CMS launches three new mandatory bundled payment models

Some critics say new models should be voluntary

Read Advisory Board's take on this story.

CMS on Tuesday released a final rule that includes a mandatory bundled payment system for heart attack treatment, bypass surgery, and surgical hip and femur fracture treatment covered under Medicare and updates CMS' existing bundled payment model for hip and knee replacements.

The programs will qualify as Advanced Alternative Payment Models (APMs) under the Medicare Access and CHIP Reauthorization Act (MACRA) beginning in 2018.

New cardiovascular bundled payment models phase in downside risk

The rule finalizes CMS' proposed bundled payment system for heart attack treatment and bypass surgery billed through Medicare. The new payment models—called the Acute Myocardial Infarction (AMI) Model and the Coronary Artery Bypass Graft (CABG) Model—are retrospective, 90-day bundles in which hospitals will need to reduce their episodic costs below a target quality-adjusted cost threshold lower than the historical average.

CMS will launch the models' first performance period on July 1, 2017. The models currently are slated to run until Dec. 31, 2021. CMS randomly selected hospitals from 98 metropolitan areas to participate when the system is first launched. Selected hospitals must participate in the initiative.

In the final rule, CMS has delayed implementing downside risk until performance year (PY) 3. Therefore, hospitals will not have to repay CMS for costs above the threshold price in PYs 1 and 2, but will be eligible to keep a portion of savings to Medicare if the payment is below the threshold. However, beginning in performance year 3, participating hospitals will be required to pay a portion of the excess costs, up to a certain repayment limit. According to CMS, repayment limits would increase over time, starting at 5 percent of the target price in PY 3 and increasing to 10 percent in PY 4 and 20 percent in PY 5. Providers also can choose to take on downside risk in PY 2.

Final rule also supports cardiac rehabilitation

The final rule also includes incentives to encourage providers to use cardiac rehabilitation, called the Cardiac Rehabilitation Incentive Payment Model. Under the final rule, CMS will pay hospitals $25 per rehabilitation service provided to Medicare beneficiaries who receive care after a heart attack or bypass surgery. That payment rate will apply to 11 services per patient. CMS will pay $175 per service for those provided beyond those first 11 services.

What you need to know about the Cardiac Rehab Incentive Proposal

The program will apply to providers in 90 U.S. regions and will span the same nearly-five-year period as the heart attack and bypass surgery bundled payment initiative. According to HHS, 45 of the regions included in the cardiac rehabilitation program will overlap with the areas in which the new heart attack and bypass surgery initiative will be launched.

Expanded bundled payments are coming for joint replacements, too

In addition, the final rule will expand CMS' existing bundled payment model for certain joint replacements to include care for hip and femur fractures.

Currently, providers participating in the joint care bundled payment model, called the Comprehensive Care for Joint Replacement (CJR) Model, are held to episodic cost thresholds for hip and knee replacements for Medicare beneficiaries. Hospitals that meet certain benchmarks for quality and cost measures will receive a bonus payment, while hospitals that exceed the set target could be penalized. The model currently applies to providers located in 67 U.S. regions.

Under the final rule, providers in those regions also will receive bundled payments for hip and femur fracture care, under the Surgical Hip and Femur Fracture Treatment Model.

The final rule also specifies that the CJR Model will qualify as an Advanced APM under MACRA.

HHS Secretary Sylvia Mathews Burwell said the new payment models will "give providers and hospitals the tools they need to provide the kind of high-quality patient-centered care we all want for our own families, while also driving down costs for the nation."

CMS to offer provider education and support

HHS said CMS will offer education and training to help prepare and support providers in complying with the new payment models, as well as a new ACO model announced Tuesday. For example, CMS will offer webinars addressing each payment model and the criteria providers must meet to qualify for incentive payments under MACRA. CMS also will release fact sheets explaining how clinicians can successfully comply with the models and will host open forums where CMS staff will answer questions about the new payment models.

Industry reacts

The American Medical Association (AMA) applauded the new payment models. AMA President Andrew Gurman in a statement said the group "supports CMS as it expands the models that can qualify as Advanced APMs" and "is working with the agency to expand opportunities for different specialties and practices to participate in innovative care models." He added, "We hope that CMS will continue to expand the list of Advanced APMs in the future so new delivery and payment arrangements can be supported and promoted—a win for physicians and patients alike."

