Fact Sheets

Advancing Care Coordination through Episode Payment Models (Cardiac and Orthopedic Bundled Payment Models) Final Rule (CMS-5519-F)
and Medicare ACO Track 1+ Model

Advancing Care Coordination through Episode Payment Models (Cardiac and Orthopedic Bundled Payment Models) Final Rule (CMS-5519-F) and Medicare ACO Track 1+ Model

On December 20, 2016, the Centers for Medicare & Medicaid Services (CMS) finalized new Innovation Center models that continue the Administration’s progress to shift Medicare payments from rewarding quantity to rewarding quality by creating strong incentives for hospitals to deliver better care to patients at a lower cost. These models will reward hospitals that work together with physicians and other providers to avoid complications, prevent hospital readmissions, and speed recovery. 

The announcement finalizes significant new policies that: 

• Improve cardiac care: Three new payment models will support clinicians in providing care to patients who receive treatment for heart attacks, heart surgery to bypass blocked coronary arteries, or cardiac rehabilitation following a heart attack or heart surgery. 
• Improve orthopedic care: One new payment model will support clinicians in providing care to patients who receive surgery after a hip fracture, other than hip replacement. In addition, CMS is finalizing updates to the Comprehensive Care for Joint Replacement Model, which began in April 2016. 
• Provides an Accountable Care Organization opportunity for small practices: The new Medicare ACO Track 1+ Model will have more limited downside risk than Tracks 2 or 3 of the Medicare Shared Savings Program in order to encourage more practices, especially small practices, to advance to performance-based risk. 

These new payment models and the updated Comprehensive Care for Joint Replacement Model give clinicians additional opportunities to qualify for a 5 percent incentive payment through the Advanced Alternative Payment Model (APM) path under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the Quality Payment Program. For the new cardiac and orthopedic payment models, clinicians may potentially earn the incentive payment beginning in performance year 2019 or potentially as early as performance year 2018 if they collaborate with participant hospitals that choose the Advanced APM path. For the Comprehensive Care for Joint Replacement model, clinicians may potentially earn the incentive payment beginning in performance year 2017. For the Track 1+ Model, clinicians may potentially earn the incentive payment beginning in performance year 2018, and the application cycle will align with the other Shared Savings Program tracks. 

Improving Patient Outcomes through Cardiac and Orthopedic Care Coordination Models 

These models are an opportunity to further provider collaboration and sharing of best practices. In the Comprehensive Care for Joint Replacement Model, approximately 90 percent of hospitals participating in the model are fostering education, outreach, communication, and collaboration. These new models advance CMS’ goal of improving the efficiency and quality of care for Medicare beneficiaries and encourage hospitals, physicians, and post-acute care providers to work together to improve the coordination of care from the initial hospitalization through recovery. These models are being implemented by the CMS Innovation Center under section 1115A of the Social Security Act, with participation by all hospitals in selected geographic areas in order to yield more generalizable results, and additional protections for small and rural providers. The models will be referred to as: 

• The Acute Myocardial Infarction (AMI) Model;
• The Coronary Artery Bypass Graft (CABG) Model;
• The Surgical Hip and Femur Fracture Treatment (SHFFT) Model; and
• The Cardiac Rehabilitation (CR) Incentive Payment Model. 

Acute care hospitals in certain selected geographic areas will participate in retrospective episode-based payments for items and services that are related to AMI, CABG, and SHFFT treatment and recovery, beginning with a hospitalization and extending for 90 days following hospital discharge. 

The first performance period for the new episode payment models (the AMI, CABG, and SHFFT Models) and the Cardiac Rehabilitation Incentive Payment Model will begin on July 1, 2017. The duration of the models is until December 31, 2021. 

The final rule also makes adjustments to the Comprehensive Care for Joint Replacement (CJR) Model, allowing the model to qualify as an Advanced APM under the Quality Payment Program as well as aligning the model’s policies with the episode payment models around financial arrangements and beneficiary engagement incentives, compliance enforcement, appeals processes, and beneficiary notifications. 

