CMS Bundled Payments for Care Improvement (BPCI) Initiative: A Discussion on Bundled Payments

Understanding the CMS Bundled Payments for Care Improvement (BPCI) Initiative

In recent years, healthcare has been undergoing a significant transformation, driven by the need to improve care delivery and reduce costs. One of the key initiatives in this transformation is the Bundled Payments for Care Improvement (BPCI) program, introduced by the Centers for Medicare & Medicaid Services (CMS). The BPCI program is part of a broader effort to move the U.S. healthcare system towards value-based care, focusing on quality outcomes rather than the volume of services.

What is the BPCI Initiative?

The BPCI initiative was launched as part of the Affordable Care Act (ACA), which allowed the establishment of the Center for Medicare and Medicaid Innovation. The goal of this center is to pilot and expand innovative payment models that improve healthcare quality while reducing costs. BPCI is one of the many alternative payment models (APMs) being tested to align financial incentives with the quality of care provided, particularly in the post-acute care (PAC) setting.

The BPCI program focuses on bundled payments, which means that instead of paying for each service separately, healthcare providers receive a single, comprehensive payment for an entire episode of care. This “bundle” covers all services related to a patient’s treatment, including post-hospitalization care, for a specified period (e.g., 30 or 90 days). The goal is to incentivize providers to deliver coordinated, high-quality care that reduces unnecessary services and prevents avoidable readmissions.

Why Focus on Post-Acute Care?

One of the most challenging areas of healthcare to manage, particularly within the Medicare Fee-For-Service (FFS) program, is post-acute care. After patients are discharged from the hospital, they often require further care in settings such as inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), or home health agencies (HHAs). The costs and quality of care in these settings vary significantly across the country, contributing to wide regional disparities in Medicare spending. In fact, 73% of the variation in Medicare spending is attributed to differences in post-acute care settings.

The BPCI initiative specifically targets these post-acute care settings because of the high cost and the potential for improvement. For example, about 20% of Medicare patients are readmitted to the hospital within 30 days of discharge, and research suggests that 75% of these readmissions could be prevented with better care coordination.

The BPCI Models

The BPCI initiative includes four different models, each offering a different approach to bundled payments:

1. Model 1: Retrospective Acute Care Hospital Stay Only – This model focuses on hospital costs for acute care stays.
2. Model 2: Retrospective Acute and Post-Acute Care Episode – In this model, hospitals are financially responsible for both the acute care and all post-acute care services provided within 30 or 90 days of discharge.
3. Model 3: Retrospective Post-Acute Care Only – This model places post-acute care providers (e.g., SNFs, HHAs) at financial risk for the services they provide after a hospital discharge.
4. Model 4: Prospective Acute Care Hospital Stay Only – In this model, hospitals receive a single, upfront payment for an acute care stay, and they cannot bill for any additional services, even if the patient is readmitted within 30 days.

Model 2 is the most complex and widely adopted model, as it requires hospitals to manage the entire episode of care, including both acute and post-acute services. The financial risk is reconciled retrospectively, meaning that CMS reviews the total cost of care after the episode is complete and compares it to a pre-determined target price. If the costs are lower than the target, the hospital may share in the savings; if the costs are higher, the hospital is responsible for the excess.

Implementation Strategies for Success

To succeed in the BPCI initiative, hospitals and post-acute care providers need to collaborate closely. Many hospitals are implementing strategies such as narrowing their networks to include only high-performing post-acute care providers. This ensures that patients are discharged to facilities with strong track records in quality care and low readmission rates.

Hospitals are also using tools like patient choice letters, which list all available post-acute care providers but highlight those that have been vetted for quality. This approach, known as “soft steerage,” helps guide patients toward the best providers without restricting their choices.

In addition to collaboration, data sharing and technology play a crucial role in the success of BPCI. Hospitals need visibility into the patient’s care journey after discharge, which can be facilitated through electronic health records and other data integration tools. This allows for better coordination and monitoring of patient outcomes across the continuum of care.

Challenges and Opportunities

While the BPCI initiative offers significant opportunities for improving care and reducing costs, it also presents challenges. One major issue is the complexity of managing bundled payments, especially with the retrospective reconciliation process that introduces delays in financial feedback. Hospitals need to track performance in real-time and adjust their strategies based on ongoing data, rather than waiting for quarterly reconciliations from CMS.

Another challenge is managing high-risk patients and outlier cases, which can significantly skew financial outcomes. However, as bundled payment models continue to evolve and expand, hospitals that proactively adapt to these challenges will be better positioned for success in the shifting healthcare landscape.

Conclusion

The BPCI initiative is an important step towards a value-based healthcare system, particularly in managing the costly and often fragmented post-acute care segment. By aligning financial incentives with quality outcomes, the BPCI program encourages providers to deliver more coordinated, efficient care, reducing unnecessary services and preventable readmissions.

As bundled payment models continue to expand, healthcare providers who embrace this shift now will be better prepared for the future. By focusing on collaboration, data integration, and patient-centered care, hospitals can succeed in the BPCI initiative and contribute to a more sustainable healthcare system.