Medicare Program; Comprehensive Care for Joint Replacement Payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint Replacement Services, 73273-73554 [2015-29438]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 80, Number 226 (Tuesday, November 24, 2015)]
[Rules and Regulations]
[Pages 73273-73554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29438]



[[Page 73273]]

Vol. 80

Tuesday,

No. 226

November 24, 2015

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 510





Medicare Program; Comprehensive Care for Joint Replacement Payment 
Model for Acute Care Hospitals Furnishing Lower Extremity Joint 
Replacement Services; Final Rule

Federal Register / Vol. 80 , No. 226 / Tuesday, November 24, 2015 / 
Rules and Regulations

[[Page 73274]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 510

[CMS-5516-F]
RIN 0938-AS64


Medicare Program; Comprehensive Care for Joint Replacement 
Payment Model for Acute Care Hospitals Furnishing Lower Extremity Joint 
Replacement Services

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule implements a new Medicare Part A and B payment 
model under section 1115A of the Social Security Act, called the 
Comprehensive Care for Joint Replacement (CJR) model, in which acute 
care hospitals in certain selected geographic areas will receive 
retrospective bundled payments for episodes of care for lower extremity 
joint replacement (LEJR) or reattachment of a lower extremity. All 
related care within 90 days of hospital discharge from the joint 
replacement procedure will be included in the episode of care. We 
believe this model will further our goals in improving the efficiency 
and quality of care for Medicare beneficiaries with these common 
medical procedures.

DATES: These regulations are effective on January 15, 2016, and 
applicable on April 1, 2016 when the first model performance period 
begins.

FOR FURTHER INFORMATION CONTACT: Claire Schreiber, 
Claire.Schreiber@cms.hhs.gov, 410 786 8939.
    Gabriel Scott, Gabriel.Scott@cms.hhs.gov, 410 786 3928.

SUPPLEMENTARY INFORMATION:

Electronic Access

    This Federal Register document is also available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Printing Office. This database can be 
accessed via the internet at https://www.gpo.gov/fdsys/.

Alphabetical List of Acronyms

    Because of the many terms to which we refer by acronym, 
abbreviation, or short form in this final rule, we are listing the 
acronyms, abbreviations and short forms used and their corresponding 
terms in alphabetical order.

[micro]SA Micropolitan Statistical Area
ACE Acute Care Episode
ACO Accountable Care Organization
APM Alternative Payment Model
ASC Ambulatory Surgical Center
ASPE Assistant Secretary for Planning and Evaluation
BPCI Bundled Payments for Care Improvement
CAH Critical Access Hospital
CBSA Core-Based Statistical Area
CCN CMS Certification Number
CFR Code of Federal Regulations
CJR Comprehensive Care for Joint Replacement
CMHC Community Mental Health Center
CMI Case Mix Index
CMMI Center for Medicare and Medicaid Innovation
CMP Civil Monetary Penalty
CMS Centers for Medicare & Medicaid Services
CoPs Conditions of Participation
CPCi Comprehensive Primary Care Initiative
CPT Current Procedural Terminology
CSA Combined Statistical Area
DME Durable Medical Equipment
DMEPOS Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies
eCQM Electronic Clinical Quality Measures
EFT Electronic funds transfer
ESRD End-Stage Renal Disease
FFS Fee-for-service
GAAP Generally Accepted Accounting Principles
GEM General Equivalence Mapping
GPCI Geographic Practice Cost Index
HAC Hospital-Acquired Condition
HACRP Hospital-Acquired Condition Reduction Program
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCC Hierarchical Condition Category
HCPCS Healthcare Common Procedure Coding System
HHA Home health agency
HHPPS Home Health Prospective Payment System
HHRG Home Health Resource Group
HHVBP Home Health Value-Based Purchasing
HIT Health Information Technology
HIQR Hospital Inpatient Quality Reporting
HLMR HCAHPS Linear Mean Roll Up
HOOS Hip Dysfunction and Osteoarthritis Outcome Score
HOPD Hospital outpatient department
HRR Hospital Referral Region
HRRP Hospital Readmissions Reductions Program
HVBP Hospital Value Based Purchasing Program
ICD-9-CM International Classification of Diseases, 9th Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, 10th Revision, 
Clinical Modification
IPPS Inpatient Prospective Payment System
IPF Inpatient psychiatric facility
IRF Inpatient rehabilitation facility
KOOS Knee Injury and Osteoarthritis Outcome Score
LEJR Lower extremity joint replacement
LOS Length of stay
LTCH Long term care hospital
LUPA Low Utilization Payment Adjustment
MAC Medicare Administrative Contractor
MACRA Medicare Access and Chip Reauthorization Act of 2015
MAPCP Multi-Payer Advanced Primary Care Practice model
MCC Major Complications or Comorbidities
MCCM Medicare Care Choices Model
MDH Medicare-Dependent Hospital
MedPAC Medicare Payment Advisory Commission
MIPS Merit-based Incentive Payment System
MP Malpractice
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
MS-DRG Medical Severity Diagnosis-Related Group
NPI National Provider Identifier
NPP Nonphysician Practitioner
NPRA Net Payment Reconciliation Amount
NQF National Quality Forum
OCM Oncology Care Model
OPPS Outpatient Prospective Payment System
PAC Post-Acute Care
PBPM Per Beneficiary Per Month
PE Practice Expense
PGP Physician Group Practice
PHA Partial hip arthroplasty
PPS Prospective Payment System
PRO Patient-Reported Outcome
PROMIS Patient-Reported Outcomes Measurement Information Systems
PRO-PM Patient-Reported Outcome Performance Measure
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
RRC Rural Referral Center
RSCR Risk-Standardized Complication Rate
RSRR Risk-Standardized Readmission Rate
RVU Relative Value Unit
SCH Sole Community Hospital
SNF Skilled nursing facility
THA Total hip arthroplasty
TIN Taxpayer identification number
TKA Total knee arthroplasty
TP Target price
VR-12 Veterans Rand 12 Item Health Survey

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    1. Model Overview: LEJR Episodes of Care
    2. Model Scope
    3. Payment
    4. Similar, Previous, and Concurrent Models
    5. Overlap With Ongoing CMS Efforts
    6. Quality Measures and Reporting Requirements
    7. Data Sharing Process
    8. Beneficiary Protections
    9. Financial Arrangements and Program Policy Waivers
    C. Summary of Economic Effects
II. Background
    A. General Background
    B. Acronym of This Model
    C. Public Comments Received in Response to the CJR Proposed Rule
III. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments

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    A. Definition of the Episode Initiator and Selected Geographic 
Areas
    1. Background
    2. Definition of Episode Initiator
    3. Financial Responsibility for the Episode of Care
    4. Geographic Unit of Selection and Exclusion of Selected 
Hospitals
    a. Overview and Options for Geographic Area Selection
    b. MSA Selection Methodology
    (1) Exclusion of Certain MSAs
    (2) Selection Strata
    (a) MSA Average Wage-Adjusted Historic LEJR Episode Payments
    (b) MSA Population Size
    (c) Analysis of Strata
    (3) Factors Considered But Not Used in Creating Proposed Strata
    (4) Sample Size Calculations and the Number of Selected MSAs
    (5) Method of Selecting MSAs
    B. Episode Definition for the CJR Model
    1. Background
    2. Clinical Dimension of Episodes of Care
    a. Definition of the Clinical Conditions Included in the Episode
    b. Definition of Related Services Included in the Episode
    3. Duration of Episodes of Care
    a. Beginning the Episode and Beneficiary Care Inclusion Criteria
    b. Middle of the Episode
    c. End of the Episode
    C. Methodology for Setting Episode Prices and Paying Model 
Participants Under the CJR Model
    1. Background
    2. Performance Years, Retrospective Episode Payment, and Two-
Sided Risk Model
    a. Performance Period
    b. Retrospective Payment Methodology
    c. Two-Sided Risk Model
    3. Adjustments to Payments Included in Episode
    a. Treatment of Special Payment Provisions Under Existing 
Medicare Payment Systems
    b. Treatment of Payment for Services That Extend Beyond the 
Episode
    c. Pricing Adjustment for High Payment Episodes
    4. Episode Price Setting Methodology
    a. Overview
    b. Pricing Features
    (1) Different Target Prices for Episodes Anchored by MS-DRG 469 
vs. MS-DRG 470
    (2) Three Years of Historical Data
    (3) Trending of Historical Data to the Most Recent Year of the 
Three
    (4) Update Historical Episode Payments for Ongoing Payment 
System Updates
    (a) Inpatient Acute Services Update Factor
    (b) Physician Services Update Factor
    (c) IRF Services Update Factor
    (d) SNF Services Update Factor
    (e) HHA Services Update Factor
    (f) Other Services Update Factor
    (5) Blend Hospital-Specific and Regional Historical Data
    (6) Define Regions as U.S. Census Divisions
    (7) Normalize for Provider-Specific Wage Adjustment Variations
    (8) Combination of CJR Episodes Anchored by MS-DRGs 469 and 470
    (9) Discount Factor
    c. Approach To Combine Pricing Features
    5. Use of Quality Performance in the Payment Methodology
    a. Background
    b. Implementation of Quality Measures for in the Payment 
Methodology
    (1) General Selection of Quality Measures
    (2) Adjustment to the Payment Methodology for Voluntary 
Submission of Data for Patient-Reported Outcome Measure
    (3) Measure Risk-Adjustment and Calculations
    (4) Applicable Time Period
    (5) Criteria for Applicable Hospitals and Performance Scoring
    (a) Identification of Applicable Hospitals for the CJR Model
    (b) Methodology to Determine Performance on the Quality Measures
    (c) Methodology to Link Quality and Payment
    (i) Background
    (ii) Alternatives Considered To Link Quality and Payment
    (iii) Threshold Methodology and Final Policy to Link Quality and 
Payment
    6. Process for Reconciliation
    a. Net Payment Reconciliation Amount
    b. Payment Reconciliation
    7. Adjustments for Overlaps With Other CMMI Models and CMS 
Programs
    a. Overview
    b. CJR Beneficiary Overlap With BPCI Episodes
    c. Accounting for CJR Reconciliation Payments and Repayments in 
Other Models and Programs
    d. Accounting for Per Beneficiary Per Month (PBPM) Payments in 
the Episode Definition
    e. Accounting for Overlap With Other Medicare Initiatives 
Involving Shared Savings and Total Cost of Care Models
    8. Limits or Adjustments to Hospital Financial Responsibility
    a. Overview
    b. Limit on Raw NPRA Contribution to Repayment Amounts and 
Reconciliation Payments
    (1) Limit on Raw NPRA Contribution to Repayment Amounts
    (2) Limit on Raw NPRA Contribution To Reconciliation Payments
    c. Policies for Certain Hospitals To Further Limit Repayment 
Responsibility
    d. Hospital Responsibility for Increased Post-Episode Payments
    9. Appeal Procedures
    a. Payment Processes
    b. Calculation Error
    c. Dispute Resolution
    (1) Limitations on Review
    (2) Matters Subject To Dispute Resolution
    (3) Dispute Resolution Process
    10. Financial Arrangements and Beneficiary Incentives
    a. Financial Arrangements
    (1) CJR Sharing Arrangement Requirements
    (2) Participation Agreement Requirements
    (3) Gainsharing Payment and Alignment Payment Conditions and 
Restrictions
    (4) Documentation and Maintenance of Records
    b. Beneficiary Incentives Under the CJR Model
    11. Waivers of Medicare Program Rules
    a. Overview
    b. Post-Discharge Home Visits
    c. Billing and Payment for Telehealth Services
    d. SNF 3-Day Rule
    e. Waivers of Medicare Program Rules to Allow Reconciliation 
Payment or Repayment Actions Resulting From the Net Payment 
Reconciliation Amount
    12. Enforcement Mechanisms
    D. Quality Measures and Display of Quality Metrics Used in the 
CJR Model
    1. Background
    a. Purpose of Quality Measures in the CJR Model
    b. Public Display of Quality Measures in the CJR Model
    2. Quality Measures for Performance Year 1 (CY 2016) and 
Subsequent Years
    a. Hospital-Level Risk-Standardized Complication Rate (RSCR) 
Following Elective Primary Total Hip Arthroplasty (THA) and/or Total 
Knee Arthroplasty (TKA) (NQF #1550)
    (1) Background
    (2) Data Sources
    (3) Cohort
    (4) Inclusion and Exclusion Criteria
    (5) Risk-Adjustment
    (6) Calculating the Risk-Standardized Complication Rate and 
Performance Period
    b. Hospital-Level 30-Day, All-Cause Risk-Standardized 
Readmission Rate (RSRR) Following Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1551)
    (1) Background
    (2) Data Sources
    (3) Cohort
    (4) Inclusion and Exclusion Criteria
    (5) Risk-Adjustment
    (6) Calculating the Risk-Standardized Readmission Rate and 
Performance Period
    c. Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAHPS) Survey
    (1) Background
    (2) Data Sources
    (3) Cohort
    (4) Inclusion and Exclusion Criteria
    (5) Case-Mix-Adjustment
    (6) HCAHPS Scoring
    (7) Performance Period
    d. Applicable Time Period
    3. Possible New Outcomes for Future Measures
    a. Hospital-Level Performance Measure(s) of Patient-Reported 
Outcomes Following Elective Primary Total Hip and/or Total Knee 
Arthroplasty
    (1) Background
    (2) Data Sources
    (3) Cohort
    (4) Inclusion and Exclusion Criteria
    (5) Outcome
    (6) Risk-Adjustment (If Applicable)
    (7) Calculating the Risk-Standardized Rate
    (8) Performance Period
    (9) Requirements for Successful Submission of THA/TKA Voluntary 
Data
    b. Measure That Captures Shared Decision-Making Related to 
Elective Primary Total Hip and/or Total Knee Arthroplasty

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    c. Future Measures Around Care Planning
    d. Future Measures for Use of Health IT and Health Enforcement 
Exchange
    4. Form, Manner and Timing of Quality Measure Data Submission
    5. Display of Quality Measures and Availability of Information 
for the Public From the CJR Model
    E. Data Sharing
    1. Overview
    2. Beneficiary Claims Data
    3. Aggregate Regional Data
    4. Timing and Period of Baseline Data
    5. Frequency and Period of Claims Data Updates for Sharing 
Beneficiary-Identifiable Claims Data During the Performance Period
    6. Legal Permission To Share Beneficiary-Identifiable Data
    F. Monitoring and Beneficiary Protection
    1. Introduction and Summary
    2. Beneficiary Choice and Beneficiary Notification
    3. Monitoring for Access to Care
    4. Monitoring for Quality of Care
    5. Monitoring for Delayed Care
    G. Coordination With Other Agencies
IV. Evaluation Approach
    A. Background
    B. Design and Evaluation Methods
    C. Data Collection Methods
    D. Key Evaluation Research Questions
    E. Evaluation Period and Anticipated Reports
V. Collection of Information Requirements
VI. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Anticipated Effects
    1. Overall Magnitude of the Model and Its Effects on the Market
    2. Effects on the Medicare Program
    a. Assumptions and Uncertainties
    b. Analyses
    c. Further Consideration
    3. Effects on Beneficiaries
    4. Effects on Small Entities
    5. Effects on Small Rural Hospitals
    6. Unfunded Mandates
    D. Alternatives
    E. Accounting Statement
    F. Conclusion
Regulations Text

