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CMS Expands Mandatory Bundled Payments to Cardiac Care

On Monday July 25, 2016, CMS proposed new models that expand mandatory participation in bundled payments and continue CMS’s initiative to shift Medicare payments from fee for service to alternative payment models.  Coming just as the Comprehensive Care for Joint Replacement (CJR) initiative gets underway, the new models are, according to CMS, intended to reward hospitals that work together with physicians and other providers to avoid complications, prevent hospital readmissions, and speed recovery. The proposed rule (available here, the “Proposed Rule”) contains three new policies:

  1. New bundled payment models for cardiac care and an extension of the existing bundled payment model for hip replacements to other hip surgeries

  2. A new model to increase cardiac rehabilitation utilization

  3. A proposed pathway for physicians with significant participation in bundled payment models to qualify for payment incentives under the proposed Quality Payment Program

The new bundled payment model for cardiac care (the “Cardiac Care Model”) will require mandatory participation by all hospitals within 98 randomly selected service areas beginning July 1, 2018. The episodes to be included in the Cardiac Care Model would be acute myocardial infraction (MS-DRGs 280-282 or 246-251) and coronary artery bypass graft surgery (MS-DRGs 231-236). Unlike, the CJR, in which applicable service areas were selected based on population and certain other criteria, for the Cardiac Care Model, selection will be randomized. CMS identified 294 areas that meet its selection criteria, and has proposed to randomly select 98 of those 294 for participation. Much like the CJR, the first year will provide for upside potential only, with downside risk being introduced incrementally over the last four years of the program. Similarly, like the CJR, the hospital in which a patient is admitted for care for a heart attack or bypass surgery would be accountable for the cost and quality of care provided to Medicare fee-for-service beneficiaries during the inpatient stay and for 90 days after discharge. Participating hospitals will receive a separate target price for each MS-DRG under the model. All providers and suppliers would be paid under the usual payment system rules and procedures of the Medicare program for episode services throughout the year. At the end of a model performance year, actual spending for the episode  would be compared to the Medicare quality-adjusted target episode price that reflects episode quality for the responsible hospital. Hospitals that work with physicians and other providers to deliver the needed care for less than the quality-adjusted target price would be paid the savings achieved. Hospitals with costs exceeding the quality-adjusted target price would be required to repay Medicare.

CMS noted in the Proposed Rule that these episodes of cardiac care have been selected because, like the CJR episodes, these episodes represent high-expenditure, high-volume episodes of care for Medicare beneficiaries. However, the episodes typically result in very different patterns of care than those in the CJR. Most episodes are emergent, and not elective, and beneficiaries in these episodes commonly have chronic conditions that contribute to the initiation of the episodes and need both planned and unplanned care throughout the episode.

The Proposed Rule also expands the scope of the CJR to include MS-DRGs 480-482 for  surgical hip/femur fracture treatment. CMS has not increased the services areas subject to the CJR, but will test the new episode payments for those 67 areas already participating.

CMS has noted that it intends to build the Cardiac Care Model on lessons learned and comments received in the establishment of the CJR.  One notable distinction is that ACO’s are allowed to be collaborators under the new Cardiac Care Model, where they could not be under the CJR. CMS notes that this is due to the interest of ACOs in gainsharing during the CJR model rule making.

The Cardiac Care Model confirms what many have suspected, that bundled payment and alternative payment model participation will quickly become mandatory across the industry, requiring all providers to begin to engage with the concepts of care redesign and the prospect of bearing risk.

The Proposed Rule also describes a new cardiac rehabilitation incentive payment model that would test the impact of providing an incentive payment to hospitals where beneficiaries are hospitalized for a heart attack or bypass surgery, which would be based on beneficiary utilization of cardiac rehabilitation and intensive cardiac rehabilitation services in the 90-day care period following hospital discharge. CMS believes increasing the use of cardiac rehabilitation services has the potential to improve patient outcomes and help keep patients healthy and out of the hospital. Under this model, CMS will pay the participating hospital a per- cardiac rehabilitation incentive payment. These payments would be available to hospital participants in 45 geographic areas that were not selected for the cardiac care bundled payment models, as well as 45 geographic areas that were selected for the cardiac care bundled payment models.

Additional information on the Cardiac Care Model and the other components of the Proposed Rule can be found here.

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Christopher J. Donovan, Foley Lardner, Partner, Litigation Lawyer
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Christopher J. Donovan is a partner with Foley & Lardner LLP. He focuses his practice on advising companies and their investors and lenders in mergers and acquisitions, recapitalizations, buyouts and restructurings as well as advising on a broad range of commercial arrangements. Mr. Donovan has particular experience in the health service, particularly post-acute, and life sciences sectors. He has a unique blend of deep regulatory as well as corporate and finance experience to bring to a transaction as a result of his consummating dozens of health and life science...

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C. Frederick Geilfuss II, Health Care Attorney, Foley Lardner Law Firm
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C. Frederick Geilfuss II is a partner and health care lawyer with Foley & Lardner LLP. Mr. Geilfuss counsels health systems, hospitals, medical clinics, rehabilitation agencies, nursing homes, and other health care providers on general operational concerns, regulatory and business matters. He has many years of experience in health care acquisitions, integrated delivery service issues, managed care contracting, defense of providers against government enforcement actions, finance, real estate, administrative and medical staff issues, physician recruitment, fraud and abuse matters, and other health law issues. He is a member of the firm’s Health Care Industry Team. Mr. Geilfuss is co-chair of the Health Care Industry Team Business and Transactions Work Group.

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Alexis Bortniker, Health Care Attorney, Foley Lardner Law Firm
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Alexis Bortniker is a senior counsel and health care lawyer with Foley & Lardner LLP. Her practice focuses on transactional and regulatory matters with an emphasis on counseling health systems, hospitals, and other providers in managed care and physician contracting. Ms. Bortniker is a member of the firm’s Health Care Industry Team.

Previously, Ms. Bortniker was an associate with Choate Hall & Stewart LLP where she gained experience working directly with health care organizations on regulatory and corporate compliance issues, including...

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