Policy & Regulation News

New Rules for Bundled Payment Models for Cardiac, Hip Care

In a proposed rule, CMS announced two new bundled payment models for cardiac care and hip surgeries that would potentially qualify as Advanced APMs under MACRA.

By Jacqueline LaPointe

- CMS has proposed to develop bundled payment models for cardiac care and hip surgeries that would qualify for financial incentives in the proposed Quality Payment Program in MACRA, according to a recent announcement.

CMS announced proposed bundled payment models for cardiac and hip fracture care

“On July 25, 2016, the Department of Health & Human Services (HHS) proposed new models that continue the Administration’s progress to shift Medicare payments from quantity to quality by creating strong incentives for hospitals to deliver better care at a lower cost,” the federal agency stated.

“These models would reward hospitals that work together with physicians and other providers to avoid complications, prevent hospital readmissions, and speed recovery.”

Under the proposed bundled payment models, select hospitals would be accountable for the quality and costs for heart attack, bypass surgery, and surgical hip/femur fracture treatments provided to Medicare fee-for-service beneficiaries during their inpatient stay and 90 days after discharge.

Through the models, CMS would set a target price for each episode of care and then adjust it for individual quality performance.

CMS plans to set target prices for the episodes of care based on historical costs data. For the first two performance years, the agency will use two-thirds of participant-specific data and one-third regional data. Participant-specific cost information will be phased out of the methodology by the fourth performance year.

The agency would then give hospitals a quality-adjusted target price for each episode of care based on various quality measures specific to each episode. The adjusted prices would reflect a 1.5 to 3 percent discount rate relative to historical spending, with higher quality hospitals receiving the lowest discount percentage.

“Payments would be based on a quality-first principle: only hospitals meeting quality standards would be paid the savings from providing care for less than the quality-adjusted target price,” CMS explained.

For example, if Medicare sets the target price for an episode of care at $50,000 and a hospital achieves the highest levels on quality measures, then its discount rate would be 1.5 percent, causing the quality-adjusted target price to drop to $49,250. If the same hospital is able to reduce the costs for that episode of care to $48,000, it would receive $1,250 per patient.

In contrast, low-performing hospitals would have their target prices adjusted by three percent, causing the benchmark to be $48,500. If the hospital also reduces the average cost of the episode to $48,000, Medicare would only pay $500 in shared savings per patient.

However, CMS also proposed to implement downside financial risk structures as part of the new bundled payment models, meaning hospitals may have to repay Medicare for shared losses. Participating hospitals that have actual costs exceeding the quality-adjusted target price would be required to refund Medicare for the difference.

In the same example, a low-performing hospital receives an adjusted target price of $48,500, but it is unable to improve its cost or quality performance, causing its actual costs to be $50,000 for that episode of care. Under the risk-based model, the hospital would have to repay Medicare $1,500 per patient.

To help hospitals prepare for the new bundled payment models and develop processes for coordinating care, CMS would phase in the implementation of shared savings and losses over the five-year models.

Participation in the models will be mandatory for 98 randomly-selected hospitals in metropolitan statistical areas, including 67 hospitals that already use the Comprehensive Care for Joint Replacement model.

The proposed reimbursement structure is scheduled to start in July 2017.

Additionally, CMS has proposed to establish new pathways to qualify bundled payment models, such as the ones in the proposal and the Comprehensive Care for Joint Replacement program, for financial rewards through MACRA’s Quality Payment Program.

Starting in 2018, the models would be considered Advanced Alternative Payment Models (APM), which exempts providers from the Merit-Based Incentive Payment System and qualifies providers for a five percent Medicare Part B incentive payment.

The proposal would develop a track for each bundled payment model to meet the proposed criteria of an Advanced APM, such as downside financial risk, use of quality measures, and demonstration of certified EHR technology.

The proposed rule would also work to expand the Bundled Payments for Care Improvement Initiative so it could potentially qualify as an Advanced APM in 2018.

In addition to bundled payment proposals, CMS also announced a new financial incentive model designed to encourage more use of cardiac rehabilitation services, which has proven to reduce a patient’s risk of heart attack or death.

The proposed payment model would provide incentive payments to hospitals where beneficiaries are hospitalized for a heart attack or bypass surgery. The payment can be used to coordinate cardiac rehabilitation services and support beneficiary adherence to the treatment plan to improve cardiovascular fitness.

The five-year model proposes to retrospectively pay hospitals an initial payment of $25 per cardiac rehabilitation service for each of the first 11 services paid for by Medicare during the care period.

After the initial 11 services, Medicare would pay $175 per service paid for by Medicare during the treatment period.

However, the agency would limit the services to a maximum of two one-hour sessions per day for up to 36 sessions over 36 weeks. For intensive cardiac rehabilitation, the services would be capped at 72 one-hours sessions for up to six sessions per day over 18 weeks.

To view the full CMS proposal, click here.

Dig Deeper:

Understanding the Basics of Bundled Payments in Healthcare

How to Scale Healthcare Bundled Payment throughout Hospitals