CMS to Expand Episode Payment Models for Cardiac Conditions, Fractures

The Centers for Medicare & Medicaid Services (CMS) recently released the proposed rule Advancing Care Coordination through Episode Payment Models for three conditions—acute myocardial infarction (AMI), coronary artery bypass graft (CABG), and surgical hip/femur fracture treatment (SHFFT) excluding lower extremity joint replacement. CMS says the proposed models further its goals of improving both the efficiency and quality of care, particularly for common clinical conditions.

Participation will be required by hospitals in certain geographic markets, beginning with a five-year performance evaluation period (July 1, 2017 to Dec. 31, 2021). Each episode for these conditions will extend to within 90 days of hospital discharge. Clinical laboratory services are included in this payment bundle. These three conditions were chosen, in part, because there is known to be significant existing variation in spending for these "high-expenditure, common episodes."

The U.S. Department of Health and Human Services previously stated its goal to promote value-based care by connecting at least 50 percent of Medicare payments to quality or value through alternative payment models by the end of 2018. This latest proposed rule follows the April launch of the Comprehensive Care for Joint Replacement (CJR) model. The CJR model similarly requires acute care hospitals in selected geographic areas to participate for all eligible lower-extremity joint replacement episodes. CMS says that approximately 800 acute care hospitals are participating.

Yet the models differ because CJR generally covers an elective procedure that requires less follow-up care. Additionally, CMS expects the models to have different patient populations. The episodes in the proposed rule are commonly tied to chronic conditions, which will increase the need for additional care throughout the 90-day episode period. Historically, CMS says that in the AMI model half of average spending was for the initial hospitalization and the majority of spending following discharge from the initial hospitalization was due to hospital readmissions. With the CABG model, historically about three-quarters of episode spending was for the initial hospitalization, with the remaining episode spending fairly evenly divided between professional services and hospital readmissions.

CMS says it is testing whether an episode payment model for AMI, CABG, and SHFFT care will reduce Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. It anticipates the proposed models will improve the coordination and transition of care by encouraging provider investment in the redesign of care processes across the inpatient and post-acute care spectrum.

The proposed rule includes potential financial risk and rewards for participating hospitals, phased in over time. Overall, CMS expects the episode payment models to result in savings to Medicare of $170 million over the five performance years, which will grow from $13 million in savings year 2 to $79 million in year 5.

Medicare claims payments for services per episode will be totaled to calculate an actual episode payment. The actual episode payment will be compared to an established target price. The difference between the actual and the target, if positive (savings), would be paid to the participant. If negative, after the second quarter of performance year 2 the participating hospital would need to repay CMS. In performance years 4 and 5 of the model, CMS will move from comparisons using target episode pricing based on a hospital's experience to target pricing based on regional experience.

According to recent calculations by the consulting firm Avalere Health, the number of hospitals expected to be winners and losers under the proposed program are fairly evenly distributed. Some institutions whose spending greatly exceeds the average spending for their region could face significant penalties. However, Avalere projects the large majority of hospitals required to participate in the cardiac bundled payment model—85 percent—will likely not experience gains or losses larger than $500,000 per year.

"Given the array of new cardiac bundles, there is no magic bullet to achieving savings. Instead, participating hospitals will need to pull multiple levers to drive down costs," said Fred Bentley, vice president at Avalere, in a statement. "They will be working more closely than ever with their physicians to streamline care and promote adherence to clinical guidelines. And they will accelerate the development of high-performance post-acute networks to cut readmissions and achieve efficiencies for their medically-managed heart attack episodes."

There are opportunities for both laboratories and post-acute providers to partner with hospitals to improve post-discharge care and transitional care processes. Efforts will need to focus on increasing post-hospitalization follow-up and medical management and better coordination across the care spectrum.

Takeaway: The proposed episode payment models for cardiac conditions and some fractures are part of a broader national shift toward value-based payment. Laboratories can expect bundled payments to become the norm and should position themselves as a partner to drive efficient, coordinated care.