Bundled Payment Initiative May Provide Opportunities for Family Medicine

Program Focuses on Reducing Expensive Hospitalizations

August 31, 2011 05:20 pm James Arvantes

A new broad-based initiative that will pay a predetermined amount to physicians and hospitals for managing patient care inside and outside of hospitals could give participating family physicians an opportunity to enhance patient care -- as well as their incomes -- by successfully reducing and preventing patient hospitalizations.

"Today a patient goes to the hospital, comes out, and the doctor focuses on trying to make sure that the patient takes his or her medications and stays out of the hospital," said Harold Miller, president and CEO of the Network for Regional Healthcare Improvement and executive director of the Center for Healthcare Quality and Payment Reform, both in Pittsburgh. "There is no reward for the physicians for doing that. This initiative actually provides an opportunity for family physicians to obtain more money by successfully managing the patient's care and keeping the patient out of the hospital."

The CMS initiative, which is known as the Bundled Payments for Care Improvement initiative(www.innovations.cms.gov), includes an option to link payments for the multiple services patients receive inside and outside of the hospital setting for an episode of care rather than paying for services separately. This is expected to give physicians and hospitals new incentives to coordinate and improve the quality of care, which could result in savings for the Medicare program, which, according to CMS, Medicare would be willing to share with participants.

CMS has undertaken similar initiatives in the past, but those projects have focused on inpatient services related to surgeries, particularly orthopedic and cardiac procedures. This bundled payments initiative is much broader, according to Miller. It will encompass both in-hospital and post-discharge care and can include chronic disease and other medical admissions, as well as surgeries, said Miller. However, he did note that the program will primarily address Medicare costs by targeting hospital stays.

Story highlights

  • CMS has launched an initiative that will pay a predetermined amount to physicians and hospitals for managing patient care inside and outside of hospitals.
  • According to one policy expert, family physicians could earn more money by successfully reducing and preventing patient hospitalizations.
  • The AAFP, however, has expressed concerns about whether there is a place for solo and small-practice family physicians in the initiative.

A Place for Family Physicians?

Although AAFP President Roland Goertz, M.D., M.B.A., of Waco, Texas, praised CMS for launching an initiative that is flexible, innovative and designed to provide a high level of efficient care, he expressed concern about small and solo family physician practices' ability to participate.

"I don't see a large number of our members being able to participate in this in an aggressive way," Goertz told AAFP News Now. "I believe an overall movement, with appropriate rewards, toward a more efficient family medicine/primary care-based system is what is needed."

According to Bruce Bagley, M.D., the AAFP's medical director for quality improvement, "Bundled payment has the most cost-saving leverage for high-cost hospitalizations and procedures. It doesn't work as well for patients with multiple chronic diseases managed in the ambulatory setting."

Miller, however, believes that there still is a major role for primary care and family physicians. "The idea is to either find a way to deliver hospital care at a lower cost, to reduce the rate of preventable readmissions, or reduce unnecessary, more expensive post-acute care." None of these approaches will work without the participation of primary care and family physicians, who usually are responsible for managing patient care in the community, said Miller.

He agreed that a small family physician practice on its own could not successfully participate in the bundled payments initiative, but small practices working in tandem through an independent physician association or a physician hospital organization could participate successfully, he noted.

Nevertheless, Goertz said some family physician practices are going to ask why they should participate in the initiative, especially if they live in areas with low medical costs. He added that it will "really depend on the level of potential incentives projected in a given Medicare region."

"For example, I live in an area that is in the bottom quartile of cost per Medicare recipient per year," said Goertz. "I don't know if my area is going to find this project very appealing because the amount I can share in savings is likely to be very small compared to an area that is twice the cost of where I am."

Program Details

CMS' Center for Medicare and Medicaid Innovation, which will manage the bundled payments initiative, recently issued a request for applications that outlines four broad approaches to bundled payments. These approaches should give participating physicians and other providers more flexibility in determining which episodes of care and which services will be bundled together, according to the agency.

In each of the four models, CMS, physicians, hospitals and other providers would agree to a target payment amount for all services delivered by both hospitals and physicians within a defined episode of care. According to a CMS fact sheet(www.cms.gov), the target price would be set by applying a discount to total costs for a similar episode of care as determined by historical data. Organizations interested in applying to the bundled payments initiative must submit a letter of intent no later than Sept. 22 for model 1 and Nov. 4 for models 2, 3 and 4.

Participants will be paid for their services according to the standard Medicare fee-for-service system. At the end of an episode of care, total payments would be compared with the target price. If the total is lower, participants will get a check from CMS for the difference. But if costs increase beyond the payment level, physicians and other providers will have to provide CMS with a refund to cover the additional costs.

As part of the initiative, CMS plans to make data on Medicare hospitalizations and rehospitalizations available to participating physicians and hospitals. This information is essential to the success of the initiative, said Miller. "Only Medicare has the data on all services that patients are receiving," he explained. And if physicians are to assume accountability and risk for patients under a bundled payment scheme, they need access to this information.