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New Medicare Bundled Payment Model

As Maryland experiments with the Total Cost of Care Model, it is important to stay abreast of initiatives occurring elsewhere.

While Maryland hospitals and doctors are not eligible to participate in the Centers for Medicare and Medicaid Services’ (CMS) newest voluntary bundled payment model, the Bundled Payment for Care Improvement-Advanced (BPCI-A) program goes into effect on October 1, 2018, and a variation of it could come to Maryland.

A.  Bundling

Bundled payment programs combine payments for physician, hospital and other health care services needed in a patient’s treatment into a single bundled payment to be allocated across all providers in a pre-defined clinical treatment episode. Health care providers that participate in bundled payment models take on downside payment risk, because payments are calculated based on the expected costs, rather than actual costs, of all items and services furnished to a patient during the clinical episode. 

In this way, bundling provides incentives for participants to coordinate and deliver health care more efficiently. Efficient providers stand to gain from the surplus remaining from their lower cost services. 

Bundling under BPCI-A provides participating physicians the added incentive of increased compensation, because it constitutes an Advanced Alternative Payment Model, which qualifies participating physicians for increased payments under the Medicare Access and CHIP Reauthorization Act of 2015.

B.  Features of BPCI-A

BPCI-A is the latest in a sequence of bundled payment programs trialed by CMS since 2013. Under BPCI-A, participants may select one or more clinical episodes from among 32 eligible episode options. This offering excludes 16 episodes available under previous CMS programs primarily because of their low volume of occurrence among participants or complexity of administration. 

Twenty-nine of the clinical episodes under BPCI-A concern inpatient care and include major joint replacements, stroke and certain disorders of the liver. The three remaining clinical episodes concern outpatient care, and consist of percutaneous coronary intervention, cardiac defibrillator and certain back and neck episodes. All clinical episodes under BPCI-A run for 90 days. 

BPCI-A includes a more sophisticated payment calculation model than previous CMS programs. Under BPCI-A, CMS determines benchmark payment levels based on factors, including patient case-mix, spending relative to peers and historic Medicare expenditures. CMS will set target prices for each clinical episode at 3% below the benchmark.  

CMS will make standard fee-for-service payments to BPCI-A participants during the clinical episode. Semiannually, CMS will reconcile the total spending for a clinical episode against the respective target prices to determine whether the total spending was greater or less than the target prices. 

The reconciled difference will be subject to adjustment based on quality measures tracked for the participants. Adjustments due to quality measures can increase or decrease the reconciled difference by up to 10%. 

If the adjustment is positive, then CMS will pay such amount to the participant. If the adjustment is negative, then the participant will owe such amount to CMS.

C.  Timeline and Participation

Although the first application period for BPCI-A has expired, it is expected that there will be a second application window beginning in January 2020. Acute care hospitals and physician group practices are the only entities eligible to initiate clinical episodes under BPCI-A, but other entity types may participate to facilitate service coordination among participants. 

Health care providers participating in other overlapping CMS programs may be excluded from participating in BPCI-A. For example, hospitals participating in CMS’s Comprehensive Joint Replacement program will not be eligible to participate in BPCI-A for the same joint replacement clinical episodes. 

Notably, all hospitals in Maryland and physicians that only practice in Maryland are also not eligible for BPCI-A, because CMS has an overlapping program that allows Maryland to set hospital rates for Medicare beneficiaries receiving hospital care in Maryland.

D.  Conclusion

BPCI-A continues the push toward value-based billing models across the health care industry. The program presents a valuable opportunity to gain experience with such models. For participants having best-in-class services for eligible clinical episodes, BPCI-A may also offer a significant opportunity for profit.

Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw.com


September 25, 2018




Himmelrich, Ned T.


Health Care