Bundled payments: What impact will they have on your practice?

In an effort to shift payment models away from fee-for-service, more healthcare providers are being paid based on their ability to provide high-quality care in a more coordinated fashion through bundled payment arrangements.

To that end, The Centers for Medicare & Medicaid Services (CMS) recently announced that more than 2,100 acute care hospitals, skilled nursing facilities, physician group practices, long-term care hospitals, inpatient rehabilitation facilities, and home health agencies have transitioned from a preparatory period to a risk-bearing implementation period in which they are now assuming financial risk for episodes of care.

The participants include 360 organizations that have entered into agreements with CMS to participate in the Bundled Payments for Care Improvement initiative and an another 1,755 providers who have partnered with those organizations. CMS defines an episode of care as the set of services provided to treat a clinical condition or procedure, such as a heart bypass surgery or a hip replacement.

The Bundled Payments for Care Improvement initiative includes four models:

In Model 1, the episode of care is defined as the inpatient stay in the acute care hospital. Medicare pays the hospital a discounted amount based on the payment rates established under the Inpatient Prospective Payment System used in the original Medicare program.

Models 2 and Model 3 involve a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. In Model 2, the episode includes the inpatient stay in an acute care hospital plus the post-acute care and all related services up to 90 days after hospital discharge.

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.

In Model 4, CMS makes a single, prospectively determined bundled payment to the hospital that includes all services furnished by the hospital, physicians, and other practitioners during the episode of care, which lasts the entire inpatient stay. Physicians and other practitioners submit “no-pay” claims to Medicare and are paid by the hospital out of the bundled payment.

Last month, CMS announced a proposal to require bundled payments for hip and knee replacement surgeries in 75 markets across the country including a number of Florida markets.

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Providers should consider the impact each of these models will have on their practice from a number of perspectives including how it will affect their financial bottom line. This can work out well for providers because, if care is delivered for less than the set amount, then they are allowed to keep the difference as “reward” for managing the care in a cost-effective manner. On the flip side, if it costs more to manage that care, they could end up paying a penalty.

Each of these bundled payment arrangements also could present legal challenges depending on the applicable state laws as well as the provider relationships involved. Those interested in implementing bundled payment arrangements should contact their healthcare law firm for advice.

The Health Law Offices of Anthony C. Vitale can assist practitioners who are considering participating in bundled payment arrangements through CMS’ Bundled Payments for Care Improvement pilot program.

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The Health Law Offices of Anthony C. Vitale