Annemarie V. Wouters, PhD

More than 35% of Medicare beneficiaries receive care from 

providers operating under some form of shared savings/risk type 

of pay-for-performance incentive. Implementation of payment 

reform without a corresponding change to coverage, benefit, 

and other payment requirements, however, creates conflicting 

incentives that may nullify the intended aim of payment reform: 

to improve health outcomes, while saving costs. If related policies 

do not evolve to align with payment reform, those entities 

contracted to receive new bundled payments, such as hospitals 

or physician groups, will only be able to redesign care to the 

extent that care meets the myriad of related payment policy 

requirements. Shifting greater medical management authority 

from payers to entities managing the payment bundles is a 

gradual process, as the experience of commercial payers proves. 

Transitioning the responsibility for modifying coverage, benefit, 

and payment requirements from CMS to principal accountable 

bundlers (PABs) will depend on the PAB’s degree of financial risk 

More than 35% of the nearly 50 million Medicare 

beneficiaries in 2013 received care from providers 

savings/risk type of pay-for-performance incentive. This 

statistic reflects more than 14.4 million beneficiaries in 

reimbursed paid using an annual capitation rate. It also includes 

4.4 million beneficiaries in 2013 who are attributed 

to 252 Medicare accountable care organizations (ACOs) under 

the Medicare Shared Savings Program (MSSP),

are paid using a combination of fee-for-service and shared 

savings or losses. In October 2013, additional beneficiaries 

began receiving care from providers participating in the 

Centers for Medicare & Medicaid Innovation’s (CMMI's) 

Bundled Payment for Care Improvement Initiative (BPCI).

Under BPCI, awardees will be sharing financial risk with 

CMS is incentivizing providers through payment reform 

to redesign healthcare services to improve health outcomes 

while saving costs. However, implementation of payment reform 

without a corresponding change to coverage, benefit, 

and other payment requirements creates conflicting incentives 

that may nullify the intended aims of payment reform.

 must comply with 3 types of CMS policies. These 

policies are core to the medical management of patients: (i) 

coverage policies under Original Medicare Part A and Part 

B (eg, national and local coverage determinations

 (eg, hospital services, physician services, 

home healthcare, durable medical equipment, telehealth 

); and (iii) other payment policy requirements tied to 

payment systems for particular sites of care (eg, prior 3-day 

inpatient stay for covered skilled nursing facility services, 

3-hour therapy inpatient rehabilitation rule). Interestingly, 

while traditional payment methodologies that are tied to the 

site of service are rapidly changing to allow for more innovative 

approaches—such as payment by episode of care, which 

permits patients to receive treatments at multiple sites of 

service for 1 bundled payment—these 3 principles of coverage 

Failure to evolve coverage, benefit, and payment policy 

requirements as payment methods change is likely to 

impede the ability of payment reform to reach maximum 

quality, efficiency, and innovation in care. If related policies 

do not evolve to align with payment reform, those 

entities contracted to receive new bundled payments, here 

referred to as principal accountable bundlers (PABs), are 

only able to redesign care to the extent that care meets 

the myriad of related payment policy requirements. PABs 

may be hospitals, physician groups, post-acute providers 

or third party entities who are in a position to financially 

and clinically oversee an episode of care. As shown in 

, coverage and benefit mechanisms that were designed 

to support original payment models must be reconfigured 

to be in synch with new pay-for-performance paradigms.

As a general rule, Medicare requires entities participating 

in payment reform initiatives such as MSSP

 to have processes in place that document and support 

adherence to evidence-based medicine payment initiatives. 

The intent is to ensure that efforts to redesign care 

actually result in clinically effective care. Tensions arise, 

Articles

Implementation of payment reform, without a corresponding change to coverage, benefit, and other payment requirements, creates conflicting incentives that may nullify the intended aim of payment reform: to improve health outcomes, while saving costs.

Annemarie V. Wouters, PhD

Articles

Synchronization of Coverage, Benefits, and Payment to Drive Innovation