Exploring Episode-Based Approaches for Medicare Performance Measurement, Accountability and Payment Final Report. Types of Episode Constructions that Have Been Used


(1) Services Related to a Major Inpatient Procedure. This type of episode typically bundles together the inpatient and physician services payments related to a major procedure.  We found four examples cited in the literature of the use of this type of episode construction for payment and in some cases for quality measurement for coronary artery bypass graft (CABG) surgery.

(2) Services Related to an Outpatient Procedure.  In the Cataract Alternative Payment Demonstration, Medicare tested an episode-based payment for outpatient cataract surgery.  The episode included physician and facility fees, intraocular lens costs, and selected pre- and postoperative tests.  Payment rates were determined by competitive bidding.  Participation was very low, and the demonstration produced a low level of savings compared to the Participating Heart Bypass Center Demonstration, with little impact on utilization or patient outcomes (Abt Associates Inc., 1997). 

(3) Contact Capitation for Specialists.  This episode definition, used for payment, included specialist physician services related to treatment of a particular condition, and in some cases hospital and/or ancillary services (Frank and Roeder, 1999).  Under this type of episode, the episode begins with the referral to the specialist and ends after a specified time or clinical endpoint.  This payment arrangement was found to be common among large Independent Practice Associations (IPAs) in the late 1990s (Robinson, 1999); however, the system proved to be administratively complex (Frank and Roeder, 1999).

While various types of episode construction have been discussed, relatively few examples exist for how each type has been applied. The findings from the various applications of episodes suggest that the potential for using episodes and achieving the goals of episode-based payment and performance measurement will likely vary depending not only on how the episode is constructed, but also on implementation issues, such as participation rates in efforts making use of episodes.

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