Government and Regulations

Policy Corner


Payment bundling may create new opportunities for hospitalists to start an important discussion with hospital executives. And forward-looking hospitalist leaders will use the new model to shape their own financial destinies.

The concept of payment bundling broadly means paying for healthcare with a single, comprehensive payment, which is intended to cover all services received by a patient. Due to the promise bundling holds when it comes to both cost containment and quality, the Affordable Care Act (ACA) includes a provision requiring the establishment of a voluntary national pilot program on payment bundling. This provision calls for bundled payments for 10 unnamed conditions by Jan. 1, 2013, and states that payment for each bundle will surround an episode of care consisting of three days prior to admission and 30 days post-hospital discharge. There is some flexibility built in because the ACA also allows for different episodes of care to be defined by the secretary of Health and Human Services.

Due to this flexibility, the discussion at SHM is probably similar to that of other forward-thinking organizations: What conditions would benefit from a hospitalist-led bundle and what is the appropriate episode of care?

In late August, the Centers for Medicare & Medicaid Services (CMS) and the Center for Medicare and Medicaid Innovation (CMMI) answered these questions with the introduction of the Bundled Payments for Care Improvement initiative. This initiative outlines four models as options for the bundling pilot while maintaining a degree of flexibility in the details for participating providers to define:

  • The first model will cover all Medicare DRGs for inpatient hospital services.
  • Model two will include hospital and physician inpatient and post-discharge services.
  • Model three will be for post-discharge services only.
  • Under the fourth model, CMS would make a single, prospective bundled payment that would encompass all services furnished during an inpatient stay by the hospital, physicians, and other practitioners.

With the exception of the first model, providers wishing to participate may propose the condition (or conditions) their bundle will cover, the episode of care, and even the measures they will use for quality purposes.

CMMI clearly is aiming for a high level of provider involvement in developing bundling models that will work, and the inpatient focus for three out of four bundling models means that hospitalists should be prepared to play a part. For example, at press time, a tight application deadline and an unclear return on investment posed potential barriers.

Nevertheless, the inpatient focus for three out of four bundling models means that hospitalists should be prepared to play a part. At a minimum, hospitalists should be prepared to negotiate their level of involvement and how they will get paid for their work, should their institutions participate. But there is nothing preventing hospitalists from taking the lead in bringing bundled payments to their institutions by approaching hospital administrators with their own bundle for a condition they will manage.

If your group or institution is planning to participate in the bundled payments initiative, please let us know by emailing

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