Thousands of providers join Medicare's bundled pay program

Providers joined Phase 1, which carries no financial risk

Investing in quality isn't a choice. But getting paid for it is.

CMS on Thursday announced that Medicare will nearly triple the number of medical groups and hospitals exploring the use of bundled payments, adding 4,122 candidates to the existing pool of 2,412 Phase 1 providers.

The first, exploratory phase of the Medicare Bundled Payments for Care Improvement (BPCI) initiative—which now includes about 6,500 provider groups—is considered the "preparation" period for the program. Participants in the first phase have not assumed financial risk and may opt out of the program before entering Phase 2.

Understanding Medicare' bundled payment initiative

The BPCI initiative was created by the Center for Medicare and Medicaid Innovation in January 2012. It is comprised of four "broadly defined" models of care that establish bundled payments for multiple services received during an episode of care.

Our breakdown of the four BPCI bundling models

The object of the initiative, which was made possible through the Affordable Care Act (ACA), is to test whether paying lump sums for episodes of care will lower health care costs without harming care.

According to CMS Administrator Marilyn Tavenner, the initiative aims to "to improve the quality of health care delivery for Medicare beneficiaries, while reducing program expenditures, by aligning the financial incentives of all providers."

Three things you need to know about the current risk environment

The 'preparation' phase and its 6,424 providers

Under Phase 1, the non-risk bearing stage of the initiative, hospitals and medical groups will explore how to use bundled payments for some or all of 48 medical conditions and procedures included in the program, such as pacemaker implants and joint replacements. With the new wave of participants, Phase 1 now has 870 participants representing 6,424 Medicare organizational providers.

These providers are exploring bundled payments, but they are not required to move on to Phase 2, which carries financial risk for participants. (For context: 86 of the 236 providers in the first crop of Phase 1 participants did not move on to Phase 2.)

In a statement, CMS officials said, "We are very pleased with the additional interest in the initiative, and we expect a number of Phase 1 participants to continue to Phase 2." However, Francois de Brantes, executive director of the Health Care Incentives Improvement Institute, says he expects a high attrition rate.

How would bundled payments affect your hospital? Get assessed now

The Phase 1 participants will have until April 2015 to decide to whether to move into Phase 2 of the program and sign bundled payment contracts.

The 'risk-bearing' phase and its 243 providers

Meanwhile, Phase 2 now counts 105 awardees representing 243 Medicare organization providers.

By comparison, the Medicare Shared Savings Program has more than 340 participating groups (Evans [1], Modern Healthcare, 7/31 [subscription required]; Ellison, Becker's Hospital Review, 7/31; Evans [2], Modern Healthcare, 7/31 [subscription required]; CMS fact sheet, 7/31).

The Advisory Board's take

Rob Lazerow, Health Care Advisory Board

The dramatic growth of the Bundled Payments for Care Improvement Initiative demonstrates that hospitals, physicians, and post-acute care providers continue to focus on preparing for value-based payment models. 

While the new organizations joining the initiative still need to operationalize their bundling programs, they have already taken an important step toward ultimately aligning incentives and coordinating care across the continuum. For these providers, focusing on delivering efficient acute care episodes is a tangible way to generate new value for their patients and the Medicare program. 

Our team has written quite a bit on the growth in bundled payments. And as always, we will continue to follow the program and study the implications for providers.

Six factors that make or break bundled pay deals

Our 2013 accountable payment survey revealed that the majority of providers expect to implement bundled payment contracts within the next three years. Ready or not, bundled payments are picking up steam and now is the time to prepare for success under this model.

Gain confidence as you consider crafting bundled payment contracts with our guide to contract profitability.

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