I. Executive Summary

A. Purpose

    The purpose of this final rule is to implement a new payment model 
called the Comprehensive Care for Joint Replacement (CJR) model under 
the authority of the Center for Medicare and Medicaid Innovation 
(CMMI). Section 1115A of the Social Security Act (the Act) authorizes 
CMMI to test innovative payment and service delivery models to reduce 
program expenditures while preserving or enhancing the quality of care 
furnished to Medicare, Medicaid, and Children's Health Insurance 
Program beneficiaries. The intent of the CJR model is to promote 
quality and financial accountability for episodes of care surrounding a 
lower-extremity joint replacement (LEJR) or reattachment of a lower 
extremity procedure.\1\ CJR will test whether bundled payments to acute 
care hospitals for LEJR episodes of care will reduce Medicare 
expenditures while preserving or enhancing the quality of care for 
Medicare beneficiaries. We anticipate the CJR model will benefit 
Medicare beneficiaries by improving the coordination and transition of 
care, improving the coordination of items and services paid for through 
Medicare Fee-For-Service (FFS), encouraging more provider investment in 
infrastructure and redesigned care processes for higher quality and 
more efficient service delivery, and incentivizing higher value care 
across the inpatient and post-acute care (PAC) spectrum spanning the 
episode of care. We will test the CJR model for 5 performance periods, 
beginning April 1, 2016, and ending December 31, 2020. Under FFS, 
Medicare makes separate payments to providers and suppliers for the 
items and services furnished to a beneficiary over the course of 
treatment (an episode of care). With the amount of payments dependent 
on the volume of services delivered, providers may not have incentives 
to invest in quality improvement and care coordination activities. As a 
result, care may be fragmented, unnecessary, or duplicative.
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    \1\ In this final rule, we use the term LEJR to refer to all 
procedures within the Medicare Severity-Diagnosis Related Groups 
(MS-DRGs) we selected for the model, including reattachment of a 
lower extremity, as described in section III.B.2.a. of this final 
rule.
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    We have previously used our statutory authority under section 1115A 
of the Act to test bundled payment models such as the Bundled Payments 
for Care Improvement (BPCI) initiative. Bundled payments, for multiple 
services in an episode of care, hold participating organizations 
financially accountable for an episode of care. They also allow 
participants to receive payment, in part, based on the reduction in 
expenditures for Medicare arising from their care redesign efforts.
    We believe the CJR model will further the mission of CMMI and the 
Secretary's goal of increasingly paying for value rather than for 
volume,\2\ because it will promote the alignment of financial and other 
incentives for all health care providers and suppliers caring for a 
beneficiary during an LEJR episode. In the CJR model, the acute care 
hospital that is the site of surgery will be held accountable for 
spending during the episode of care. Participant hospitals will be 
afforded the opportunity to earn performance-based payments by 
appropriately reducing expenditures and meeting certain quality 
metrics. They will also gain access to data and educational resources 
to better understand LEJR patients' PAC needs and associated spending. 
Payment approaches that reward providers that assume financial and 
performance accountability for a particular episode of care create 
incentives for the implementation and coordination of care redesign 
between hospitals and other providers and suppliers.
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    \2\ Sylvia Mathews Burwell, HHS Secretary, Progress Towards 
Achieving Better Care, Smarter Spending, Healthier People, https://www.hhs.gov/blog/2015/01/26/progress-towards-better-care-smarter-spending-healthier-people.html (January 26, 2015).
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    The CJR model requires the participation of hospitals in multiple 
geographic areas that might not otherwise participate in the testing of 
bundled payments for episodes of care for LEJR procedures. Other 
episode-based, bundled payment models being tested by the Centers for 
Medicare & Medicaid Services (CMS), such as the BPCI initiative, are 
voluntary in nature. Interested participants must apply to such models 
to participate. To date, we have not tested an episode payment model 
with bundled payments in which providers are required to participate. 
We recognize that realizing the full potential of new payment models 
will require the engagement of an even broader set of providers than 
have participated to date, providers who may only be reached when new 
payment models are applied to an entire class of providers of a 
service. As such, we are interested in testing and evaluating the 
impact of a bundled payment approach for LEJR procedures in a variety 
of circumstances, especially among those hospitals that may not 
otherwise participate in such a test.
    This model will allow CMS to gain experience with making bundled 
payments to hospitals who have a variety of historic utilization 
patterns; different roles within their local markets; various volumes 
of services; different levels of access to financial, community, or 
other resources; and various levels of population and health provider 
density including local variations in the availability and use of 
different categories of PAC providers. We believe that by requiring the 
participation of a large number of hospitals with diverse 
characteristics, the CJR model will result in a robust data set for 
evaluation of this bundled payment approach, and will stimulate the 
rapid development of new evidence-based knowledge. Testing the model in 
this manner will also allow us to learn more about patterns of 
inefficient utilization of health care services and how to incentivize 
the improvement of

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quality for common LEJR procedure episodes. This learning potentially 
could inform future Medicare payment policy.
    This final rule implements a model focused on episodes of care for 
LEJR procedures. We chose LEJR episodes for the CJR model because as 
discussed in depth in section III.C. of this final rule, these are 
high-expenditure, high utilization procedures commonly furnished to 
Medicare beneficiaries,\3\ where significant variation in spending for 
procedures is currently observed. The high volume of episodes and 
variation in spending for LEJR procedures create a significant 
opportunity to test and evaluate the CJR model that specifically 
focuses on a defined set of procedures. Moreover, there is substantial 
regional variation in PAC referral patterns and the intensity of PAC 
provided for LEJR patients, thus resulting in significant variation in 
PAC expenditures across LEJR episodes initiated at different hospitals. 
The CJR model will enable hospitals to consider the most appropriate 
PAC for their LEJR patients. The CJR model additionally will offer 
hospitals the opportunity to better understand their own processes with 
regard to LEJR, as well as the processes of post-acute providers. 
Finally, while many LEJR procedures are planned, the CJR model will 
provide a useful opportunity to identify efficiencies both for when 
providers can plan for LEJR procedures and for when the procedure must 
be performed urgently.
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    \3\ For example, total hip arthroplasty and total knee 
arthroplasty procedures are very high volume LEJR procedures that 
together represent the largest payments for procedures under 
Medicare. Suter L, Grady JL, Lin Z et al.: 2013 Measure Updates and 
Specifications: Elective Primary Total Hip Arthroplasty (THA) And/Or 
Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-
Standardized Readmission Measure (Version 2.0). 2013. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html; Bozic KJ, 
Rubash HE, Sculco TP, Berry DJ., An analysis of Medicare payment 
policy for total joint arthroplasty. J Arthroplasty. Sep 2008; 23(6 
Suppl 1):133-138.
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    The following is a summary of the comments received on the proposed 
model as a whole, including the authority for the model and general 
comments on CMS' implementation of the CJR model at this time and our 
responses.
    Comment: A commenter stated that while the proposed rule emphasized 
the learning CMS hoped to gain from implementing and testing the CJR 
model, it made inadequate mention of the potential benefits to 
beneficiaries, providers, hospitals, and other stakeholders. Other 
commenters contended that bundled payment models encourage hospitals to 
engage in care stinting and potentially stifle innovation.
    Response: We appreciate the commenters' concerns. We refer readers 
to section III.F. of this final rule for discussion of monitoring and 
beneficiary protections under this model which we believe will address 
the commenters' concerns about care stinting. We expect that the CJR 
model will benefit not just CMS, but also beneficiaries, hospitals, and 
other providers in the health care system. The goals of this model are 
to improve the quality of care furnished to beneficiaries and reduce 
spending during LEJR episodes. Beneficiaries would directly benefit 
from improved care coordination and care redesign activities that 
reduce readmissions and complications rates, for example, as well as 
provide an improved care experience during the inpatient 
hospitalization and post-discharge period. Hospitals also stand to 
benefit from the CJR model, in the form of the opportunity to earn 
reconciliation payments if successful under the model, and a structured 
incentive to redesign care processes for beneficiaries receiving LEJR 
procedures. For example, section III.C.11. of this final rule details 
waivers of Medicare program rules that would allow hospitals to test 
additional ways to introduce flexibility into care processes and 
improve the quality of care for beneficiaries. In addition, providers 
and suppliers across the spectrum of care provided during an LEJR 
episode could also benefit from the care redesign strategies as well as 
the financial arrangements as detailed in section III.C.10. of this 
final rule. Finally, we disagree with commenters that the CJR model 
will stifle innovation for care furnished during an LEJR episode. We 
proposed, and are finalizing in this final rule, a payment methodology 
that will account for changes in care patterns and utilization trends 
for LEJR episodes by updating the historical performance periods used 
throughout the model, as described in section III.C.4. of this final 
rule. In addition, the CJR financial incentives would be consistent 
with clinical practices that result in reductions of spending during 
LEJR episodes, allowing hospitals that engage in such practices to earn 
reconciliation payments and engage with other providers furnishing 
services during the episode, as discussed in section III.C.10. of this 
final rule.
    Comment: Several commenters questioned CMS' legal authority to 
require participation in a model. Commenters stated that CMS lacks the 
legal authority to compel participation in a model, and that CMS 
misreads section 1115A(a)(5) of the Act as the legal basis for 
compelling providers in selected Metropolitan Statistical Area (MSAs) 
to participate in the CJR model. A commenter stated that language in 
the Act has never been interpreted to afford the Secretary the 
authority to compel provider participation in a Medicare demonstration 
project or model, and that the Congress intended for model tests to be 
voluntary, not mandatory, when authorizing CMS to test new models. The 
commenter noted that requiring providers to participate in a model that 
would encompass a substantial proportion of a particular service would 
render the statutory distinction between testing and expanding models 
meaningless. The commenter also expressed concern about the model's 
potential effect on beneficiaries' appeal rights. Several commenters 
stated that CMS is sidestepping the legal safeguards designed to 
prevent the Agency from imposing novel or haphazard models on providers 
prior to adequate testing and evaluation. Commenters also claimed that 
CMS had exceeded its statutory authority because under section 1115A of 
the Act, providers are precluded from appealing their selection in a 
model, raising further concern that CMS is overreaching by requiring 
participation in the CJR model. Commenters also noted that there is no 
precedent for a CMS demonstration or model that requires providers to 
participate. Finally, several commenters stated that CMS has reversed 
the intended sequence of testing and then expanding models.
    Response: We disagree with commenters that we lack the legal 
authority to test the CJR model as proposed and specifically, to 
require the participation of selected hospitals. We note that although 
CJR will be the first Innovation Center model in which acute care 
hospitals are required to participate, we refer readers to the 2016 
Home Health Prospective Payment System (HHPS) Final Rule, which 
finalizes the Home Health Value-Based Purchasing (HHVBP) model. Home 
health agencies in selected states will be required to participate in 
the HHVBP model beginning in January 2016.
    We believe that both section 1115A and the Secretary's existing 
authority to operate the Medicare program authorize the CJR model as we 
have proposed and are finalizing it. Section 1115A of the Act 
authorizes the Secretary to test payment and service delivery models 
intended to reduce Medicare costs while preserving quality. The statute 
does not

[[Page 73278]]

require that models be voluntary, but rather gives the Secretary broad 
discretion to design and test models that meet certain requirements as 
to spending and quality. Although section 1115A(b) of the Act describes 
a number of payment and service delivery models that the Secretary may 
choose to test, the Secretary is not limited to those models. Rather, 
models to be tested under section 1115A of the Act must address a 
defined population for which there are either deficits in care leading 
to poor clinical outcomes or potentially avoidable expenditures. Here, 
the CJR model addresses a defined population (FFS Medicare 
beneficiaries undergoing LEJR procedures) for which there are 
potentially avoidable expenditures (arising from less than optimal care 
coordination). For the reasons described elsewhere in this rule, we 
have determined that it is necessary to test this model among varying 
types of hospitals that have not chosen to voluntarily participate in 
another episode payment model such as BPCI. As noted elsewhere in this 
final rule, we are testing an episode approach for LEJR episodes 
through the voluntary BPCI models. We have designed the CJR model to 
require participation by hospitals in order to avoid the selection bias 
inherent to any model in which providers may choose whether to 
participate. Such a design will allow for testing of how a variety of 
hospitals will fare under an episode payment approach, leading to a 
more robust evaluation of the model's effect on all types of hospitals. 
We believe this is the most prudent approach for the following reasons. 
The information gained from testing of the CJR model will allow CMS to 
more comprehensively assess whether LEJR episode payment models are 
appropriate for any potential national expansion. We will have 
evaluation information on results for providers who are participating 
in such models voluntarily (under BPCI) as well as for hospitals that 
are required to participate in CJR. Under CJR, we will have tested and 
evaluated such a model across a wide range of hospitals representing 
varying degrees of experience with episode payment. We believe it is 
important to gain knowledge from a variety of perspectives in 
considering whether and which models merit national expansion. Thus, 
the CJR model meets the criteria required for initial model tests.
    Moreover, the Secretary has the authority to establish regulations 
to carry out the administration of Medicare. Specifically, the 
Secretary has authority under both sections 1102 and 1871 of the Act to 
implement regulations as necessary to administer Medicare, including 
testing this Medicare payment and service delivery model. We note that 
while CJR will be a model, and not a permanent feature of the Medicare 
program, the model will test different methods for delivering and 
paying for services covered under the Medicare program, which the 
Secretary has clear legal authority to regulate. The proposed rule went 
into great detail about the provisions of the proposed CJR model, 
enabling the public to fully understand how the proposed model was 
designed and could apply to affected providers. We acknowledge section 
1115A(d)(2) of the Act, which states that there shall be no 
administrative or judicial review of, among other things, ``the 
selection of organizations, sites, or participants to test . . . models 
selected,'' as well as the commenter's concern that this provision 
would preclude a participant hospital from appealing its selection as a 
participant in the CJR model. However, it is precisely because the 
model will impose new requirements upon participant hospitals that we 
undertook notice and comment rulemaking to implement it.
    In response to the comment indicating that we misread section 
1115A(a)(5) of the Act, we believe that the commenter misunderstood the 
reference to that provision in the proposed rule. The reference to 
section 1115A(a)(5) of the Act was made in the context of the 
discussion of selecting certain MSAs within which we will test the 
model. We do not rely on section 1115A(a)(5) of the Act specifically as 
the authority for a model in which participation is not voluntary; 
rather, as noted previously, we rely on section 1115A of the Act as a 
whole, as well as the Secretary's existing authority to carry out her 
duties and administer the Medicare program.
    We disagree with commenters that implementing the CJR model will 
negatively affect beneficiaries' appeal rights. We note that normal 
claims processes will continue under this model, including beneficiary 
and provider appeal rights. We also refer readers to section III.C.9. 
of this final rule for discussion of hospital appeals procedures under 
the CJR model.
    With regard to the comment about CMS sidestepping safeguards 
designed to prevent imposing haphazard models prior to appropriate 
vetting and testing, we reiterate that we have undertaken rulemaking to 
solicit comprehensive public input on all aspects of the CJR model. In 
addition, as previously noted, the CJR model has been designed to limit 
selection bias, which will allow for more robust evaluation results 
across a variety of providers.
    We note that this is a new model, not an expansion of an existing 
model. We disagree with the commenters who believe that we have 
reversed the order of testing and expansion of Innovation Center 
models. As permitted by section 1115A of the Act, we are testing the 
CJR model within specified limited geographic areas. The fact that the 
model will require the participation of certain hospitals does not mean 
it is not an initial model test. If the model is successful such that 
it meets the statutory requirements for expansion, and the Secretary 
determines that expansion is warranted, we would undertake rulemaking 
to implement the expansion, as required by section 1115A(c) of the Act.
    Comment: Several commenters questioned how the proposed CJR model 
relates to the potential for expansion of BPCI. Commenters also noted 
that CMS included language in the FY 2016 IPPS/LTCH PPS proposed rule 
requesting public input on an eventual expansion of BPCI.
    Response: CMMI's three major priorities include testing new payment 
and service delivery models, evaluating results and advancing best 
practices, and engaging stakeholders. Since 2011, we have been working 
to develop and test models of bundling Medicare payments under the 
authority of section 1115A of the Act. Consistent with its ongoing 
commitment to develop new models and refine existing models based on 
additional information and experience, we may modify existing models or 
test additional models under our authority under section 1115A of the 
Act. The CJR model is a new, additional episode payment model being 
tested under the authority of section 1115A of the Act. As such, it is 
not an expansion of the BPCI initiative, which needs further evaluation 
to determine its impact on both Medicare cost and quality before the 
Secretary can determine whether the findings from the evaluation of the 
initiative demonstrate that it meets all criteria for expansion, 
consistent with the requirements of section 1115A(c) of the Act, and 
that, based on these findings and other pertinent factors, expansion is 
warranted.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24414 through 
24418), we solicited public comments regarding policy and operational 
issues related to a potential expansion of the BPCI initiative in the 
future. We explained that as we initiated discussions about potential 
expansion, we continued to value stakeholder

[[Page 73279]]

engagement within the framework of our three priorities. With respect 
to expansion, section1115A(c) of the Act, as added by section 3021 of 
the Affordable Care Act, provides the Secretary with the authority to 
expand through rulemaking the duration and scope of a model that is 
being tested under section 1115A(b) of the Act, such as the BPCI 
initiative (including implementation on a nationwide basis), if the 
following findings are made, taking into account the evaluation of the 
model under section 1115A(b)(4) of the Act: (1) The Secretary 
determines that the expansion is expected to either reduce Medicare 
spending without reducing the quality of care or improve the quality of 
patient care without increasing spending; (2) the CMS Chief Actuary 
certifies that the expansion would reduce (or would not result in any 
increase in) net Medicare program spending; and (3) the Secretary 
determines that the expansion would not deny or limit the coverage or 
provision of Medicare benefits. The decision of whether or not to 
expand BPCI will be made by the Secretary in coordination with CMS and 
the Office of the Chief Actuary based on whether findings about the 
initiative meet the statutory criteria for expansion under section 
1115A(c) of the Act. We did not propose an expansion of any of the BPCI 
models or any policy changes associated with those models in the FY 
2016 IPPS/LTCH PPS proposed rule.
    Although BPCI and the CJR model both include testing episode 
payment for LEJR episodes of care, CJR differs from BPCI in significant 
ways, as detailed throughout this final rule. Providers elected to 
participate in BPCI, and were given a choice of various design 
features, such as the clinical episodes included and the episode 
length. The CJR model was designed in part based on feedback and 
experience from BPCI, and will provide additional information on the 
impact of episode payment for LEJR episodes across a variety of 
hospitals, including those who may not have elected to participate in 
the model. As previously discussed in this section, it is necessary to 
require participation in the CJR model in order to avoid the selection 
bias inherent to any voluntary model. When the CJR model begins on 
April 1, 2016, we will be testing both episode payment models 
concurrently for a period of time, as well as many other payment and 
service delivery models, in order to gain information about the most 
successful strategies to improve the quality of care and reduce 
spending. The different design features of BPCI and the CJR model will 
aid us in evaluating the success of episode-based payment across a 
range of provider types and in a range of geographic areas. As 
evaluation results addressing the impact of each model on Medicare 
quality and cost become available, the Secretary will review this 
information to determine whether the findings from the evaluation of 
the model demonstrate that it meets all criteria for expansion, 
consistent with the requirements of section 1115A(c) of the Act, and 
that, based on these findings and other pertinent factors, expansion is 
warranted.
    Comment: Many commenters requested changes to the BPCI model in 
response to the proposed rule. Commenters also requested clarification 
on how BPCI awardees would be transitioned into the CJR model; for 
example, which performance year policies would apply to the new model 
participants.
    Response: We will not address comments about BPCI policies in this 
final rule. We will address commenters' suggestions on BPCI through our 
usual processes for informing BPCI participants and the public of any 
changes to BPCI. As discussed in section III.A of this final rule, all 
Inpatient Prospective Payment System (IPPS) hospitals in the selected 
MSAs that are not participating in BPCI Model 1 or Phase II of Models 2 
or 4 for LEJR episodes would be included in the CJR model. We intend 
for the current performance year's policies to be in effect for any new 
entrants in the CJR model. We also note that an acute care hospital 
formerly participating in BPCI for the LEJR episode will have likely 
established care coordination and redesign strategies for success. As 
such, it would not be necessary to grant such hospitals additional time 
to transition from BPCI into the CJR model.
    Comment: Numerous commenters requested that physicians who enter 
into sharing arrangements with CJR hospitals qualify as eligible 
professionals under the Medicare Access and Chip Reauthorization Act of 
2015 (MACRA) beginning in 2019. A commenter requested that all CJR 
collaborators qualify as eligible professionals under MACRA. Several 
commenters outlined wholly different structures for the proposed CJR 
model, including provisions that would allow for the CJR model to 
qualify as an alternative payment model (APM) under MACRA.
    Response: We interpret commenters' requests as follows: That 
collaborators under the CJR model would be able to meet the 
requirements that would otherwise apply under the Merit-based Incentive 
Payment System (MIPS) or, alternatively, qualify as APM participants 
under section 1833(z)(2) of the Act (and therefore be excluded from 
MIPS) through their participation in CJR. We further interpret 
commenters' requests as follows: That CJR would include eligible 
alternative payment entities, and therefore that eligible professionals 
in CJR would potentially be qualifying APM participants. We note that 
the statute specifies which types of individuals qualify as eligible 
professionals (EPs) under section 1848(k)(3)(B) of the Act or as MIPS 
EPs under section 1848(q)(1)(C) of the Act. We plan to develop 
regulations under MACRA through notice and comment rulemaking. We will 
be releasing further guidance on the implementation of MACRA, and 
through such guidance, will be clarifying the parameters for 
eligibility under MACRA.
    Comment: Several commenters presented different episode payment 
models for CMS' consideration to be tested in addition to or instead of 
the CJR model, or suggested such major changes to the proposed CJR 
model design elements that the result of their adoption would be a 
wholly different test of episode payment than CMS proposed. A few 
commenters recommended that CMS consider testing a model that 
emphasizes the role of PAC providers in managing episode care for 
beneficiaries, instead of just the hospital. Such a model would assign 
financial responsibility during an episode to a PAC entity with 
capabilities to coordinate care across a wide range of post-acute 
settings. Other commenters suggested that CMS test a model that would 
create physician-led organizations to manage financial risk for LEJR 
episodes of care, instead of assigning risk to hospitals. These 
organizations would receive prospective episodic payments and allocate 
such payments among the providers and suppliers furnishing care to 
beneficiaries during an LEJR episode. Several commenters recommended 
CMS implement a population-based model similar to an Accountable Care 
Organization (ACO) model, in lieu of an episode-based payment model. 
Finally, a commenter requested that instead of including rural and low-
volume hospitals in the CJR model, CMS develop a model tailored to this 
subset of providers.
    Response: We appreciate the suggestions for alternatives to the CJR 
model design that were recommended by the commenters, including the 
details and rationale provided about many features of those models. We 
are

