A new Avalere analysis of Medicare’s new bundled payment program shows a strong and growing interest in alternative payment models among providers. Data show there will be 1,755 provider organizations participating in Phase 2 of the Centers for Medicare & Medicaid Services’ Bundled Payments for Care Improvement Initiative (BPCI).

The program tests provider organizations’ ability to save money by treating patients in episodes of care (i.e., grouping together all the services needed to treat a specific condition rather than treating them as different points of care) at a specified price. Of the total number of providers participating in Phase 2, approximately 1,350 entered at the July 1, 2015 deadline imposed by CMS.The Avalere analysis also shows that most providers have chosen to assume risk for Medicare patients with orthopedic, pulmonary, and cardiovascular conditions.

The Phase 2 deadline is an important milestone because it is the point at which provider organizations accept financial risk. At this stage of the program, if it costs more to treat a patient than the pre-determined, agreed-upon amount, the provider organization must absorb the extra costs. If the provider organization treats the patient for less than the set amount and meets certain quality metrics, the provider organization benefits from the savings. Participants in Phase 1 of the program did not bear any risk.

While the number of providers assuming risk is high and growing, many still choose not to do this. The 1,755 providers entering Phase 2 represent 27 percent of all providers who had originally expressed interest in the program.

“These results are significant because they show an acceleration in interest by providers in taking risk,” said Elana Stair, director at Avalere. “The number of new participants who have elected to move into the risk-bearing phase is an early indicator of Medicare’s success, the willingness of providers to take on risk within their respective markets, and the level of opportunity to achieve the triple aim goals.”

Of the estimated 1,350 provider organizations that entered at the Phase 2 deadline, 181 are acute care hospitals, 197 are physician group practices, 896 are skilled nursing facilities, 73 are home health agencies, and three are inpatient rehabilitation facilities.

“Provider acceptance of risk is starting to transform clinical care at the provider level,” said Dan Mendelson, Avalere’s CEO. “The focus on orthopedics and cardiovascular care in particular shows that this program is likely to generate lasting effects on quality and cost for Medicare beneficiaries.”

The Avalere analysis also shows that providers selected conditions that are most common in Medicare. In order, the five most common conditions that providers are testing under the bundled payment model in Phase 2 are: (1) major joint replacement of the lower extremity; (2) simple pneumonia and respiratory infections; (3) chronic obstructive pulmonary disease, bronchitis/asthma; (4) congestive heart failure; and (5) sepsis. Providers had a list of 48 clinical conditions to select from and test in Phase 2.