What Mandatory Bundling Payment Programs mean for Hospitals

by | Last updated Jun 30, 2023 | Published on Jun 28, 2017 | Medical Billing

Bundling Payment Programs
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As the fee-for-service environment becomes outdated, medical billing companies are well aware that the future of revenue cycle management in healthcare could be influenced by alternative payment models such as bundled payments. Under the bundled payment model, healthcare providers and facilities will be paid a single payment for all the services performed to treat a patient undergoing a specific episode of care. An “episode of care” is the care delivery process for a certain condition or care provided within a defined period of time. The aim of this model is to enhance improve care quality and coordination, while also decreasing costs for patients.

In December 2016, the Centers for Medicare and Medicaid Services (CMS) released the final rule detailing bundled payment models for cardiac services with the goal to reduce costs for patients with heart attack or who undergo bypass surgery. In March 2017, CMS announced it will delay from July 1 to October 1, two bundled payment programs for heart attack treatment and bypass surgery billed through Medicare. The delay will give CMS more time to review the programs and also give providers more time to prepare for the payment changes under the models.

The proposed mandatory payment models-the Acute Myocardial Infarction (AMI) Model and the Coronary Artery Bypass Graft (CABG) Model-are retrospective, 90-day bundles in which hospitals will need to reduce their episodic costs below a target quality-adjusted cost threshold lower than the historical average. The payment models are aimed at rewarding hospitals for high quality coordinated care that will avoid complications, prevent hospital readmissions and speed recovery. They are set to take effect in 98 metropolitan areas.

Each year, CMS will fix the target prices for different episodes of care based on a combination of regional historical data and hospital-specific data on total costs for Medicare fee-for-service patients admitted for heart attack and bypass surgery – from hospitalization through 90-days post-discharge. The bundled payment model for cardiac services would works as follows:

  • The hospital admitting the patient for heart attack or bypass graft surgery would be responsible for the cost and quality of the care provided to Medicare fee-for-service beneficiaries during their inpatient stay and 90 days post-discharge.
  • Target prices will be adjusted based on the complexity of treating a heart attack or performing bypass surgery
  • Hospitals would be paid a fixed target price per episode and those that deliver higher-quality care will get a higher target price.
  • At the end of the model year, the actual spending for the episode of care will be compared to the targeted price which is an indication of the quality of care outcomes of the hospital.
  • Hospitals and physicians that meet or exceed quality standards while providing the necessary care for less than the quality-adjusted target price, will share in all or a portion of the savings
  • Hospitals that do not meet the above-mentioned standards would be required to repay Medicare the difference, and will thereby lose revenue.

To succeed in the bundled payments model, all the healthcare organizations involved in the episode of care should work together to provide quality care and reduce costs. They should educate themselves and their teams on the new payment models. As diagnosis-related groups (DRGs) drive the conditions to bundle, accurate DRG assignment and DRG coding will be crucial. Electronic medical records must have accurate data on patient diagnoses and co-morbidities; service dates, types, and cost, and patient and provider identifiers. Reliable medical coding services are necessary to avoid ICD-10 coding errors. As the Alabama Association for Health Information Management (AAHIM) points out, medical coding companies can also work as data analysts and help providers evaluate patient care processes and information flow.

  • Natalie Tornese
    Natalie Tornese
    CPC: Director of Revenue Cycle Management

    Natalie joined MOS’ Revenue Cycle Management Division in October 2011. She brings twenty five years of hands on management experience to the company.

  • Meghann Drella
    Meghann Drella
    CPC: Senior Solutions Manager: Practice and RCM

    Meghann joined MOS’ Revenue Cycle Management Division in February of 2013. She is CPC certified with the American Academy of Professional Coders (AAPC).

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    Hired for her dental expertise, Amber brings a wealth of knowledge and understanding of the dental revenue cycle management (RCM) services to MOS.

  • Loralee Kapp
    Loralee Kapp
    Solutions Manager: Practice and RCM

    Loralee joined MOS’ Revenue Cycle Management Division in October 2021. She has over five years of experience in medical coding and Health Information Management practices.