On July 25, 2016, CMS announced ambitious, multi-pronged plans to expand mandatory Medicare coordinated care/bundled payment programs, promote the use of cardiac rehabilitation services, refine current Comprehensive Care for Joint Replacement Model (CJR) rules, and integrate bundled payment programs into the upcoming Medicare physician quality/payment framework. The proposed “Advancing Care Coordination through Episode Payment Model” rule is part of the Administration’s efforts to move the Medicare system away from fee-for-service (FFS) payments and towards alternative payment models that reward quality of care rather than volume of services.

The new policies are set forth in a 906-page proposed rule that is scheduled to be published in the Federal Register on August 2, 2016. Comments on the rule will be accepted for 60 days from the date of publication.

The following are the major components of the proposed rule; Reed Smith is preparing a more detailed analysis of the program.

New Mandatory Episode Payment Models for Cardiac Care, Hip Fractures

CMS proposes to test three new Medicare Parts A and B bundled payment models – which it calls “episode payment models” (EPMs) – for episodes of care surrounding an acute myocardial infarction (AMI), coronary artery bypass graft (CABG), and surgical hip/femur fracture treatment excluding lower extremity joint replacement (SHFFT).  The goal for the proposed EPMs is to improve the quality of care provided to beneficiaries in an applicable episode while reducing episode spending through financial accountability.  Like the CJR program on which these models are patterned, participation in the new EPMs would be mandatory in selected geographic areas. CMS expects the EPMs to result in Medicare savings of $170 million over five years.

CMS proposes to test the proposed EPMs for five performance years (PYs), beginning July 1, 2017 and ending December 31, 2021. Under the proposed rule, CMS would designate 98 randomly-selected metropolitan statistical areas (MSAs) for the CABG and AMI EPMs.  CMS plans to test the SHFFT EPM in the same 67 MSAs in which CJR is currently operating.

Under the proposed EPMs, an AMI, CABG, or SHFFT model episode would begin with an inpatient admission to an “anchor hospital” for a specified Medicare Severity-Diagnosis Related Group (MS-DRG):

AMI episodes: AMI MS-DRGs 280-282 and Percutaneous Coronary Intervention (PCI) MS-DRGs 246-251 representing IPPS admissions for AMI that are treated with PCIs

CABG episodes: MS-DRGs 231-236

SHFFT episodes: MS-DRGs 480-482

The episode would end 90 days after the date of discharge. The episode would include the inpatient stay and all related care covered under Medicare Parts A and B within the 90 days after discharge, including hospital care, post-acute care, and physician services, with very limited exceptions.

As under the current CJR program, the acute care hospital would be the “episode initiator” and bear financial risk under the proposed EPMs. During the duration of the program, CMS would continue to pay hospitals and other providers and suppliers according to the usual Medicare FFS rules.  At the completion of a PY, CMS would compare (1) actual Medicare claims data for service furnished to beneficiaries during the episode, to (2) a quality-adjusted target price based on historical data with various adjustments with a discount to reflect savings to Medicare.  The target price initially would be based on a blend of hospital-specific and regional historical data, transitioning to only regional data for PY4 and PY5.  Hospitals that deliver care for less than the quality-adjusted target price and meet applicable quality standards would be eligible for a “reconciliation payment”; hospitals with costs that exceed the quality-adjusted target price would be required to repay Medicare after a phase-in period beginning in the second quarter of PY2.  A number of other factors also would be considered in determining reconciliation and repayment amounts, including quality scores, certain transfers and readmissions of beneficiaries to inpatient hospitals for these episodes and various limits on the hospital gains and losses during reconciliation.  The following is the phase-in schedule, with limits on repayments and gains:

Repayment Limits (payments from hospital to Medicare):

  • July 2017 – March 2018 (PY1 and quarter 1 of PY2):  No repayment
  • April 2018 – December 2018 (quarters 2 through 4 of PY2): Capped at 5 percent
  • 2019 (PY3): Capped at 10 percent
  • 2020 – 2021 (PY4 and PY5): Capped at 20 percent

Reconciliation Payment Limits (payments from Medicare to hospitals):

  • July 2017 – December 2018 (PY1 and PY2): Capped at 5 percent
  • 2019 (PY3): Capped at 10 percent
  • 2020 – 2021 (PY4 and PY5): Capped at 20 percent

Also as under the CJR program, CMS anticipates that EPM participant hospitals will enter into gainsharing arrangements with other providers and suppliers. Moreover, CMS proposes to add other hospitals as potential collaborators, along with accountable care organizations (ACOs). CMS also proposes to provide hospitals with additional utilization and spending data to help improve care coordination. The proposed rule discusses the extent to which CMS will waive certain Medicare program rules to promote coordination of care.  While some policies, such as telehealth originating site requirements, would be waived for all three proposed EPMs, CMS proposes to make model-specific decisions about other waivers, including waivers of the skilled nursing facility 3-day stay requirement and post-discharge nursing visit limits.

Cardiac Rehabilitation Model

CMS also proposes to establish a Cardiac Rehabilitation (CR) incentive payment model to test the use of CR and intensive cardiac rehabilitation (ICR) services for beneficiaries hospitalized for treatment of an AMI or CABG for 90 days post-hospital discharge. CMS proposes to make the CR incentive payments available to hospital participants in 45 geographic areas that were selected for the CABG and AMI EPMs and 45 geographic areas that were not selected for the EPM program.  The CR model will span the same five-year period as the cardiac care EPMs.

CMS proposes to make standard Medicare payments for CR/ICR services (HCPCS codes 93797, 93798, G0422, and G0423) at the time of service, with an additional retrospective payment to participant hospitals based on total CR service use:

  • CMS would make an initial payment of $25 per CR/ICR service for each of the first 11 CR/ICR services paid for by Medicare during an AMI or CABG model episode or an AMI or CABG care period.
  • After 11 CR/ICR services are paid for by Medicare for a beneficiary, the level of the per-service CR incentive amount would increase to $175 per CR/ICR service for each additional CR/ICR service paid for by Medicare during the AMI or CABG model episode or AMI care period or CABG care period.

CMS proposes certain limits on services and conditions of coverage for such services.

CMS estimates a total aggregate impact between $27 million in net Medicare costs and $32 million in net Medicare savings from July 2017-December 2024 as a result of the CR incentive payment model; CMS notes that this range of potential impacts is due to uncertainty regarding the extent to which CR/ICR utilization will increase based on the proposed CR incentive.

Integration of Bundled Payment Models within MACRA Physician Quality Payment Program

CMS proposes that physician collaboration with hospitals participating in the new cardiac care and hip fracture EPMs (along with the ongoing CJR program) could qualify as participation in an Advanced Alternative Payment Model (APM) for purposes of the Medicare Access and CHIP Reauthorization Act (MACRA) physician payment and quality reform provisions, beginning in 2018. CMS proposes different rules for the Advanced APM “track,” including use of certified health information technology functions and assumption of financial risk.

Revisions to CJR Rules

The proposed rule includes a number of changes to CJR program rules, including: enabling the CJR model to potentially qualify as an Advanced APM; allowing ACOs, critical access hospitals, and hospitals to be CJR collaborators; and other provisions related to financial arrangements, pricing, the reconciliation process, and composite scoring.  CMS estimates that the proposed changes in the CJR model will increase estimated costs to the Medicare program by $35 million over the duration of the CJR (April 2016-December 2020) compared to CMS’s estimate in the CJR final rule.