Legal Intelligencer article by: Vasilios J. Kalogredis, Esquire*

On January 3, 2017, the Centers for Medicare & Medical Services (“CMS”) issued a final rule implementing three new episode payment models (“EPMs”) under Medicare Parts A and B, and a Cardiac Rehabilitation (“CR”) Incentive Payment model. Previously, under the traditional fee-for-service (“FFS”) model, Medicare made payments to health care providers for items and services provided over the course of treatment, which primarily incentivizes volume rather than quality. The new EPMs will reward health care providers that work together to avoid complications, prevent hospital re-admissions, and promote quick recovery for patients. Acute care hospitals in certain selected geographic areas will participate in retrospective episode payment models targeting care for Medicare FFS beneficiaries receiving services during acute myocardial infarction, coronary artery bypass graft, and surgical hip/femur fracture treatment episodes. All related care within 90 days of hospital discharge will be included in the episode of care remuneration.

The Final Rule addresses three care coordination models:

1. Cardiac care: CMS added two new cardiac care EPMs for items and services furnished to patients receiving treatment for heart attacks and bypass surgery. CMS also created an incentive payment system to encourage use of cardiac rehabilitation following a heart attack or heart surgery.
2. Orthopedic care: CMS added one new EPM applicable to items and services furnished to patients who receive surgery after a hip fracture, other than hip replacement. CMS also revised the existing Comprehensive Care for Joint Replacement Model, which began in April 2016, to align it with the features of the new EPMs, and to allow it to potentially qualify as an advanced alternative payment model (“Advanced APM”) under the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) Quality Payment Program.
3. Medicare Shared Savings Program ACO: CMS also added a MSSP Track 1+ ACO model that involves a lower downside risk than the current APM-qualifying MSSP ACO models. The new track is intended to encourage more provider practices, particularly small rural practices, to participate in APMs with performance-based risk.

The cardiac and orthopedic care EPMs hold participating hospitals financially accountable for Medicare Part A and B covered items and services provided to beneficiaries in qualifying episodes of care, beginning with hospitalization for applicable cardiac or orthopedic diagnoses and extending for 90 days after hospital discharge. Items and services covered by the EPM episodes include the inpatient stay as well as post-acute care and physician services. Medicare pays providers and suppliers on a fee-for-service basis during the episode. Afterwards, Medicare performs a retrospective true-up, holding the hospitals responsible for excess costs, and rewarding hospitals and their networks with a share of cost savings if they meet specified quality goals and keep costs below certain thresholds. The final rule addresses three specific EPMs:

1. Acute Myocardial Infarction (“AMI”) Model. The AMI model will bundle payment for items and services provided to beneficiaries discharged for treatment of an acute myocardial infarction, or heart attack.
2. Coronary Artery Bypass Graft (“CABG”) Model. The Coronary Artery Bypass Graft Model or (“CABG”) bundles payments for items and services furnished to Medicare beneficiaries treated for coronary bypass surgery for blocked arteries.
3. Surgery after Hip or Femur Fracture Treatment (“SHFFT”) Model. The SHFFT model bundles payments for Medicare items and services provided to Medicare patients who receive surgery after a hip fracture, other than hip replacement.

The AMI, CABG, and SHFFT EPMs will be in effect for 5 performance years. Performance year 1 is the period from July 1, 2017 through December 31, 2017, and performance years 2 through 5 are calendar years (2018, 2019, 2020 and 2021, respectively). During each of the 5 performance years, CMS will continue paying hospitals and other providers and suppliers according to regular FFS payment rates for services and items provided to EPM beneficiaries during AMI, CABG, and SHFFT episodes of care.

However, after the completion of a performance year, for each participant hospital, CMS will undertake a cost reconciliation process under the AMI EPM and, separately, under the CABG EPM. In sum, CMS’s cost reconciliation process will determine if the total amount of claims payments for the performance year is less than the amount that Medicare would have been paid based on a quality-adjusted target price calculated for the participant hospital. Medicare will pay the participant hospital a sum equal to the difference between the two amounts (subject to certain limitations and provided that the hospital achieved at least an “acceptable” rating in quality care). This Medicare payment to a participant hospital is referred to as a “reconciliation payment.” Separate reconciliation payments will be paid under the AMI EPM and the CABG EPM.

The SHFFT model would be tested in the same hospitals participating in the CJR model, so that all surgical treatments for Medicare beneficiaries with hip fractures would be included in EPMs. The existing CJR model tests payment for LEJR procedures, whereas the SHFFT model would test payment for hip fixation. SHFFT episodes would include procedures covered by Medicare Severity Diagnosis Related Groups (MS-DRGs) 480-482.

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

The Final Rule also implements a 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.

This Final Rule will take effect on February 18, 2017. To read the full text of the Final Rule click here.

*Katherine E. LaDow, Esquire, an associate with Lamb McErlane P.C., contributed to this article.

Vasilios (“Bill”) J. Kalogredis is Chairman of Lamb McErlane’s Health Law Department. Bill has been practicing health law for over 40 years, representing exclusively physicians, dentists, group practices, other health care professionals and health care-related entities.

*Katherine (“Katie”) E. LaDow, Esquire, an associate with Lamb McErlane P.C., contributed to this article. Katie is an associate in the litigation department. She concentrates her practice in the areas of state civil litigation, family law and health law.

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