Bundles: Not Just for Your Cable and Internet

Bundle payment models, including the Bundled Payments for Care Improvement Initiative (BPCI), are an important part of the episode-based health care value transformation.  However, they are also under increased scrutiny, in part due to strong concerns among some Republicans regarding mandatory models as well as the idea that they do little to curb the volume of services provided, and by some estimates may even increase the volume of services.


The Bundled Payments for Care Improvement Initiative (BPCI) is a voluntary, value-based innovation model introduced and managed by the Center for Medicare and Medicaid Innovation (CMMI). The premise of BPCI is to align incentives for a team of providers involved in an episode of care (physicians, hospitals, post-acute care), hopefully resulting in both improved patient care and lower costs.  BPCI has four unique care models that focuses on different places of service tied to similar episodes of care.

Although still early, the BPCI initiative is showing signs of success. One study found that hospitals participating in BPCI demonstrated a greater reduction in costs for lower extremity joint replacement than non-BPCI participating hospitals. A second study found a 20.8 percent decline in Medicare expenditures for joint replacement episodes at a hospital participating in BPCI and the earlier bundled payment model, the Medicare Acute Episode (ACE) demonstration. These initial findings suggest bundled payments may be able to reduce costs while preserving quality.

The Future of BPCI

The August 2016 Episode Payment Model (EPM) proposed rule indicated the possible development of an Advanced BPCI, or BPCI 2.0, in 2018. The next iteration of BPCI would build on the current BPCI initiative and remain voluntary, but meet the criteria for Advanced APM status under MACRA (uses certified EHR technology, quality measures comparable to MIPS quality measures, and has downside risk).

Leavitt Partners recently published a white paper on strategic considerations for providers in the MACRA Quality Payment Program. Under MACRA, CMS is attempting to create a glide path for organizations to move out of the MIPS program (Merit-Based Incentive Payment System) and into Advanced APMs. An Advanced BPCI model will likely take lessons learned from the current BPCI initiative, similar to the way the Next Generation ACO model was developed from experience gained from the Pioneer ACO program. For example, due to the design of the model and limited participation, it is anticipated that Model 1 and Model 4 will not be part of BPCI 2.0.

However, it is also anticipated that Advanced BPCI will incorporate more prospective target prices. Prospective pricing, as opposed to FFS payments with retrospective reconciliation, can benefit the government, providers, and ultimately patients. From the provider perspective, a prospective global episode payment reduces perverse incentives associated with FFS payments and allows providers to focus on the best care and allows the most care delivery flexibility. From a patient perspective, prospective pricing allows more flexible participation, whether through email communication with their doctor or through other forms of telehealth.

BPCI provides an easier entre into the value-based health care movement by focusing on discrete episodes of care with payments built on a FFS payment system. However, bundle models are becoming more advanced and are taking on the additional risk necessary to move them even further down the value equation.

Leavitt Partners believes bundles are an important component for advancing the health care transformation away from paying for volume and toward paying for value. Our tools and research support providers as they consider participation in value-based payment models. Please contact Natalie Burton at Natalie.burton[at]leavittpartners.com if you are interested in learning more or receiving our upcoming publications.