At the Helm

3 mandatory bundles will likely be canceled, a 4th scaled back: What you need to know


On Tuesday afternoon, CMS issued a proposed rule that would cancel three mandatory bundled payment programs, significantly roll back a fourth, and cancel a cardiac rehabilitation incentive payment model. We asked three Advisory Board experts for their key takeaways.

Specifically, the rule if finalized would:

  • Roll back the Comprehensive Care for Joint Replacement Model (CJR) bundled payment model, which has been in effect since April 2016, from 67 mandatory geographic regions to 34 mandatory regions;
  • Cancel the mandatory Surgical Hip and Femur Fracture Treatment (SHFFT) bundled payment model, which is currently scheduled to begin in CJR's 67 regions on Jan. 1;
  • Cancel the mandatory Acute Myocardial Infarction (AMI) and Coronary Artery Bypass Graft (CABG) bundled payment models, also known as the Episode Payment Models (EPMs), which is currently scheduled to begin in 98 metropolitan areas on Jan. 1; and
  • Cancel the Cardiac Rehabilitation (CR) Incentive Payment model, a program designed to incentivize providers in 90 U.S. regions to increase patient utilization of cardiac rehabilitation that is currently scheduled to begin on Jan. 1.

The Daily Briefing's Josh Zeitlin spoke with several Advisory Board experts about what this would all mean for providers. Join the experts for an upcoming webinar on Aug. 23 where they'll continue the conversation.

Daily Briefing: Kristen, you've been following the twists and turns of EPM since they were first announced last year. Why is CMS proposing these changes now?

Kristen Barlow: Tuesday's news didn't come as a big surprise. Let's remember, CMS had repeatedly delayed the start of the cardiac bundles and the expansion of orthopedic bundles—and mandatory bundled payments have certainly been politically contentious in the past.

It's also interesting that CMS in the new proposed rule argues that having mandatory programs makes it less likely that hospitals will participate in voluntary programs. In our past experience, though, the potential for more mandatory programs motivated hospitals to participate in voluntary models, with the goal of being prepared to take on more risk. Given Tuesday's news, we'll see if this continues to hold true.

DB: Rob, I know you look at payment reform much more broadly; you focus on the big picture of payment reform. What's the big picture here about the implications of Tuesday's news for providers' Medicare risk strategies?

Rob Lazerow: It's critical to remember that yesterday's news and the most recent bundled payment programs are just one portion of CMS's overall portfolio of new payment models. All the pay-for-performance programs are here to stay and the optional Medicare ACO models continue. Also, MACRA certainly isn't going away, spurring physicians to take a new look at alternative payment models. What was unique about CJR and EPM is that they are the only mandatory alternative payment models (APMs), so we are seeing the Trump administration scale back on the rollout of mandatory APMs. However, signs continue to point to new voluntary programs emerging. Notably, CMS in the proposed rule underscored that they intend to unveil a new voluntary bundling program for 2018.

So big picture: While Tuesday's announcement is newsworthy for the 98 EPM markets and half of the CJR markets, the broader transition to alternative payment models continues, and providers are still having the same conversations about participation in voluntary programs, particularly ACOs. So hospital leaders still need to design an intentional Medicare risk strategy.

Learn the three steps to establishing an intentional Medicare risk strategy

DB: So Kristen, let's get back into the specifics of the propose rule. Starting with CJR, who is required to participate?

Barlow: Since it launched in April 2016, CJR has been mandatory for hospitals in 67 geographic areas, but the proposed rule would cut that number by nearly half, to 34 areas. It's interesting to note, these 34 markets have relatively higher average spending on joint replacement episodes. Hospitals in the 33 non-mandatory areas would then have a one-time chance to opt in to CJR by Feb. 1, 2018—otherwise, they'd be automatically withdrawn from the program.

