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A Speedier Launch for Medicare Bundled Payments?

By Jane Norman, CQ HealthBeat Associate Editor

July 18, 2011 -- Accountable care organizations (ACOs) may have grabbed plenty of attention when it comes to coordinated care in Medicare. But the ACO program's cousin—payment bundling—is also on the way, and maybe sooner than expected.

Under the health overhaul law, a large-scale pilot program is to be established to try out payment bundling—a single payment for multiple hospital services from a number of providers received by one patient, rather than the traditional fee-for-service payment system.

The voluntary program is supposed to begin by Jan. 1, 2013, and continue for five years. If it's successful in cutting costs while maintaining or improving quality, the secretary of Health and Human Services could expand the pilot.

But Richard Gilfillan, acting director of the Centers for Medicare and Medicaid Innovation, said at a Center for American Progress forum that the agency's intent is to launch at least part of the pilot prior to 2013. "We are moving forward sooner with a program that addresses bundled payments for care improvement," Gilfillan said, without citing any specifics. "So, we are interested in getting going."

Nancy-Ann DeParle, White House deputy chief of staff, said that "in the weeks ahead" Medicare will launch a series of different models for payment bundling for hospitals and post-acute care facilities. "Interested providers can begin implementing and using these models in hospitals and other health care sites beginning this year," she said.

DeParle, who also worked on the health care law, said other models will come next year.

Bundling payments should help stop the perverse incentives now in Medicare, she said. "Right now there's no financial incentive for providers to work together and prevent illnesses from becoming serious long term health problems with disastrous consequences for patients and cost containment," she said.

While some bundling already goes on in hospital payments, the pilot project would extend the concept to cover payments across multiple providers, according to a Center for American Progress report on payment bundling also released at the forum. There could be financial rewards as well as penalties for providers.

The law requires that the pilot project pay for episodes of care that occur in connection with a hospitalization, with episodes defined as the time period from three days prior to hospital admission through 30 days afterward, though HHS could alter the time frame.

The services to be covered are acute inpatient hospital, physician services in and outside the hospital, outpatient hospital, emergency room, post-acute services such as physical therapy and potentially other treatments identified by HHS like care coordination.

Under the pilot, 10 defined conditions, some chronic and some acute, will be included for bundled payments, and providers can choose whether they want to participate.

Judy Feder, a health policy expert at the Georgetown Public Policy Institute and one of the report authors, said at the forum that one key issue for the pilot's design is to stimulate the broadest participation possible. Conditions for inclusion and standards for performance should be clear, she said.

In addition, the focus should be on conditions with high volumes so costs can be averaged over high numbers of patients and are more predictable, said the report. They should also be conditions for which medical treatments are well established and evidence-based.

One major challenge is to get providers who have worked separately to come together, not just in their work providing health care but in their contractual arrangements, said Feder. She suggested that if an organization such as a hospital wants to take on an entire bundle and divvy up the payments, they should be able to do so. Or Medicare could offer an alternative route in which Medicare would manage the payment, she said, distributing the payments on an agreed-upon formula.

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