Model Design

Under the episode payment models (CABG, AMI, SHFFT) and CJR, the hospital is financially accountable for the quality and cost of an episode of care, which incentivizes increased coordination of care among hospitals, physicians, and post-acute care providers. 

For each performance year of the models, CMS will establish Medicare episode quality-adjusted target prices for each participant hospital that includes payment for all related services furnished to eligible Medicare fee-for-service beneficiaries who are treated and discharged for included Medicare Severity-Diagnosis Related Groups (MS-DRGs). Almost all Part A and Part B services provided in the 90 days post-discharge are included in the episode price. Quality-adjusted target prices for each year will initially be set based on a blend of provider-specific pricing and pricing in the relevant census regions while increasing the proportion of regional pricing over time. 

All providers and suppliers will continue to be paid under the usual payment system rules and procedures of the Medicare program for episode services throughout the year. Following the end of a model performance year, actual spending for all episodes (total expenditures for related services under Medicare Parts A and B) will be aggregated and compared to the aggregate quality-adjusted target price for the participant hospital. Depending on the participant hospital’s quality and episode spending performance, the hospital may receive an additional payment from Medicare or repay Medicare for a portion of the episode spending exceeding the aggregate target price. 

For the AMI, CABG, and SHFFT Models, participants will earn a composite quality score (CQS) which is based on quality of care previously provided. Participants’ CQS will be largely based on an organization’s quality performance in comparison to that of other hospitals and will allow hospitals with relatively high quality performance an increased opportunity for financial incentives within the models. Following completion of a model performance year, participant hospitals that achieve actual episode spending below the target price and achieve an acceptable or better CQS will be eligible to earn a reconciliation payment from Medicare for the difference between the target price and actual episode spending, up to a specified cap. We are finalizing a policy for no repayment responsibility (downside risk) for all of the new episode payment models in performance years 1 and 2, with optional downside risk in performance year 2 and a reduced discount percentage for repayment responsibility in performance years 3 and 4, in order to phase in financial responsibility for spending during the model episodes throughout the model performance years. (Note that this timeline for downside risk applies to the AMI, CABG, and SHFFT Models only; the timeline for downside risk in the CJR Model has not changed.) 

All hospital participants that achieve actual spending below the quality-adjusted target price and achieve an acceptable or better CQS will be eligible to earn up to 5 percent of their target price in performance years 1, 2 and 3: 10 percent in performance year 4; and 20 percent in performance year 5 for the AMI, CABG, and SHFFT Models. Hospitals with model episode spending that exceeds the target price will be financially responsible for the difference to Medicare up to a specified repayment limit. We are also finalizing parallel stop-loss and stop-gain limits, which both protect hospitals from excess financial risk offset while limiting gains proportional to the potential downside risk. We are finalizing a lower level of stop-loss limits for rural hospitals, Medicare-dependent hospitals, rural referral centers, sole community hospitals and, in response to comments received, certain low-volume hospitals. 

Under the CR Incentive Payment Model, all providers and suppliers will continue to be paid under the usual Medicare payment system rules and procedures. Following the end of a model performance year, depending on beneficiaries’ utilization of CR/Intensive CR services, participant hospitals may receive an additional incentive payment from Medicare.

Participants 

The AMI and CABG Models will be implemented in 98 geographic areas, defined by MSAs. MSAs are counties associated with a core urban area that has a population of at least 50,000. Non-MSA counties (no urban core area or urban core area of less than 50,000 population) were not eligible for selection. Eligible MSAs must have had at least 75 AMI Model eligible cases among other criteria. The SHFFT Model will be implemented in the 67 MSAs where the CJR Model is currently underway. To be eligible for the CJR Model, eligible MSAs had to have at least 400 eligible CJR cases. The MSAs were selected by stratified random sampling for CJR. The 98 MSAs selected for the AMI and CABG Models and the 67 MSAs for the CJR and SHFFT Models can be found on our website: https://innovation.cms.gov/initiatives/epm. 

