CMS presses for bundling patient payments

Oct. 1, 2011

Revenue Cycle Management

In the current Medicare scenario, hospitals, physicians and other clinicians bill and are paid separately for their services. But that may change soon.

The U.S. Department of Health and Human Services (HHS) announced at the end of August that doctors, hospitals and other healthcare providers can now apply to participate in a program called the Bundled Payments for Care Improvement initiative (Bundled Payments initiative).

The Centers for Medicare & Medicaid Services (CMS) program seeks to align payments for services delivered across an episode of care, such as heart bypass or hip replacement, rather than paying for services separately. Bundled payments aim to give doctors and hospitals new incentives to coordinate care, improve the quality of care and save money for Medicare.

The Bundled Payments initiative is being launched by the new Center for Medicare and Medicaid Innovation, which was created by the Affordable Care Act. The program is based on research and previous demonstration projects that suggest the approach has lucrative potential. For example, a Medicare heart bypass surgery bundled payment demonstration saved the program $42.3 million, or roughly 10 percent of expected costs, and saved patients $7.9 million in coinsurance while improving care and lowering mortality.

“This Bundled Payment initiative responds to calls from the hospital and physician communities for a flexible approach to patient care improvement,” says Donald Berwick, M.D., CMS administrator. “All around the country, many of the leading healthcare institutions have already implemented these kinds of projects and seen positive results.”

The Center for Medicare and Medicaid Innovation’s request for applications (RFA) outlines four broad approaches to bundled payments. Providers will have the choice to determine which episodes of care and which services will be bundled together.

“From a patient perspective, bundled payments make sense,” says Dr. Berwick. “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 healthcare providers to have.”

Find out more about the Bundled Payments initiative at

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