On August 15, 2017, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule (Proposed Rule) that, if finalized, would (1) reduce the number of Metropolitan Statistical Areas (MSAs) in which there is mandatory participation in the Comprehensive Care Joint Replacement model (CJR) from 67 to 34, and (2) cancel the mandatory Episode Payment Models and Cardiac Rehabilitation incentive payment program. The action reflects a change in course for CMS, de-emphasizing and significantly reducing mandatory participation in Alternative Payment Programs.
The CJR model originally became effective on April 1, 2016 and mandated that hospitals in 67 specified MSAs must participate in an episode-based payment program for hip and knee joint replacements. The Proposed Rule, anticipated to be effective as of February 1, 2018, reduces the mandatory participation in the CJR essentially by one half to 34 MSAs (see Table 1 below taken from the proposed rule for the remaining MSAs).
The remaining MSAs have the highest average wage-adjusted historic episode payments, that is, the counties with the highest average expense cost for the episodes involved. Under the Proposed Rule, hospitals in the other 33 MSAs would no longer be required to participate in the CJR model, but they may elect voluntarily to participate in that program by submitting a participation election letter to CMS by January 31, 2018. In addition, within the 34 MSAs for which participation is mandatory, identified low volume or rural hospitals also would no longer be required to participate, but they may elect voluntarily to do so.
According to CMS, the remaining 34 MSAs for which participation is mandatory will provide sufficient information to evaluate the effects of the CJR model across a broad range of providers. The higher costs in these MSAs also allows the participating hospitals a greater opportunity for showing improvement through participation in the CJR model.
The Proposed Rule also seeks to cancel the Episode Payment Model (EPM), that would have expanded mandatory participation in an episode-based payment to hospitals in a number of MSAs for acute myocardial infarctions, coronary artery bypass grafts and surgical hip/femur fracture treatment, and a Cardiac Rehabilitation Incentive payment model that was to be implemented simultaneously with the EPM. Regulations for both models were originally issued on July 25, 2016 and are described here.
The Proposed Rule shows CMS does not favor mandatory participation in Alternative Payment Programs. As CMS states in the commentary to the Proposed Rule “requiring hospitals to participate in episode payment models at this time is not in the best interests of the agency or affected providers.” CMS further explained that large mandatory episode-based payment models “may impede [the] ability to engage providers, such as hospitals, in future voluntary efforts.”
While CMS and the Center for Medicare and Medicaid Innovation have introduced many Alternative Payment Programs which move reimbursement to providers away from fee-for-service reimbursement toward reimbursement models focused on efficiency, delivery of value, and quality care, some have thought the pace of the transition to value-based care has been slower than anticipated. Since Alternative Payment Models are viewed as an effective way to restrain health care cost increases, some view that such slower pace will mean providers will not be required to take steps necessary to be more efficient and reduce costs. Cancellation of and reductions in mandatory programs will allow providers to avoid, at least for the near term, preparing themselves for such models given the lack of any requirement to do so.
At the same time, voluntary participation ensures participants in such models are committed to and engaged in the value-based models. The continued evaluation of such models with voluntary participants also helps ensure that access to care, quality, and favorable outcomes are not adversely affected by mandatory participation of providers not ready for such programs.
Commercial payor arrangements and market incentives aimed at helping providers to become more efficient are not directly affected by the Proposed Rule. Their presence may still encourage providers to voluntarily participate in Alternative Payment Models.