Bundled payments demonstration shows early promise

Medicare has scheduled a bundled payment demonstration project for early 2012, but a handful of organizations across the country have launched the Acute Care Episode, or ACE, demonstration early.

Initial results of the three-year demonstration suggest that bundled payments can boost quality indicators, expand patient volume, and yield efficiency and cost savings.

The Centers for Medicare & Medicaid Services selected five organizations to participate in the bundled payment project:
Baptist Health System in San Antonio, Texas
Exempla Saint Joseph Hospital in Denver, Colo.
Hillcrest Medical Center in Tulsa, Okla.
Oklahoma Heart Hospital, LLC in Oklahoma City, Okla.
Lovelace Health System in Albuquerque, N.M.

"It's an opportunity to do right by your providers," said Debbie Welle-Powell, vice president for payer strategies at Exempla Healthcare. "(Bundled) payments begin with parameters for quality."

The ACE Demonstration is an innovative pilot program by CMS to bundle Medicare payments to improve quality and reduce healthcare costs. It intends to "re-engineer alignment strategy with physicians" and create "a business strategy to move the commercial market toward payment reform."

"We know that the quality metrics were an important part of the evaluation process," said Shannon Fiser, vice president of financial operations at Ardent Health Services, the organization that operates Lovelace Health and Hillcrest Medical Center.

Fiser leads Ardent Health Services' initiative in the ACE demonstration project.

According to Michael Zucker, senior vice president and chief development officer at Baptist Health System, the benefits of bundled payments for physicians include: Improved patient outcomes, enhanced care coordination, being on the leading edge of global pricing, increased Medicare and non-Medicare volumes, potentially increased reimbursement through provider-incentive program and increased local and national recognition.

He said transparency was critical to winning over physicians who were wary of the bundled payment model, because the model isn't without problems. The health system has experienced issues with double payments and having to deal with reconciliations.

"There's a big 'sticking point' – about 10 percent of claims get stuck until we can figure out where the payments go," said Zucker. "There must be some way to streamline this process, because it's causing a lot of headaches."
Individual beneficiaries receive half of the program's savings, while CMS gets about a 5 percent savings on hospital DRGs, in the form of incentive payments.

Baptist Health chose to do monthly gainsharing and has thus far experienced immediate improvements in quality measures, a shift towards evidence-based practice, sooner-than-expected gainsharing distributions, information systems "opportunities" and a labor-intensive process to administer the program.

"Physicians are still skeptical of bundled payments," Zucker said. "We knew it would be a challenge but we did it and we saw immediate tangible results."