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Value-Based Care News

How the Bundled Payment System Supports Coordinated Care

The bundled payment system allows hospitals and other medical providers to work more closely together across many healthcare settings.

By Vera Gruessner

- The bundled payment system offers a method for reducing skyrocketing costs throughout the healthcare delivery continuum by moving away from fee-for-service reimbursement. In particular, the bundled payment system covers all of the costs associated with treating a patient in an episode of care situation.

Bundled Payment Models

This could include a bundled payment for administering medication, conducting a CT scan, nursing care during a hospital admission, and a physician consultation. The Centers for Medicare & Medicaid Services (CMS) took part in establishing the Bundled Payments for Care Improvement (BPCI) initiative, which consist of four models of care based on the premise of receiving a lump sum for multiple medical care services.

The first model of care covers inpatient hospital stays and Medicare pays a set amount to providers based on payment rates under the Inpatient Prospective Payment System. In the second model of care, the bundled payment system is based on an inpatient stay in an acute care hospital and post-acute healthcare services upon discharge from the inpatient stay.

“In Model 3, the episode of care is triggered by an acute care hospital stay but begins at initiation of post-acute care services with a skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency,” CMS reports. “Under these retrospective payment models, Medicare continues to make fee-for-service (FFS) payments; the total expenditures for the episode is later reconciled against a bundled payment amount (the target price) determined by CMS.”

“In Model 4, CMS makes a single, prospectively determined bundled payment to the hospital that encompasses all services furnished by the hospital, physicians, and other practitioners during the episode of care, which lasts the entire inpatient stay.”

Healthcare organizations that take part in the initiative’s bundled payment system must have high quality performance and adhere to financial requirements for these episodes of care. It is hoped that the Medicare program will have lower costs while the patients receive higher quality coordinated care.

The traditional form of reimbursement throughout the healthcare industry has been fee-for-service in which doctors received payments based on each individual course of treatment. This type of payment model led to more fragmented care in which separate providers and specialists did not communicate as much or work together to improve overall health outcomes among the consumer base.

However, the Affordable Care Act led to significant changes throughout the healthcare delivery spectrum, especially when it comes to medical coverage. With the Affordable Care Act leading to the creation of Accountable Care Organizations and stronger coordinated care, it is no surprise that new payment models such as the bundled payment system came into effect.

The bundled payment system allows hospitals and other medical providers to work more closely together across many healthcare settings. It was the Affordable Care Act that led to the development of the Innovation Center at CMS in order to test new reimbursement models and their impact on medical care. Shortly after, the Bundled Payments for Care Improvement (BPCI) initiative was born.

“The Innovation Center was created by the Affordable Care Act to test innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) expenditures while preserving or enhancing the quality of care for beneficiaries,” the brief from CMS stated. “Over the course of the initiative, CMS will work with participating organizations to assess whether the models being tested result in improved patient care and lower costs to Medicare.”

The Association of American Medical Colleges (AAMC) mentioned an expansion to the BPCI program that took place in early 2014, which brought the inclusion of extra hospitals, physician offices, and other healthcare systems.

Over the next few years, it will become clearer whether the bundled payment system has brought more cost savings and greater care coordination throughout the medical industry.


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