Will new bundling initiative resolve PCP concerns?

August 31, 2011

The government?s new flexible bundled payment initiative allows practices to largely define their own terms of participation. But will the array of models resolve issues with undervaluing evaluation and management work and negotiating fair payment rates with hospitals? Find out how the definition of ?episodes of care? might make a difference.

The Centers for Medicare and Medicaid Services (CMS) rolled out a flexible bundled payment initiative in late August that allows practices to largely define their own terms of participation. The unanswered question is whether the array of models will address the issues about bundling that have plagued primary care physicians in the past: Will evaluation and management work be undervalued, and how effectively will they be able to negotiate payment rates with hospitals?

In an earlier analysis, the Rand Corporation pointed out that addressing multiple issues in one patient visit may continue to be an issue, with a challenge in ensuring that “physicians seeing a patient for a problem unrelated to the bundled diagnosis were still paid appropriately.”

The flexibility of the new CMS plan is an advantage in meeting the needs of all providers, suggested the Premier healthcare alliance, made up of more than 2,500 U.S. hospitals and more than 76,000 other healthcare sites. Blair Childs, senior vice president of public affairs for the alliance, pointed out that “health systems are at different points in their journey to deliver coordinated care. Some are prepared to accept population-based risk, while others require more time, resources, knowledge, and experience. This new alternative to the Medicare shared savings program will provide an on-ramp to those systems beginning the journey to full continuum accountable care, while reinforcing the alternative payment arrangements they may already have underway with private payers.”

CMS previously has tested bundled payments for episodes of acute care for a small number of conditions. This program is the first to include post-acute providers, who may choose to participate either individually or in partnership with an acute provider, according to Robert Minkin of The Camden Group.

Because bundled payments will be new for many physicians, the American Medical Association (AMA) urged CMS to encourage applications for physician-led bundling initiatives and to be “prepared to provide technical assistance and data to interested physicians who may not have experience with bundled payment models," said Cecil B. Wilson, immediate past president of the AMA.

The new program offers four models for bundled payments. Three are retrospective, in which CMS and providers agree on a target price and then compare payments for the care made on a discounted fee-for-service basis to the target and share in any savings. One is prospective; CMS makes a set payment to a hospital for an episode of care and the hospital pays all providers out of the bundled payment. All four models have a shared-risk component.

The flexibility comes in the retrospective models’ different definitions of episodes of care:

For Model 1, hospital services provided to a beneficiary during an acute inpatient stay, where physicians are partners in improving care;
For Model 2,  physician, post-acute provider, and other Medicare-covered services provided during the inpatient stay as well as during recovery after discharge to the home or another care setting; or
For Model 3, hospital, physician, post-acute provider, and other Medicare-covered services beginning with the initiation of post-acute care services after discharge from an acute inpatient stay.

For the models that include post-acute care, “CMS will give preference to applications that propose an episode definition longer than 30 days post-hospital discharge,” according to the request for applications document. The program covers all diagnostic-related groups and is open to any provider in the country.

“By giving providers the flexibility to determine which model of bundled payments works best for them, it will be easier for providers of different sizes and readiness to participate in this initiative,” according to a news release from CMS.

Organizations interested in participating in the bundled payments initiative must submit a Letter of Intent by September 22 for Model 1 and November 4 for Models 2, 3, and 4.

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