Skip to main content
Report this ad

See also:

Health Policy and You, Part II: The ACE demonstration

heart health


As discussed in the previous post, and in line with the CMS’ goal of improved health care quality, the three-year Acute Care Episode (ACE) demonstration tested the use of a global payment for an episode of care as an alternative payment for service delivery. The overarching goals were betterment of the coordination, quality, and efficiency of care.

Provider incentives and inpatient procedures in the ACE demonstration
The ACE demonstration offered a bundled payment comprised of a set of inpatient episodes of care for orthopedic and cardiovascular procedures. Cardiovascular procedures covered included: coronary artery bypass graft surgery, cardiac valve replacement surgery, cardiac pacemaker implantation and replacement, cardiac defibrillator implantation, and coronary artery angioplasty. Sites where the ACE demonstration took place had the option to reward individual clinicians, teams of clinicians, or other hospital staff who succeed with quality and efficiency improvements.

Shared savings component with Medicare patients
The ACE demonstration offered a bundled payment for inpatient episodes of care for orthopedic and cardiovascular procedures. Medicare would share savings achieved through the ACE demonstration with beneficiaries who, based on quality and cost, choose to receive care from participating demonstration providers. However, beneficiaries were able to choose a hospital if they so preferred. Medicare planned to share up to 50 percent of the Medicare savings via payments to beneficiaries to offset the beneficiaries’ Medicare cost-sharing obligations, not to exceed beneficiaries’ annual Part B premium amount. Medicare sent the shared savings payment to qualified beneficiaries 90 days post-hospital discharge, subject to taxes. (Medicare beneficiaries who are receiving Medicaid benefits are not eligible to receive shared savings payments).

What lies ahead in the future of medical payments?
Bundled payments enhance the alignment of hospitals and physicians, targeting service lines and economics via the use of vendors and standardized devices. Additionally, these bundled payments are a useful tool for assessing which quality measures require further evaluation and improvement. The ACE demonstration was meant to be a bundled payment method alternative to fee-for-service, targeting orthopedic and cardiovascular procedures. The Bundled Payments for Care Initiative (BPCI) program of 2013 expands this concept of bundled payments to specially-chosen DRGs, with the goal of improving financial and clinical aspects of medical care across a greater number of hospitals and providers.

The BPCI program and its associated four distinct models of care will be discussed in next article's segment.

(Sidenote: Disclaimer: the above post is a simplified policy writing and does not constitute medical advice of any kind).


CMS. “Acute Care Episode Demonstration.” Accessed January 15, 2014.

CMS. “Medicare Acute Care Episode Demonstration for Orthopedic and Cardiovascular Surgery.” Accessed January 15, 2014.

Herman, Bob. “2 Major Lessons from CMS’ Bundled Payment ACE Demonstration.” (April 3, 2012). Accessed January 15, 2014.

Medical Billing and Coding. “How does Medicare Work?” (2012). Accessed January 22, 2014.

Report this ad