ECONOMIC REPORT OF THE PRESIDENT

and any other services associated with the patient’s recovery, including those
triggered by complications.
Making a single payment for this broad array of services associated
with an episode allows providers to deliver the most appropriate combination
of services to patients, without regard to how those individual services
are compensated, creating opportunities to improve the efficiency and
quality of care. Many bundled payment models further encourage quality
improvement by providing a higher payment per episode to providers who
perform well on specified measures of care quality. Medicare captures a portion
of the savings generated by more efficient care by setting the bundled
payment amount at a discount relative to the costs historically associated
with each type of clinical episode.
CMMI is testing several different types of bundled payment models.
Through the Bundled Payments for Care Improvement initiative, CMMI is
testing bundled payments for 48 different clinical episodes, and this model
has attracted nearly 1,500 participating provider organizations across the
country as of the middle of 2016. Similarly, CMMI is testing bundled payment
for the full scope of care provided to beneficiaries receiving chemotherapy
through the Oncology Care Model, which has enrolled 194 oncology
practices from markets across the country. CMMI has also begun tests of
bundled payment models that include all providers in randomly selected
metropolitan areas. Specifically, CMMI began this type of test of a bundled
payment model for hip and knee replacement in 67 metropolitan statistical
areas across the country in early 2016 and recently proposed a similar
approach to testing bundled payment for additional orthopedic procedures
and certain types of cardiac care.
Testing models on a geographic basis, as these new bundled payment
models do, has two important advantages relative to other approaches. First,
randomly selecting metropolitan areas to participate in the model ensures
that participants will not differ systematically from non-participants, allowing
the test to deliver particularly compelling evidence on how the model
affects the efficiency and quality of care. Second, participation by all providers
in the randomly-selected geographic areas allows the test to provide evidence
on how the model would perform if it were expanded program-wide;
evidence from tests that allow each individual provider to opt in or out of
the model are much more challenging to generalize in this fashion. In light
of these advantages, CBO recently noted that CMMI’s ability to conduct
geographically based tests is an important reason that CBO projects CMMI
to generate substantial savings for the Medicare program (Hadley 2016).
A second major category of APM deployed under this Administration
are ACO models, which go a step further than episode payment models and
252 | Chapter 4