On February 18, 2014, the U.S. Centers for Medicare & Medicaid Services (CMS) published an announcement (the Announcement) in the Federal Register regarding an open period for additional providers to be considered for participation in Models 2, 3 and 4 of the Bundled Payment for Care Improvement (BPCI) Initiative.  Under the BPCI Initiative, CMS compensates participating providers via bundled payments, rather than the traditional fee-for-service (FFS) payments, for providing a set of services to traditional Medicare beneficiaries.  Bundled payments are designed to incentivize provider coordination and adoption of redesigned care processes by making a single payment for a set of services related to treatment of a particular condition during an episode of care.

In August 2011, CMS released a request for applications for organizations interested in participating in one of four episode payment models through the BPCI Initiative.  On January 31, 2013, CMS announced the initial providers selected to participate in BPCI Initiative.  CMS published the Announcement for additional organization to be considered for participation in Models 2, 3 and 4 of the BPCI Initiative in order to obtain a more robust data set to evaluate the impact of these alternative payment models on reducing Medicare program spending, while preserving or enhancing the quality of care.

Summary of Models 2, 3 and 4

There are four different BPCI Initiative models; however, the Announcement only opens enrollment for additional applicants of Models 2, 3 & 4.  Under Model 1, the bundled payment is limited to the acute care inpatient hospitalization and applies to all Medicare Severity Diagnosis Related Groups.  Models 2–4 go beyond the inpatient hospitalization to include post-acute care and participants are able to choose to receive bundled payments for up to 48 different clinical condition episodes.  Examples of available episodes include knee and hip replacement, stroke care and coronary bypass surgery.

Models 2 and 3

The bundled payment in Models 2 and 3 applies to post-acute care; Model 2 also includes the inpatient acute care hospitalization.  Model 2 and 3 applicants are able to propose episodes of care extending 30, 60 or 90 days after the hospital discharge (Model 2) or initiation of post-acute services (Model 3).  Participants are required to propose a target price for the bundled payment based on the historical Medicare FFS payments for the episode services, with a discount applied.  During the episode of care, participants will continue to receive FFS payments for all services related to the selected condition(s) provided to its Medicare patients.  After the episode is complete, CMS will retrospectively compare the actual FFS payments made for episode services provided during the episode of care to the target price.  Any amounts over the target price must be repaid to CMS and any savings may be distributed by participants to providers.

Model 4

The bundled payment in Model 4 applies to all services during an acute care, inpatient stay and includes all related readmissions provided within 30 days after discharge.  Unlike Models 2 and 3, under Model 4, CMS will make a single, prospective payment at the target price to the acute care hospital upon a beneficiary’s hospitalization for the selected condition(s).  All Medicare Part A and Part B services provided during the inpatient hospitalization that are related to the selected condition(s) are included in the bundle.  Participating physicians and other providers will submit no-pay claims to Medicare and will be paid out of the bundled payment amount that is sent to the hospital.  This model is similar to CMS’s Acute Care Episode Demonstration.

Interested providers must apply by April 18, 2014.  For additional information on the BPCI Initiative, please see McDermott’s publication CMS Announces Participants in Bundled Payment Initiative.