1. Bundled Payments Health Care Industry Committee
Ready-to-Use Presentation Slides

2. Redefining the Acute Care Episode
Bundled Payments
Redefining the Acute Care Episode
Bundled Payments Drive Delivery System Integration
Fee-for-Service Environment
Bundled Payment Environment
Individual Payments Reinforce Siloed Care Delivery
Lump Sum Payments Drive Integration through Shared Accountability
Payer
Physician Services
Hospital Services
Post-Acute Services
Payer
Physician Services
Hospital Services
Post-Acute Services
Source: Advisory Board interviews and analysis.

3. Elevating the Episodic Care Ambition
Reform Legislation Expands Bundling Across the Continuum
3 Days Pre-Acute1
Hospital Inpatient Stay
Inpatient MD Services
Post-Acute
Facility Services
MD Services
Related Readmissions
Model 1
Model 2
Model 3
Model 4
Case in Brief: Medicare’s Bundled Payments for Care Improvement (BPCI)
Program seeking voluntary participation in four bundled payment models
Models 1-3 provide retrospective reimbursement; Models 2 and 3 include post-episode reconciliation; Model 4 offers single prospective payment
Acute care hospitals, physician groups, health systems eligible for all models; post-acute facilities may participate without hospitals in Model 3
Participating providers may share in the financial gains resulting from a more efficient care model if cost savings are achieved 
Includes all hospital diagnostic testing and related therapeutic services furnished by an entity wholly owned or operated by the admitting hospital.
Source: Centers for Medicare and Medicaid Services; Advisory Board interviews and analysis.

4. Over 6000 Providers Participating in BPCI1
BPCI1 Participation by State
August 2014
providers
providers
providers
>300 providers
Bundled Payments for Care Improvement.
Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.

5. Favoring Retrospective Bundling Models
Participants Targeting Models 2 and 3 in BPCI
BPCI Model Selection Rates
n=6,801 Providers
Bundled Payment Mechanics
Retrospective payment method: (Model 2-3) Reimburses providers through traditional FFS payments, subject to post-episode reconciliation against a pre-determined target price
Prospective payment method: (Model 4) Reimburses hospital and physicians through single, lump sum payment; hospital collects and distributes funds to providers involved in episode of care
Hospital Inpatient Services
Hospital and Physician Inpatient and Post-Discharge Services
Post- Discharge Services
Hospital and Physician Inpatient Services
Model 1: 16 participants
Model 2: 2150 participants
Model 3: 4617 participants
Model 4: 18 participants
Total participants=6801
However, despite the big participation numbers, few providers are currently being reimbursed through bundled payments. BPCI has two phases, designed to give providers time to implement their bundled payment programs. During Phase I, providers don’t bear any financial risk. If participants transition to Phase II, which is optional, then they begin receiving bundled payments.
Right now, only 243 providers are in Phase II—that’s just 4% of total BPCI participants. However, the organizations joining Phase I are taking an important step toward implementing bundled payment programs.
Although BPCI offers providers a choice of four different bundling models, few participants have selected Model 1 or Model 4, which both focus on inpatient care rather than the full care continuum. Only 15 organizations signed up for Model 1 and 17 for Model 4; together, these two models represent roughly 0.5% of total program participation.
Why the limited interest? Two main reasons.
First, both Models 1 and 4 have some practical disadvantages. In Model 1, participating hospitals face a price discount on every inpatient Medicare admission. In contrast, Models 2-4 allow participants to selectively choose among 48 different clinical conditions. So under Models 2-4, some providers are bundling for just one or two clinical areas, such as orthopedic or cardiac surgery. And Model 4 uses a true prospective bundled payment, meaning that participants need to collect the single bundle and distribute payments among partner providers. Models 2 and 3, however, use a retrospective (or virtual) bundling model, which is much less disruptive to existing revenue cycle operations.
Second, there are some strategic advantages to implementing more expansive bundles. If participants opt for Model 2, which includes post-discharge care and readmissions, they may enjoy more cost savings opportunities. And focusing on care spanning across the continuum may also have greater alignment with other ongoing initiatives, especially efforts to reduce readmissions or prepare for population health.
Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.