New demonstration project bundles Part A and Part B payments for certain clinical services

In January, the Centers for Medicare & Medicaid Services (CMS) launched its test drive of a proposed bundled payment concept it hopes will generate improved quality of care and cost efficiencies. The Acute Care Episode (ACE) Demonstration project replaces fee-for-service (FFS) with global payments for orthopedic or cardiovascular inpatient procedures or both at the five participating hospitals.

A bundled payment is a single payment for both Part A and Part B Medicare services provided during a single inpatient stay. Currently, Medicare Part A pays hospitals a single predicted amount under the Inpatient Prospective Payment System for all care provided during an inpatient stay. Physicians, laboratories, and other providers with a role in a patient’s care are paid separately for services performed under Part B.

The idea is to use these bundled payments as a way to align incentives for both hospitals and physicians. Expectations are that collaboration will increase among providers and costs will be reduced. This project encourages providers to develop efficiencies in the care through quality improvement in clinical pathways; improved coordination of care among specialists; and “gainsharing,” or sharing in financial incentives offered for improvements in efficiency and quality.

The ACE Demonstration includes 28 cardiac and nine orthopedic inpatient surgical services and procedures. These service areas were selected because they involve high-volume, elective procedures. Therefore, there is sufficient market competition to ensure ACE Demonstration participation, and these services are easy to specify, and quality metrics are available for them.

Another goal of this demonstration project is to provide Medicare beneficiaries with more transparency on the price and quality of services. In particular, CMS wants to know if the easy access to this information influences how beneficiaries select hospitals and other providers for the clinical services covered in the demonstration project.

Each participating hospital, referred to as a “Value-Based Care Center”, is being actively marketed to both beneficiaries and referring physicians. This includes Baptist Health System in San Antonio, Oklahoma Heart Hospital LLC in Oklahoma City, Hillcrest Medical Center in Tulsa, Exempla Saint Joseph Hospital in Denver and Lovelace Health System in Albuquerque.

CMS considers the move to a bundled payment system synonymous with health care reform. In announcing the project launch, CMS Acting Administrator Kerry Weems said the ACE Demonstration reflects an ongoing commitment of CMS to break down silos in health care by creating better care teams and improved communications between caregivers and their patients. “This demonstration is another important step to develop new value-based purchasing approaches by rewarding health care providers who provide the right care at the right time.”

Pathologists and lab administrators will want to track the progress of this demonstration project. If the concept of bundling Part A and Part B services into a single payment gains traction, then Part B laboratory testing services for selected procedures might also be included in the bundled payments. That would not be a welcome development, because it would likely trigger similar issues of collecting payment for clinical pathology professional services that has dogged the pathology profession since introduction of Part A DRGs (diagnostic-related groups) in the early 1980s. – P. Kirk

Related Information:

Nashville leads effort to combine health payments

CMS Announces Acute Care Episode Demonstration Teleconference