Bundled Payment for Observation Care

by Stefani Daniels, Managing Partner
Published on Jul 10, 2015

If you were ever in doubt that fee-for-service payment models are coming to an end, last week's announcement about mandated bundled payments is a signal to providers that they better fast track adaptive strategies and is evidence that CMS is moving full-steam ahead with even more packaging.

Last year, CMS introduced Comprehensive APCs (C-APCs) which packaged payment for services and supplies rather than providing separate multiple payments for each individual service. When introduced,CMS focused on high cost devices plus the costs of "adjunctive and secondary services" related to the primary procedure. The C-APCs, which have been referred to as mini-DRGs, are intended to provide incentives for greater efficiency. There are currently 25 procedures on the C-APC list and most are related to high cost implantation devices.  CMS now proposes to add 9 more C-APCs. Unlike the existing device-dependent C-APCs, these payments will include any room and board as well as nursing costs. 

Last week's proposal also includes creation of a bundled payment for all primary procedures found on the observation claim. Currently, CMS makes a single payment for observation based on the number of hours (units) spent in observation and then makes another payment for the part B services. Observation care must be provided hourly for a minimum of 8-hours and is exclusive of any time the patient was out of the observation area without an RN and exclusive of any time that a separately billable procedure was performed that required active monitoring.  Under the proposal, the minimum of 8-hours remains the same but all the other services and supplies are now packaged and one payment based on average cost of $2,111. will be made.  Providers will need to analyze the payment differential between this new C-APC 8011 (comprehensive observation services) and what they receive for payment today.

The move to package observation care is not unexpected; it was pretty predictable and supports CMS' goal of delivery system reform by making payments for larger packages of items and services rather than making separate payments for each individual service.  Case managers working within a contemporary progression-of-care model already know that they must take a proactive advocacy position to avoid wasteful medical interventions to reduce their patients financial and clinical risks.  By tapping into this pool of potential savings, not only does the case manager advocate for the patient, but also for the organization and the community it serves.