[[Page 73280]]

not adopting these approaches to an episode payment model under this 
final rule as we did not propose the design elements of such models for 
public notice and comment nor did we propose the additional policies 
that would be required to implement such features that do not rely on 
existing Medicare definitions (for example, the definition of a 
physician-led organization to manage risk). However, we note that we 
are constantly considering modifications to existing models and 
designing new models under our testing authority under section 1115A of 
the Act, taking into consideration stakeholder input received through 
many channels, including public comments on this proposed rule and the 
FY 2016 IPPS/LTCH PPS proposed rule discussion item on potential BPCI 
expansion considerations, as well as feedback from providers 
participating in existing models. We note that potential modifications 
to the CJR model would go through notice and comment rulemaking as 
necessary. As we consider developing additional payment service and 
delivery models, we will continue to engage with stakeholders and 
review all of the information available to us about alternative 
approaches to episode payment that could be tested.

B. Summary of the Major Provisions

1. Model Overview: LEJR Episodes of Care
    LEJR procedures are currently paid under the IPPS (IPPS) through 
one of two Medicare Severity-Diagnosis Related Groups (MS-DRGs): MS-DRG 
469 (Major joint replacement or reattachment of lower extremity with 
Major Complications or Comorbidities (MCC)) or MS-DRG 470 (Major joint 
replacement or reattachment of lower extremity without MCC). Under the 
CJR model, as described further in section III.B of this final rule, 
episodes will begin with admission to an acute care hospital for an 
LEJR procedure that is assigned to MS-DRG 469 or 470 upon beneficiary 
discharge and paid under the IPPS and will end 90 days after the date 
of discharge from the acute care hospital. This episode of care 
definition offers operational simplicity for providers and CMS. The 
episode will include the LEJR procedure, inpatient stay, and all 
related care covered under Medicare Parts A and B within the 90 days 
after discharge, including hospital care, PAC, and physician services.
2. Model Scope
    We have finalized that participant hospitals will be the episode 
initiators and bear financial risk under the CJR model. In comparison 
to other health care facilities, hospitals are more likely to have 
resources that will allow them to appropriately coordinate and manage 
care throughout the episode, and hospital staff members are already 
involved in hospital discharge planning and PAC recommendations for 
recovery, key dimensions of high quality and efficient care for the 
episode. We require all hospitals paid under the IPPS in selected 
geographic areas to participate in the CJR model, with limited 
exceptions. Eligible beneficiaries who elect to receive care at these 
hospitals will automatically be included in the model. We have selected 
geographic areas based on a stratified random sampling methodology 
within strata using the following criteria: historical wage adjusted 
episode payments and population size. Our geographic area selection 
process is detailed further in section III.A of this final rule.
3. Payment
    We will test the CJR model for 5 performance years. We have 
finalized an alternative start date for the model from the timeline set 
forth in the proposed rule. As discussed in further detail in section 
III.C.2.a. of this final rule, the first performance year for the CJR 
model will begin on April 1, 2016 and end on December 31, 2016. During 
these performance years we will continue paying hospitals and other 
providers and suppliers according to the usual Medicare FFS payment 
systems. However, after the completion of a performance year, the 
Medicare claims payments for services furnished to the beneficiary 
during the episode, based on claims data, will be combined to calculate 
an actual episode payment. The actual episode payment is defined as the 
sum of related Medicare claims payments for items and services 
furnished to a beneficiary during a CJR episode. The actual episode 
payment will then be reconciled against an established CJR target price 
that is stratified based on the beneficiary's fracture status, with 
consideration of additional payment adjustments based on quality 
performance, post-episode spending, and policies to limit hospital 
financial responsibility. The amount of this calculation, if positive, 
will be paid to the participant hospital. This payment will be called a 
reconciliation payment. If negative, we will require repayment from the 
participant hospital. Medicare will require repayment of the difference 
between the actual episode payments and the CJR target price from a 
participant hospital if the CJR target price is exceeded.
    We will make reconciliation payments to participant hospitals that 
achieve quality outcomes and cost efficiencies relative to the 
established CJR target prices in all performance years of the model. We 
will also phase in the requirement that participant hospitals whose 
actual episode payments exceed the applicable CJR target price pay the 
difference back to Medicare beginning in performance year 2. Under this 
final rule, Medicare will not require repayment from hospitals for 
performance year 1 for actual episode payments that exceed their target 
price in performance year 1.
    We will also limit how much a hospital can gain or lose based on 
its actual episode payments relative to target prices. We have also put 
in place additional policies to further limit the risk of high payment 
cases for all participant hospitals and for special categories of 
participant hospitals as described in section III.C. of this final 
rule.
4. Similar, Previous, and Concurrent Models
    The CJR model is informed by other models and demonstrations 
currently and previously conducted by CMS and will explore additional 
ways to enhance coordination of care and improve the quality of 
services through bundled payments. We recently announced the Oncology 
Care Model (OCM), a new voluntary payment model for physician practices 
administering chemotherapy. Under OCM, practices will enter into 
payment arrangements that include financial and performance 
accountability for episodes of care surrounding chemotherapy 
administration to cancer patients. We plan to coordinate with other 
payers to align with OCM in order to facilitate enhanced services and 
care at participating practices. More information on the OCM can be 
found on CMMI's Web site at: https://innovation.cms.gov/initiatives/Oncology-Care/. Medicare tested innovative approaches to paying for 
orthopedic services in the Medicare Acute Care Episode (ACE) 
demonstration, a prior demonstration, and is currently testing 
additional approaches under BPCI. Both of these models have also 
informed the design of the CJR model.
    Under the authority of section 1866C of the Act, we conducted a 3-
year demonstration, the ACE Demonstration. The demonstration used a 
prospective global payment for a single episode of care as an 
alternative approach to payment for service delivery under traditional 
Medicare FFS. The episode

[[Page 73281]]

of care was defined as a combination of Part A and Part B services 
furnished to Medicare FFS beneficiaries during an inpatient hospital 
stay for any one of a specified set of cardiac and orthopedic MS-DRGs. 
The MS-DRGs tested included 469 and 470, which are included in the CJR 
model. The discounted bundled payments generated an average gross 
savings to Medicare of $585 per episode for a total of $7.3 million 
across all episodes (12,501 episodes) or 3.1 percent of the total 
expected costs for these episodes. After accounting for increased PAC 
costs that were observed at two sites, Medicare saved approximately $4 
million, or 1.72 percent of the total expected Medicare spending. More 
information on the ACE Demonstration can be found on CMMI's Web site 
at: https://innovation.cms.gov/initiatives/ACE/.
    We are currently testing the BPCI initiative. The BPCI initiative 
is comprised of four related payment models, which link payments for 
multiple services that Medicare beneficiaries receive during an episode 
of care into a bundled payment. Under the initiative, entities enter 
into payment arrangements with CMS that include financial and 
performance accountability for episodes of care. Episodes of care under 
the BPCI initiative begin with either--(1) An inpatient hospital stay; 
or (2) PAC services following a qualifying inpatient hospital stay. The 
BPCI initiative is evaluating the effects of episode-based payment 
approaches on patient experience of care, outcomes, and cost of care 
for Medicare FFS beneficiaries. Each of the four models tests LEJR 
episodes of care. While final evaluation results for the models within 
the BPCI initiative are not yet available, we believe that CMS' 
experiences with BPCI support the design of the CJR model. Under 
section 1115A(c) of the Act, the Secretary may, taking into 
consideration an evaluation conducted under section 1115A (b)(4) of the 
Act, ``through rulemaking, expand (including implementation on a 
nationwide basis) the duration and the scope of a model that is being 
tested under'' CMMI's authority. CJR is not an expansion of BPCI, and 
BPCI may be expanded in the future. We published a discussion item 
soliciting public comment on a potential future expansion of one or 
more of the models within BPCI in the FY2016 IPPS rule, 80 FR 24414 
through 24418. CJR will not be an expansion or modification of BPCI; 
nor does it reflect comments received in response to the proposed rule 
for the 2016 IPPS Rule. CJR is a unique model that tests a broader, 
different group of hospitals than BPCI. It is necessary to provide CMS 
with information about testing bundled payments to hospitals that are 
required to participate in an APM. For a discussion of why we are 
requiring hospitals to participate in the CJR model, see section III.A. 
of this final rule.
    The CJR model's design was informed to a large degree by our 
experience with BPCI Model 2. BPCI's Model 2 is a voluntary episode 
payment model in which a qualifying acute care hospitalization 
initiates a 30, 60 or 90 day episode of care. The episode of care 
includes the inpatient stay in an acute care hospital and all related 
services covered under Medicare Parts A and B during the episode, 
including PAC services. More information on BPCI Model 2 can be found 
on CMMI's Web site at: https://innovation.cms.gov/initiatives/BPCI-Model-2/.
    Further information of why elements of the OCM, the ACE 
Demonstration, and BPCI Model 2 were incorporated into the design of 
the CJR model appears later in this final rule.
5. Overlap With Ongoing CMS Efforts
    We are excluding from participation in CJR certain hospitals 
participating in the risk-bearing phase of BPCI Models 2 and 4 for LEJR 
episodes, as well as acute care hospitals participating in BPCI Model 
1. We are not excluding beneficiaries in CJR model episodes from being 
included in other Innovation Center models or CMS programs, such as the 
Medicare Shared Savings Program (Shared Savings Program), as detailed 
later in this final rule. We will account for overlap, that is, where 
CJR beneficiaries are also included in other models and programs, to 
ensure the financial policies of CJR are maintained and results and 
spending reductions are attributed to the correct model or program.
6. Quality Measures and Reporting Requirements
    We are adopting two hospital-level quality of care measures for the 
CJR model. Those measures include a complications measure and a patient 
experience survey measure. We will use these measures in the model pay-
for-performance payment methodology, as well as to test the success of 
the model in achieving its goals under section 1115A of the Act and to 
monitor for beneficiary safety. We intend to publicly report this 
information on the Hospital Compare Web site. Additionally, we will 
encourage the voluntary submission of data to support the development 
of a hospital-level measure of patient-reported outcomes following an 
elective primary total hip (THA) or total knee arthroplasty (TKA) 
through incorporation of the measure in the composite quality scoring 
methodology described in III.C.5. of this final rule.
7. Data Sharing Process
    We will share data with participant hospitals upon request 
throughout the performance period of the CJR model to the extent 
permitted by the HIPAA Privacy Rule and other applicable law. We will 
share upon request both raw claims-level data and claims summary data 
with participants. This approach will allow participant hospitals 
without prior experience analyzing claims to use summary data to 
receive useful information, while allowing those participant hospitals 
who prefer raw claims-level data the opportunity to analyze claims. We 
will provide hospitals with up to 3 years of retrospective claims data 
upon request that will be used to develop their target price, as 
described in section III.C. of this final rule. In accordance with the 
HIPAA Privacy Rule, we will limit the content of this data set to the 
minimum data necessary for the participant hospital to conduct quality 
assessment and improvement activities and effectively coordinate care 
of its patient population.
8. Beneficiary Protections
    Under the CJR model, beneficiaries retain the right to obtain 
health services from any individual or organization qualified to 
participate in the Medicare program. Under the CJR model, eligible 
beneficiaries who receive services from a participant hospital will not 
have the option to opt out of inclusion in the model. We require 
participant hospitals to supply beneficiaries with written information 
regarding the design and implications of this model as well as their 
rights under Medicare, including their right to use their provider of 
choice. We will also make a robust effort to reach out to beneficiaries 
and their advocates to help them understand the CJR model.
    We also will use our existing authority, if necessary, to audit 
participant hospitals if claims analysis indicates an inappropriate 
change in delivered services. Beneficiary protections are discussed in 
greater depth in section III.E. of this final rule.
9. Financial Arrangements and Program Policy Waivers
    We will hold participant hospitals financially responsible for CJR 
LEJR episodes as participants in the model as discussed in section 
III.C.6. of this final

[[Page 73282]]

rule. Specifically, only these hospital participants will be directly 
subject to the requirements of this final rule for the CJR model. 
Participant hospitals will be responsible for ensuring that other 
providers and suppliers collaborating with the hospital on LEJR episode 
care redesign are in compliance with the terms and conditions of the 
model, including any applicable program policy waivers.
    Several of the Medicare program policy waivers outline the 
conditions under which SNFs and physicians could furnish and bill for 
certain services furnished to CJR beneficiaries where current Medicare 
programs rules will not permit such billing. We draw the attention of 
SNFs and physicians to these waivers, which are included in section 
III.C.11.b.(5). of this final rule.

C. Summary of Economic Effects

    As shown in our impact analysis, we expect the CJR model to result 
in savings to Medicare of $343 million over the 5 performance years of 
the model. We note that a composite quality score will be calculated 
for each hospital in order to determine eligibility for a 
reconciliation payment and whether the hospital qualifies for quality 
incentive payments that will reduce the effective discount percentage 
experience by the hospital at reconciliation for a given performance 
year.
    More specifically, in performance year 1 of the model, we estimate 
a Medicare cost of approximately $11 million, as hospitals will not be 
subject to downside risk in the first year of the model. As we 
introduce downside risk beginning in performance year 2 of the model, 
we estimate Medicare savings of approximately $36 million. In 
performance year 3 of the model, we estimate Medicare savings of $71 
million. In performance years 4 and 5 of the model, we will move from 
target episode pricing that is based on a hospital's experience to 
target pricing based on regional experience, we estimate Medicare 
savings of $120 million and $127 million, respectively.
    As a result, we estimate the net savings to Medicare to be $343 
million over the 5 performance years of the model. We anticipate there 
will be a broader focus on care coordination and quality improvement 
for LEJR episodes among hospitals and other providers and suppliers 
within the Medicare program that will lead to both increased efficiency 
in the provision of care and improved quality of the care provided to 
beneficiaries.
    We note that under section 1115A(b)(3)(B) of the Act, the Secretary 
is required to terminate or modify a model unless certain findings can 
be made with respect to savings and quality after the model has begun. 
If during the course of testing the model it is determined that 
termination or modification is necessary, such actions will be 
undertaken through rulemaking as necessary.

II. Background

A General Background

    This final rule finalizes the implementation of a new innovative 
health care payment model under the authority of section 1115A of the 
Act. Under the model, called the CJR model, acute care hospitals in 
certain selected geographic areas will receive bundled payments for 
episodes of care where the diagnosis at discharge includes a lower 
extremity joint replacement (LEJR) or reattachment of a lower extremity 
that was furnished by the hospital. The bundled payment will be paid 
retrospectively through a reconciliation process; hospitals and other 
providers and suppliers will continue to submit claims and receive 
payment via the usual Medicare FFS payment systems. All related care 
covered under Medicare Part A and Part B within 90 days after the date 
of hospital discharge from the joint replacement procedure will be 
included in the episode of care. We believe this model will further our 
goals of improving the efficiency and quality of care for Medicare 
beneficiaries for these common medical procedures.

