In January 2013, the Centers for Medicare & Medicaid Services (CMS) announced the health care organizations selected to participate in its three-year Bundled Payments for Care Improvement initiative. It comprises four defined models of care, which link payments to the full range of services that beneficiaries require during an episode of care. The “bundle” of patient-specific procedures for which a single payment is made is referred to as an “episode.”

Different Models

Model One will apply to an episode of care encompassing only acute inpatient care hospitalization. Under Model Two, an inpatient stay plus 30, 60 or 90 days of post-discharge service is covered. Payment results from a retrospective comparison of a budget with actual “fee for service” payments. The payment arrangement for Model Three is the same as Model Two, but only covers post-discharge care. Finally, Model Four offers prospectively set payments for episodes consisting solely of inpatient care. After three years, the CMS will assess how well each model improved patient care and whether the models resulted in lower costs to Medicare.

Model One will pay only for the services billed by the hospital. Model Two may include a bulk payment to a hospital and a rehabilitation facility.

Practices should plan ahead for operating under such arrangements, focusing on certain provisions. First, understand rules that trigger, break or expire an episode. The payment contract should specify which CPT or ICD codes initiate each type of episode, what events may nullify the payment process, and when an episode has come to an end so that payments cease. Be clear about what providers and services are included in an episode budget.

Performance Data

You will also need to determine what performance data will be available about other network providers. This can help you decide to whom referrals should be made and from whom they should be accepted. You will also need to decide when the reconciliation of payments will be made after an episode is terminated or expires.

Another issue to address includes learning how disputes between providers and payers can be appealed. Inquire into the mechanisms for resolving disputes among providers and pay attention to the governance structure of the provider network. It will influence decisions on qualifications for joining the network, adding new classes of providers, changing the formula for allocating bundled payments among providers or renegotiating the budget for an episode. Also, you will want to understand what happens when an episode costs more than what was budgeted as well as how risk is allocated among participants and what happens if a provider leaves the network in mid-episode.

Finally, identify the process by which providers may voluntarily terminate participation in the network or be involuntarily terminated from it. Determine what steps will be taken if two providers claim the same share of an episode budget. Possibilities include simple negotiations or a decision by a tribunal.

Mind the Details

As confusing as all this is, bundled payments are here to stay, and it is critical that you understand the process and how your practice can fit into a network. To learn more about these types of payments, contact Larry Sophian at 312.670.7444.