HHS Unveils Bundled Payments To Encourage Care Coordination, Savings

This afternoon, the Department of Health and Human Services (HHS) announced a new pilot program that will pay hospitals and doctors a lump sum for treating a particular condition, rather than reimbursing for each separate service. The initiative is part of the new payment reform demonstration projects authorized by the Affordable Care Act:

In Medicare currently, hospitals, physicians and other clinicians who provide care for beneficiaries bill and are paid separately for their services. This Centers for Medicare & Medicaid Services (CMS) initiative will bundle care for a package of services patients receive to treat a specific medical condition during a single hospital stay and/or recovery from that stay – this is known as an episode of care. By bundling payment across providers for multiple services, providers will have a greater incentive to coordinate and ensure continuity of care across settings, resulting in better care for patients. Better coordinated care can reduce unnecessary duplication of services, reduce preventable medical errors, help patients heal without harm, and lower costs.

The Bundled Payments initiative is being launched by the new Center for Medicare and Medicaid Innovation (Innovation Center), which was created by the Affordable Care Act to carry out the critical task of finding new and better ways to provide and pay for health care to a growing population of Medicare and Medicaid beneficiaries.

Policy makers are hoping that by paying for an episode of care as a whole, providers will have the flexibility and financial incentives to better coordinate care within each episode and avoid complications and readmissions. HHS is now accepting applications for the program and if it accrues savings will hopefully expand the project to more providers and health conditions.