B. Acronym of This Model

    We have changed the acronym of this model to ``CJR'' and have 
updated all references in this rule and the regulations to reflect this 
change.

C. Public Comments Received in Response to the CJR Proposed Rule

    We received approximately 400 timely pieces of correspondence 
containing multiple comments on the CJR proposed rule. We note that 
some of these public comments were outside of the scope of the proposed 
rule. These out-of-scope public comments are mentioned but not 
addressed with the policy responses in this final rule. Summaries of 
the public comments that are within the scope of the proposed rule and 
our responses to those public comments are set forth in the various 
sections of this final rule under the appropriate heading.

III. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments

A. Definition of the Episode Initiator and Selected Geographic Areas

1. Background
    The CJR model is different from BPCI because it would require 
participation of all hospitals (with limited exceptions) throughout 
selected geographic areas, which would result in a model that includes 
varying hospital types. However, a discussion of BPCI is relevant 
because its design informs and supports the proposed CJR model. The 
BPCI model is voluntary, and under that model we pay a bundled payment 
for an episode of care only to entities that have elected to 
participate in the model. We are interested in testing and evaluating 
the impact of an episode payment approach for LEJRs in a variety of 
other circumstances, including among those hospitals that have not 
chosen to voluntarily participate because we have not tested bundled 
payments for these hospitals previously. This would allow CMS and 
participants to gain experience testing and evaluating episode-based 
payment for LEJR procedures furnished by hospitals with a variety of 
historic utilization patterns; roles within their local markets; volume 
of services provided; access to financial, community, or other 
resources; and population and health care provider density. Most 
importantly, participation of hospitals in selected geographic areas 
will allow CMS to test bundled payments without introducing selection 
bias such as the selection bias inherent in the BPCI model due to self-
selected participation.
2. Definition of Episode Initiator
    Under the CJR model, as described further in section III.B. of this 
final rule, episodes will begin with admission to an acute care 
hospital for an LEJR procedure that is paid under the IPPS through 
Medical Severity Diagnosis-Related Group (MS-DRG) 469 (Major joint 
replacement or reattachment of lower extremity with MCC) or 470 (Major 
joint replacement or reattachment of lower extremity without MCC) and 
end 90 days after the date of discharge from the hospital. For the CJR 
model, we proposed that hospitals would be the only episode initiators. 
For purposes of CJR, the term ``hospital'' means a hospital as defined 
in section 1886(d)(1)(B) of the Act. This statutory definition of 
hospital includes only acute care hospitals paid under the IPPS. We 
proposed that all acute care hospitals in Maryland would be

[[Page 73283]]

excluded from CJR. The state of Maryland entered into an agreement with 
CMS, effective January 1, 2014, to participate in CMS' new Maryland 
All-Payer Model. In order to implement the Maryland All-Payer Model, 
CMS waived certain requirements of the Act, and the corresponding 
implementing regulations, as set forth in the agreement between CMS and 
Maryland. Specifically, under the Maryland All-Payer Model, Maryland 
acute care hospitals are not paid under the IPPS or Outpatient 
Prospective Payment System (OPPS) but rather are paid under rates set 
by the state. Following the model's performance period, Maryland will 
transition to a new model that incorporates the full spectrum of care, 
not just hospital services. As such, with respect to Maryland 
hospitals, CMS intends to test and develop new payment and delivery 
approaches that can incorporate non-hospital services in a manner that 
accounts for Maryland's unique hospital rate setting system and permit 
Maryland to develop its own strategy to incentivize higher quality and 
more efficient care across clinical situations within and beyond 
hospitals, including but not limited to LEJR episodes of care. We 
proposed that because Maryland hospitals are not paid under the IPPS or 
OPPS, payments to Maryland hospitals will be excluded in the regional 
pricing calculations as described in section III.C.4. of this final 
rule. We sought comment on whether there were potential approaches for 
including Maryland acute care hospitals in CJR. In addition, we sought 
comment on whether Maryland hospitals should be included in CJR in the 
future upon any termination of the Maryland All-Payer Model.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters commented on the proposed exclusion of 
Maryland hospitals in the All-Payer model from the model. A commenter 
requested that if we are considering approaches for including Maryland 
acute care hospitals in the CJR model that we ensure that the inclusion 
of such hospitals would not jeopardize the current all-payer system in 
Maryland. If such an approach were to be developed, the commenter noted 
that it would welcome the opportunity to participate in the CJR model 
and further stated that it is confident that it would be successful 
under the CJR model in helping to further to goals of providing high 
quality care at lower costs to better patient outcomes and population 
health. Another commenter noted that Maryland's All-Payer Model 
Agreement is focused on holding hospitals accountable for improving 
care, improving health, and reducing the total cost of hospital care 
for all payers. Under the All-Payer model, Maryland has shifted its 
long-standing hospital rate-setting system from a volume-based system, 
focused on cost per case, to a global population-based system that 
incorporates performance requirements for quality and outcomes. The 
Maryland system will be held accountable for the total cost of care for 
Medicare patients under its contract with CMS and thus already has two-
sided risk for hospital costs. The commenter stated that Maryland wants 
to work with CMS to develop a unique approach to achieving the goals of 
the model, but under the All-Payer model. Lastly, another commenter 
expressed confusion if we were announcing a plan to have Maryland 
transition to a new model that incorporates the full spectrum of care, 
not just hospital services.
    Response: Under the All-Payer model, Maryland has facilitated the 
movement of regulated hospital revenue into population-based payment 
reimbursement under a hospital global budget model. We appreciate the 
state's efforts to move away from volume-based payments and to focus on 
reducing total cost of care and improving quality of care, and we have 
seen improvement on these areas in the first year of the All-Payer 
model. However, we remain concerned that certain aspects of the All-
Payer Model make it challenging for Maryland to be included in other 
payment and delivery innovations being launched by the CMS Innovation 
Center. As we anticipate testing more models across the country, we do 
not want Maryland to fall behind in payment and delivery innovation. We 
are very interested in Maryland's strategy to be accountable for total 
cost of care beyond hospital services, which we intend to implement 
under the All-Payer model in 2019. We note that we are not announcing a 
new model for Maryland in this rule, but rather the CMS Innovation 
Center looks forward to working with Maryland on its total cost of care 
model.
    Comment: Several commenters agreed with CMS that Maryland hospitals 
should not be included in our definition of ``hospital'' and, instead, 
the state of Maryland should be allowed to develop its own strategy to 
encourage higher quality care and efficiencies across clinical 
settings.
    Response: We agree that for the purposes of the CJR model, the term 
``hospital'' should only encompass hospitals currently paid under the 
IPPS and we are finalizing as proposed to exclude Maryland hospitals 
from the CJR model.
    Final Decision: After consideration of the public comments we 
received, we are finalizing, for purposes of the CJR model, the term 
``hospital'' to mean a hospital subject to the IPPS as defined in 
section 1886(d)(1)(B) of the Act. This statutory definition of hospital 
includes only acute care hospitals paid under the IPPS, thus excluding 
Maryland hospitals from participating in CJR and excluding payments to 
Maryland hospitals in regional pricing calculations described in 
section III.C.4 of this final rule. This definition will be codified in 
Sec.  510.2
    We proposed to designate IPPS hospitals as the episode initiators 
to ensure that all Medicare FFS LEJR services furnished by participant 
hospitals in selected geographic areas to beneficiaries who do not meet 
the exclusion criteria (specified in section III.B.3. and section 
III.C.7. of this final rule) are included in the CJR model. Given that 
our proposal that the LEJR episode begins with an admission to a 
hospital paid under the IPPS that results in a discharge assigned to 
MS-DRG 469 or 470, we further believed that utilizing the hospital as 
the episode initiator is a straightforward approach for this model 
because the hospital furnishes the LEJR procedure. In addition, we 
noted our interest in testing a broad model in a number of hospitals 
under the CJR model in order to examine results from a more generalized 
payment model. Thus, we believed it is important that, in a model where 
hospital participation is not voluntary, all Medicare FFS LEJR episodes 
that begin at the participant hospital in a selected geographic area 
should be included in the model for beneficiaries that do not meet the 
exclusion criteria specified in section III.B.3. of this final rule and 
are not LEJR BPCI episodes that we are excluding as outlined in this 
section and also in section III.C.7 of this final rule. This is best 
achieved if the hospital is the episode initiator. Finally, as 
described in the following sections that present our proposed approach 
to geographic area selection, this geographic area selection approach 
relies upon our definition of hospitals as the entities that initiate 
episodes. We sought comment on our proposal to define the episode 
initiator as the hospital under CJR. However, commenters generally 
commented on our proposal to define the episode initiator as the 
hospital in tandem with comments regarding the proposal that the 
hospital also be the entity financially responsible for the episode of 
care under CJR. As such, comments regarding the proposed

[[Page 73284]]

episode initiator and the entity financially responsible for the 
episode of care are summarized in section III.A.2. of this final rule.
3. Financial Responsibility for the Episode of Care
    BPCI Model 2 participants that have entered into agreements with 
CMS to bear financial responsibility for an episode of care include 
acute care hospitals paid under the IPPS, health systems, physician-
hospital organizations, physician group practices (PGPs), and non-
provider business entities that act as conveners by coordinating 
multiple health care providers' participation in the model. Thus, our 
evaluation of BPCI Model 2 will yield information about how results for 
LEJR episodes may differ based on differences in which party bears 
financial responsibility for the episode of care. For the CJR model, we 
proposed to make hospitals financially responsible for the episode of 
care.
    Although we proposed that hospitals would bear the financial 
responsibility for LEJR episodes of care under CJR, because there are 
LEJR episodes currently being tested in BPCI Model 1, 2, 3 or 4, we 
believed that participation in CJR should not be required if it would 
disrupt testing of LEJR episodes already underway in BPCI models. 
Therefore, we proposed certain exceptions for instances where IPPS 
hospitals located in an area selected for the model are active 
participant hospitals or episode initiators for LEJR episodes as of 
July 1, 2015, and exceptions for LEJR episodes initiated by other 
providers or suppliers under certain BPCI models.
    The following is a summary of the comments received and our 
responses.
    Comment: Most commenters expressed overall support for the CJR 
model, with some commenters noting that the CJR model could help to 
transform care delivery through improved care coordination and 
financial accountability. Several commenters further expressed support 
for our proposal to designate hospitals as the episode initiators and 
the entity financially responsible for the episode of care under the 
CJR model. These commenters agreed that hospitals should bear the 
responsibility of implementing the CJR model and further agreed with 
being able to share this responsibility with ``collaborators'' through 
gainsharing agreements. The commenters noted that the themes 
surrounding responsibility and cost in conjunction with quality as 
presented in the proposed rule were encouraging and show a continued 
focus on bettering outcomes and patient engagement while lowering 
costs.
    Response: We thank the commenters for their support. As noted in 
the proposed rule, the intent of the CJR model is to promote quality 
and financial accountability for episodes of care surrounding a lower-
extremity joint replacement (LEJR) or reattachment of a lower extremity 
procedure. We anticipate the CJR model would benefit Medicare 
beneficiaries by improving the coordination and transition of care, 
improving the coordination of items and services paid for through 
Medicare FFS, encouraging more provider investment in infrastructure 
and redesigned care processes for higher quality and more efficient 
service delivery, and incentivizing higher value care across the 
inpatient and PAC spectrum spanning the episode of care (80 FR 41198).
    Comment: Several commenters disagreed with the proposal for the CJR 
model to limit financial responsibility for the episode of care to only 
hospitals. Commenters advocated for PGPs or orthopedic surgeons to be 
financially responsible, while other commenters advocated for PAC 
entities to be financially responsibility for the episode of care. 
Commenters listed a variety of reasons why orthopedic physician groups 
and/or PAC providers should be financially responsible for the episode 
of care. Some commenters stated that the episode initiator for the CJR 
model should be a physician, as key clinical decisions about care 
within the episode are made by physicians, including determining what 
kind of follow-up care is needed. A few commenters stated that the 
episode initiator should be the PAC provider, similar to BPCI Model 3, 
since much of the reduction in CJR episode costs could occur through 
changes in PAC utilization. A few commenters stated that CMS should 
distribute program risk across all providers within the episode of care 
and not delegate that function to the hospital because during a CJR 
episode, ideal care and successful care coordination involve multiple 
providers across the care continuum and is especially dependent on PAC 
providers. Finally, several commenters stated that with gainsharing 
there is greater opportunity for the physician to participate in 
patient care redesign, but that unless the physician is also 
financially responsible, physician involvement in the full care 
redesign would be less than ideal.
    Response: As noted in the proposed rule (80 FR 41204 through 
41205), because the CJR model is testing a more generalizable model by 
including providers that might not participate in a voluntary model, we 
believe it is most appropriate to identify a single type of provider to 
bear financial responsibility for making repayment to CMS under the CJR 
model as one entity needs to be ultimately responsible for ensuring 
that care for CJR model beneficiaries is appropriately furnished and 
coordinated in order to avoid fragmented approaches that are often less 
effective and more costly. Hospitals play a central role in 
coordinating episode-related care and ensuring smooth transitions for 
beneficiaries undergoing LEJR procedures. Most hospitals already have 
some infrastructure in place related to patient and family education 
and health information technology as hospitals receive incentive 
payments for the adoption and meaningful use of interoperable health 
information technology (HIT) and qualified electronic health records 
(EHRs). In addition, hospitals are required by the hospital Conditions 
of Participation (CoPs) to have in effect a discharge planning process 
that applies to all patients (Sec.  482.43). As part of the discharge 
planning process, hospitals are required to arrange for the initial 
implementation of the discharge plan (Sec.  482.43(c)(3)), which 
includes coordinating with PAC providers, a function usually performed 
by hospital discharge planners or case managers. Thus hospitals can 
build upon already established infrastructure, practices, and 
procedures to achieve efficiencies under this episode payment model. 
Many hospitals also have recently heightened their focus on aligning 
their efforts with those of community providers to provide an improved 
continuum of care due to the incentives under other CMS models and 
programs, including ACO initiatives such as the Medicare Shared Savings 
Program, and the Hospital Readmissions Reduction Program (HRRP), 
establishing a base for augmenting these efforts under the CJR model. 
Hospitals are also more likely than other providers and suppliers to 
have an adequate number of episode cases to justify an investment in 
episode management for this model, have access to resources that would 
allow them to appropriately manage and coordinate care throughout the 
LEJR episode, and hospital staff is already involved in discharge 
planning and placement recommendations for Medicare beneficiaries, and 
more efficient PAC service delivery provides substantial opportunities 
for improving quality and reducing costs under CJR.
    We considered requiring treating physicians (orthopedic surgeons or

[[Page 73285]]

others) or their associated PGPs, if applicable, to be financially 
responsible for the episode of care under the CJR Model. However, the 
services of providers and suppliers other than the hospital where the 
acute care hospitalization for the LEJR procedure occurs would not 
necessarily be furnished in every LEJR episode. For example, that 
physicians of different specialties play varying roles in managing 
patients during an acute care hospitalization for a surgical procedure 
and during the recovery period, depending on the hospital and community 
practice patterns and the clinical condition of the beneficiary and 
could not be assumed to be included in every LEJR episode. This 
variability would make requiring a particular physician or PGP to be 
financially responsible for a given episode very challenging. If we 
were to assign financial responsibility to the operating physician, it 
is likely that there would be significant variation in the number of 
relevant episodes that could be assigned to an individual person. Where 
the physician was included in a PGP, episodes could be aggregated to 
this group level but this would not be possible for all cases and would 
likely still have multiple instances with physicians with a very low 
volume of cases. We acknowledge that providers and suppliers with low 
volumes of cases may not find it in their financial interests to make 
systematic care redesigns or engage in an active way with the CJR 
model. We expect that low volume hospitals may achieve less savings 
compared to their target episode payments for the simple reason that 
they would not find the financial incentive present in the CJR 
sufficiently strong to cause them to shift their practice patterns. 
While this concern is present in low volume hospitals, it is much more 
likely to occur if physicians are financially responsible for episode 
costs because physicians typically do not have the case volume to 
justify an investment in the infrastructure needed to adequately 
provide the care coordination services required under the CJR model 
(such as dedicated support staff for case management), which leads us 
to believe that as a result, the model would be less likely to succeed.
    Although the BPCI initiative allows a PGP and PAC providers to have 
financial responsibility for episodes of care, the physician groups and 
PAC providers electing to participate in BPCI have done so because 
their business structure supports care redesign and other 
infrastructure necessary to bear financial responsibility for episodes 
and is not necessarily representative of the typical group practice or 
PAC provider. Most of the PGPs in BPCI are not bearing financial 
responsibility, but are participating in BPCI as partners with convener 
organizations, which enter into agreements with CMS on behalf of health 
care providers, through which they accept financial responsibility for 
the episode of care. The PAC providers in BPCI are not at risk for 
episodes that include more than just the post-anchor hospital discharge 
period. The incentive to invest in the infrastructure necessary to 
accept financial responsibility for the entire CJR episode of care, 
starting at admission to an acute care hospital for an LEJR procedure 
that is paid under the IPPS MS-DRG 469 or 470 and ending 90 days after 
the date of discharge from the hospital, would not be present across 
all PGPs and PAC providers. Thus we do not believe it would be 
appropriate to designate PGPs or PAC providers to bear the financial 
responsibility for making repayments to CMS under the CJR model where 
participation is mandatory, rather than voluntary in nature, 
potentially causing this model to be less likely to succeed. We may 
consider, through future rulemaking, other episode of care models in 
which PGPs or PAC providers are financially responsible for the costs 
of care.
    Comment: Several commenters suggested that conveners--non-provider 
business entities that coordinate multiple health care providers' 
participation in the model--should also be allowed to bear financial 
responsibility for episodes of care under the proposed CJR model. A 
commenter suggested that instead of making hospitals responsible for 
managing payments and costs, a management organization should be 
designated or created to manage the costs and payments.
    Response: In the BPCI initiative, participants have entered into a 
variety of relationships with entities above the hospital level. Some 
of these relationships are ones where the financial responsibility is 
borne by an entity other than the hospital, such as a parent 
organization (known as awardee conveners). Other relationships between 
hospitals and other organizations (known as facilitator conveners) are 
more managerial or consultative where financial responsibility remains 
with the episode initiator (for example, the hospital). We acknowledge 
the important role that conveners play in the BPCI initiative with 
regard to providing infrastructure support to hospitals and other 
entities initiating episodes in BPCI. The convener relationship (where 
another entity assumes financial responsibility) may take numerous 
forms, including contractual (such as a separate for-profit company 
that agrees to take on a hospital's financial risk in the hopes of 
achieving financial gain through better management of the episodes) and 
through ownership (such as when financial responsibility is borne at a 
corporate level within a hospital chain). However, we proposed that for 
the CJR model we would hold only the participant hospitals financially 
responsible for the episode of care. This is consistent with the goal 
of evaluating the impact of bundled payment and care redesign across a 
broad spectrum of hospitals with varying levels of infrastructure and 
experience in entering into risk-based reimbursement arrangements. If 
conveners were included as participants in CJR, we may not gain the 
knowledge of how a variety of hospitals can succeed in relationship 
with CMS in which they bear financial risk for the episode of care.
    While we proposed that the participant hospital be financially 
responsible for the episode of care under CJR, we agreed that effective 
care redesign for LEJR episodes requires meaningful collaboration among 
acute care hospitals, PAC providers, physicians, and other providers 
and suppliers within communities to achieve the highest value care for 
Medicare beneficiaries. We believe it may be essential for key 
providers and suppliers to be aligned and engaged, financially and 
otherwise, with the hospitals, with the potential to share financial 
responsibility with those hospitals. As such, CJR participant hospitals 
may enter into relationships with other entities in order to manage the 
episode of care or distribute risk. We refer readers to section 
III.C.10 of this final rule for further discussion of financial 
arrangements between participant hospitals and other providers and 
suppliers. Depending on a hospital's current degree of clinical 
integration, new and different contractual relationships among 
hospitals and other health care providers and suppliers may be 
important, although not necessarily required, for CJR model success in 
a community. We acknowledge that financial incentives for other 
providers and suppliers may be important aspects of the model in order 
for hospitals to partner with these providers and suppliers and 
incentivize certain strategies to improve episode efficiency.
    As noted in the proposed rule (80 FR 41261), in addition to 
providers and