Participant hospitals in these selected geographic areas are all acute care hospitals paid under the Inpatient Prospective Payment System (IPPS) that are not concurrently participating in Models 2, 3, or 4 of the Innovation Center’s Bundled Payment for Care Improvement (BPCI) initiative for AMI, CABG, or SHFFT episodes. Geographic areas where all-payer models under the Innovation Center are operating -- Maryland and Vermont -- are excluded. Hospitals paid under a reasonable cost methodology, such as critical access hospitals, also are excluded.

The CR Incentive Payment Model will be implemented in 45 geographic areas also selected for the AMI and CABG Models, defined by MSAs, as well as in 45 geographic areas that were not selected for the AMI and CABG Models. This test will cover the same five-year period as the episode payment models. The 90 MSAs selected can be found on our website. https://innovation.cms.gov/initiatives/epm. 

Approximately 1,120 hospitals will participate in the AMI and CABG models, 860 hospitals in the SHFFT Model and 1,320 hospitals in the CR Incentive Payment Model. For more information on participants, please visit https://innovation.cms.gov/initiatives/epm. 

Additional Flexibilities for Participant Hospitals and Collaborating Providers and Suppliers 

The episode payment models waive certain existing payment system requirements to assist participant hospitals in caring for beneficiaries in the most efficient, convenient setting; to encourage timely, accessible care; and to facilitate improved communication and treatment adherence. These include: a waiver of the requirement for a three-day inpatient hospital stay prior to admission for a covered skilled nursing facility (SNF) stay under certain conditions beginning in performance year 3 for the AMI Model; allowing payment for certain telehealth services provided to a beneficiary in his or her home; and allowing payment for certain types of physician-directed home visits for non-homebound beneficiaries. In addition, a participant hospital may wish to enter into certain financial arrangements with collaborating providers, suppliers, and Accountable Care Organizations (ACOs), who are engaged in care redesign with the hospital. Under these arrangements, a participant hospital may share payments received from Medicare as a result of reduced episode spending and hospital internal cost savings with collaborating entities. Participant hospitals may also share financial accountability for increased episode spending with collaborating entities. Finally, participant hospitals may provide beneficiaries with in-kind patient engagement incentives to advance the clinical goals of their care, under certain conditions. 

No waivers of any fraud and abuse authorities are being issued in the final rule. Waivers of certain fraud and abuse laws for purposes of testing these models would be issued by CMS and the HHS Office of the Inspector General (OIG). These notices are published on the CMS and OIG websites. 

Quality and the Pay-for-Performance Methodology 

These episode payment models have the potential to improve quality. All of the episode payment models adopt a quality first principle where hospitals must achieve a minimum level of quality before receiving reconciliation payments when episode spending is below the target price. Higher quality of care, considering both performance and improvement, may lead a hospital to garner greater financial reward if the CQS reflects high hospital performance and improvement on the relevant quality measures for that model. In response to comment, CMS added a voluntary quality measure for the CABG Model. The specific measures for each model and the pay for performance methodology can be found on our website at https://innovation.cms.gov/initiatives/epm. 

To assist hospitals in pursuing quality, CMS provides additional tools including: 1) providing hospitals with relevant spending and utilization data; 2) waiving certain Medicare requirements to encourage flexibility in the delivery of care; and 3) facilitating the sharing of best practices between participant hospitals through a learning and diffusion program.

