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The Centers for Medicare and Medicaid Services is encouraging hospitals, physician practices and other provider organizations to apply to participate in one of four reimbursement programs under its new Bundled Payments for Care Improvement Initiative.

The initiative will bundle payment across provider sites for multiple services given during an episode of care, which is a single hospital stay and/or recovery from the stay. The idea behind bundled payments is to give providers a greater incentive to coordinate care across settings, which would require advanced use of health information technologies.

The initiative follows a Medicare bundled payment demonstration program for heart bypass surgery that saved Medicare $42.3 million--about 10 percent of expected costs--and saved patients $7.9 million in co-insurance costs, and lowered mortality rates, according to CMS.

The four payment models in the Bundled Payments for Care Improvement Initiative are:

* Model 1: An acute care hospital stay only,

* Model 2: The acute care stay plus associated post-acute care,

* Model 3: Just the post-acute care following discharge, and

* Model 4: A single prospective bundled payment that would encompass all services during an inpatient stay by the hospital, physicians and other providers.

Interested organizations must submit a nonbinding letter of intent by Sept. 22, 2011, for the first model and by Nov. 4, 2011, for the other models. Medicare will provide historical claims data to prepare for models 2-4 and organizations wanting the data must file a separate research request packet and data use agreement with the letter of intent.

"Applicants would propose the target price, which would be set by applying a discount to total costs for a similar episode of care as determined from historical data," according to an explanation from CMS.

Final applications for Model 1 are due by Oct. 21, 2011, with applications for other models due by March 15, 2012. More information is available here.