[[Page 73286]]

suppliers with which the participant hospital may want to enter into 
financial arrangements to share risks and rewards, we expect that 
participant hospitals may choose to engage with organizations that are 
neither providers nor suppliers to assist with matters such as: Episode 
data analysis; local provider and supplier engagement; care redesign 
planning and implementation; beneficiary outreach; CJR beneficiary care 
coordination and management; monitoring participant hospital compliance 
with the terms and conditions of the CJR model; or other model-related 
activities. These organizations may play important roles in a 
hospital's plans to implement the CJR model based on the experience 
these organizations may bring to the hospital's successful 
participation in the model, such as prior experience with bundled 
payment initiatives, care coordination expertise, familiarity with the 
local community, and knowledge of Medicare claims data. All 
relationships established between participant hospitals and these 
organizations for purposes of the CJR model would only be those 
permitted under existing law and regulation, meaning that gainsharing 
agreements between hospitals and organizations that are neither 
providers nor suppliers are not permitted. Hospital relationships with 
organizations other than providers and suppliers would be based solely 
on the ability of such organizations to directly support the 
participant hospitals' CJR model implementation.
    Comment: Numerous commenters urged CMS to implement the CJR model 
on a voluntary basis, rather than requiring hospitals to participate. 
Commenters observed that the CJR model was unprecedented, unjustified, 
and risky for beneficiaries, because it was the first time CMS would 
require participation of providers who may not have the interest, 
experience, capability, or infrastructure to carry out what is 
necessary for an experiment whose outcomes are unknown. Other 
commenters claimed that some of the hospitals in the selected MSAs 
would not be prepared for model participation due to a lack of 
resources to better coordinate care, insufficient infrastructure, low 
patient volumes, and lack of negotiating power in their communities, 
among other reasons. A few commenters disagreed with designating 
hospitals as financially responsible for the episode of care under CJR 
if the hospital cannot withdraw its participation if it cannot thrive 
under the model. The commenters stated that absent readmissions, 
hospitals have limited influence over other, non-surgical costs 
associated with joint replacements, such as PAC, rehabilitation, home 
care, doctors' visits, and more. Conversely, a commenter wrote that 
there may be some hospitals not in the selected MSAs that would like to 
participate in CJR and would be precluded from doing so unless CMS 
opens the model to other hospitals who volunteered to participate. 
Several commenters requested that CMS continue to test voluntary 
payment models so that providers can continue to tailor bundled payment 
reforms to their particular patient populations, practice settings, 
markets, infrastructure, and administrative resources. A commenter 
stated that requiring participation in the CJR model may preclude 
testing of alternative, potentially more effective, approaches. Another 
commenter contended that requiring participation in this model for 
providers who may also be participating in a voluntary payment model 
could create confusion and competing incentives. Commenters further 
questioned the appropriateness of requiring participation in CJR, given 
that hospitals may not have contractual agreements with other providers 
and suppliers furnishing services during an episode. Finally, several 
commenters contended that the CJR model could result in beneficiary 
harm; a commenter stated that because participation in the CJR model is 
required, CMS should be held responsible for any harm to beneficiaries 
as a result of the model.
    Response: We appreciate the views of the commenters on our proposal 
for required participation in the CJR model test of LEJR episode 
payment. We recognize that the CJR model represents the first time the 
Innovation Center will require hospital participation in a payment 
model being tested under section 1115A of the Act, and we have engaged 
in rulemaking to ensure robust opportunity for public notice and 
comment on the model and its design. This model will allow CMS to gain 
experience with making bundled payments to hospitals who have a variety 
of historic utilization patterns; different roles within their local 
markets; various volumes of services; different levels of access to 
financial, community, or other resources; and various levels of 
population and health provider density including local variations in 
the availability and use of different categories of PAC providers. We 
believe that by requiring the participation of a large number of 
hospitals with diverse characteristics, the CJR model will result in a 
robust data set for evaluation of this bundled payment approach, and 
will stimulate the rapid development of new evidence-based knowledge. 
Testing the model in this manner will also allow us to learn more about 
patterns of inefficient utilization of health care services and how to 
incentivize the improvement of quality for common LEJR procedure 
episodes. Finally, requiring participation removes selection bias and 
gives CMS a better, more accurate picture of the effects of the model 
for consideration of any potential expansion on a national scale.
    We have multiple years of experience with several types of large 
voluntary episode payment models where we have successfully 
collaborated with participants on implementation of episode payment in 
a variety of settings for multiple clinical conditions. We believe the 
relatively narrow scope of the model (LEJR episodes only), the phasing 
in of full financial responsibility over multiple years of the model, 
and our plan to engage with hospitals to help them succeed under this 
model through the provision of claims data, will aid hospitals in 
succeeding under the CJR model. As discussed in section III.C.2. of 
this final rule, we are also finalizing that the model's first 
performance period will begin April 1, 2016, instead of on January 1, 
2016 as originally proposed. The longer notice of the final model 
policies before implementation will provide hospitals with more time to 
prepare for participation by identifying care redesign opportunities, 
beginning to form financial and clinical partnerships with other 
providers and suppliers, and using data to assess financial 
opportunities under the model.
    We acknowledge commenters' concern that some hospitals not in a 
selected MSA may desire to participate in the CJR model. We also note 
that CMS will continue to test voluntary bundled payment models, 
including those already undergoing testing through the BPCI initiative, 
which offered several open periods over the past few years where 
interested hospitals and other organizations could join. We expect that 
many providers will continue to engage in initiatives such as BPCI, and 
may also participate in other emerging models in the coming years. The 
coexistence of voluntary initiatives such as BPCI alongside new models 
in which providers are required to participate will provide CMS, 
providers, and beneficiaries with multiple opportunities to benefit 
from various care redesign and payment reform initiatives. We will also 
continue

[[Page 73287]]

to explore alternative approaches that may also prove effective in 
improving care for beneficiaries while reducing spending.
    We disagree that requiring participation in the CJR model could 
create confusion and competing incentives for hospitals already 
participating in voluntary initiatives. We note that simultaneous 
testing of multiple bundled payment models is appropriate in many 
situations, depending on the care targeted under each model. Section 
III.C.7. of this final rule lays out our policies for accounting for 
overlap between models and contains discussion of the potential 
synergies and improved care coordination we expect will ensue through 
allowing for hospitals and beneficiaries to be engaged in more than one 
initiative simultaneously.
    We appreciate that not all hospitals will have contractual 
arrangements with providers and suppliers furnishing services to 
beneficiaries during LEJR episodes. However, this final rule lays out 
the various financial arrangements that will be permitted under the CJR 
model, to allow hospitals the opportunity to engage with other 
providers and suppliers and to form clinical and financial 
partnerships. Section III.C.10. of this final rule details the 
requirements for these financial arrangements. Although hospitals will 
not be required to form financial relationships with other providers 
and suppliers, we expect many will do so in order to help align the 
clinical and financial incentives of key providers and suppliers caring 
for CJR model beneficiaries.
    Finally, we do not see how participation in the CJR model, in and 
of itself, would lead to beneficiary harm and that if beneficiary harm 
were to occur, that CMS would be responsible. First, and most 
importantly, we note that under the model, providers and suppliers are 
still required to provide all medically necessary services, and 
beneficiaries are entitled to all benefits that they would receive in 
the absence of the model. Second, we note that we have employed many 
payment systems, such as IPPS, and payment models, such as BPCI and 
ACOs, that include similar economic incentives to promote efficiency, 
and we have not determined that beneficiaries have been harmed by those 
systems and models. Third, we note that CMS has numerous tools and 
monitoring plans which are both specific to this model and common to 
all FFS Medicare. These include audits, monitoring of utilization and 
outcomes within the model, and the availability of Quality Improvement 
Organization (QIOs) and 1-800-MEDICARE for reporting beneficiary 
concerns, among other protections. The CJR model includes monitoring to 
ensure beneficiary access, choice, and quality of care is maintained 
under the model. We refer readers to section III.F. of this final rule 
for discussion of beneficiary protections and monitoring under the CJR 
model. The model pricing structure, discussed in III.C. of this final 
rule, also includes features to protect against such potential harm, 
such as responsibility for post-episode spending increases, stop-gain 
policies that set a maximum threshold a hospital can earn for savings 
achieved during episodes, and other policies as detailed in that 
section. In summary, we note that this payment model does not constrain 
the practice of medicine and we do not expect clinical decisions to be 
made on the basis of the payment amount.
    Comment: Several commenters stated that all states selected to 
participate in the proposed HHVBP should be exempted from having to 
participate in the CJR model. Commenters stated that forcing HHAs to 
participate in two mandatory models simultaneously is harsh and 
punitive and would likely skew the results of both models in areas of 
overlap.
    Response: Only participant hospitals under the CJR model are 
financially responsible to CMS for the episode of care. HHAs will 
continue to be paid the FFS amount that they would otherwise receive 
for beneficiaries included in the CJR model. Therefore, there is no 
reason to exempt hospitals located in MSAs selected for participation 
in CJR that are also located in states selected for participation in 
the HHVBP model.
    Comment: Many commenters expressed concern with the interaction 
between BPCI and the proposed joint replacement model due to instances 
where LEJR episodes excluded from CJR due to BPCI would cause a low 
volume issue for certain hospitals. Other commenters stated that the 
proposed CJR model penalizes providers that are voluntarily 
participating in the BPCI initiative and suggested that CMS allow 
hospitals in selected MSAs to be allowed to choose between 
participation in BPCI and the joint replacement model.
    Response: Because there are LEJR episodes currently being tested in 
BPCI Models 1, 2, 3 and 4, we noted in the proposed rule that we 
believed that participation in CJR should not be required if it would 
disrupt testing of LEJR episodes already underway in BPCI models. 
Therefore, we proposed that IPPS hospitals located in an area selected 
for the model that are active Model 1 BPCI participant hospitals as of 
July 1, 2015, or episode initiators for LEJR episodes in the risk-
bearing phase of Model 2 or 4 of BPCI as of July 1, 2015, would be 
excluded from participating in CJR during the time that their 
qualifying episodes are included in one of the BPCI models. We clarify 
that we will utilize current information on BPCI participation to 
determine whether a given hospital is included in CJR. For example, if 
a hospital elected to participate in the LEJR episode under BPCI Model 
2 in September 2015, that hospital would not be included in CJR during 
the time that their qualifying episodes are included in BPCI. Likewise, 
we proposed that if the participant hospital is not an episode 
initiator for LEJR episodes under BPCI Model 2, then LEJR episodes 
initiated by other providers or suppliers under BPCI Model 2 or 3 
(where the surgery takes place at the participant hospital) would be 
excluded from CJR. Otherwise qualifying LEJR episodes (that is, those 
that are not part of a Model 3 BPCI LEJR episode or a Model 2 PGP-
initiated LEJR episode) at the participant hospital would be included 
in CJR. We are testing a model where participation is not voluntary; 
therefore, it would not be appropriate for hospitals in selected MSAs 
to be allowed to choose between participation in BPCI and the joint 
replacement model. If hospitals were allowed to voluntarily participate 
in the CJR model, this would introduce selection bias and hamper CMS' 
ability to analyze how such a payment model potentially would work on a 
national scale. In addition, a hospital interested in participating in 
a voluntary model had the opportunity under BPCI. In response to 
concerns regarding the interaction between BPCI and CJR and potential 
for too few LEJR episodes at a given hospital to remain under the CJR 
model, low volume concerns are discussed and addressed in section 
III.A.4.b of this final rule.
    Comment: Some commenters requested CMS to allow hospitals 
participating in ACOs that achieved shared savings in recent 
performance periods, Shared Savings Program ACOs (Track 2 and Track 3), 
and full-risk ACOs (such as Next Generation ACO), to opt-out of 
participation in the CJR model.
    Response: As we previously noted and in the proposed rule, many 
hospitals have recently heightened their focus on aligning their 
efforts with those of community providers to provide an improved 
continuum of care due to the incentives under other CMS models and 
programs. Therefore, hospitals that are already involved in ACO 
initiatives and

[[Page 73288]]

the HRRP have already established a base for augmenting these efforts 
under the CJR model (80 FR 41205). Therefore, we see no compelling 
reason why hospitals participating in ACO initiatives and other efforts 
cannot be participant hospitals in the CJR model. However, adjustments 
to account for overlaps with other innovation center models and CMS 
programs are discussed in section III.C.7. of this final rule.
    Comment: A commenter stated that a CMS Certification Number (CCN) 
can include multiple hospitals. The commenter inquired, if at least one 
hospital under the CCN is in a selected MSA, would the entire CCN be 
required to participate in the CJR model. The commenter also requested 
if some of the hospitals in the CCN are not eligible for the CJR 
program, would they be required to participate because they are under 
the same CCN.
    Response: The proposed approach indicated that CMS would base 
selection on the physical location of the hospital. The manner in which 
CMS tracks and identifies hospitals is through the CCN. In keeping with 
this approach, the CJR model will administer model-related activities 
at the CCN level including the determination of physical location. The 
physical location associated with the CCN at the time of the model 
start will be used to determine whether that CCN is located in a 
selected MSA. For hospitals that share a CCN across various locations, 
all hospitals under that CCN would be required to participate in the 
CJR model if the physical address associated with the CCN is in the 
MSA, unless otherwise excluded. Similarly, all hospitals under the same 
CCN, even if some are physically located in the MSA selected for 
participation, would not participate in in the CJR model if the 
physical address associated with the CCN is not in the MSA. Our 
analysis of the hospitals in the selected MSAs indicates that this 
phenomenon is not present in the selected areas.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to designate IPPS hospitals as 
the episode initiators. The initiation of an episode is described in 
Sec.  510.100. We are also finalizing our proposal to require IPPS 
hospitals physically located in an area selected for participation in 
the CJR model, according to the address associated with the CCN, to 
participate in the model and bear the financial responsibility for LEJR 
episodes of care under the CJR model. Finally, we are finalizing our 
proposal that hospitals selected for the model that are active Model 1 
BPCI participant hospitals as of July 1, 2015, or episode initiators 
for LEJR episodes in the risk-bearing phase of Model 2 or 4 of BPCI as 
of October 1, 2015, are excluded from participating in CJR during the 
time that their qualifying episodes are included in one of the BPCI 
models. However, LEJR episodes initiated by other providers or 
suppliers under BPCI Model 2 or 3 (where the surgery takes place at the 
participant hospital) are excluded from CJR. Otherwise qualifying LEJR 
episodes (that is, those that are not part of a Model 3 BPCI LEJR 
episode or a Model 2 physician group practice-initiated LEJR episode) 
at the participant hospital are included in CJR. The definition of a 
``participant hospital'' and ``CJR-regional hospital'' will be codified 
in Sec.  510.2, exclusions to episodes being tested due to BPCI overlap 
will be codified in Sec.  510.100(b). The following chart illustrates 
the inclusion of episodes in CJR relative to BPCI.
[GRAPHIC] [TIFF OMITTED] TR24NO15.000

