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CMS Adds Over 4,000 Organizations to BPCI Initiative

CMS has added 4,000 Organizations to the BPCI Initiative(August 12, 2014):  The Centers for Medicare & Medicaid Services (CMS) has added 4,122 providers to a list of health care organizations eligible to test the first phase of the Bundled Payments for Care Improvement (BPCI) initiative. The BPCI is an innovative new payment program that will allow certain health care organizations to enter into payment arrangements that include financial and performance accountability for episodes of care. CMS’ hope is that the BPCI initiative will lead to higher quality and more coordinated care at a lower cost to Medicare.  The BPCI initiative allows health care providers to enter into payment arrangements that include financial and performance accountability for episodes of care. It was developed by the Center for Medicare and Medicaid Innovation (Innovation Center), which was created by the Affordable Care Act (ACA). Its purpose is to test innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) expenditures while preserving or enhancing the quality of care for beneficiaries.

I.  Background:

The Federal Medicare program traditionally operates under a Fee-For-Service (FFS) model. Under this system, providers are reimbursed for each individual service furnished to a beneficiary for a single illness or course of treatment. However, the FFS model incentivizes providers to furnish multiple services but does nothing to reduce any unnecessary care. Providers also do not have to worry about coordinating care across providers and health care systems. This can result in fragmented – and often a diminished – levels of care.

In contrast, there is the bundled payment approach. Under this model, multiple providers are reimbursed a single sum of money for all services related to an episode of care. An episode of care may include, for example, the patient’s hospitalization plus a period of post-acute care.

Research has shown that bundled payments can reduce overall spending incurred in an episode of care. The goal is to reduce the number of unnecessary physician services during a hospitalization, provide more judicious use of health care resources during the hospital stay, and reduce post-discharge costs, including unnecessary post–acute care services and avoidable re-admissions.

Moreover, a bundled payments approach can align incentives for the various providers throughout a beneficiary’s episode of care, including those operating in the hospital and post-acute care setting, as well as the beneficiary’s personal care physician or other specialists. Notably, if the costs of an episode of care are less than the bundled payment amount, the providers can keep the difference. As a result, these providers are strongly encouraged to coordinate care and work more closely together.

II.  Initiative Design – The Four Models:

The BPCI initiative includes four broadly defined models of care. These models link payments for multiple services beneficiaries receive during an episode of care. These models include the following episodes, services, and payment methods:


Model 1Model 2Model 3Model 4
EpisodeAll acute patients, all diagnosis-related groups (DRGs)Selected DRGs, hospital plus post-acute period.Selected DRGs, post-acute period only.Selected DRGs, hospital plus readmissions
Services included in the bundleAll Part A services paid as part of the MS-DRG paymentAll non-hospice Part A and B services during the initial inpatient stay, post-acute period, and readmissionsAll non-hospice Part A and B services during the post-acute period and readmissionsAll non-hospice Part A and B services (including the hospital and physician) during initial inpatient stay and readmissions


The first set of Awardees in Model 1 began in April 2013. Models two through four are further divided into Phase one and Phase two. The first set of participating organizations in Models 2, 3, and 4 were announced in January 2013.  The initiative is set to cover a three year period. During this time, CMS will work with participating organizations to assess whether the models being tested result in improved patient care and lower costs to Medicare.

III.  CMS Adds Additional Providers to the BPCI Initiative:

Within Phase 1, there are 870 participants, including 138 conveners of health care organizations, representing 6,424 Medicare organizational providers.  Raymond Thorn, a health insurance specialist at the Innovation Center, outlined the agency’s intent to include more providers. Mr. Thorn notes that, with this many providers, there appears to be “widespread interest in aligning payment and quality incentives.”

As for Phase 2 participation levels, Thorn said that currently there are “105 awardees, including 38 conveners of health care organizations, representing 243 providers (across all models).”

Now, CMS has announced that it will add approximately 4,100 providers to about 2,400 already exploring the possible use of bundled payments for some or all of the four dozen medical conditions and procedures. However, these providers must apply in order to become candidates to participate in the BPCI.

IV.  Final Remarks:

Why would a health care provider want to participate in a bundled payment system, especially given the financial incentives under the traditional FFS model?

Again, the bundled payment system provides an opportunity to help reduce costs and improve quality and patient experience for selected procedures. It also allows physicians to coordinate care across various health care systems and develop improvement initiatives. Importantly, physician engagement is critical to the success of not just the BPCI initiative, but also in all health care reform efforts. The bundled payment system can allow hospitals to gain a better understanding of the total cost of care per case. CMS and other payers are increasingly expecting hospitals to take responsibility for the total cost of care associated with a case. And this picture of the costs of care with one case does not end at the hospital door. The BPCI initiative can then provide hospitals with information related to post-acute provider use and results.

CMS is increasingly looking for ways to salvage funds for the Medicare, Medicaid, and CHIP programs. The agency has significantly increased its efforts to combat fraud, waste, and abuse in these programs through the use of contractors to audit prepayment and postpayment systems. For once, it is notable that CMS is undertaking measures to save money that promotes physician efforts and participation instead of increased regulatory controls that only hinder physician care.

Saltaformaggio, RobertRobert Saltaformaggio, Esq., serves as an Associate at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers around the country in connection with Medicare audits by ZPICs and other CMS program integrity contractors.  The firm also represents health care providers in HIPAA Omnibus Rule risk assessments, privacy breach matters, State Medical Board inquiries and regulatory compliance reviews.  For a free consultation, call Robert at:  1 (800) 475-1906

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