New Program Changes the Way Medicare Reimburses Health Care Providers

A pilot program called the Bundled Payments for Care Improvement Initiative (the “Bundling Initiative”) has recently been unveiled by The Department of Health and Human Services (the “Department”).  The program is designed to change the way Medicare reimburses health care providers. 

Under the current method, Medicare makes separate payments to each provider. In an effort to encourage better coordinated care and decreased costs, the Bundling Initiative calls for Medicare to pay one lump sum to the hospital for an “episode”, such as a hip replacement or heart bypass surgery, and the hospital would then distribute the payment to participating providers.  The concept is that if Medicare pays only one large payment, the individual providers will communicate with each other to promote efficient and high quality care.  Obviously, the Department is ignoring the possibilities of abuse by some providers, especially the recipient provider.

The Bundling Initiative is seeking applications for four defined models of care.  Three of the models involve retrospective bundled payments, and one model would pay providers prospectively.  Interested providers must submit a nonbinding letter of intent to the Department by September 22, 2011 for Model 1 and November 4, 2011 for Models 2-4. 

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