Beneficiary Benefits and Protections 

Under these models, beneficiaries retain their freedom to choose services and providers. Physicians and hospitals are expected to continue to meet current standards required by the Medicare program. All existing safeguards to protect beneficiaries and patients remain in place. If a beneficiary believes that his or her care is adversely affected, he or she should call 1-800- MEDICARE or contact their state’s Quality Improvement Organization by going to http://www.qioprogram.org/contact-zones. The Alternative Payment Models Beneficiary Ombudsman will also be monitoring the Models and fielding inquiries from beneficiaries if needed. The final rule also describes additional monitoring of claims data from participant hospitals to ensure that hospitals continue to provide all necessary services.

Interaction with Other Models and Programs 

Hospitals participating in other CMS models or programs such as the Shared Savings Program and other ACO initiatives are included in the episode payment models if they are located in a selected MSA. Beneficiaries included in a model episode may also be assigned or aligned to an ACO, in which case CMS will attribute savings achieved during an episode to the episode model participant, and include model reconciliation payments for ACO-assigned beneficiaries as ACO expenditures. Episodes initiated by beneficiaries who are prospectively assigned to certain two-sided risk shared savings programs such as the Next Generation ACO Model, the Comprehensive ESRD Care Model, and in response to comment, a Shared Savings Program ACO in Track 3, will be excluded from the model.

Cardiac Rehabilitation Incentive Payment Model 

The CR Incentive Payment Model tests whether a payment incentive can increase the utilization of cardiac rehabilitative services, which have historically been under-used by Medicare beneficiaries. Following completion of any CR Incentive Payment Model performance year, which are consistent with the episode payment models’ performance years, participant hospitals will receive incentive payments from Medicare based on the frequency of beneficiary utilization of cardiac rehabilitation. 

CMS established a two-part cardiac rehabilitation incentive payment to be paid retrospectively based on the total cardiac rehabilitation use of beneficiaries attributable to participant hospitals, and limited by coverage requirements for CR and Intensive CR. The initial payment is $25 per cardiac rehabilitation service for each of the first 11 services paid for by Medicare during the care period for an AMI or CABG care episode, and $175 per service during care period after 11 services. In response to comments, we are broadening final beneficiary engagement incentives to be the same as the episode payment models but as applicable to AMI care periods and CABG care periods under the CR Incentive Payment Model.

Improvements in Comprehensive Care for Joint Replacement Model 

The final rule also makes several modest adjustments to the CJR Model that are largely conforming changes for consistency with the other episode payment models. These include refinements for use of the SNF waiver, exclusion of beneficiaries participating in selected ACOs, and revising target pricing methodology to include reconciliation and repayment amounts for performance years 3, 4, and 5. We are finalizing revisions to the quality adjustment to incorporate improvement as well as absolute performance. CMS also finalized changes to align CJR with the episode payment models around financial arrangements and beneficiary engagement incentives, compliance enforcement, appeals processes, and beneficiary notifications. For more information on the final rule, including effective dates for the adjustments made, please go to www.federalregister.gov 

Revisions in Response to Comments on the Proposed Rule for the episode payment models 

CMS made several revisions to the episode payment models in response to the robust and thoughtful comments received on the proposed rule. The following are examples of key revisions. 

• Implements downside risk for the AMI, CABG, and SHFFT Models in performance year 3 (January 1, 2019), but provides the option of downside risk beginning in performance year 2 (January 1, 2018) for hospitals wishing to offer collaborating suppliers participation in an Advanced Alternative Payment Model as part of the Quality Payment Program. The stop-loss and stop-gain limits and applicable discount factors were altered accordingly. For more information on the Quality Payment Program please visit https://qpp.cms.gov.  
• Revises the proposed transfer policy. For AMI episodes, the episode will be canceled at the original transferring hospital and a new one established upon admission to the hospital accepting the transfer if the discharging DRG for that hospital falls under applicable cardiac episode payment model MS-DRGs and the hospital accepting the transfer is a participant in the cardiac episode payment model.
• Adopts a voluntary quality measure for the CABG Model.
• Creates greater protections for low-volume hospitals.
• Expands flexibility to offer additional beneficiary engagement incentives beyond transportation for CR Incentive Payment Model.
• Establishes an Alternative Payment Models Beneficiary Ombudsman to monitor the models and field inquiries from beneficiaries, if needed. 

