Bundled Payment Pilot

What We Do and Don’t Know About the BPCI Program

It is now January 2013 and the “No-Risk” BPCI program has begun; how much more (or less) do we know about this program than we did nine months ago when CMS first issued its Request for Applications?  In this paper, we will list what we know and highlight the remaining uncertainties about the Medicare BPCI program.


CMS has released some information about the data to be provided to BPCI applicant awardees.

30 Day All-Cause Readmissions

Our friends at Strategic Business Alternatives have written an excellent series of articles about the opportunities and strategies for reducing 30-day readmissions.  In their three-part series on Medicare ACO Management: 30 Day All Cause Readmissions, they discuss the potential opportunity for cost savings, review several different models for addressing the problem, and some of the human and technological tools necessary to add

CMS Requests Comments on BPCI Data Formats

CMS has recently circulated an email to BPCI participants requesting comments on the data formats that will apparently be utilized for the reconciliation data distribution to be made in March, as well as the ongoing data to be provided to BPCI participants.

Medicare Bundled Payment Q&A with CMS

Throughout the BPCI application process, Singletrack Analytics and our partners at DataGen have maintained an ongoing dialogue with CMS about issues related to the bundled payment implementation process.  Below are some of the issues discussed along with our interpretation of the response.

Price Determination

Assessing Participation Risk in the Medicare Bundled Payment Initiative

For most organizations contemplating participation in bundled payment programs such as the Medicare Bundled Payment for Care Improvement (BPCI) initiative, a critical factor in the participation decision is a quantification of the risk that they will assume are participating in a particular DRG or other clinical condition. This risk is the result of inherent randomness in the episode costs among different episodes.

Bundled Payment Analytics - Adjusting Pricing for Low Volume DRGs

Considerable discussion has taken place about the process to be used to compute episode payment rates for low-volume DRGs. This is necessary because applicants are required to participate for all DRGs within a selected episode definition, even though the applicant may have extremely low volumes of those DRGs. These low volumes would cause the historical cost computation to be inaccurate because of the small sample size, and may create an appropriate advantages or disadvantages for the provider if the historical costs were extremely high or low.

Bundled Payment Analytics - Understanding Risks of the New DRG Requirements

One significant major change made by CMS was to require additional DRGs in an "episode family" to be included in the applicant’s proposal. Under the initial application rules, only DRGs that were related through presence or absence of complications were required to be included in an application. For example, to include DRG 194 (Simple pneumonia pleurisy with CC), applicants were also required to include DRGs 193 (with MCC) and DRG 195 (without CC/MCC).

Bundled Payment Analytics - the Effect of Outliers on Payment and Incentives

One of the changes implemented by CMS in this round of the bundled payment application project is the introduction of outlier limits on episode costs. These limits are computed on a DRG basis, supposedly from the HRCs provided to each applicant, and are established at the 5th and 95th percentiles of the episode costs. This means that on average 5% of the cases in each episode will fall above and below these limits respectively. Because of Pareto's law, however, each of these limits will generally not affect 5% of the cost.

AHA White Paper on Bundled Payment Released

The American Hospital Association recently released its white paper analyzing the Medicare bundled payment initiative, as well as other bundled payment issues.

CMS Bundled Payment Changes offer New Opportunities

Like many others, we've been carefully listening to the CMS webcasts describing the next steps in the Bundled Payment for Care Improvement (BPCI) program. Some of the changes are straightforward and had been expected, such as the need to converge to more consistent models that eliminate some of the initial flexibility that was allowable during the application stage. Other changes, such as the details of implementation of the Empirical Bayes techniques that will apparently be used in some cases to compute episode payments remain to be clarified, and we are reserving judgment on them.

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