As elements of the Accountable Care Act (ACA) are being ramped up, it is useful to understand their origin. CMS has a long history of supporting many types of payment reform demonstrations and the new bundled payment system is a good example.
Bundled payments are a new payment methodology in the ACA and this system is based on the Acute Care Episode (ACE) demonstration project. The ACE program pays a flat bundled rate for 9 orthopedic and 28 cardiac procedures. This fee includes hospital care, physicians and outpatient follow up and rehab. There are 22 quality measures reported each quarter to CMS. Physician payments can be increased by 25 percent if certain cost reduction targets and quality goals are met. The Baptist Health System in Texas participated in the ACE project and immediately began to receive gain sharing payment from Medicare that ranged from $65 to $6,000 per admission.
Other CMS demonstrations have shown that bundling payments improves care for patients, and leads to better health, better care and lower costs.
- During the five-year Heart Bypass Center Demonstration (started in 1986), Medicare saved $42.5 million – or 10 percent – on Coronary Artery Bypass Graft surgery at participating hospitals in Atlanta, Columbus, Ann Arbor (Michigan), and Boston, largely through improved hospital processes and a reduced need for intensive care. Medicare patients saved $7.9 million in coinsurance payments.
- Medicare’s three-year cataract surgery demonstration (started in 1993) was also successful in reducing Medicare spending by $500,000 for approximately 7,000 procedures at sites in Cleveland, Dallas/Fort Worth, and Phoenix.
- The fixed price for Coronary Artery Bypass Grafts (CABG) under Geisinger’s ProvenCare reduced costs and improved patient care showing that hospital costs dropped 5 percent, average length of stay fell by 0.5 days, and the 30-day readmission rate fell 44 percent over 18 months for Pennsylvania hospitals in Geisinger’s network.
CMS has provided four separate new bundling models for providers to consider:
- Inpatient stay only – pre-set fee for service discount with gain sharing if targets are met
- Inpatient stay plus post discharge services
- Post-discharge services only
- Inpatient stay – bid price
The program is scheduled to begin in 2012. More detailed information can be found on the HealthCare.gov website.