The Bundled Payments for Care Improvement Initiative (Bundled Payment Initiative) was launched by the Center for Medicare & Medicaid Innovation (CMMI) on August 23 as a separate and new initiative from one that may otherwise be undertaken pursuant to Section 3023 of the Patient Protection and Affordable Care Act (PPACA) -- The National Pilot Program on Payment Bundling. This new initiative underscores the role that CMMI will play, using its own authority, to incentivize innovations in care delivery models in healthcare.

The Bundled Payment Initiative appears ready for rapid movement, at least as to one of the four models that providers may select to proceed. A key component of the Bundled Payment Initiative is the flexibility with which providers appear to be able to structure their proposal, both in choosing the model they wish to pursue and the manner in which they wish to structure the payment, episodes of care and care delivery models.

Providers may choose among one of four broadly defined models of care:

Model 1: Retrospective Acute Care Hospital Stay Only

If Model 1 is chosen, the episode of care is focused on the acute care inpatient hospitalization. Under this model, hospitals may share gains beyond the predetermined MS-DRG payment discount that accrues due to higher quality, more efficient care delivery and more care coordination between and among physicians and other key healthcare personnel that treat patients during a hospital stay. In this model, physicians will be paid separately under the Medicare Physician Fee Schedule. See discount and additional detail relating to the model. CMMI is accepting a nonbinding letter of intent from providers due on September 22, 2011, by 5 p.m., with full application for the model due October 21, 2011.

Model 2: Retrospective Acute Care Hospital Stay Plus Post-Acute Care

Model 2 would include the inpatient stay and post-acute care and would end, at the applicant's option, either 30 or 90 days after discharge. Bundled payments would include physician services, as well as post-acute provider services, related readmissions and other services proposed in the episode definition including clinical laboratory services, durable medical equipment services, prosthetics, orthotics and supplies (DMEPOS) and Part B drugs. Payments are made at the usual fee-for-service payment rates, after which the aggregate Medicare payment for the episode will be reconciled against a target price. The applicable discounts are detailed in the application, but range from 2-3 percent. At the end of the episode of care, the participating providers will be allowed to share in the amount by which total payments were less than the target price. CMMI will be accepting a nonbinding letter of intent from providers due on November 4, 2011, with full application due by March 15, 2012.

Model 3: Retrospective Acute Care Only

In Model 3, the episode of care would begin on the date of discharge from the inpatient stay and extend through 30 days after discharge. In other respects, the bundled payment is structured as in Model 2; however, a minimum discount rate is not specified as it is in the other models.

Model 4: Prospective Acute Care Hospital Stay Only

Model 4 contemplates a single prospective payment to the hospital, encompassing all services furnished during the inpatient hospital 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.

The Bundled Payment Initiative contemplates a gainsharing component to the proposed models and outlines the gainsharing design and quality components for consideration in the proposed application. Additionally, it is clear that providers may pursue more than one care coordination initiative and also be considered for this Bundled Payment Initiative.

CMS invites organizations that submit proposals to demonstrate care improvement processes and enhancements such as reegineered care pathways, evidence-based methods, standardization of care using checklists and other care coordination initiatives.

CMS clearly views these initiatives as progress toward achieving the triple aim, describing the Bundled Payment Initiative as "one more step" in an effort across the U.S. Department of Health and Human Services (HHS) to move toward more care coordination in our healthcare system.