In contrast, some stakeholders criticized CMS for finalizing another mandatory payment reform initiative.

Tom Nickels, executive vice president for government relations and public policy at the American Hospital Association (AHA), in a statement said, "The bundled-payment model for cardiac care is the second mandatory demonstration project [CMS] has finalized in just the past 15 months," adding, "This is too much too soon." Nickels continued, "Regrettably, at the same time, the agency finalized its plans to expand and further complicate its existing mandatory hip and knee bundled payment model less than a year after it began, and before fully evaluating its results." He said AHA will "continue to urge that any new bundled payment programs be of a voluntary nature."

Some observers said they do not expect the new mandatory payment models to last under President-elect Donald Trump's administration.

Terry Haines, managing director and head of political analysis at the economic research firm Evercore ISI, said, "Expect anything CMS does at the 11th hour to be on a list for" Rep. Tom Price (R-Ga.)—Trump's pick to lead HHS under his administration—"to consider killing upon confirmation." According to CQ HealthBeat, Price has been skeptical of mandatory payment reform implement under CMMI.

Rob Lazerow, managing director at Advisory Board, agreed that the initiative's future was uncertain: "The big question is what's the future of CMMI—and mandatory bundling models in particular—under the Trump administration." But he added, "Fortunately, the new bundling models have a long on-ramp until they impose mandatory downside risk, providing time for the politics to play out."

For his part, Conway when asked whether he thought Trump's administration would overturn the new payment models noted that MACRA was enacted with bipartisan support (Frieden, MedPage Today, 12/20; HHS release, 12/20; CMS fact sheet, 12/20; Dickson, Modern Healthcare, 12/20; Young, CQ HealthBeat, 12/20 [subscription required]; Joszt, American Journal of Managed Care, 12/20; Morse, Healthcare Finance News, 12/20; CMS final rule, accessed 12/21).

Advisory Board's take

Megan Tooley

Megan Tooley, Practice Manager

CV leaders across the country—not to mention the Cardiovascular Roundtable team—have anxiously awaited this final rule since the proposal was issued in July. The big unknown was which 98 randomly selected Metropolitan Statistical Areas (MSAs) would be required to participate in the AMI and CABG episodic payment models. Now, we know that 1,120 hospitals have been selected for mandatory participation.

Not surprisingly, the rule hasn't changed significantly, as it largely was modeled off of the CJR model that began this summer. However, CMS did make some revisions that we think providers will appreciate. For example, the agency is postponing implementation of downside risk to performance Year Three (January 1, 2019), with the option of downside risk beginning in performance Year Two (January 1, 2018) for programs looking to participate in the Advanced Alternative Payment Model under MACRA.

Nevertheless, Year One will begin as proposed on July 1, 2017, leaving programs little time to prepare. To succeed, hospitals must begin building partnerships with high-value physicians and post-acute care providers to manage costs and quality across the continuum.

We also eagerly await results of the new cardiac rehab (CR) incentive payment pilot that was finalized in this rule. This model indicates that CMS is willing to pay for prevention services that are likely to yield long-term value and cost avoidance. To capitalize on this incentive opportunity, hospitals will need to hardwire referrals to CR for appropriate patients, and they'll need to encourage patient adherence to this underutilized service.

Despite uncertainty surrounding the future of CMMI, mandatory bundling is just one of many initiatives demanding hospital accountability for care across the continuum. For example, new Value-Based Purchasing metrics for AMI and HF 30-day episodic payment will take effect in FY 2021, and the new MIPS track under MACRA includes several episodic cost measures. To us, the mandatory bundling rule is signal value of payment models to come.

Therefore, we advise even programs that were not selected for the pilot to think of this as a grace period, not a pardon. There's no time to waste in preparing for episodic payments.

Our team will provide in-depth analysis of the rule and implications across the coming weeks, alongside analytical and best practice support for selected programs. Subscribe to the CV Insights and Cardiovascular Rounds blog to get the latest updates, and join our webconference on January 13 for exclusive analysis and insights. You'll learn about key changes from the proposed rule, how the program will be implemented, and what providers need to do to prepare for the program's launch in July 2017.

Register now


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