4. Geographic Unit of Selection and Exclusion of Selected Hospitals
    In determining which hospitals to include in the CJR model, we 
considered whether the model should be limited to hospitals where a 
high volume of LEJRs are performed, which would result in a more narrow 
test on the effects of an episode-based payment, or whether to include 
all hospitals in particular geographic areas, which would result in 
testing the effects of an episode-based payment approach more broadly 
across an accountable care community seeking to coordinate care 
longitudinally across settings. Selecting certain hospitals where a 
high volume of LEJRs are performed may allow for fewer hospitals to be 
selected as model participants, but still result in a sufficient number 
of CJR episodes to

[[Page 73289]]

evaluate the success of the model. However, there would be more 
potential for behavioral changes that could include patient shifting 
and steering between hospitals in a given geographic area that could 
impact the test. Additionally, this approach would provide less 
information on testing episode payments for LEJR procedures across a 
wide variety of hospitals with different characteristics. Selecting 
geographic areas and including all IPPS hospitals in those areas not 
otherwise excluded due to BPCI overlap as previously described and in 
section III.C.7. of the proposed rule as model participants would help 
to minimize the risk of participant hospitals shifting higher cost 
cases out of the CJR model. Moreover, in selecting geographic areas we 
could choose certain characteristics, stratify geographic areas 
according to these characteristics, and randomly select geographic 
areas from within each stratum. Such a stratified random sampling 
method based on geographic area would allow us to observe the 
experiences of hospitals with various characteristics, such as 
variations in size, profit status, and episode utilization patterns, 
and examine whether these characteristics impact the effect of the 
model on patient outcomes and Medicare expenditures within episodes of 
care. Stratification would also substantially reduce the extent to 
which the selected hospitals will differ from non-selected hospitals on 
the characteristics used for stratification, which would improve the 
statistical power of the subsequent model evaluation, improving our 
ability to reach conclusions about the model's effects on episode costs 
and the quality of patient care. Therefore, given the authority in 
section 1115A(a)(5) of the Act, which allows the Secretary to elect to 
limit testing of a model to certain geographic areas, we proposed to 
use a stratified random sampling method to select geographic areas and 
require all hospitals paid under the IPPS in those areas to participate 
in the CJR model and be financially responsible for the cost of the 
episode, with certain exceptions as previously discussed and in 
sections III.B.3 and III.C.7. of the proposed rule.
a. Overview and Options for Geographic Area Selection
    In determining the geographic unit for the geographic area 
selection for this model, we considered using a stratified random 
sampling methodology to select--(1) Certain counties based on their 
Core-Based Statistical Area (CBSA) status, (2) certain zip codes based 
on their Hospital Referral Regions (HRR) status; or (3) certain states. 
We address each geographic unit in turn.
    We considered selecting certain counties based on their CBSA 
status. A CBSA is a core area containing a substantial population 
nucleus, together with adjacent communities having a high degree of 
economic and social integration within that core. Counties are 
designated as part of a CBSA when the county or counties or equivalent 
entities are associated with at least one core (urbanized area or urban 
cluster) of at least 10,000 in population, plus adjacent counties 
having a high degree of social and economic integration with the core 
as measured through commuting ties with the counties associated with 
the core. There are 929 CBSAs currently used for geographic wage 
adjustment purposes across Medicare payment systems.\4\ The 929 CBSAs 
include 388 MSAs, which have an urban core population of at least 
50,000, and the 541 Micropolitan Statistical Areas ([mu]SA), which have 
an urban core population of at least 10,000 but less than 50,000. CBSAs 
may be further combined into a Combined Statistical Area (CSA) which 
consists of two or more adjacent CBSAs (MSAs or [mu]SAs or both) with 
substantial employment interchange. Counties not classified as a CBSA 
are typically categorized and examined at a state level.
---------------------------------------------------------------------------

    \4\ As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27552) and final rule (78 FR 50586), on February 28, 2013, OMB 
issued OMB Bulletin No.13-01, which established revised delineations 
for MSAs, [mu]SA s, and CSAs, and provided guidance on the use of 
the delineations of these statistical areas. A copy of this bulletin 
may be obtained at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf.
---------------------------------------------------------------------------

    The choice of a geographical unit based on CBSA status could mean 
selection of a CBSA, an MSA, or a CSA. We proposed basing the selection 
on an MSA, which we will discuss later in this section.
    We proposed that counties not in an MSA would not be subject to the 
selection process. These counties not subject to selection would 
include the [mu]SA counties and the counties without a core urban area 
of at least 10,000. These areas are largely rural areas and have a 
limited number of qualifying LEJR cases. Relatively few of these areas 
would be able to qualify for inclusion based on the minimum number of 
LEJR episodes in year requirement discussed later in this section.
    We considered, but ultimately decided against, using CSA 
designation instead of MSAs as a potential unit of selection. Under 
this scenario, we would look at how OMB classifies counties. We would 
first assess whether a county has been identified as belonging to a 
CSA, a unit which consists of adjacent MSAs or [mu]SAs or both. If the 
county was not in a CSA, we would determine if it was in an MSA that is 
not part of a larger CSA. Counties not associated with a CSA or an MSA 
would be unclassified and excluded from selection. These unclassified 
areas would include the counties in a state that were either not a CBSA 
(no core area of at least 10,000) or associated with a [mu]SA (core 
area of between 10,000 and 50,000) but unaffiliated with a CSA.
    Whether to select on the basis of CSA/MSAs or just on MSAs was 
influenced by a number of factors. We considered the following factors:
     CSAs, by definition, have a significantly lower degree of 
interchange between component parts than the interchange experienced 
within an MSA. Thus, we did not believe that using CSAs would be 
necessary in order to capture referral patterns. A case study 
examination of the geographic areas included in CSAs with respect to 
the health care markets of those areas and their respective parts 
helped to validate our conclusion.
     We assessed the anticipated degree to which LEJR patients 
would be willing to travel for their initial hospitalization.
     We assessed the extent to which surgeons are expected to 
have admitting privileges in multiple hospitals located in different 
MSAs.
     We considered the degree to which we desire to include 
hospitals within [mu]SAs that are part of a larger CSA.
    After examining these factors, we concluded that that the 
anticipated risk for patient shifting and steering between MSAs within 
a CSA was not severe enough to warrant selecting CSAs given CMS' 
preference for smaller geographic units. However, because MSAs are 
units with significant levels of social and commercial exchange and due 
to the mobility of patients and providers within MSAs, we believed that 
selecting complete MSAs is preferable to selecting metropolitan 
divisions of MSAs for inclusion in the CJR model. We use the 
metropolitan divisions to set wage indices for its prospective payment 
systems (PPSs). Of the 388 MSAs, there are 11 MSAs that contain 
multiple metropolitan divisions. For example, the Boston-Cambridge-
Newton, MA-NH MSA is divided into the following metropolitan divisions:
     Boston, MA.
     Cambridge-Newton-Framingham, MA.
     Rockingham County-Strafford County, NH.

[[Page 73290]]

    The Seattle-Tacoma-Bellevue, WA MSA is divided into the following 
metropolitan divisions:
     Seattle-Bellevue-Everett, WA.
     Tacoma-Lakewood, WA.
    We proposed selecting entire MSAs rather than sub-divisions within 
an MSA.
    We next considered selecting HRRs. HRRs represent regional health 
care markets for tertiary medical care. There are 306 HRRs with at 
least one city where both major cardiovascular surgical procedures and 
neurosurgery are performed. HRRs are defined by determining where the 
majority of patients were referred for major cardiovascular surgical 
procedures and for neurosurgery.\5\ Compared to MSAs, HRRs are 
classified based on where the majority of beneficiaries within a zip 
code receive their hospital services for selected tertiary types of 
care. The resulting HRRs represent the degree to which people travel 
for tertiary care that generally requires the services of a major 
referral center and not the size of the referral network for more 
routine services, such as knee and hip arthroplasty procedures. In 
addition, because HRRs are defined based on referrals for 
cardiovascular surgical procedures and neurosurgery, they may not 
reflect referrals for orthopedic procedures. Therefore, we believed 
that MSAs as a geographic unit are preferable over HRRs for this model.
---------------------------------------------------------------------------

    \5\ The Dartmouth Atlas of Healthcare, https://www.dartmouthatlas.org/data/region/. Accessed on April 9, 2015.
---------------------------------------------------------------------------

    We also considered selecting states for the CJR model. However, we 
concluded that MSAs as a geographic unit are preferable over states for 
the CJR model. As stated in section III.A.4.b. of the proposed rule, we 
anticipate that hospitals that would otherwise be required to 
participate in the CJR model would be excluded from the model because 
their relevant LEJR episodes are already being tested in BPCI. If we 
were to select states as the geographic unit, there is a potential that 
an entire state would need to be excluded because a large proportion of 
hospitals in that state are episode initiators of LEJR episodes in 
BPCI. In contrast, if we excluded a specific MSA due to BPCI 
participation, as discussed in the next section, we could still select 
another MSA within that same state. Likewise, if we chose states as the 
geographic unit, we would automatically include hospitals in all rural 
areas within the state selected. If MSAs are selected for the 
geographic unit, we anticipate that fewer small rural hospitals would 
be included in the model. Using a unit of selection smaller than a 
state would allow for a more deliberate choice about the extent of 
inclusion of rural or small population areas. Selecting states rather 
than MSAs would also greatly reduce the number of independent 
geographic areas subject to selection under the model, which would 
decrease the statistical power of the model evaluation. Finally, MSAs 
straddle state lines where providers and Medicare beneficiaries can 
easily cross these boundaries for health care. Choosing states as the 
geographic unit would potentially divide a hospital market and set up a 
greater potential for patient shifting and steering to different 
hospitals under the model. The decision that the MSA-level analysis was 
more analytically appropriate was based on the specifics of this model 
and is not meant to imply that other levels of selection would not be 
appropriate in a different model such as the proposed HHVBP model.
    For the reasons previously discussed, we proposed to require all 
IPPS hospitals to participate in the CJR model (with limited exceptions 
as previously discussed in section III.A.2. of the proposed rule) if 
located in an MSA selected through a stratified random sampling 
methodology (outlined in section III.A.3.b. of the proposed rule) to 
test and evaluate the effects of an episode-based payment approach for 
an LEJR episodes. We proposed to determine that a hospital is located 
in an area selected if the hospital is physically located within the 
boundary of any of the counties in that MSA where the counties are 
determined by the definition of the MSA as of the date the selection is 
made. In response to comments, we are clarifying that we will determine 
physical location using the address associated with the CCN of the 
hospital. Although MSAs are revised periodically, with additional 
counties added or removed from certain MSAs, we proposed to maintain 
the same cohort of selected hospitals throughout the 5 performance 
years of the model with limited exceptions as described later in this 
section. Thus, we proposed that, if after the start of the model, new 
counties are added to one of the selected MSAs or counties are removed 
from one of the selected MSAs, those re-assigned counties would retain 
the same CJR status they had at the beginning of the initiative. We 
believed that this approach will best maintain the consistency of the 
participants in the model, which is crucial for our ability to evaluate 
the results of the model. We retain the possibility of adding a 
hospital that is opened or incorporated within one of the selected 
counties after the selection is made and during the period of 
performance. (See section III.C.4. of the proposed rule for discussion 
of how target prices will be determined for such hospitals.) Hospitals 
in selected counties that do not have any LEJR cases that qualify for 
CJR, due to their participation in the BPCI initiative as a hospital 
initiator in an LEJR episode, will become subject to CJR at the time 
their participation in BPCI ends and their episodes become eligible for 
CJR. Although we considered including hospitals in a given MSA based on 
whether the hospitals were classified into the MSA for IPPS wage index 
purposes, this process would be more complicated, and we could not find 
any compelling reasons favoring this approach. For example, we assign 
hospitals to metro divisions of MSAs when those divisions exist. See 
our previous discussion of this issue. In addition, there is the IPPS 
process of geographic reclassification by which a hospital's wage index 
value or standardized payment amount is based on a county other than 
the one where the hospital is located. For the purpose of this model, 
it is simpler and more straightforward to use the hospital's physical 
location as the basis of assignment to a geographic unit. This decision 
would have no impact on a hospital's payment under the IPPS. We sought 
comment on our proposal to include participant hospitals for the CJR 
model based on the physical location of the hospital in one of the 
counties included in a selected MSA.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters generally supported MSAs as the unit of 
geographic selection. However, several had concerns regarding the 
particular circumstances of their MSAs. Some commenters stated that 
MSAs were too large and preferred the use of metropolitan regions for 
large urban areas such as New York City, while others expressed concern 
with the inclusion of rural portions of the MSA counties. Commenters 
addressing the rural providers within the selected MSAs questioned 
whether the inclusion of rural hospitals in the model was deliberate or 
whether CMS believed hospitals in rural areas should not be included in 
the CJR model. Other commenters expressed concern that MSAs were a 
smaller than ideal unit of selection and that selecting MSAs for the 
model would encourage practices such as funneling patients to hospitals 
outside a selected MSA for surgery in order to avoid inclusion in the 
model. Conversely, a commenter asserted that

[[Page 73291]]

participation in the model would result in a competitive advantage for 
hospitals in a selected MSA through the use of gainsharing to recruit 
physicians to move referrals into a selected market. Some commenters 
were also concerned about patient shifting in or out of a selected MSA 
in areas where the MSA was part of a larger CSA, such as in the Atlanta 
CSA in which some, but not all, component MSAs were selected for 
participation in the CJR model.
    Response: We first address the issue of the inclusion of the 
entirety of an MSA as the unit of selection rather than just the core 
urban area. This was a deliberate choice reflecting the fact that we 
seek to examine the performance of hospitals under CJR that could be 
considered rural, low volume, or outside the urban core. Inclusion of 
such hospitals in the model will give us insight on how the model 
functions in these areas and increase the potential generalizability of 
the model. The proposed rule proposed additional protections to 
selected classes of hospitals such as SCHs, Medicare-Dependent 
Hospitals (MDHs), and RCHs because we wanted to further protect these 
federally-recognized categories of vulnerable hospitals while including 
them in the model.
    We chose MSAs as the unit of selection to balance the following 
considerations: The scope for shifting patients in or out of selected 
areas, our ability to observe the impact of the model in a variety of 
circumstances, and our preference to not use a geographic unit larger 
than strictly necessary to evaluate the model. We acknowledge that 
there are inevitably tradeoffs among these criteria. With respect to 
the choice of CSA versus MSA, a far greater number of commenters were 
concerned with the inclusion of rural providers than were concerned 
with their or their competitor's markets crossing the borders of MSAs 
within a CSA. By definition, CSAs have a lesser degree of the 
employment interchange than an MSA and basing the geographic unit of 
selection on a CSA would entail the possibility of selecting [micro]SAs 
within CSAs. On balance, we believe it is appropriate to limit the 
extent of rural participation in CJR by confining it to rural areas 
within MSAs. We are sympathetic to concerns related to the experience 
of hospitals that are located near the borders between MSAs, but 
believed that those concerns did not outweigh these other 
considerations. In contrast, the density of populations and providers 
at the borders of these markets was one of the reasons that we decided 
to not proceed with allowing selection to be done based on metropolitan 
divisions for those 11 MSAs that were so sub-divided. Metropolitan 
divisions are very likely to have hospitals whose referral markets 
straddle divisions and their use as a unit would have had been 
problematic. After weighing the comments we continue to believe that 
MSAs are the most appropriate compromise position for the choice of 
geographic unit of selection.
    Finally, we note that separate commenters stated that a hospital in 
a CJR selected county could be either at both a competitive advantage 
(for example, by providing an opportunity to attract physicians through 
gainsharing), or a competitive disadvantage (for example, by causing 
physicians to shift patients to nearby hospitals). We believe that both 
phenomena may occur and that the ability of a hospital to use the 
opportunities presented to it under the CJR model to strengthen its 
relationship with other providers and potentially achieve savings will 
vary by the hospital's specific circumstances and capabilities. We do 
not see a strong argument for why these types of effects necessitate a 
change to the geographic unit used for this model.
    Comment: Some commenters contended that the CJR model has 
inadequate participation by small and rural providers due to the 
elimination of non-CBSA and [micro]SAs from the possibility of 
selection for this model. The commenters wrote that CMS should include 
more rural providers in order to foster a model that is not overly 
tailored to large providers and urban areas. A commenter stated that 
inclusion in the model would result in rural providers being more 
prepared to adapt to future payment and delivery reforms. Another 
stated that it was important to include more small volume hospitals, 
and urged CMS to reconsider the implications of this exclusion and to 
broaden the definition of geographic areas.
    Response: We appreciate commenters' input on how to incorporate 
rural providers in the CJR model and acknowledge commenters' concerns 
related to the ability of small and rural providers to effectively 
participate and succeed in the model. Our proposed approach to 
including low-volume and non-urban providers within the selected MSAs 
but removing from the possibility of selection counties that are not in 
an MSA or in an MSA with less than 400 qualifying LEJR cases is an 
appropriate strategy that allows for inclusion of rural providers in 
the model, while not oversampling such providers.
    Comments related to requests for exclusion of particular hospitals 
are addressed in the next section, MSA Selection Methodology. Financial 
protections for hospitals are addressed later in section III.C.8. of 
this final rule.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal, without modification, to 
utilize MSAs as the unit of selection for the model.
b. MSA Selection Methodology
    We proposed to select the MSAs to include in the CJR model by 
stratifying all of the MSAs nationwide according to certain 
characteristics.
(1) Exclusion of Certain MSAs
    Prior to assigning an MSA to a selection stratum, we examined 
whether the MSA met specific proposed exclusion criteria. MSAs were 
evaluated sequentially using the following 4 exclusion criteria: First, 
MSAs in which fewer than 400 LEJR episodes (determined as discussed in 
section III.B.2. of this final rule) occurred from July 1, 2013 through 
June 30, 2014 were removed from possible selection. The use of the 400 
LEJR cases in a year was based on a simple one-sided power calculation 
to assess the number of episodes that would be needed to detect a 5 
percent reduction in episode expenditures. Cases in hospitals paid 
under either the critical access hospital (CAH) methodology or the 
Maryland All-Payer Model are not included in the count of eligible 
episodes. This criterion removed 156 MSAs from possible selection.
    Second, MSAs were removed from possible selection if there were 
fewer than 400 non-BPCI LEJR episodes in the MSA in the reference year. 
For the purposes of this exclusion, the number of BPCI episodes was 
estimated as the number of potentially eligible cases during the 
reference year that occurred in acute care hospitals participating in 
BPCI Model 1, or in phase 2 of BPCI Models 2 or 4 as of July 1, 2015 
and the number of LEJRs in the reference year associated with these 
hospitals was examined. This criterion removed an additional 24 MSAs 
from potential selection.
    Third, MSAs were also excluded from possible selection if the MSA 
was dominated by BPCI Models 1, 2, 3, or 4 episodes to such a degree 
that it would impair the ability of participants in either the CJR 
model or the BPCI models to succeed in the objectives of the initiative 
or impair the ability to set accurate and fair prices. We anticipate 
that some degree of overlap in the two models will be mutually helpful 
for both models. There are two steps to this exclusion. First, we 
looked at the number of LEJR episodes at BPCI Model 1, 2 or 4 
initiating hospitals and second,

