Bundled Payments Demo Shares Savings with Doctors and Patients

Tuesday, November 17th, 2009
This post was written by Melanie Matthews

Baptist Health System Chief Development Officer Michael Zucker shares Baptist’s motivation for participating in a CMS pilot on shared or bundled payments — a reimbursement model increasingly mentioned in healthcare reform debates.

There were several components of the CMS Acute Care Episode (ACE). First, there was a competitive bidding process. CMS was focused on one geographic region within the country. They chose the Southwest, which included Texas, Colorado, Oklahoma and New Mexico. These four states fall under the fiscal intermediary TrailBlazer, which administers the Medicare program in this region.

During the competitive bidding process, CMS put out a proposal to providers in the 15 largest metropolitan statistical areas within these four states and sought bids on package pricing or bundled pricing from both the hospitals and the physicians on the targeted cardiac and orthopedic DRGs. CMS was going to select one provider system; that is, the hospitals and physicians who put in the combined bids in each of these metropolitan areas up to the 15 markets that they’ve identified. They didn’t select 15 markets; in fact, CMS only chose five markets in the country to kick off this program.

Another key component of the ACE Demonstration Project was the concept of shared savings. CMS was seeking a lower combined pricing structure from what they would traditionally get under the current Medicare process, which is a DRG basis for the hospital side and the fee schedule arrangements on the physician’s side — or Part A and Part B as we know them. In effect, taking that savings and passing it back on to the Medicare beneficiary is a key differentiator from past demonstration projects. The actual patient or Medicare beneficiary would be allowed to share in that cost savings, but also have an incentive to seek out CMS to find this as a value-based center of excellence.

The bundled payment concept would include both Part A and the Part B components for the hospital where individuals were having any of 28 cardiac and nine orthopedic DRGs. Note that this does not include any outpatient procedures; these are only admissions.

Another key focus for the ACE Demonstration Project was the gainsharing with physicians. And lastly, the beneficiary incentive or the check back to the beneficiary in that shared savings.

To give you an idea of why Baptist Health System pursued the ACE Demonstration Project, I wanted to illustrate the market share in San Antonio and South Texas. The Baptist Health System is a major player in the cardiac arena, having a little over a third of the cardiac market share. We saw the opportunity in that other 65 percent of the market that is undirected and going to other healthcare systems in the area. We have a little more market share on the orthopedic side, but the opportunity there was that 59.9 percent of the marketplace that potentially could move to a Baptist Healthcare System facility.

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