CMS to launch three-year Medicare demonstration program that bundles payments for physician, hospital services

CMS on Friday announced plans to launch a three-year Medicare pilot project in 2009 that will test a bundled-payment system in which physicians and hospitals are paid a single amount for all services associated with surgical procedures, CQ HealthBeat reports.

CMS currently pays hospitals a pre-set amount for services, but those payments do not include physician services. Under the pilot program, providers would receive a single payment for Medicare Part A, which covers hospital services, and Medicare Part B, which covers physician services. CMS in a statement said, "The physicians who care for the patient during the stay are paid separately under the Medicare Physician Fee Schedule for each service they perform," adding, "The separate payment systems can lead to conflicting incentives that may affect decisions about what care will be provided."

The program will be launched in as many as 15 markets in four states -- Colorado, New Mexico, Oklahoma and Texas -- beginning Jan. 1, 2009, and will involve 28 cardiac and nine orthopedic inpatient surgical services. A CMS spokesperson said the four states were chosen because Medicare administrative contractors there were prepared to participate in the program starting Jan. 1, 2009. CMS also aims to publicly release cost and quality information about the medical services to determine whether such data draw more beneficiaries and physician referrals to the facilities involved.

CMS acting Administrator Kerry Weems said, "CMS expects to demonstrate how to not only better coordinate inpatient care, but to also achieve savings in the delivery of that care that can ultimately be shared between providers."

James Bentley, senior vice president for policy planning at the American Hospital Association, said the pilot program should be a good experiment to show how well physicians and hospitals cooperate, but he added, "We need to find out if there are multiple models that work" (Reichard, CQ HealthBeat, 5/16).