CMS Proposes Cancellation of Bundled Payment Initiatives

On August 15, 2017, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule (the “Proposed Rule”) that, if finalized, would (A) cancel the mandatory Episode Payment Models (“EPM Models”) and Cardiac Rehabilitation incentive payment program (“CR Program”) and rescind the regulations governing these models, and (B) revise certain aspects of the Comprehensive Care for Joint Replacement Model (“CJR Model”). These actions may signal a change in course for CMS, seemingly de-emphasizing mandatory participation in Alternative Payment Models (“APMs”).

  1. Cancellation of EPM Models and CR Program.

    The Proposed Rule seeks to cancel (1) the EPM Models that would have expanded mandatory participation in an episode-based payment to hospitals in a number of Metropolitan Statistical Areas (“MSAs”) for acute myocardial infarctions, coronary artery bypass grafts and surgical hip/femur fracture treatment, and (2) the CR Program that was to be implemented simultaneously with the EPM Models. Regulations for both models were originally issued on July 25, 2016 and are contained here. According to the preamble to the Proposed Rule, CMS “concluded that certain aspects of the design of the [EPM Models] and the [CR Program] should be improved and more fully developed prior to the start of the models,” and stated that moving ahead with the current regulations “would not be in the best interest of beneficiaries or providers at this time.” CMS invites public comment on its proposal to cancel the EPM Models and CR Program.
  2. Reduction in Mandatory Participation in CJR Model.

    The CJR Model originally became effective on April 1, 2016 and mandated that hospitals in sixty-seven (67) specified MSAs participate in an episode-based payment program for hip and knee joint replacements. In brief, under this model, CMS provides a “bundled” payment to impacted hospitals for an “episode of care” for lower extremity joint replacement (LEJR) surgery, covering all services provided during the inpatient admission through 90 days post-discharge (with certain exceptions). The CJR Model bundled payment is paid retrospectively through a reconciliation process, with providers receiving regular FFS payments in the interim.

    CMS now proposes to change course—it would make participation in the CJR Model voluntary for eligible hospitals in thirty-three (33) MSAs currently covered by the program, beginning in February 2018. The CJR Model would remain mandatory in the other thirty-four (34) MSAs for the remainder of the program, with an exception for certain low volume and rural hospitals. CMS expects the number of mandatory participating hospitals to decrease from about 700 to approximately 393 beginning in year 3 and beyond under its proposal. CMS will accept comments on the proposed rule until October 16, 2017.

  3. Change in Course?

    The Proposed Rule arguably suggests that CMS currently disfavors mandatory participation in APMs. As CMS states in the commentary to the Proposed Rule “requiring hospitals to participate in episode payment models at this time is not in the best interests of the agency or affected providers.” CMS further explained that large mandatory episode-based payment models “may impede [the] ability to engage providers, such as hospitals, in future voluntary efforts.” On the other hand, while cutting these programs may seem like a shift away from value-based care, CMS emphatically stated in a press release that it hopes canceling these programs will allow stakeholders to devote time and resources toward creating other episode-based models.

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