QUESTION:    In the January 2, 2014 Question of the Week, you discussed the Bundled Payments for Care Improvement initiative, which was developed by the CMS Innovation Center. In Model 2, the participants were “live” and in the risk-bearing period (“Phase 2” – actual expenditures on beneficiaries were reconciled against a “target price” for an episode of care – if a participant was under the target price for a beneficiary, it kept the difference, but if over the target price, pays the difference to CMS). Can you update us on Model 2, Phase 2?

ANSWER:    Yes. In November, CMS announced that it would eliminate downside financial risk for 2014 for all participants in Phase II because of complications associated with launching BPCI. The elimination of downside financial risk means that hospitals will not have to pay back CMS for losses, nor will hospitals have any financial liability for the rest of 2014. However, hospitals will still be able to earn gains if their aggregate spending falls below the aggregate target price amounts during 2014. However, as of the first quarter of 2015, all BPCI participants in Phase 2 will face full downside risk.