Bundled Payments for Acute Care Hospitalization Episodes

Management and implementation of the Acute Care Episode demonstration

By Sara Freeman

This project demonstrates the effectiveness of a bundled payment to align incentives for both hospitals and physicians and also tests the effect that transparent price and quality information may have on beneficiary choice for select inpatient care.

RTI assisted the Centers for Medicare & Medicaid Services (CMS) with development, site solicitation, implementation, and management of the Acute Care Episode (ACE) demonstration. The goal of the ACE demonstration was to assess the feasibility of a bundled payment concept (combining Part A and Part B payments for a hospitalization episode) as a cost-effective alternative payment approach for Medicare. This approach would increase access to quality health care at affordable prices, provide incentives for more efficient and coordinated service delivery and administrative procedures, and allow for a more flexible use of resources.

RTI assisted in the demonstration design by analyzing and recommending covered demonstration procedures, recommending demonstration regions, analyzing geographic dispersion, preparing solicitation materials, evaluating solicitation bids, developing and implementing a quality monitoring program, designing and implementing a beneficiary shared savings program, updating the Part A and Part B payment rates, and helping to manage the demonstration.

This project provided helpful information to CMS and policymakers in the development of current episode-based payment models. The ACE demonstration was one of the initial episode-based payment model demonstrations, which tested global payments for an episode of care. This work was a precursor to current episode-based payment models including the Bundled Payments for Care Improvement initiative. This effort continues to be highly relevant as CMS continues to introduce new episode-based payment demonstration projects.