CMS Finalizes Policies for New Mandatory Cardiac and Orthopedic Models, Adjustments to CJR; Previews Details of Medicare Track One Plus ACO Model

On Tuesday, December 20, 2016 the Centers for Medicare and Medicaid Services (CMS) finalized several new Innovation center models expanding the agency’s footprint in the value based payment model space. While these models are primarily focused on further promoting provider accountability for improving quality and reducing costs, they also expand opportunities for Eligible Clinicians to qualify for a 5 percent incentive payment through the Advanced Alternative Payment (APM) pathway under the Quality Payment Program (QPP).

Tuesday’s Final Rule addresses three previously proposed episodic payment models (EPMs), an incentive payment for providing cardiac rehabilitation services and adjustments to the current Comprehensive Joint Replacement Model (CJR). The rule announcement also includes preliminary details on a new Track 1+ option in the Medicare Shared Savings Program.

CMS released the Proposed Rule outlining these models in July 2016, including mandatory participation by hospitals in nearly 100 geographic areas for the three EPMs. The rollout of these new mandatory models in addition to the recently launched CJR model drew concern from providers as well as some members of Congress, citing an unreasonable pace of change and excessive use of CMMI authority. As such, there is some speculation that incoming agency leadership under the Trump Administration may seek to nullify or modify elements of the Final Rule released this week but for now, health care providers and stakeholders should proceed with preparation for participation in these new programs.

Overview of the Final Rule Policies
The Rule addresses requirements for several new payment model programs within Medicare:

Cardiac Care Payment Models Orthopedic Care Payment Models 
  • Acute Myocardial Infarction (AMI) Model*
  • Coronary Artery Bypass Graft (CABG) Model*
  • Cardiac Rehabilitation (CR) Incentive Payment Model
  • Surgical Hip and Femur Fracture Treatment (SHFFT) Model*
  • Updates to existing CJR model

* Episode Payment Model

Understanding the Episode Payment Models
Acute care hospitals in selected geographic areas are required to participate in retrospective episode-based payments for items and services that are related to AMI, CABG, and SHFFT treatment and recovery, with the defined episode beginning with a hospitalization and ending 90 days after hospital discharge.

Model Timeline

CMS is finalizing its proposal to test these models for 5 performance years beginning July 1, 2017, and ending December 31, 2021.

Performance Year (PY) Calendar Year (CY) EPM Episodes Included in Performance Year
1 2017 EPM episodes that start on or after July 1, 2017 and end on or before December 31, 2017
2 2018 EPM episodes that end between January 1, 2018 and December 31, 2018, inclusive
3 2019 EPM episodes that end between January 1, 2019 and December 31, 2019, inclusive
4 2020 EPM episodes that end between January 1, 2020 and December 31, 2020, inclusive
5 2021 EPM episodes that end between January 1, 2021 and December 31, 2021, inclusive

* Please not that some EPM episodes beginning in a calendar year may be reflected in the following performance year due if the episode ends after December 31st of that year.

Setting Target Prices

Under the finalized policy, acute care hospitals bear the financial risk of the model. During the performance year, CMS will continue to pay hospitals and all other providers and suppliers under the usual payment system rules and procedures. Following the end of the performance year, all spending (Parts A and B) will be aggregated and compared to a quality-adjusted target price. CMS will use 3 years of historical EPM episodes for calculating EPM participants’ EPM-episode benchmark prices, with each set of historical episodes updated every other year.

Downside Risk Begins in Performance Year Three

CMS also specifies that hospitals will not be responsible for repaying CMS if they exceed the aggregate target price in performance years 1 and 2 but also establishes an optional downside risk track in year 2 that rewards participants with a reduced discount percentage performance years 3 and 4. The final timeline represents a change from the original proposed rule, which would have required downside risk began in the second quarter of the second performance year, and is intended as a compromise in response to those commenters who requested a delay in implementation from the proposed start date of July 1, 2017 (which CMS did not change).

Stop-loss and Stop-gain Thresholds Finalized

CMS also finalizes stop-loss thresholds to limit financial risk for providers participating in the EPMs and more conservative stop-loss thresholds are established for rural and sole-community hospitals, rural referral centers, Medicare Dependent Hospitals and hospitals determined to meet specified volume thresholds within an EPM. Additionally, they are also finalizing parallel stop-gain limits, which are outlined in the chart below:

Proposed Stop-Gain Limits
5% 5% 10% 20% 20%
Final Stop-Gain Limits
5% 5% 5% 10% 20%
Final Stop-Loss Limits: Downside Risk for All Participants*
n/a as no
downside risk
n/a as no
downside risk
     5%      10%      20%
Final Stop-Loss Limits: Voluntary Downside Risk in PY2*
n/a as no
downside risk
5% 5% 10% 20%

Source: Table 20, Final Rule, CMS 5519-F
*Limits apply to hospitals other than those eligible for the separate stop-loss limits (rural and sole-community hospitals, rural referral centers, Medicare Dependent Hospitals and hospitals determined to be EPM volume protection hospitals within an EPM)

Quality Measures and Application of Discount Factor

Similar to the Proposed Rule, CMS also explains that a participating hospital may receive an additional payment from Medicare or be required to repay Medicare for a portion of the episode spending exceeding the aggregate target price, depending on the participant hospital’s quality and spending performance.

