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CMS Holds Off on One of Its Models for Bundled Payments

By Rebecca Adams, CQ HealthBeat Associate Editor

October 11, 2012 -- The Center for Medicare and Medicaid Innovation, which is in the process of reviewing applications for its bundled-payments initiative, has decided to postpone implementation of one of the four models that it originally proposed.

"We are moving forward with models 2 through 4 first, before model 1," a Centers for Medicare and Medicaid Services (CMS) official said. "We're reviewing to see how it [model 1] and the participants will fit with respect to the other models."

Under the bundled-payments initiative, which was announced in August 2011, CMS plans to tie payments for multiple services that patients receive during an episode of care. For example, instead of multiple providers generating different claims for a surgery, the entire team is paid with a so-called "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. The bundled-payment initiative is part of an effort by CMS to move away from volume-based fee-for-service care toward payments that are based more on quality.
The model that is being re-evaluated and not being implemented at this time is one of three of the initiative's four models that affect inpatient acute care hospital stays. The other model affected post-discharge services.

Under the stalled first model, the episode of care would have been an inpatient stay in the hospital. Medicare officials had planned to pay the hospital a discounted amount based on the payment rates established under the Inpatient Prospective Payment System. Under this variation of the bundling initiative, Medicare officials expected to pay physicians separately using the Medicare Physician Fee Schedule. Hospitals and physicians would have been allowed to share in any savings. CMS officials had already accepted applications for this model last year, several months before applications for the other three alternatives were due.

Some hospitals and physicians may be disappointed that the option is being pulled back for review instead of being implemented.

Federal officials are contacting candidates that applied under the other three alternatives that CMS is moving forward on to go over the details of their proposals before announcing which applicants will participate in the program.

Model 2 of the initiative includes not only inpatient hospital stays but also post-acute care. The episode of care would last at least 30 days after a patient is discharged.

Model 3 does not include inpatient care. Instead, it would start when a patient leaves a hospital and last at least 30 days after discharge.
Model 4 would test out a broad option in which CMS would set one predetermined bundled payment to the hospital to care for a patient.

That payment would be expected to cover all of the services during an inpatient stay by the hospital, including physicians and other providers.

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