On July 25, 2016, CMS posted a proposed rule that would create three new Medicare Parts A and B episode payment models for patients admitted for care for a heart attack, bypass surgery or surgical hip/femur fracture treatment under its section 1115A authority to test innovative payment and delivery models (the “Proposed Rule”). As described in more detail below, for the three conditions, hospitals would be accountable for the cost and quality of care provided during both the inpatient stay and for the 90 days following discharge. The Proposed Rule would also implement a model for testing the use of cardiac rehabilitation services for patients hospitalized for heart attacks or bypass surgeries, amend provisions relating to the Comprehensive Care for Joint Replacement Model (the “CJR Model”) and propose new pathways for physicians who participate in bundled payment models to qualify for financial rewards in Advanced Alternative Payment Models under the proposed Quality Payment Program established by MACRA.
How the Payment Would Work Under the Three New Episode Payment Bundles
Payment to hospitals under the three new proposed episode payment models would be calculated as follows. CMS would set target prices annually for each condition based upon: (i) the historical costs for treating the condition during the hospitalization and for the 90 days post-discharge; (ii) the complexity of the patient’s condition; (iii) for heart attack patients, whether the patient was managed with medications or treated with surgery; and (iv) a blend of hospital-specific data and regional historical data initially based more upon hospital-specific data and gradually phasing to regional data only for performance years 4 and 5.
Each hospital’s target price would then be adjusted by its quality performance. The target prices of hospitals providing higher quality care would be subject to a lower discount, and the target prices of hospitals with lower quality performance would be subject to a greater discount, ranging from 1.5 percent to 3 percent. In other words, CMS is going to hold hospitals financially accountable for achieving at least a 1.5 percent reduction in Medicare spending from the date of admission through 90 days post-discharge. A hospital’s discount for quality would be measured based upon quality metrics appropriate to each episode that are already required measures in other programs or in development and testing.
The target price minus the hospital’s quality discount would then be compared against the hospital’s average costs for the entire year for that episode. If the target price minus the discount exceeds the hospital’s average cost, then the hospital would receive the difference in savings per patient from Medicare. This potential gain would be phased in over 5 years, with the potential gain capped at 5 percent for performance years 1 and 2, 10 percent for performance year 3 and 20 percent for performance years 4 and 5. If the target price minus the discount is less than the hospital’s average cost for the year, then the hospital may be subject to repayment and obligated to repay Medicare the per-patient difference. This downside risk would be phased in over time, with no repayment obligation in performance year 1 or the first quarter of performance year 2, and the downside risk capped at 5 percent for the remainder of performance year 2, 10 percent for performance year 3 and 20 percent for performance years 4 and 5 (caps for rural hospitals are substantially lower). Performance year 1 would run from July 1, 2017 through December 31, 2017, with performance years 2 through 5 aligning with the subsequent calendar years.
Hospital Participants Under the New Episode Payment Bundles
There would not be an application process. For the new hip/femur fracture bundle, hospitals would be located in the same 67 metropolitan statistical areas as the CJR Model. Hospital participants in the two new cardiac bundles would be located in 98 randomly-selected MSAs. Rural counties would be excluded, and financial risk for any remaining rural hospitals in MSAs would be limited. CMS proposes to provide the hospital participants with tools to assist with coordination and quality improvement. For example, CMS proposes to allow participants to enter into financial arrangements with Medicare ACOs and other provider types to share payments, cost savings and downside risk.
Cardiac Rehabilitation Incentive Payments
The purpose of this model would be to test the effects of cardiac rehabilitation services during the 90 days post-discharge on Medicare beneficiaries who have been hospitalized for a heart attack or bypass surgery. Hospital participants would continue to be paid standard Medicare payments for cardiac rehabilitation services. However, CMS proposes paying an additional retrospective incentive payment in the amount of $25 per cardiac rehabilitation service for the first 11 services paid for by Medicare and $175 per cardiac rehabilitation service for each service after the first 11 services, subject to limitations set forth in the Proposed Rule.
This model would be in effect during the same five-year period as the three new bundled payment models and would be available in 90 geographic areas (45 of which were selected for the new cardiac care bundled payment models and 45 of which were not).
Click here to view CMS’s Fact Sheet regarding the Proposed Rule, and here to view the display copy of the Proposed Rule. Comments are due 60 days after the proposed rule is published in the Federal Register. Not only has CMS recognized that “[s]takeholder input is vital for the success of these proposals,” but raising issues in comments may also be a pre-requisite for the filing of an appeal from the final rule of that issue. While CMS has claimed that most aspects of the proposed programs are shielded from administrative and judicial review, we have assisted clients in filing challenges to CMS’s authority under the Center for Medicare and Medicaid Innovation to enact such sweeping, mandatory changes to the prospective payment system.
