Early Lessons from the Bundled Payment Acute Care Episode Demonstration Project

- July 21, 2010

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The federal health reform legislation includes several demonstration projects that will be held in the coming years to test new models for care delivery and payment.   Hospitals and health systems are encouraged to carefully study the provisions of these upcoming projects and clearly understand their requirements.  Early Lessons from the Bundled Payment Acute Care Episode Demonstration Project provides an overview and summary of lessons learned to date from a current CMS pilot project, the CMS Acute Care Episode (ACE) Demonstration Project, which is testing the effect of bundling Part A and B payments for episodes of care on the coordination, quality, and efficiency of care.

The report offers the following lessons learned to date:

• Constructing a framework before the beginning is helpful.
• Getting more patient volume isn't as important as getting market share with the vendors.
• Bringing physicians on board early in the process is vital.
• Understanding that money is not a driving incentive for patients is important.
• Hiring a full time case manager is necessary.
• Having prior health plan experience is a plus.

It also explores several questions yet to be answered:

• How can the ACE Demo be expanded into a post-hospital setting? What would a post-acute payment bundle that goes 30-60 days post-discharge look like?
• What will the provider incentives look like as the project enters future years of the demo, especially if it is harder to find savings as the "low-hanging fruit" is all picked?
• How does the project work if there are multiple, competitive hospitals doing the same thing in the same market? How do vendors react if all hospitals in one market are working in this type of program?
• How can this be expanded to non-surgical MS-DRGs? Would this program work well for cancer patients, for example?
• How do you create better beneficiary incentives? Are the incentives even worthwhile as the demo expands?
• What quality measures do you use for other MS-DRGs?

As the conversation continues around this demonstration project and others put forward by CMS, it is important for hospitals to understand the lessons learned in CMS demonstrations and be prepared to implement these successful practices in the upcoming health care reform demonstration projects.