CMS Bundled Payments Initiative October 4, 2011 Practice Groups: - PDF document

CMS Bundled Payments Initiative October 4, 2011 Practice Groups: By Richard P. Church and Irene B. Nsiah Health Care The Patient Protection and Affordable Care Act (“PPACA”), Pub. Law 111-148, authorized the creation within the Centers for Medicare and Medicaid Services (“CMS”) of a new Center for Health Care Reform Medicare and Medicaid Innovation (“CMMI”) designed to test new payment models including bundled payment models. On August 23, 2011, the CMMI announced the Bundled Payments for Care Improvement Initiative (“Bundled Payment Initiative” or the “Initiative”). The Bundled Payment Initiative proposal includes four different payment models for providers: three retrospective payment bundling models and one prospective payment bundling model, each centered on a single episode of care or so-called “episode anchor.” The Initiative comes in follow up to CMS’s proposed Accountable Care Organization (“ACO”) rule released in April 2011, 1 which has been widely criticized as impracticable in its proposed form. Since releasing the proposed ACO rule, CMS has promulgated a number of new demonstration projects, such as the Pioneer ACO, Advanced Payment ACO, and now the Bundled Payment Initiative, each of which appears designed to address some of the flaws identified in the proposed ACO rule. The Bundled Payment Initiative provides greater flexibility to the provider in determining target payment amounts, the episodes of care for which the provider will be accountable (and in turn for which beneficiaries it will be responsible), and the services to include in the bundled payment. The Four Models As set forth in detail in the CMS Table reprinted below, under the Bundled Payment Initiative, CMS will pay a single amount for an episode of care involving a defined period and set of services:  Model 1: covers all Part A services (including inpatient DRG, diagnostic services, and other separately billable Part A services) provided by a hospital in the 3 days prior to admission through acute discharge.  Model 2: covers the acute care stay, physician services, and other post-acute services (i.e. all Part A and Part B services, including readmissions) related to the episode of care for a period beginning with the acute inpatient stay and extending for a minimum of 30 days with a preference for longer post-acute care periods of 90 days or greater.  Model 3: covers all post-acute care services (i.e. all Part A and Part B services, including readmissions) related to the episode of care for a period beginning with a skilled nursing facility stay, inpatient rehabilitation or long-term care hospital stay, or the initiation of home health services and extending for a minimum of 30 days with a preference for longer post-acute care periods.  Model 4: covers all Part A services (including inpatient DRG, diagnostic services, and other separately billable Part A services) provided by a hospital in the 3 days prior to admission through acute discharge as well as any related Part A hospital expenses regarding a readmission and all Part B professional services during the same periods; payment is made to the hospital prospectively, i.e. 1 Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 76 Fed. Reg. 19528 (April 7, 2011).

CMS Bundled Payments Initiative this is akin to a “super DRG” that includes all hospital and physician services and requires physician providers to bill the hospital for services rendered. The Initiative requires applicants in each model to provide CMS with a discount from the amount that CMS would otherwise pay for patient care under the traditional fee-for-service payment structure. CMS allows applicants to set the amount of the discount, but has stated that it will give preference to applicants that offer higher discounts. Under Model 1, in exchange for this discount, a hospital is permitted to make certain gainsharing payments to physicians, as discussed in more detail below. Under Models 2 through 4, the awardee will also share savings and bear risk for achieving an overall target price for the episode of care. CMS will pay using the current fee-for-service system. At the end of a patient’s episode of care, CMS will compare the total FFS payments with the target price. If the total fee-for-service payments are below the target price, the participating organization may share in the savings. On the other hand, if total payments exceed the target price, the participating organization must pay back the difference to CMS. Under Model 4, CMS pays the participating organization a single prospective bundled payment for the episode of care. The organization must then distribute the payments to participating providers on a fee-for-service basis. KEY FEATURES OF BUNDLED PAYMENT MODELS COMPARED MODEL 1 MODEL 2 MODEL 3 MODEL 4 Inpatient Stay Only Inpatient Stay plus Post- Post-discharge Inpatient Stay discharge Services Services Only Only Model / Feature • Physician group • Physician group • Physician group • Physician group Eligible practices practices practices practices Awardees • Acute care hospitals • Acute care hospitals • Acute care • Acute care paid under the IPPS paid under the IPPS hospitals paid under hospitals paid the IPPS under the IPPS • Health systems • Health systems • Health systems • Health systems • Physician-hospital • Physician-hospital organizations organizations • Long-term care • Physician- hospitals hospital • Conveners of • Post-acute providers organizations participating health • Inpatient • Conveners of care providers rehabilitation • Conveners of participating health care facilities participating providers health care • Skilled nursing providers facilities • Home health agency • Physician-hospital organizations • Conveners of participating health care providers 2

CMS Bundled Payments Initiative MODEL 1 MODEL 2 MODEL 3 MODEL 4 Inpatient Stay Only Inpatient Stay plus Post- Post-discharge Inpatient Stay Model / discharge Services Services Only Only Feature Discounted IPPS Retrospective Retrospective Prospectively set Payment of payment; no separate comparison of target comparison of payment Bundle and target price price and actual FFS target price and Target payments actual FFS Price payments All MS-DRGs Applicants to propose Applicants to Applicants to Clinical based on MS-DRG for propose based on propose based on Conditions inpatient hospital stay MS-DRG for MS-DRG for Targeted inpatient hospital inpatient hospital stay stay Inpatient hospital • Inpatient hospital and • Post-acute care • Inpatient hospital Types of services physician services services and physician Services services Included in • Related post-acute • Related care services readmissions • Related Bundle readmissions • Related readmissions • Other services defined in the • Other services defined bundle in the bundle To be proposed by To be proposed by To be proposed by To be proposed by Expected applicant; CMS applicant; CMS requires applicant applicant; subject Discount requires minimum minimum discount of to minimum Provided discounts increasing 3% for 30-89 days post- discount of 3%; to from 0% in first 6 discharge episode; 2% larger discount for Medicare mos. to 2% in Year 3 for 90 days or longer MS-DRGs in ACE episode Demonstration • Acute care hospital: Traditional fee-for- Traditional fee-for- Prospectively Payment IPPS payment less service payment to all service payment to established from CMS pre-determined providers and suppliers, all providers and bundled payment to discount subject to reconciliation suppliers, subject to to admitting Providers with predetermined reconciliation with hospital; hospitals • Physician: target price predetermined distribute Traditional fee target price payments from schedule payment bundled payment (not included in episode or subject to discount) All Hospital IQR To be proposed by applicants, but CMS will ultimately establish a Quality measures and standardized set of measures that will be aligned to the greatest extent Measures additional measures possible with measures in other CMS programs to be proposed by applicants *Source: CMS Fact Sheet, Bundled Payments for Care Improvement Initiative, Appendix (August 23, 2011) http://innovations.cms.gov/documents/pdf/Fact-Sheet-Bundled-Payment-FINAL82311.pdf 3