BPCI Tutorial Video 4: Baseline and Target Price
Within BPCI, CMS has said, an episode should cost a little bit less (discount rate) than what it cost in the past (baseline price). Baseline price is the average cost of taking care of a patient for a specific clinical episode (say, COPD) across a 3-year baseline period. The thinking is that over 3 years, there’s sufficient volume, and seasonal effects to the data are evened out.
In relatively sparse episodes (for example: cervical spinal fusion), there might be insufficient volume even over the 3-year baseline period to reliably estimate average costs of care. In such situations, the low case volume for the episode initiator is supplemented with the experience across the episode initiator’s state using Empirical Baysean weights.
This baseline price less the required discount rate (2% or 3% based on episode length chosen) gives the Target Price for each clinical episode. The target price is the budgeted amount the entire care team is allowed to spend in managing the patient episode. If the care team spends more than target price, then the episode loses money within the BPCI framework (negative NPRA episode)