We are pleased to announce a new American Health Care Association (AHCA) initiative to provide support to our members that wish to explore and become involved in the new Centers for Medicare & Medicaid Services (CMS) bundled payment initiative provided by the Centers for Medicare and Medicaid Innovation (CMMI).

CMMI recently announced its new bundled payment for care improvement initiative — details below. This initiative seeks to improve patient care through payment innovation that fosters improved coordination and quality through a patient-centered approach. Through the bundled payment initiative, providers have great flexibility in selecting conditions to bundle, developing the health care delivery structure, and determining how payments will be allocated among participating providers.

In coordination with your partners on this initiative, long-term and post-acute care (LTPAC) providers must submit a nonbinding letter of intent by November 4, 2011 as described in the bundled payments for care improvement initiative request for application (RFA). For applicants wishing to receive historical Medicare claims data, a separate research request packet and data use agreement must be filed in conjunction with the letter of intent. Final applications must be received on or before March 15, 2012.

Participation in the initiative will require members to gather considerable information to understand the opportunities in your market; identify conditions and design the bundles; and determine the upside and downside risk for various bundling options and opportunities. This will be the case whether you seek out others with whom to partner or whether you are approached by, for example, a hospital. Aggregate data and supporting materials to assist in preparing the research request packet will be posted on the AHCA website the week of October 17, 2011. We will post these materials on our website when they are available. In addition we have posted a brief overview of the CMMI bundled payment initiative, the AHCA member support initiative, and background materials and forms needed to participate in the CMMI bundled payment initiative (the request for application, letter of intent, research request packet, models 2 and 3 applications, and an FAQ document) on a new section of our health care reform page here.

Background
The Affordable Care Act (ACA) required the Department of Health and Human Services (HHS) to establish a national, voluntary pilot program on payment bundling by January 1, 2013. Instead of establishing a national, voluntary pilot program on payment bundling by January 1, 2013, CMS has launched a bundled payment initiative that relies on the participants to design the bundled payments systems/arrangements. CMS has released the Innovation Center’s request for applications (RFA), which outlines four broad approaches to bundled payments. Providers can determine which episodes of care and which services will be bundled together.

Briefly the models are as follows:

Retrospective payment bundling – models 1, 2 and 3

In these models, CMS and providers would set a target payment amount for a defined episode of care. Applicants would propose the target price, which would be set by applying a discount to total costs for a similar episode of care as determined from historical data. Participants in these models would be paid for their services under the original Medicare fee-for-service (FFS) system, but at a negotiated discount. At the end of the episode, the total payments would be compared with the target price. Participating providers may then be able to share in the savings. In these models, CMS and providers would set a target payment amount for a defined episode of care. Applicants would propose the target price, which would be set by applying a discount to total costs for a similar episode of care as determined from historical data. Participants in these models would be paid for their services under the original Medicare fee-for-service (FFS) system, but at the discounted rate. At the end of the episode, the total payments would be compared with the target price. If payments are less than the targeted price, participating providers may then be able to share in the savings. Alternatively, if payments are above the targeted price, providers would have to reimburse CMS for the overpayments.

Model 1:
Retrospective acute-care hospital stay only — In model 1, the episode of care includes all hospital services provided to a beneficiary during an acute inpatient hospital stay, where physicians are partners in improving care. In model 1, the episode of care would be defined as the inpatient stay in the general acute-care hospital. Medicare will pay the hospital a discounted amount based on the payment rates established under the inpatient prospective payment system (IPPS). Medicare will pay physicians separately for their services under the Medicare physician fee schedule. Hospitals and physicians will be permitted to share gains arising from better coordination of care.

Model 2:
Retrospective acute-care hospital stay plus post-acute care — In model 2, the episode of care includes hospital, physician, post-acute provider (i.e. skilled nursing facility, inpatient rehabilitation facility, long-term care hospital, and home health agency), and other Medicare-covered services provided during the inpatient hospital stay as well as during post-acute hospital discharge to the home or another care setting. In model 2, the episode of care would include the inpatient stay and post-acute care and would end, at the applicant’s option, either a minimum of 30 or 90 days after discharge, while in model 3, the episode of care would begin at discharge from the inpatient stay and would end no sooner than 30 days after acute-care hospital discharge.

Organizations interested in receiving historical Medicare claims data for use in developing episode definitions for model 2 should complete a research request packet, data use agreement, and data use agreement signature addendum (if needed). Data will be provided for approved requests before the application is due.

Model 3:
Retrospective post-acute care only — In model 3, the episode of care includes 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 hospital stay. Organizations interested in receiving historical Medicare claims data for use in developing episode definitions for model 3 should complete a research request packet, data use agreement, and data use agreement signature addendum (if needed). Data will be provided for approved requests before the application is due.

In both models 2 and 3, the bundle would include physicians’ services, care by a post-acute provider, related readmissions, and other services proposed in the episode definition such as clinical laboratory services; durable medical equipment, prosthetics, orthotics and supplies (DMEPOS); and Part B drugs. The target price will be an amount based on the applicant’s historical fee-for-service payments for the episode. Payments will be made at the negotiated discounted fee-for-service payment rates, after which the aggregate Medicare payment for the episode will be reconciled against the target price. Any reduction in expenditures beyond the discount reflected in the target price will be paid to the participants to share among the participating providers. Alternatively, providers will be responsible for reimbursing the Medicare program for expenditures in excess of the target price.

Prospective bundling – model 4

Model 4:
Acute-care hospital stay only — In model 4, the episode of care includes all services furnished during the inpatient hospital stay. CMS would make a single, prospectively-determined bundled payment to the hospital that would encompass all of these services. Physicians and other practitioners would submit “no-pay” claims to Medicare and would be paid by the hospital out of the bundled payment.

Organizations interested in receiving historical Medicare claims data for use in developing episode definitions for model 4 should complete a research request packet, data use agreement, and data use agreement signature addendum (if needed).

Data will be provided for approved requests before the application is due. Under model 4, CMS would make a single, prospectively-determined bundled payment to the hospital that would encompass all services furnished during the inpatient stay by the hospital, physicians and other practitioners. Physicians and other practitioners would submit “no-pay” claims to Medicare and would be paid by the hospital out of the bundled payment.

Gainsharing arrangements: In addition to streamlining care through the use of bundles, the proposals for this initiative may include gainsharing arrangements. Gainsharing refers to payments that may be made by hospitals and other providers to physicians and other practitioners as a result of collaborative efforts to improve quality and efficiency.

Next steps
Organizations interested in applying to the bundled payments for care improvement initiative must first submit a non-binding letter of intent and may submit a research request packet to obtain CMS data. Organizations subsequently submit their application to participate in the initiative. Deadlines for the submission of the letter of intent, research request packet, and the application are below.

Background materials and forms needed to participate in the CMMI bundled payment initiative can be found on the CMMI website. These include the request for application, the letter of intent, the research request packet, data use agreement (DUA), DUA signature addendum, the model 2 application, the model 2 application tables, the model 3 application, the model 3 application tables, and an FAQ document. (Most of this information is also posted our website link noted above.) For more information, please send your questions to BundledPayments@cms.hhs.gov.

Patti Cullen, CAE
952.851.2487
pcullen@careproviders.org

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