Medicare Selects Demo Sites for Testing Bundled Payments

Five hospitals have been selected to be demonstration sites for Medicare's test run of bundling payments for physicians and hospitals for a selected set of inpatient episodes of care.

The Centers for Medicare and Medicaid Services (CMS) says the goal of the 3-year Acute Care Episode demonstration project is to “better align the incentives for both hospitals and physicians, leading to better quality and greater efficiency in the care that is delivered.”

In its June 2008 report to Congress, the Medicare Payment Advisory Commission recommended a voluntary pilot program to test the feasibility of bundling. The commission's staff said that such a demonstration project could give the CMS valuable data on how hospitals and physicians share payments and on how Medicare might share in the savings generated by bundling.

In announcing the selected sites, Acting CMS Administrator Kerry Weems said that with the demonstration project, Medicare “expects to demonstrate how to better coordinate inpatient care and achieve savings in the delivery of that care that can ultimately be shared between hospitals, physician, beneficiaries, and Medicare.”

The demonstration will cover 28 cardiac surgical services—pertaining to valve replacement, defibrillator and pacemaker implantation, percutaneous coronary angioplasty, and coronary artery bypass graft—and 9 orthopedic surgical services—all related to hip, knee, and other major joint replacement. The CMS chose these procedures because they are high volume, easy to specify, and have quality metrics.

Medicare will make a single payment to the hospital for both Part A and Part B. The payment will be reviewed each year in October when inpatient and outpatient payment rates are set. The bundled payment will cover the same time window as that covered by a traditional inpatient payment, which includes preadmission testing. All physician services in the hospital from admission through the date of discharge are also covered.

The CMS sought applicants from Colorado, New Mexico, Oklahoma, and Texas. The selected sites are Exempla Saint Joseph Hospital in Denver, Lovelace Health System in Albuquerque, Hillcrest Medical Center in Tulsa, Oklahoma Heart Hospital in Oklahoma City, and Baptist Health System in San Antonio. Each hospital will be designated as a “valued-based care center” and promoted that way to Medicare beneficiaries.

Oklahoma Heart Hospital and Exempla Saint Joseph Hospital will be designated as value-based centers for cardiac procedures, Lovelace Health System will be a center for orthopedic procedures, and Baptist and Hillcrest for both orthopedic and heart procedures.