The Medicare Payment Advisory Commission (MedPAC) has recommended that Congress take steps toward bundling fee-for-service (FFS) Medicare payments for all services associated with an episode of inpatient hospital care. The commissioners recommended that Congress require the Centers for Medicare & Medicaid Services (CMS) to confidentially report to hospitals and physicians' provider resource use for an episode of inpatient care for two years. Commissioners also recommended that Congress direct CMS to reduce payments to hospitals with high readmission rates for selected conditions and study how to implement "virtual bundling." Under virtual bundling, hospitals and physicians would continue to receive separate FFS payments for their services, but providers with high resource use would be penalized by having their payments reduced. Providers with low resource use could be rewarded by receiving bonus payments.

Further details can be found by visiting, http://www.medpac.gov/documents/Mar08_EntireReport.pdf.