How to Handle Bundled Payments

How to Handle Bundled Payments

Medicare and Medicaid programs are making structural reforms regarding entitlement reform intensities. They plan to add prevention initiatives that will reduce or slow the growth in chronic disease prevalence, introduce care coordination in the Medicare program, and reform how cmslogo1healthcare providers are paid. One of the main objectives is the Centers for Medicare & Medicaid Services (CMS) is implementing the Bundled Payment for Care Improvement (BPCI) initiative.

Bundled Payment for Care Improvement

In November 2016, CMS released a preliminary list of 48 “episodes of care.” These specify what would be paid at a targeted rate lower than the actual service payment fee. These episodes of care will cover around 70% of all Medicare expenditures if applied to all providers, and for all the 48 episodes. Under this initiative, providers will identify which of the conditions should be tested. The purpose of the Bundled Payment for Care Improvement initiative is to replace flawed sustainable growth rate and offer strong financial incentives to integrate inpatient care with post-acute care services.

More than 75% of Medicare program spending is associated with patients under treatment for five or more medical conditions. Additionally, all the growth regarding Medicare spending since 1987 is related to people with multiple chronic health conditions. Under the Bundled Payment for Care Improvement (BPCI) initiative, Medicare will provide coordinated care for chronically ill patients. This requires “team-based care,” which includes health coaching, transitional care, comprehensive medication management, and a care coordinator among other elements.

CMS to Test Three Bundled Payment Models

The BPCI complements other Medicare initiatives, such as accountable care organizations (ACOs). Designed to address population costs, ACOs also evaluate quality and include preventive initiatives to reduce incidence/prevalence of chronic medical conditions. The BPCI complements many initiatives and efforts, and is a way to manage overall spending within one episode of care. CMS is also interested in exploring three payment models.

The BPCI has promise to offer strong financial incentives across inpatient care and post-acute care in the Medicare program. Medicare spending for Part A and B services are to be included in each model, along with Part D spending outside the scope of an initiative. The three models to be tested include:

  • Payment for inpatient state – For one of the 48 specified conditions, the provider will receive payment for the inpatient stay, plus targeted payments for services provided 30 or90 days Medicare-Bundlepost-discharge. This method pays providers using the fee-for-service payments, and then compares the total payments to the standard (minimum of 3% discount for episodes 30-89 days after discharge and 2% for 90 days or more.
  • Payment for post-discharge services – When services provide after discharge are linked to one of the 48 conditions, the bundled model provides payment. This includes post-acute care services and hospital readmissions. In addition, provider payments will use fee-for-service payment with a reconciliation compared to a predetermined target.
  • Payment for inpatient stays – These payments will include both physician-provided and inpatient services, as well as any related hospital readmissions. This approach differs from the other models, as it would be prospectively determined amounts provided for the services. Also, the hospital would distribute payments to doctors from the bundle.

Bundled Payments lead to Health System Reform

Payment bundles will require several changes in how medical facilities and providers interact in order to meet the discounted targets. Hospitals will contract with, vertically integrate with, or establish joint ventures with post-acute care provider practices to create the capacity of managing and coordinating services for patients after discharge. Joint ventures accelerate between hospitals and home health agencies anticipating these payment changes.

Another key component to after care for the patient involves effective care coordination services, which are offered to patients in the original Medicare program. To accomplish this, the incentive will involve efforts to provide effective traditional care, as well as links to nurse care coordinators, transitional care, and health coaching. Health information technology is critical for tracking expenditures across many sites of care, along with monitoring changes in the patient’s health status.

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