Beyond flipping some markets from mandatory to voluntary, CMS would further cut the number of hospitals required to participate in the program by exempting certain low-volume and rural hospitals, which would also have a one-time option to opt in by Feb. 1. The full lists of proposed mandatory and voluntary areas and low-volume hospitals are on pages 25 through 27 of the rule.

Right now, about 800 hospitals are required to participate in CJR. CMS expects that number would fall to about 390 hospitals under the proposed rule, and that another 60 to 80 hospitals would choose to participate voluntarily.

DB: Rob, you work with hospital leaders on a daily basis. What are the big takeaways for them on the CJR news—especially if they are in a market that might become voluntary?

Lazerow: On one hand, hospitals in the 33 non-mandatory markets probably feel like they just got a reprieve, and CMS expects that most of these organizations will decide against remaining in CJR. Before making a decision, though, there are some critical considerations that leaders need to assess.

It's easy to start with the economic case—what's the investment hospitals would need to make, and what are the odds they will receive reconciliation payments and share in the rewards of high performance?

But I think there's an even more important set of considerations about what ending participation would mean for how a given hospital partners with its orthopedic surgeons. Near term, bundles can provide a relatively low-cost option for strengthening relationships with orthopedic surgeons and partnering to improve the quality and efficiency of care, without defaulting to employment.

Longer term, clinicians across the country are preparing for MACRA, and CJR could give providers participating in the model a direct path to qualifying for the Advanced APM model. So before making a final decision, it's important for providers to think about the full context, not just the economic business case.

Something that's important to keep in mind is that this is a proposed rule and there's time for stakeholders, including providers in the CJR and EPM markets, to weigh in.

DB: Megan, you're an expert in all things CV. What are your takeaways on the proposed cancellation of the Episode Payment Models and Cardiac Rehab Incentive Payment Model?

Megan Tooley: It's not a surprise that CMS canceled the Episode Payment Models given the HHS secretary's past comments. There was more uncertainty about whether CMS would make the models voluntary—as opposed to cancelling them altogether—but the agency in the proposed rule indicated there would not be sufficient time for them to restructure the existing EPM rule accordingly for a January 1, 2018 rollout.

Many hospitals that would have been required to participate in the EPMs may be breathing a sigh of relief, although it is too early to tell what the cancellation would mean for CV programs' MACRA strategies and prospects for success. EPMs is currently the only CV-specific payment model that would qualify as an Advanced Alternative Payment Model (APM) under MACRA. That said, CMS reiterated in the proposal that CMMI expects to develop new voluntary bundled payment models for CY 2018 that would quality as Advanced APMs.

Furthermore, many CV leaders are likely to be disappointed that CMS has proposed cancelling the Cardiac Rehab Incentive Payment Model. Given the potential for cardiac rehab to reduce costs and readmissions across a CV episode, hospitals and medical societies were on the whole supportive of the new model. Given that support, CMS did note in the proposed rule that it may revisit whether to create a similar model in the future.

DB: How should these changes affect the way CV programs approach tackling costs for episodes of CV care?

Tooley: CV programs should not view the proposed cancellation of the EPMs as a respite from episodic cost scrutiny. Mandatory bundled aren't the only lever for CMS to push on those costs; in fact, the agency through several other regulations is increasingly tying payment to episodic cost performance.

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For example, under MACRA, the cost/resource utilization category in MIPS includes Medicare Spending per Beneficiary and Total per Capita Cost measures, and could potentially include episode-based measures for CV and other conditions in the future. CMS's pay-for-performance and reporting programs are also beginning to include episodic value measures, such as the AMI and heart failure 30-day episodic payment measures that will be added to the Value-Based Purchasing Program beginning in FY 2021.

CV leaders must continue to develop an infrastructure for managing CV costs across the continuum so they can be set up for success going forward.


Register for our webconference on the proposed rule

Join our experts for a webconference on Wednesday, August 23 on CMS's proposed changes to CJR and cancellation of the EPM models.

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