Provider Interest in Bundled Payments Increases

The bundled payment initiative initially attracted about 2,400 providers over the 18 months since it was launched in January 2013. CMS recently announced an additional 4,100 provider candidates in the initiative, bringing the total to approximately 6,500.


These candidates will analyze Medicare spending data to decide whether to enter into bundled-payment contracts. Under these contracts, payments are “bundled” for multiple services connected to certain episodes of care. Participating providers profit when their spending on these episodes of care falls below Medicare’s savings target. Providers must reduce Medicare costs by 2% to 3.5% before they are rewarded, with some exceptions.


Hospitals and doctors can test any of four bundles that include some or all medical expenses for care provided throughout a hospital stay; one to three months after patients leave; or both.


Bundled payments and accountable care, both financing experiments under the Patient Protection and Affordable Care Act (ACA), have gained significant traction “even though providers have limited experience with them and previous demonstrations have shown mixed results.” (“Interest surges in Medicare bundled-payment initiative,” Modern Healthcare, July 31, 2014)


The initiatives hold potential but also pose risks, health policy experts say. “Bundles and accountable care may reduce waste and fragmentation under existing financing, which pays providers for each procedure, visit or service, creating an incentive to do more regardless of need. But the incentive to control spending may also entice providers to reduce necessary care or avoid costly patients.” (“Interest surges in Medicare bundled-payment initiative,” Modern Healthcare, July 31, 2014)


The success of the bundled payment initiative will depend on how many  providers move from exploration to the contract stage. Providers at the exploration stage examine their performance to determine whether they can withstand the risk. Of the original group of candidate providers, 236 proceeded to contract; 86 did not.


The surge in interest in bundled payments suggests growing comfort among providers with reimbursement that comes with heightened financial risk, an executive from the Health Care Incentives Improvement Institute noted. The Medicare initiative’s four models give providers the opportunity to test bundled payments on a limited scale, unlike contracts that require a more global budget, he said. “There is a pent-up demand; this is a manifestation of that pent-up demand,” he said. (“Bundled payment attracts providers—but will they sign?,” Modern Healthcare AM, August 1, 2014)


Challenges hospitals face with bundled payments include achieving clinical depth to prevent hospital readmissions, and building a strong case management team.




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