August 3, 2016

Bundled Payments for Major Procedures Being Weighed by CMS

By

On Tuesday, Aug. 2, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule noting that it intends to test bundled payments to hospitals for treatment of heart attacks (myocardial infarction, or MI), coronary artery bypass graph (CABG) surgery, and surgical hip/femur fractures. Similar to the Comprehensive Care for Joint Replacement (CJR) Model that was put into effect this April, this proposal seeks to make hospitals responsible for the costs of all care provided in the 90 days following a hospital discharge for these conditions. The proposal would also link reimbursement to quality metrics. While the rule is only proposed, and one can’t assume that the July 1, 2017 target date will be met, it seems nearly certain that some form of this policy will be implemented in the very near future. 

The surgical hip/femur component is functionally an add-on to the current CJR program, and CMS expects to apply it in all hospitals subject to CJR.  

For the cardiac portion of the proposal, CMS plans to choose 98 metropolitan areas in which almost every hospital will be required to participate in the program. The only exception may be hospitals enrolled in Bundled Payments for Care Improvement (BPCI) Models 2 and 4 for the hip and femur procedures (except major joint, which may be excluded from all three new programs). We don’t yet know the markets where the plan will be tested, and that will not be known until the final rule is published. It is worth noting that when CJR was implemented, the proposal was published in mid-July, with the final rule issued just before Thanksgiving. Assuming the timing here is similar, the final rule for cardiac bundling may come out in late November. Note that there are 60 days to comment on the proposal, which means the comment period won’t close until the start of October.  

To determine whether your hospital may be included in the program, consult the proposed rule, which may be accessed online here: https://www.gpo.gov/fdsys/pkg/FR-2016-08-02/pdf/2016-17733.pdf Page 50,817 of the rule (page 39 of the PDF) has the first page of the list of metropolitan statistical areas (MSAs) eligible for inclusion. The proposed rule lists the 294 MSAs from which CMS intends to select its 98. Note that the final number may change slightly in the final rule. The last column indicates whether each MSA will be entered in the “lottery” for the program, or whether the MSA is excluded because it did not meet CMS’s criteria. Note that if you are outside of a MSA, you will not be in this program. 

The program is expected to last five years. A target price will be established by taking past Medicare payments and discounting them by between 1.5 and 3 percent. The size of the discount is influenced by each hospital’s quality scores, so hospitals with higher quality metrics face a smaller discount. The target is initially two-thirds hospital-specific and one-third regional, but it becomes entirely regional by the fourth year. If the total expenditures are lower than the target, the hospital keeps the difference. If they are higher, the hospital must pay CMS. The target price will include all payments for care CMS deems related to each episode, including physician work, rehab, drugs, and hospital readmissions. 

One important note: CMS’s definition of “related” services is much broader than the definition a layman might use. For example, hospice care is considered “related.” If a patient is discovered to have a terminal cancer shortly after their MI and opts for hospice care, that care is considered “related” to the MI.

The gains and losses are capped, with no loss possible in the first year and gain capped at 5 percent. Thereafter, the cap on gains and loses increases to 10 percent in the third year, reaching 20 percent in the fourth and fifth years.

As with CJR, hospitals will be allowed to share the gains and losses with other organizations, but those organizations are not required to agree to accept risk. The other organizations may also opt to accept upside potential but reject any downside risk. In other words, hospitals have the risk, but somewhat limited ability to control it. 

Included in the proposal is a plan to test an increase in the payment for cardiac rehabilitation (CR). CMS believes that cardiac rehab is very effective, but underused. To incentivize an increase in utilization, hospitals in 45 regions in the bundled program and 45 regions outside the bundle program will get an extra $25 for each of the first 11 CR visits, and $175 for the 12th and all subsequent visits.

This rule is only proposed. However, it is clear that CMS is committed to implementing some or most of it. If you are a hospital in one of the included MSAs, you will want to understand the implications and should seriously consider offering comments on the rule before the deadline at 5 p.m. on Oct. 3. It can be particularly efficient for hospitals to band together and use a trade group or jointly hire one lawyer to offer comments. 

About the Author 

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and is a member of the RACmonitor editorial board. 

Contact the Author 

dglaser@fredlaw.com

Comment on this Article

editor@racmonitor.com 

David M. Glaser, Esq.

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and is a member of the RACmonitor editorial board.

This email address is being protected from spambots. You need JavaScript enabled to view it.