[[Page 73292]]

the number of LEJR episodes among BPCI Model 3 SNF and Home Health 
Agency (HHA) episode initiators. First, we excluded MSAs if more than 
50 percent of otherwise qualifying proposed CJR episodes were in Phase 
2 of BPCI Model 2 or 4 with hospital initiators. Second, we excluded 
MSAs if either SNF or HHA BPCI Model 3 initiating providers accounted 
for more than 50 percent of LEJR referrals to that provider type. As a 
result of this third criterion, 4 additional MSAs were removed from 
possible selection. No MSAs were excluded based on SNF or HHA 
participation in Model 3.
    Finally, MSAs were removed if, after applying the previous three 
criteria they remained eligible for selection, but more than 50 percent 
of estimated eligible episodes during the reference year were not paid 
under the IPPS system. The purpose of this rule was to assess the 
appropriateness of MSAs that contained both Maryland and non-Maryland 
counties. No MSAs were eliminated on the basis of this rule. Please 
refer to the appendix for this final rule for the status of each MSA 
based on these exclusion criteria, available at https://innovation.cms.gov/initiatives/cjr/. After applying these four 
exclusions, 196 MSAs remained to be stratified for purposes of our 
proposed selection methodology.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters requested that we exclude additional MSAs 
from the selection process. Commenters supported our exclusion of MSAs 
with less than a minimum number of eligible LEJR episodes and a high 
rate of BPCI LEJR penetration, but were concerned that the list of BPCI 
participating providers used in making the exclusion determination did 
not reflect providers entering BPCI as of October 1, 2015. Such 
commenters recommended that CMS recalculate BPCI participation in LEJR 
episodes in each MSA based on both hospital- and physician-led 
participants and adjust the MSA selection accordingly. Commenters also 
suggested adding additional selection criteria based on the overall 
percent of LEJR episodes associated with a BPCI episode, the percent of 
LEJR episodes associated with a PGP initiated BPCI episode, and the 
percent of LEJR episodes associated with an ACO.
    Response: In response to the comments, we re-examined the exclusion 
rules based on an updated list of providers participating in the BPCI 
initiative for LEJR episodes. We also examined the potential impact on 
selection of MSAs that incorporating an updated list of BPCI 
participants would have. For the purposes of the re-examination of 
exclusion rule 2, which eliminates MSAs with less than 400 CJR 
eligible, non-BPCI episodes, we estimated the BPCI LEJR episode count 
as the number of potentially eligible cases during the reference year 
that (1) occurred in an acute care hospital participating in BPCI Model 
1 that would still be active as of April 1, 2016; (2) occurred in an 
acute care hospital in a Phase 2 LEJR episode for BPCI Models 2 or 4 as 
of October 1, 2015; or (3) were associated with an operating or 
admitting physician on the hospital claim assigned to a PGP with an 
LEJR episode in Phase 2 of BPCI Model 2 as of October 1, 2015. October 
1, 2015 is the final quarter for which participants in Phase 1 of BPCI 
could transition any episode into Phase 2. This represents a change to 
the exclusion rule articulated in the proposed rule, in that it updates 
the list of BPCI participants and also takes into account episodes 
associated with Model 2 PGP episode initiators. As we did for exclusion 
rule 2, we used the October 2015 list of BPCI participants to reassess 
exclusion rule 3. Rule 3 removes an MSA if more than 50 percent of 
patients were treated in a BPCI initiating hospital or if more than 50 
percent of LEJR patients treated in a PAC setting of that type were 
treated in a BPCI initiating HHA or SNF.
    After we made the previously stated changes, some MSAs previously 
eligible for selection would now be considered excluded. Additionally, 
two of the MSAs previously excluded would now be eligible for selection 
due to hospitals withdrawing from BPCI and the MSAs now having more 
than 400 eligible cases. Eight MSAs that were selected in the proposed 
rule would be classified as excluded on the basis of these updated 
exclusion rules.
    We considered a variety of alternative approaches to address the 
changes in the eligibility of MSAs. First, we considered proceeding 
with the list of 75 MSAs as initially selected and using the exclusion 
rules as initially proposed. Second, we considered removing the 8 
selected MSAs that would now be excluded on the basis of the updated 
BPCI participation numbers. Third, we considered replacing the 8 MSAs 
by randomly selecting new MSAs from the remaining MSAs in the relevant 
strata. However, we believed that it would preferable, although not 
required, to give the selected MSAs a consistent period of time between 
selection and the start of the model. Fourth, we contemplated creating 
a revised list of eligible MSAs and randomly selecting a new group of 
75 MSAs. Given the concern of many commenters about the start date of 
the model, we were reluctant to create a completely new list of 
selected MSAs. We believe that making a new selection would be regarded 
unfavorably by impacted MSAs and hospitals and should be avoided if 
possible. In order to be responsive to concerns regarding the growth of 
BPCI after the publication of the proposed rule and the increase in PGP 
participation in BPCI, we are proceeding with the second option.
    The function of the stratification approach was to ensure that our 
selection of MSAs covered a range of efficiency levels and population 
sizes and allowed us to target our sampling percentages so as to 
oversample in the less efficient areas. Regarding the selected MSAs now 
eliminated, they are distributed fairly evenly throughout the 
distribution of average episode payments. From the least expensive to 
the most expensive quartiles, the number selected and now eliminated 
are, in order, 2/15 (13 percent), 2/19 (11 percent), 3/30 (15 percent), 
and 1/22 (5 percent). We also believe that the removal of these 8 MSAs 
from the model will not preclude us from undertaking a rigorous 
statistical evaluation of the model.
    Given the aforementioned information, we believe that the 
relatively minor reduction in statistical power due to not re-selecting 
MSAs is outweighed by the desire to give affected participant hospitals 
equal time to prepare for the model. We are removing the 8 MSAs as 
noted in Table 1.

 Table 1--MSAs That Were Previously Selected That Are No Longer Included
                                 in CJR
------------------------------------------------------------------------
                                   Revised exclusion   Revised exclusion
           CBSA title                rule 2 status       rule 3 status
------------------------------------------------------------------------
Colorado Springs, CO............  Fail..............  Pass.
Evansville, IN-KY...............  Fail..............  Pass.
Fort Collins, CO................  Fail..............  Pass.
Las Vegas-Henderson-Paradise, NV  Fail..............  Fail.

[[Page 73293]]

 
Medford, OR.....................  Fail..............  Pass.
Richmond, VA....................  Fail..............  Pass.
Rockford, IL....................  Fail..............  Pass.
Virginia Beach-Norfolk-Newport    Pass..............  Fail.
 News, VA-NC.
------------------------------------------------------------------------

    We next contemplated whether to apply additional MSA-level 
exclusion rules. We investigated a potential new rule whereby an MSA 
would be excluded based on the percent of the MSA's qualifying LEJR 
episodes associated with Phase 2 Model 2 PGP initiators. We did not 
believe that there was as strong of an argument for excluding MSAs on 
the basis of the percent of patients treated by a BPCI physician given 
that the hospital is the financially accountable entity in CJR. We 
examined two possible cut off points (>65 percent and >50 percent) to 
assess which MSAs would be eliminated if we were to exclude MSAs where 
a specific percent of an MSA's otherwise qualifying LEJR cases was 
attributable to a BPCI PGP. At 65 percent, no selected MSAs not 
otherwise excluded were impacted. 8 MSAs that were previously selected 
had more than 50 percent of their LEJRs performed by BPCI PGPs. Five of 
these 8 MSAs are already eliminated due to the revised exclusion rule 
2. For markets with more than 400 non-BPCI cases but more than 50 
percent BPCI PGP penetration, the number of the CJR eligible patients 
was between 556 and 1834 indicating that there was a sizable number of 
cases. Consequently, we did not find this new exclusion rule necessary.
    Comment: Commenters requested modifications to the proposed 
exclusions of specific categories of hospitals within an MSA. While 
commenters stated a variety of concerns, many of them were related to 
the request that CMS exclude low volume hospitals from the model. 
Commenters made requests around specific categories of hospitals 
including Medicare Dependent Hospitals (MDHs), Sole Community Hospitals 
(SCHs), Rural Referral Centers (RRCs), hospitals that are reclassified 
as rural, hospitals perceived of as rural or outside of a core urban 
area, and larger hospitals with a low potential CJR LEJR volume due to 
the exclusion of their patients because their LEJR episodes were 
initiated by a PGP BPCI LEJR episode initiator.
    Commenters provided a variety of rationales for why they believed 
it was undesirable or unfair to include low volume providers in the 
model. These reasons include, but are not limited to, observations 
that--
     Low-volume providers are less likely to be proficient at 
taking care of these patients in an efficient cost-effective manner and 
they will be less likely to achieve savings;
     Low-volume hospitals will be disproportionately impacted 
by outlier cases and will have less predictable cost and quality 
outcomes making it difficult for them to manage the model effectively. 
In addition, low volume providers are likely to see a greater 
proportion of hip fractures and non-planned procedures;
     Low-volume hospitals will have less control over and 
ability to impact the behavior of other providers. The pool of 
collaborating providers such as orthopedic surgeons in most rural 
communities may be limited and small hospitals may not have the market 
position to successfully influence others' behavior;
     Hospitals with a limited number of Medicare hip and knee 
procedures may not have sufficient incentive to invest the time and 
resources necessary to develop the infrastructure and partnerships 
required to effectively manage these episodes of care and may not find 
the opportunity to improve patient outcomes significant enough to 
engage referring physicians and PAC partners for redesign;
     Low volume providers may be more financially vulnerable 
and with fewer resources to design and carry out initiatives or make 
effective responses to the financial incentives in the model. A 
commenter noted concerns with hospital margins, and the possibility for 
the reductions in revenue as a result of the loss of volume or loss of 
margin under CJR could result in additional hospital closures.
    Due to these concerns, commenters requested a variety of solutions 
including (1) the exclusion of hospitals based on a volume cut off 
variously defined by volume of eligible LEJR cases, LEJR cases within 
specific MS-DRGs and total hospital volume, (2) making the model 
voluntary for low volume providers, (3) extending the protections 
afforded to SCH, MDH and RRC to additional categories of hospitals 
including hospitals electing to be treated as rural under Sec.  
412.103, and (4) the provision of additional protections or payment 
adjustments beyond what was included in the proposed rule.
    Response: We acknowledge the fact that hospitals, particularly low 
volume hospitals, are concerned and would like to increase their 
probability of receiving reconciliation payments under CJR while 
minimizing the possibility of reduction in revenue. We refer readers to 
the following sections of this final rule: Section III.C.8. for a 
discussion of hospital financial protections, III.C.4. for a discussion 
of how we will determine target prices for hospitals with low volume, 
and section III.C.4. for a discussion of target prices for hip fracture 
patients. We believe that the modification of the treatment of hip 
fractures in the payment methodology should allay many concerns of 
small and rural providers. This change may disproportionately impact 
them since emergency surgeries, such as hip fractures, have a higher 
probability of being performed in low volume settings.
    As stated in relation to comments requesting that CJR operate as a 
voluntary model, the inclusion of low volume hospitals in the CJR model 
is consistent with the goal of evaluating the impact of bundled payment 
and care redesign across a broad spectrum of hospitals with varying 
levels of infrastructure, care redesign experience, market position, 
and other considerations and circumstances. The design of the CJR model 
and the inclusion of low volume providers within the model reflects our 
interest in testing and evaluating the impact of a bundled payment 
approach for LEJR procedures in a variety of circumstances, especially 
among those hospitals that may not otherwise participate in such a 
test. The inclusion of these providers allows CMS to better appreciate 
and understand how the model operates as a general payment approach and 
its impact on a wide range of hospitals. Many LEJR surgeries are 
performed in low volume settings, thus, the impact of the CJR model on 
low volume hospitals is of great interest to the evaluation of this 
initiative.
    We acknowledge that providers with low volumes of cases may not 
find it in their financial interests to make

[[Page 73294]]

systematic care redesigns or engage in an active way with the CJR 
model. We expect that low volume providers may decide that their 
resources are better targeted to other efforts because they do not find 
the financial incentive present in the CJR sufficiently strong to cause 
them to shift their practice patterns. We acknowledge that low volume 
hospitals may achieve less savings because they did not or could not 
make the necessary changes to the treatment of their qualifying 
beneficiary population. We believe this choice is similar in nature to 
that made as hospitals decide their overall business strategies and 
where to focus their attentions.
    Comment: Many commenters requested that CMS exclude hospitals where 
more than 50 percent of the eligible LEJRs performed at a hospital 
would be attributed to a PGP initiated BPCI episode and would thus not 
be in CJR. The majority of these commenters were concerned about low 
volumes of patients, which is addressed in the previous comment and 
response. Some were concerned about the operational complexity of 
identifying, tracking, and managing patients treated in CJR versus 
BPCI.
    Response: We will not exclude IPPS hospitals in selected MSAs other 
than as already specified or allow IPPS hospitals to opt out of 
participation in CJR. As previously noted in the discussion on low 
volume hospitals, we consider the inclusion of low volume providers a 
core feature of the model that will aid us in understanding the impact 
of a variety of providers in various circumstances. Similarly, we do 
not believe it is necessary or appropriate to exclude hospitals on the 
basis of some of the surgeons in their hospitals being associated with 
a BPCI PGP. Like with more traditional low volume providers, the extent 
to which a hospital alters its behavior in response to the CJR model 
will likely be the result of a variety of factors including but not 
limited to the anticipated number of cases. It should be noted that the 
revised exclusion rule that resulted in the elimination of 8 MSAs was 
based on failing to meet a minimum MSA number of LEJRs and not based on 
either the number of LEJRs at a particular hospital or the portion of 
PGPs at any level of analysis. If an IPPS hospital in a selected area 
has some of their LEJR cases qualify as CJR episodes and some that do 
not due to BPCI participation, Medicare Advantage status or any other 
reason, the fact that CJR cases are not their full caseload will not be 
considered a reason for exclusion of the hospital.
    With respect to challenges that hospitals may experience related to 
identifying eligible patients and following them over the course of 
their episodes, we acknowledge that concern. However, we consider the 
improved tracking and communication with other providers and suppliers 
that is likely to occur as a result of hospital efforts in CJR to be a 
benefit of the model that will improve the coordination of patient care 
and possibly improve patient outcomes.
    Comment: Two commenters raised the issue of hospital systems 
spanning more than one MSA. They requested that CMS either allow all of 
the hospitals in the system to be included in CJR or allow all of the 
hospitals to be excluded. Commenters stated that the additional 
administrative burden associated with two concurrent Medicare payment 
methodologies would be unduly burdensome. Additionally, commenters 
stated that CMS should develop criteria under which all providers in 
health systems with a significant number of BPCI participants would be 
excluded from the CJR model due to operational challenges to managing 
the BPCI and CJR models simultaneously within a health care system.
    Response: With respect to the request that all members within a 
health system be allowed to have all of their hospitals participate in 
BPCI because operating under two systems is too onerous, if a health 
system made the choice to enter some but not all of their locations 
into BPCI, they have already made the business decision to operate 
partly under one incentive structure and partly under another. We do 
not believe that the existence of CJR model as proposed should change 
the timelines for transitioning to Phase 2 of BPCI. We will not exclude 
hospitals from the model on the basis that some of the hospitals in its 
health system are participating in BPCI or some of the hospitals in its 
health system have CCNs with addresses located in a non-selected MSA.
    The CJR model will require hospitals within selected geographic 
areas to participate (unless otherwise excluded as set forth in this 
final rule). The inclusion of additional voluntarily participating 
hospitals outside of these selected areas would constitute a major 
change to the model that was not considered in the proposed rule. 
Providers who wished to participate in a voluntary episode model had 
the opportunity under the BPCI initiative.
    Final Decision: After consideration of the public comments we 
received, we are modifying the MSA exclusion rules used in determining 
which MSAs are eligible for selection. The following is a description 
of the MSA exclusion criteria used in this final rule:
    In determining if an MSA was eligible for selection, we first 
examined whether the MSA met any of the four exclusion criteria as 
formulated in the proposed rule. This process resulted in a pool of 196 
MSA from which we then selected 75 for inclusion in CJR via stratified 
random selection.
    In this final rule, we revised the exclusion rules as defined later 
in this section, with the purpose of assessing whether any of the 75 
selected MSAs would be considered not eligible for selection based on 
applying the new criteria.
    Specifically, the second exclusion rule, which eliminates MSAs with 
fewer than 400 non-BPCI CJR eligible cases, is modified with the 
following additions (1) the determination of the count of patients 
associated with a BPCI Phase 2 initiating hospital is based on the 
participation in BPCI as of October 1, 2015 rather than July 1, 2015 
and (2) the count of BPCI episodes to be removed from the count of 
eligible episodes takes into consideration patients who would have been 
attributed to a BPCI Model 2 initiating PGP in Phase 2 for an LEJR 
episode as of October 1, 2015. The third exclusion rule, wherein MSAs 
were excluded based on the percent of the MSA's LEJR population 
associated with either a BPCI hospital, SNF or HHA in an MSA, was 
changed to be based on episodes associated with participation in BPCI 
as of October 1, 2015 rather than July 1, 2015.
    As a result of updating the list of BPCI participants to those 
entering the model in October 2015 and including Phase 2 PGPs in the 
calculation of the number of cases in the MSA, 8 MSAs out of the 75 
MSAs that were previously selected are now deemed not eligible for 
selection and are consequently no longer required to participate in 
CJR. These previously selected and now excluded MSAs are shown in Table 
1. The remaining 67 MSAs selected in the proposed rule will be required 
to participate in CJR.

