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Physician/Hospital Alignment and Bundled Payment – Part Two

Peter Rastello

Continuing the discussion from Part One of physician/hospital alignment and the reemergence of bundled payment initiatives, let’s discuss the impact of health care reform in the area of bundled payment for care.  A national pilot program on payment bundling is included in H.R. 3590, the Patient Protection & Affordable Care Act.  This pilot program is set to commence in 2012 (no later than January 1, 2013) and run for five years.


Although conceptually similar to previous efforts by HHS, this pilot is intended to bundle payment for an entire episode of care inclusive of up to 30 days post-hospital discharge (implying an unprecedented level of physician/hospital cooperation, coordination and collaboration!).  While no identification of covered procedures/conditions has yet been made, but it seems reasonable that major cardiovascular procedures, and possibly certain medical cardiology admissions such as heart failure, will be included as has been done in past pilot projects.  Some other details included in the legislation (and pending final detailed regulations), include the following:


  • Inclusive of Medicare beneficiaries
  • Up to eight medical conditions for an episode of care to be selected
  • Conditions will be a mix of chronic and acute
  • Bundled services to include acute inpatient, physician, outpatient hospital, post acute, and other appropriate services
  • An episode of care is defined as three days prior to admission, inpatient hospital admission, and the 30 days following discharge from a hospital
  • Program to be established no later than January 1, 2013
  • Quality measures to be developed under contract for use in the program
  • The pilot to be conducted for a period of five years
  • Applications can be submitted by an “entity” consisting of a hospital, a physician group, an SNF, and a home health care agency
  • The Secretary of HHS will make bundled payments (amounts to-be-determined) to the contracting entity
  • Quality measure to be reported and to include:
    • Functional status improvement
    • Reducing rates of avoidable hospital readmission
    • Rates of admission to emergency room after hospitalization
    • Incidence of healthcare acquired infection
    • Efficiency measures
    • Measures of patient-centeredness of care
    • Measures of patient perception of care
    • Other appropriate measures of patient outcome
  • An interim report on the demonstration not less than two years after implementation
  • A final report no later than three years after implementation


Participation in such a pilot project is always challenging – it must make both strategic and operational sense to the participant(s).  Notice the high level of cooperation, coordination and information required of the participating “entities” especially among hospital and physicians inclusive of both pre-hospitalization, hospitalization and 30-days post-acute care phases!  The work that will need to go into the program design on the part of all of the participants, just to be able to file an application, let alone pull off designing and managing such a program at the local level will be extraordinary.


Will this pilot program “have legs?”  Only time will tell.  However, it is vital for hospitals and physicians to recognize that such efforts will only continue and place an increased burden on hospitals to solidify their alignment strategies with select physicians.  It is hard to image that success under the requirements of care coordination, bundled payment and pay-for-performance scenarios can be possible without the appropriate physician/hospital alignment strategies in place.


CFA will keep you informed on further developments on hospital/physician alignment and bundled pricing, and would welcome your thoughts and comments as we progress. For further information, CFA recommends you review H.R. 3590 and, in particular, the proposed bundled payment pilot program.

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