CMS Launches Payment Bundling Initiative To Improve Care, Cut Costs

On Tuesday, CMS announced a new initiative to bundle Medicare payments to physicians and other health providers in an effort to encourage care coordination and reduce costs, Reuters reports (Selyukh/Yukhananov, Reuters, 8/23).

About the New System

The new system -- created by the federal health reform law -- reimburses care providers for a patient's entire treatment process rather than for each consultation or service (Walker, MedPage Today, 8/23).

The initiative allows providers to apply for four broadly defined care models; three models involve retrospective bundled payments and the fourth would reimburse providers using prospective payments (Daly, Modern Healthcare, 8/23).

The four payment models include:

• Model 1: Only care provided during an acute care hospital stay;
• Model 2: The acute care hospital stay, plus associated post-acute care;
• Model 3: Only post-acute care services;
• Model 4: A single prospective payment that encompasses all services delivered during an inpatient stay (MedPage Today, 8/23).

Federal Officials Explain Incentive of Program

The models aim to give care providers an incentive to avoid unnecessary or duplicative treatments, according to Reuters.

CMS Administrator Donald Berwick said, "From a patient perspective ... you want your doctors to collaborate more closely with your physical therapist, your pharmacist and your family caregivers," but "that sort of common sense practice is hard to achieve without a payment system that supports coordination over fragmentation" (Reuters, 8/23).

HHS Secretary Kathleen Sebelius noted that the current fee-for-service reimbursement system "can punish the providers who are most successful" at keeping their patients healthy and said the new bundled payment system will re-align physicians' incentives.

AHA Says Hospitals Must Consider Whether To Participate

Nancy Foster, vice president for quality and patient safety at the American Hospital Association, praised the initiative for allowing applicants to shape their own programs to meet local requirements rather than establishing a single model for the entire U.S., The Hill's "Healthwatch" reports. However, she added that hospitals will have to consider the implications of the initiative before deciding to participate, noting that it is too early to gauge whether financial incentives are strong enough (Baker, "Healthwatch," The Hill, 8/23).

According to Foster, some providers could receive less money overall in a bundled payment. Still, they at least should receive complete reimbursement for services and might even be eligible for awards for better coordination, she said (Reuters, 8/23).