Health Information Management

News: CMS releases bundled payment information

CDI Strategies, September 2, 2011

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Trying to convince physicians that good documentation has “something in it for them” is a battle that CDI specialists fight each day. But a new CMS initiative that bundles physician and hospital payment into one lump sum could represent a long-term, revolutionary solution to that age-old question.

CMS is looking for providers to test four new bundled payment plans, according to a Fact Sheet released August 23. Of the four “broadly defined” models, three revolve around a retrospective arrangement with a target payment for a specified episode of care. The fourth proposal would provide a single, prospectively determined bundled payment to the hospital that would encompass all services furnished during the inpatient stay by the hospital, physicians, and other practitioners, the Fact Sheet states. Facilities would then reimburse the physicians from the bundled payment amount.
Although the first three models are retrospective each includes different elements. The first essentially follows the existing payment structure with facilities receiving payments under IPPS and physicians under MPFS albeit at a reduced amount. Then each shares any profits gained from improved quality care, according to the Fact Sheet.
In the second model, the episode of care would include the inpatient stay and post-acute care and would end at either 30 or 90 days after discharge. The third model begins at discharge and ends no sooner than 30 days after discharge. Both of these models bundle payment for physician services, post-acute care, related readmissions, as well as related services such as Part B drugs, related testing, and medical equipment. The payment will be based on the applicant’s historical fee-for-service payment for the episode, made at the typical fee-for-service rates, according to the Fact Sheet. Then the aggregate Medicare payment for the episode will be reconciled against the target price. Savings beyond the discount reflected in the target price will be paid to the participants to share among the participating providers.
“Bundling payment for services that patients receive across a single episode of care, such as heart bypass surgery or a hip replacement, is one way to encourage doctors, hospitals and other health care providers to work together to better coordinate care for patients both when they are in the hospital and after they are discharged,” the Fact Sheet states.
Those wishing to become testing facilities need to “identify the clinical condition(s) through MS-DRGs, define the time period for the episode of care, and identify the services included in the bundled payment, among other criteria,” according to the Fact Sheet. Due dates for various letters of intent and formal applications begin in September and continue through March 2012. RFA and application found at: or e-mail at

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