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Episode Based Payment Initiatives 

The second category of innovative models described by CMS fall under the Episode Based Payment Initiative.  This is sometimes referred to as “Bundled Payments” and refers to an alternative payment model or APM.  Like ACOs, there are several different initiatives under this category, including the following four general models and the models listed under “Specific Examples of Episode Based Initiatives":

  • BPCI Model 1: Retrospective Acute Care Hospital Stay Only – Under this model, the acute care hospital is given a payment that is meant to cover all hospital resources used during an inpatient stay, or episode of care.  The amount of payment is a discounted amount of what the hospital would have received under the Inpatient Prospective Payment System.
  • BPCI Model 2: Retrospective Acute & Post-Acute Care Episode - The episode In this model includes the inpatient stay in an acute care hospital plus the post-acute care and all related services provided for 30, 60 or 90 days after acute care hospital discharge (initiator chooses time frame.)
  • BPCI Model 3: Retrospective Post-Acute Care Only - The episode of care begins at initiation of post-acute care services with a skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency.  The episode ends 30, 60 or 90 days after acute care hospital discharge (initiator chooses time frame.)  Note - The post-acute services must have been triggered by an acute care hospital stay but the costs for that stay are not included in the episode.
  • BPCI Model 4: Prospective Acute Care Hospital Stay Only - This bundled payment includes all Medicare Part A and Part B covered services furnished during the inpatient stay by the hospital, physicians, and nonphysician practitioners, as well as any related readmissions that occur within 30 days after discharge.  Note that in this case, the bundle is paid for prospectively.

Note: In Model 1, the model could be based on any DRG while models 2, 3, and 4 had to pick from a list of 48 clinical conditions.  Model 1 did not require risk-sharing while models 2, 3, and 4 had two phases – one in which they did not have to accept risk followed by a period in which they do have to take risk. Read additional, more detailed information on the four bundled payment initiatives

Specific examples of Episode-Based Initiatives

  • Comprehensive Care for Joint Replacement Model – This is an example of a BPCI Model 2 demonstration; however it is mandatory for hospitals in 75 areas selected by CMS.
  • Medicare Acute Care Episode (ACE) Demonstration – This demonstration project has ended – it was designed to test the use of a global payment for an episode of care as an alternative approach to payment for service delivery. The global payment was to cover all Part A and Part B services, including physician services, pertaining to the inpatient stay for Medicare fee-for-service beneficiaries
  • Medicare Hospital Gainsharing Demonstration – This demonstration has ended and only involved 2 hospitals, one of which dropped out after 1 year.  The final report states that the gainsharing did ultimately achieve its goal of generating savings to be dispersed to participating physicians, but there were many challenges with communication and understanding of what was to be achieved.
  • Oncology Care Model - Episodes will begin on the date of an initial chemotherapy administration claim or an initial Part D chemotherapy claim and will not include services provided prior to that date. OCM-FFS episodes will include all Medicare A and B services that FFS beneficiaries receive during the episode period; certain Part D expenditures will also be included. Episodes will terminate six months after a beneficiary’s chemotherapy initiation.  Physicians will receive an extra payment per beneficiary per month to enable care coordination, as well as possible performance rewards.
  • Physician Hospital Collaboration Demonstration – This model was designed to  examine the effects of gainsharing aimed at improving the quality of care in a health delivery system including long-term follow-up to assure both documented improvements in quality and reductions in the overall costs of care beyond the acute inpatient stay, and to determine the impact of hospital-physician collaborations on preventing short and longer-term complications, duplication of services, coordination of care across settings, etc.  The final report notes that there were no cost savings to Medicare and no difference in quality.
  • Specialty Practitioner Payment Model Opportunities – This model was designed to test new models of care that will focus on specific diseases, patient populations, and specialty practitioners in the outpatient setting to incentivize improved care, better health, and lower costs.  It is not clear whether they did not get sufficient response to their request for information in 2014 – it is listed as not currently active now.