New Accountable Care Organization Model Opportunity

Medicare ACO Track 1+ Model 

CMS is announcing the new Medicare ACO Track 1+ Model. This new opportunity, beginning in 2018, will allow clinicians to join Advanced Alternative Payment Models to improve care and potentially earn an incentive payment under the Quality Payment Program, created by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).  The new Medicare ACO Track 1+ Model will test a payment model that incorporates more limited downside risk than is currently present in Tracks 2 or 3 of the Medicare Shared Savings Program in order to encourage more rapid progression to performance-based risk. 

The new Model is based on Shared Savings Program Track 1 with maximum 50% shared savings rate, but incorporates elements of Track 3 including: prospective beneficiary assignment to allow ACOs to know in advance the patient population for which they are responsible; choice of symmetrical thresholds from which to start sharing in savings or losses; and the option to elect the SNF 3-Day Rule Waiver to provide greater flexibility to Track 1+ ACOs to better coordinate and deliver high quality care. The model has a fixed 30% loss sharing rate and the maximum level of downside risk would vary based on the composition of ACOs with potentially lower levels of risk available to qualifying ACOs that include physicians or small rural hospitals. 

Under a bifurcated approach, in 2018, the maximum loss limit would be either 8 percent of ACO participant Medicare fee-for-service revenue (for ACOs that are physician-led or include small, rural hospitals); or 4 percent of the ACO’s updated benchmark depending on the composition of the ACO (for other ACOs now in Track 1 or new or renewing ACOs). In later years, ACOs eligible for the lower sharing limit could opt for a higher percentage of revenue in 2019 and 2020 consistent with changes to the Advanced APM nominal risk requirement. The ACO’s loss sharing limit, as a percentage of revenue, would not exceed the equivalent of 4 percent of the ACO’s updated historical benchmark.  

The Track 1+ Model 2018 application cycle will align with the annual application cycle for the Shared Savings Program. Additional information about the application process is forthcoming, but organizations interested in applying should plan to submit the required Notice of Intent to Apply in May of 2017. The Track 1+ Model will be open to Shared Savings Program Track 1 ACOs that are within their current agreement period, initial applicants to the Shared Savings Program, and Track 1 ACOs renewing their agreement that meet Model eligibility criteria. For Track 1 ACOs that have renewed their agreements, the benchmark that would apply under the Model could also incorporate a regional benchmark adjustment consistent with the timing and phase-in of the regional benchmark adjustment, as outlined in the June 2016 final rule for the Shared Savings Program. ACOs will have additional opportunity to join the Model test as part of the 2019 and 2020 Shared Savings Program application cycles. 

Additional information on the Medicare ACO Track 1+ Model will be forthcoming. 

Innovation Center and Support for Participants 

The episode payment models have been designed by the CMS Innovation Center, which was established by section 1115A of the Social Security Act (as added by section 3021 of the Affordable Care Act). Congress created the Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care for Medicare, Medicaid, and Children’s Health Insurance Program beneficiaries. The CMS Innovation Center seeks to take locally-driven approaches –from doctors and other health care partners providing care to patients every day – and give them platform to be tested through a very collaborative and highly transparent process. 

CMS plans to offer education and training to support and prepare clinicians in these models. These activities will include webinars about each model as well as how to qualify for the Quality Payment Program incentive payments, fact sheets explaining what model participants will need to do to be successful in the models, and open door forums where CMS staff will be able to answer questions about the models. 

The Advancing Care Coordination through Episode Payment Models final rule can be viewed at https://www.federalregister.gov/public-inspection/current starting December 20, 2016.   

For more information about the individual cardiac and orthopedic bundled payment models finalized through this rule, visit the CMS Innovation Center website at https://innovation.cms.gov/initiatives/epm.

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