CMS cancelling two mandatory bundled payment models and reducing the geographic area required to participate in a third is not necessarily a surprise, it’s an unfortunate miscalculation by the current Administration. We know this for two reasons:
- Bundled payments work (and we have extensive data to prove it).
- Bundled payments save American taxpayers money.
A brief history of bundled payment models
The idea behind bundled payment models is to incentivize more efficient spending and better care coordination between providers, which ultimately reduce costs. Traditional payment models reward the quantity of services providers offer rather than the quality of care, as Medicare payments are made separately to providers for the individual services rendered to patients. This approach often results in fragmented care with minimal coordination across providers and care settings. Research has shown that bundled payments align incentives for providers allowing them to work closely across all specialties and settings.
The Bundled Payments for Care Improvement (BPCI) initiative was developed by the Center for Medicare and Medicaid Innovation (CMMI). CMMI was created by the Affordable Care Act to test innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid or Children’s Health Insurance Program (CHIP) expenditures while enhancing the quality of care for patients.
For certain procedures, CMS adds up the costs for the entire episode, from the hospital stay and medical supplies to rehabilitation. If the total is below a target set by CMS, the hospital keeps the savings. If not, the hospital pays Medicare the difference.
Bundled payments: The impact
A recent study in JAMA revealed significant cost savings in total spending per episode, up to $5,577, in addition to reduced readmissions, complications, emergency department visits and length of stay under bundled payment models. Hospitals and health systems across the country have witnessed better bottom lines and, more importantly, satisfied patients who receive more coordinated care at lower costs.