CMS has announced the hospitals for its Acute Care Episode (ACE) demonstration project: Baptist Health System (San Antonio); Oklahoma Heart Hospital LLC (Oklahoma City); Exempla Saint Joseph Hospital (Denver); Hillcrest Medical Center (Tulsa); and Lovelace Health System (Albuquerque).

ACE is a new hospital-based demonstration project that will test the use of a bundled payment for hospital and physician services for a select set of inpatient episodes of care. For the ACE demonstration, a bundled payment will be a single payment for both Part A and Part B Medicare services furnished during an inpatient stay. Under the current system, CMS generally pays the hospital a single prospectively determined amount under the Inpatient Prospective Payment System for all care it furnishes to the patient during the inpatient stay. The physicians who provide services during the patient’s stay are reimbursed separately under the Medicare Physician Fee Schedule for each service they perform. This is the opening salvo in a growing idea within the Agency to consolidate payments based on episodes of care as opposed to reimbursement based on provider type. Such a concept could eventually lead to significant changes in how providers are reimbursed under Medicare.

For the demonstration project, 28 cardiac and non-orthopedic inpatient surgical services and procedures will be included in the bundled payment. These elective procedures were selected because volume has historically been high and there is sufficient marketplace competition to ensure interested demonstration applicants, among other things. You can find more information on the demonstration here.