medicare claims data must complete a Research Request Packet by November 4, 2011. If approved to receive Medicare data, applicants must submit a DUA prior to receipt of data.

 

Related Links

Additional information on CMS’s Bundled Payments for Care Improvement initiative is available at the following links:

General Fact Sheet on the Bundled Payments for Care Improvement Initiative,
http://www.innovations.cms.gov/documents/pdf/Fact-Sheet-Bundled-Payment-FINAL82311.pdf

Bundled Payments for Care Improvement Initiative Frequently Asked Questions
http://www.innovations.cms.gov/areas-of-focus/patient-care-models/bundled-payments-for-care-improvement.html

Bundled Payments for Care Improvement Initiative Request for Application,
http://www.innovations.cms.gov/documents/payment-care/Request_for_Applications.pdf

Bundled Payments for Care Improvement Initiative Application Information and Materials
http://www.innovations.cms.gov/areas-of-focus/patient-care-models/Bundled-Payments-%20Care-Improvement-Application.html