Annals of Health Law
VALUE BASED PURCHASING
fee-for-episode-of-care model:
From a patient perspective, bundled payments make sense. You
want your doctors to collaborate more closely with your physical
therapist, your pharmacist and your family caregivers. But that
sort of common sense practice is hard to achieve without a
payment system that supports coordination over fragmentation and
fosters the kinds of relationships we expect our health care
providers to have. 77
Under the Initiative, providers can apply to participate in one of four
models (discussed below), all of which group different services together for
bundled payments. Providers are defined broadly, and include physician’s
groups, hospitals, physician-hospital organizations, nursing homes, and
others. 78 To participate in the Initiative, physicians and hospitals design
their own models of bundled payment under the four general types of
payment models. Providers then submit bids to The Center for Medicare
and Medicaid Innovation. The bids must propose a target price for an
episode of care; participants would receive discounted payments under the
fee for service system, and at the end of the episode the total payments for
the care would be compared to the target price. Those involved in
providing the patient’s care could share in any savings generated to
Medicare.
As mentioned, there are four available models for providers to design
their program. 79 The first three models involve retrospective payments. In
these models, CMS and providers set a target payment amount for a defined
episode of care. 80 Applicants would propose a target price, which would be
set by applying a reduction to total costs for a similar episode of care (to be
determined based on historical data). 81 While participants in these models
would be paid under the traditional fee-for-service system, this payment
would be at a negotiated discount. 82 At the conclusion of an episode, the
total payment amount would be compared with the target
price. 83 Participants may share the profits resulting from this theoretically
more efficient care model. 84
77. Id.
78. Bundled Payments for Care Improvement, CTR. FOR MEDICARE AND MEDICAID
INNOVATION (2012), http://innovations.cms.gov/initiatives/bundled-payments/index.html.
79. Id.
80. Id.
81. Id.
82. Id.
84. Bundled Payments for Care Improvement, CTR. FOR MEDICARE AND MEDICAID
INNOVATION (2012), http://innovations.cms.gov/initiatives/bundled-payments/index.html.
