Lessons from the CMS ACE Bundled Payment Project

Thursday, April 3rd, 2014
This post was written by Cheryl Miller

Simply put, payment bundling is one of the few policy alternatives available to the healthcare industry in which patients, providers and payors do better, explains Jay Sultan associate vice president and chief product portfolio architect, Trizetto® Corporation. Here, he explains the model, in light of lessons learned from CMS’ recent Acute Care Episode (ACE).

I worked on the CMS ACE Demonstration as an agent for two of the hospitals participating in it; I helped them set up and design the program. Going through all the different constituents, the payor received a discount, they shifted risk, the hospital was able to decrease cost and increase market share.

In one fairly straightforward instance, a single diagnostic-related group (DRG) in the ACE Demonstration Project covered roughly 38 DRGs related to hips and knees. It was all of the implantable related cardiac DRGs, like valves, stents and AICDs. It also included coronary artery bypass grafting (CABG). On one of the DRGs, , they were able to get a $2,000 case reduction in their internal costs.

The hospitals and the physicians both had their revenues go up through their share of the cost savings by the 25 percent that CMS limited them to. Had CMS not placed a limit on how much revenue the physicians could collect, at least one hospital said they thought that they could have doubled the physicians.

Just to be clear, the physicians doing ACE on average, based on the data that’s been reported so far, are getting paid 125 percent for doing traditional Medicare. They could have gotten 200 percent if CMS had not capped their savings.

Is all of this bad for the patient? It’s led to improved quality measurement, improved patient satisfaction. And in this particular program, the members actually got a rebate; a portion of the savings CMS negotiated was given to the patient for going to the facility doing the bundles. I’ll come back to that point later when we talk about the role of steerage and winners and losers in these new payment methodologies.

Excerpted from Blueprint for Bundled Payments: Strategies for Payors and Providers.

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