CMS has established separate quality measures for each of the EPMs:

  • Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Myocardial Infarction (NQF #0230) (MORT-30-AMI)
  • Excess Days in Acute Care after Hospitalization for AMI (AMI Excess Days)
  • HCAHPS Survey (NQF #0166)
  • Voluntary Hybrid Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #2473) (Hybrid AMI Mortality) data submission
  • Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 2558) (MORT-30-CABG)
  • HCAHPS Survey (NQF #0166)
  • STS composite measure data submission voluntary option (change from proposed rule)
  • Hospital-level RSCR following elective primary THA and/or TKA (NQF #1550) (Hip/Knee Complications)
  • HCAHPS Survey (NQF #0166)
  • Total Hip Arthroplasty (THA)/Total Knee Arthroplasty (TKA) voluntary patient-reported outcome (PRO) and limited risk variable data submission (Patient-reported outcomes and limited risk variable data following elective primary THA/TKA)

Required Participation Regions for EPMs
In developing policies around the implementation of quality, CMS explains that it relies heavily on its policies similar to those established for the CJR model. CMS will apply a discount factor to EPM-episode benchmark prices in calculating quality-adjusted target prices. EPM participants that provide high-quality episode care would have the opportunity to reduce the effective discount factor used to calculate their quality-adjusted prices at reconciliation. The EPM-specific composite quality score (which includes both patient experience and outcome measures, including points for voluntarily reported measures) will place each EPM participant into one of four quality categories, specifically “Below Acceptable,” “Acceptable,” “Good,” and “Excellent,” for each EPM performance year. Participants that achieve actual EPM-episode payments below the quality-adjusted target price for a given performance year may be eligible for a reconciliation payment from CMS.

The AMI, CABG and SHFFT models will require the participation of hospitals in multiple geographic areas randomly selected by CMS. CMS estimates that approximately 1,120 hospitals will participate in the AMI and CABG modles and 860 hospitals will participate in the SHFFT model.

  • 98 geographic areas, defined by MSAs
  • Eligible MSAs must have had at least 75 AMI Model eligible cases among other criteria
  • 67 MSAs where the CJR model is currently underway

Episode Initiator and Definition
The list of MSAs selected for the cardiac EPM is included in Table 2 of the final rule. The list of hospitals identified in the MSAs selected for the cardiac EPMs can be found here. CMS notes that any hospital that believes that is was incorrectly identified as being located in a required participation area must notify CMS at within 45 days of the final rule publication date.

The Final Rule finalizes the definition of the episode for each model and notes that an AMI, CABG, or SHFFT model episode begins with an inpatient admission to an anchor hospital assigned to one of the following MS-DRGs upon beneficiary discharge. Episodes will end 90 days after the date of discharge from the anchor hospital. The EPM episodes will include the inpatient expenses 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. CMS also finalizes its policy to exclude certain specific readmission costs and certain Part B-covered items and services from the EPM episode.

  • AMI MS-DRGs (280-282)
  • Percutaneous Coronary Intervention (PCI) MS-DRGs (246-251) representing IPPS admissions for AMI that are treated with PCIs
  • CABG MS-DRGs (231-236)
  • SHFFT MS-DRGs (480-482)

Beneficiary Protections
It is worth noting that the clinical considerations of AMI and CABG episodes are inherently more complex than those included in the CJR model. To capture the various scenarios that an AMI or CABG episode may be initiated, CMS provides a useful summary of its final policies for initiation and attribution of AMI and CABG episodes that involve no transfer, outpatient-to-inpatient transfer, or inpatient-to-inpatient transfers at the beginning of AMI care in Table 8 of the Final Rule.

Medicare beneficiaries receiving treatment at a provider who is included in the EPM models retain the right to obtain health services from any individual or organization qualified to participate in the Medicare program but cannot opt out of inclusion in the applicable model. Beneficiaries must receive certain notifications about the models and relevant sharing arrangements from participating providers, and CMS outlines a framework for the beneficiary notification requirements that apply to EPM collaborators in the Final Rule.

Advanced APM Opportunities Expanded

CMS also finalizes its proposal to establish an Advanced APM Track option (referred to as Track 1) for the three EPMs as well as the CJR payment model. This would allow physicians and other providers identified by CMS as Eligible Clinicians under the QPP to qualify for the related updates and bonuses associated with the Advanced APM pathway under the new physician payment methodology. Track 1 participants must use Certified Electronic Health Record Technology (CEHRT) as required by the criteria established in the MACRA statute. CMS does not require the use of CEHRT for other EPM and CJR participants who do not seek Advanced APM credit (referred to as Track 2). Track 1 EPM and CJR participants will be considered to be participating in an Advanced APM in the year that they begin to bear downside risk for excess actual episode spending above the quality-adjusted target price.

Overview of CR Incentive Payment Model
The purpose of the CR Incentive Payment model is to encourage the utilization of cardiac rehabilitation (CR) and intensive cardiac rehabilitation (ICR) services for beneficiaries hospitalized for treatment of AMI or CABG. CMS notes that clinical studies demonstrate that CR/ICR services improve long-term patient outcomes for patients treated for AMI or CABG but that such services are currently underutilized so it is establishing a voluntary payment incentive program to test expanded use of these of services. Under the incentive payment model, a participating hospital will receive $25 per CR/ICR service for the first 11 services paid by Medicare for a beneficiary during an AMI or CABG model episode or AMI care period or CABG care period. After the first 11 CR/ICR services, 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 set the proposed service utilization benchmark based on evidence from the literature that shows reduced mortality for Medicare beneficiaries that complete at least 12 CR sessions relative to Medicare beneficiaries who complete 1-11 CR sessions.

The CR Incentive Payment Model will be implemented in 45 MSAs also selected for the AMI and CABG models, as well as in 45 geographic areas that were not selected for the AMI or CABG model. CMS estimates that 1,320 hospitals will participate in the CR Incentive Payment model which will run for the same five-year period as the EPMs.

Updates to Existing CJR Model
CMS includes several adjustments to the requirements for the CJR payment model that began earlier this year in order to ensure consistency with the new EPM models in the Final Rule. The changes include finalizing the proposed policy to include CJR reconciliation and repayment amounts in the historical episode spending benchmark for performance years 3, 4 and 5 of the CJR model. CMS also finalizes several policies related to financial performance calculations and quality performance calculations under the model.

The Final Rule also modifies the ACO overlap framework to specify that Medicare beneficiaries that are assigned to a Track Three ACO within the Medicare Shared Savings Program (MSSP) are excluded from the CJR model beginning on July 1, 2017 but that beneficiaries that are not prospectively assigned to a Next Generation ACO, an ESRD ACO or a Track 3 ACO will be included in CJR for episodes starting on or after July 1, 2017. Finally, the rule also includes technical modifications to policies related to financial sharing arrangements for CJR collaborators, beneficiary engagement incentives and notification and application of previously finalized SNF waiver.

Overview of Medicare ACO Track 1+ Model
In its Final Rule announcement, CMS also outlined the basic parameters of a new “Track 1+” option that it intends to offer within the MSSP program beginning in 2018. The summary indicates that CMS intends to call for applications during the regular MSSP cycle in 2017 and that Letters of Intent to Apply will be due in May 2017. The model will be open to Track One ACOs that are in the current agreement period as well as new MSSP applicants and Track One ACOs that are renewing their agreements. CMS also explains that ACOs will have the opportunity to join during the 2019 and 2020 application cycles.

The Track 1+ model is designed to qualify as an Advanced APM for purposes of QPP and incorporates downside risk at a rate significant enough to meet the nominal risk criteria but less aggressively than MSSP Tracks Two and Three. It incorporates the 50% maximum savings sharing rate included in the current Track One but also includes some benefits of Track Three, such as prospective beneficiary assignment, symmetrical savings and loss thresholds and waiver of the 3-day SNF rule. It offers a fixed 30% loss sharing rate with a maximum loss limit at either 8 percent of ACO participant Medicare fee-for-service revenue (for ACOs that are physician-led or include small, rural hospitals); or 4 percent of the ACO’s updated benchmark depending on the composition of the ACO (for other ACOs now in Track 1 or new or renewing ACOs). In later years, ACOs eligible for the lower sharing limit could opt for a higher percentage of revenue in 2019 and 2020.

The CMS announcement includes few details beyond the basic parameters but indicates that additional information on the model will be forthcoming. It will be important to monitor developments to determine whether the incoming CMS leadership will modify any of the elements described in the Fact Sheet or the timeline for implementing the model.

More information on MACRA can be found at the McDermottPlus MACRA Resource Center.