(2) Selection Strata

    Numerous variables were considered as potential strata for 
classifying MSAs included in the model. However, our proposal was 
intended to give priority to transparency and understandability of the 
strata. We proposed creating selection strata based on the following 
two dimensions: MSA average wage-adjusted historic LEJR episode 
payments and MSA population size.

[[Page 73295]]

(a) MSA Average Wage-Adjusted Historic LEJR Episode Payments
    We were interested in being able to classify and divide MSAs 
according to their typical patterns of care associated with LEJR 
episodes. As a straightforward measure of LEJR patterns of care, we 
selected the mean MSA episode payment, as defined in the proposed rule. 
MSAs vary in their average episode payments. The average episode 
payments in an area may vary for a variety of reasons including--(1) In 
response to the MS-DRG case mix and thus the presence of complicating 
conditions; (2) readmission rates; (3) practice patterns associated 
with type of PAC provider(s) treating beneficiaries; (4) variations of 
payments within those PAC providers, and (5) the presence of any 
outlier payments.
    The measure of both mean episode payments and median episode 
payments within the MSA was considered. We proposed to stratify by mean 
because it would provide more information on the variation in episode 
payments at the high end of the range of payments. We are interested in 
the lower payment areas for the purpose of informing decisions about 
potential future model expansion. However, the CJR model is expected to 
have the greatest impact in areas with higher average episode payments.
    The average episode payments used in this analysis were calculated 
based on the proposed episode definition for CJR using Medicare claims 
accessed through the Chronic Conditions Warehouse for 3 years with 
admission dates from July 1, 2011 through June 30, 2014. Episode 
payments were wage-adjusted using the FY 2014 hospital wage index 
contained in the FY 2014 IPPS Final Rule, downloaded at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Data-Files.html. The adjusted payment was 
calculated by dividing the unadjusted payment by a factor equal to the 
sum of 0.3 plus the multiplicative product of 0.7 and the wage index 
value of the hospital where the LEJR was performed. We truncated the 
episode payment at the 99.9th percentile of the distribution ($135,000) 
to limit the impact of extreme outliers.
(b) MSA Population Size
    The second dimension proposed for the CJR selection strata is the 
number of persons in the MSA. In deciding how best to incorporate the 
dimensions of urban density and availability of medical resources, a 
variety of measures were considered, including overall population in 
the included counties, overall population in the core area of the MSA, 
population over the age of 65 in the MSA, the number of hospital beds 
and the number of Medicare FFS LEJR procedures in a year. The reason we 
decided to include this dimension in the strata definition is that 
these factors are believed to be associated with the availability of 
resources and variations in practice and referral patterns by the size 
of the healthcare market. When examined, these alternative measures 
were all very highly correlated with one another, which allowed the use 
of one of these measures to be able to substitute for the others in the 
definition of the stratum. From these alternative approaches, we choose 
to use MSA population. In operationalizing this measure, MSAs were 
classified according to their 2010 census population.
(c) Analysis of Strata
    The two proposed domains, MSA population and MSA historic LEJR 
episode spending, were examined using a K-Means factor analysis. The 
purpose of this factor analysis was to inform the process of which cut 
points most meaningfully classify MSAs. Factor analysis attempts to 
identify and isolate the underlying factors that explain the data using 
a matrix of associations. Factor analysis is an interdependence 
technique. Essentially, variables are entered into the model and the 
factors (or clusters) are identified based on how the input variables 
correlate to one another. The resulting clusters of MSAs produced by 
this methodology suggested natural cut points for average episode 
payments at $25,000 and $28,500. While not intentional, these divisions 
correspond roughly to the 25th and 75th percentiles of the MSA 
distribution. Cut points based on these percentiles seemed reasonable 
from statistical and face validity perspectives in the sense that they 
created groups that included an adequate number of MSAs and a 
meaningful range of costs.
    As a result of this analysis, we classified MSAs according to their 
average LEJR episode payment into four categories based the on the 
25th, 50th and 75th percentiles of the distribution of the 196 
potentially selectable MSAs as determined in the exclusion rules as 
applied in the proposed rule (80 FR 41198). This approach ranks the 
MSAs relative to one another and creates four equally sized groups of 
49. The population distribution was divided at the median point for the 
MSAs eligible for potential selection as determined and defined in the 
proposed rule. This resulted in MSAs being divided into two equal 
groups of 98. The characteristics of the resulting strata are shown in 
Table 2.

                     Table 2--Summary Population and Episode Payment Statistics by MSA Group
----------------------------------------------------------------------------------------------------------------
                                                                                    Payment in
                                    Payment in    Payment in 2nd  Payment in 3rd      highest     Total eligible
                                  lowest quarter  lowest quarter  lowest quarter      quarter
----------------------------------------------------------------------------------------------------------------
MSAs deemed eligible in the
 proposed rule (80 FR 41198)
 with population less than
 median:
    Number of Eligible MSAs.....              33              19              22              24              98
    Average of Population.......         251,899         238,562         268,331         254,154         253,554
    Minimum MSA Population......          96,275          55,274         106,331          96,024          55,274
    Maximum MSA Population......         425,790         416,257         424,858         428,185         428,185
    Average Episode Payments ($)         $22,994         $25,723         $27,725         $30,444         $26,410
    Minimum Episode Payments....         $18,440         $24,898         $26,764         $29,091         $18,440
    Maximum Episode Payments....         $24,846         $26,505         $28,679         $32,544         $32,544
MSAs deemed eligible in the
 proposed rule (80 FR 41198)
 with population more than
 median:
    Number of Eligible MSAs.....              16              30              27              25              98
    Average of Population.......       1,530,083       1,597,870       1,732,525       2,883,966       1,951,987
    Minimum MSA Population......         464,036         436,712         434,972         439,811         434,972
    Maximum MSA Population......       4,335,391       5,286,728      12,828,837      19,567,410      19,567,410
    Average Episode Payments ($)         $23,192         $25,933         $27,694         $30,291         $27,082

[[Page 73296]]

 
    Minimum Episode Payments....         $16,504         $25,091         $26,880         $28,724         $16,504
    Maximum Episode Payments....         $24,819         $26,754         $28,659         $33,072         $33,072
                                 -------------------------------------------------------------------------------
        Total Eligible MSAs.....              49              49              49              49  ..............
----------------------------------------------------------------------------------------------------------------
Note: Population and episode payment means are unweighted averages of the MSA values within each of the eight
  MSA groups.

    Please refer to the addenda for this final rule for information on 
the non-excluded MSAs, their wage adjusted average LEJR episode 
spending, their population and their resultant group assignment at: 
https://innovation.cms.gov/initiatives/cjr/.
(3) Factors Considered But Not Used in Creating Proposed Strata
    In addition to the two dimensions we proposed to use for the 
selection groups previously discussed, a variety of possible 
alternative measures and dimensions were considered. Many of these 
variables are considered to be important but it was believed that it 
was important to have a fairly straightforward and easily 
understandable stratum definition. Simplicity, by definition, required 
that only the most important variables would be used. If a market 
characteristic under consideration was correlated with one of the 
chosen dimensions or it was believed that variations in the 
characteristic could be adequately captured by random selection within 
the strata, is was not prioritized for inclusion.
    Some of the factors considered that we did not propose as 
dimensions are--
     Measures associated with variation in practice patterns 
associated with LEJR episodes. In considering how to operationalize 
this measure, a number of alternatives were considered including total 
PAC LEJR payments in an MSA, percent of LEJR episodes with a SNF claim 
in an MSA, percent of LEJR episodes with an initial discharge to HHA, 
percent of LEJR episodes with an Inpatient rehabilitation facility 
(IRF) claim, and percent of LEJR episodes with claims for two or more 
types of PAC providers;
     Measures associated with relative market share of 
providers with respect to LEJR episodes;
     Healthcare supply measures of providers and suppliers in 
the MSA including counts of IRF beds, SNF beds, hospital beds, and 
number of orthopedic surgeons;
     MSA level demographic measures such as; average income, 
distributions of population by age, gender or race, percent dually 
eligible, percent of population with specific health conditions or 
other demographic composition measures; and
     Measures associated with the degree to which a market 
might be more capable or ready to implement care redesign activities. 
Examples of market level characteristics that might be associated with 
anticipated ease of implementation include the MSA-level EHR meaningful 
use levels, managed care penetration, ACO penetration and experience 
with other bundling efforts.
    It should be noted that, while these measures were not proposed to 
be part of the selection strata, we acknowledge that these and other 
market-level factors may be important to the proper understanding of 
the evaluation of the impact of CJR. It is the intention that these and 
other measures will be considered in determining which MSAs are 
appropriate comparison markets for the evaluation as well as considered 
for possible subgroup analysis or risk adjustment purposes. The 
evaluation will include beneficiary, provider, and market level 
characteristics in how it examines the performance of this proposed 
model.
(4) Sample Size Calculations and the Number of Selected MSAs
    Analyses of the necessary sample size to facilitate a robust 
statistical analysis of CJR's effects led us to conclude that we needed 
to include between 50 and 100 MSAs of the 384 MSAs with eligible LEJR 
episodes to participate in CJR and we proposed to select 75 MSAs. As 
previously discussed, the proposed revision of the MSA exclusion rules 
resulted in 8 of the previously selected MSAs now being considered 
excluded, leading to their removal from the model. The resulting number 
of selected MSAs, 67, is still within the acceptable range for an MSA 
count as determined by our analysis. The number and method of selection 
of these original 75 MSAs from the 8 proposed groups is addressed in 
the following section. In finalizing this approach, we are undertaking 
a test in as few markets as possible while still allowing us to be 
confident in our results and to be able to generalize from the model to 
the larger national context. We discuss the assumptions and modeling 
that went into our proposal later in this section.
    In calculating the necessary size of the model, a key consideration 
was ensuring that the model would have sufficient power to be able to 
detect the desired size impact. The larger the anticipated size of the 
impact, the fewer MSAs we would have to sample in order to observe it. 
However, a model sized to be able to only detect large impacts runs the 
risk of not being able to draw conclusions if the size of the change is 
less than anticipated. The measure of interest used in estimating 
sample size requirements for the CJR model was wage-adjusted total 
episode spending. To measure wage-adjusted total episode spending, we 
used the 3 year data pull also used for the average regional episode 
spending estimation that covers LEJR episodes with admission dates from 
July 1, 2011 through June 30, 2014. For the purposes of the sample size 
calculation the impact estimate assumed we wanted to be able to detect 
a 2 percent reduction in wage adjusted episode spending after 1 year of 
experience. This amount was chosen because it is the anticipated amount 
of the discount we proposed to apply to target prices in CJR.
    The next consideration in calculating the necessary sample size is 
the degree of certainty we will need for the statistical tests that 
will be performed. In selecting the right sample size, there are two 
types of errors that need to be considered ``false negatives'' and 
``false positives''. A false positive occurs if a statistical test 
concludes that the model was successful when it was, in fact, not. A 
false negative occurs if a statistical test fails to find statistically 
significant evidence that the model was successful, but it was, in 
fact, successful. In considering the minimum sample size needs of a 
model, a standard guideline in the statistical literature suggests 
calibrating statistical tests to generate no more than a 5 percent 
chance of a false positive and selecting the sample size to ensure no 
more than a 20 percent

[[Page 73297]]

chance of a false negative. In contrast, the proposed sample size for 
this project was based on a 20 percent chance of a false positive and a 
30 percent chance of a false negative after one year of episodes in 
order to be as conservative as was practicable. A greater degree of 
certainty will be available with additional years of data.
    A third consideration in the sample size calculation was the 
appropriate unit of selection and whether it is necessary to base the 
calculation on the number of MSAs, the number of hospitals, or the 
number of episodes. As discussed later in this section, we are 
proposing to base the sample size calculation at the MSA level.
    The CJR model is a nested comparative study, which has two key 
features. First, the unit of assignment (to treatment and comparison 
groups) is an identifiable group; such groups are not formed at random, 
but rather through some physical, social, geographic, or other 
connection among their members. Second, the units of observation are 
members of those groups. In such designs, the major analytic problem is 
that there is an expectation for a positive correlation (intra-class 
correlation (ICC)) among observations of members of the same group 
(MSA). The ICC reflects an extra component of variance attributable to 
the group above and beyond the variance attributable to its members. 
This extra variation will increase the variance of any aggregate 
statistic beyond what would be expected with random assignment of 
beneficiaries or hospitals to the treatment group.
    In determining the necessary sample size, we need to take into 
consideration the degrees of freedom. As part of this process, we 
examined the number of beneficiaries, the number of hospitals, and the 
number of MSAs and the level of correlation in episode payments between 
each level. For example, while each beneficiary has their own episode 
expenditure level, there are commonalities between those expenditure 
amounts at the hospital level, based on hospital-specific practice and 
referral patterns. The number of degrees of freedom needed for any 
aggregate statistic is related to the number of groups (MSAs or 
hospitals), not the number of observations (beneficiary episodes). If 
we were to base the determination of the size of the model on 
beneficiary episodes where correlation exists, we would have an 
inflated false positive error rate and would overstate the impact of 
the model. We empirically examined the level of correlation between 
beneficiaries and hospitals and between hospitals and MSAs and 
determined that the correlation was high enough to be of concern and 
necessitate an MSA level unit of selection.
    Using the previous assumptions, a power calculation was run which 
indicated we would need between 50 and 150 treatment MSAs to be able to 
reliably detect a 2 percent reduction in payments after 1 year. The 
lower end of this range assumed that our evaluation approach could 
substantially reduce variation through regression adjustment and other 
types of statistical modeling. We anticipated that we would have 
adequate statistical power based on prior research results, but wanted 
to ensure that we did not have to achieve the ``best possible'' results 
from such modeling in order to draw conclusions. In order to allow for 
some degree of flexibility we proposed the selection of 75 MSAs. We 
narrowed the acceptable range to between 50 and 100 MSAs rather than 50 
to 150 MSAs, based on the assumption that we will be able to 
substantially improve our estimates through modeling, and then chose a 
number near the middle of this reduced range. Due to the revised 
exclusion rules, we are proceeding with 67 MSAs, which we believe will 
provide adequate statistical power.
    In assessing to what degree regression adjustment and other 
statistical adjustments could reduce the number of MSAs needed to 
generate statistically reliable results, it should be noted that 
calculations are based on the actual Medicare payments associated with 
episodes. Thus, the variation in payments associated with MS-DRG case 
mix, or other reasons are already captured in the methodology.
(5) Method of Selecting MSA
    As previously discussed, we selected 75 MSAs from our proposed 8 
selection groups and subsequently reduced this number to 67. In 
performing the initial MSA selection, we examined and considered a 
number of possible approaches including equal selection in each of the 
eight groups, equal selection in the four payment groups, selection 
proportionate to the number of MSAs in each group, and a number of 
approaches that differentially weighted the payment categories.
    After consideration, we proposed a methodology that proportionally 
under-weighted more efficient MSAs and over-weighted more expensive 
MSAs was the most appropriate approach to fulfilling the overall 
priorities of this model to increase efficiencies and savings for LEJR 
cases while maintaining or improving the overall quality of care. This 
approach made MSAs in the lowest spending category less likely to be 
selected for inclusion. We thought this appropriate because the MSAs in 
the lowest expenditure areas have the least room for possible 
improvement and are already performing relatively efficiently compared 
to other geographic areas, which means that experience with the model 
in these areas may be relatively less valuable for evaluation purposes. 
At the same time, we believed it was important to include some MSAs in 
this group in order to assess the performance of this model in this 
type of circumstance. We also believed it was appropriate for higher 
payment areas to be disproportionately included because they are most 
likely to have significant room for improvement in creating 
efficiencies. We expect more variation in practice patterns among the 
more expensive areas. There are multiple ways an MSA can be more 
relatively expensive, including through outlier cases, higher 
readmission rates, greater utilization of physician services, or 
through PAC referral patterns. A larger sample of MSAs within the 
higher payment areas will allow for us to observe the impact of the CJR 
model on areas with these various practice patterns in the baseline 
period.
    The method of disproportionate selection between the strata used 
was to choose 30 percent of the MSAs in the two groups in the bottom 
quarter percentile of the payment distribution, 35 percent of the MSAs 
in the two groups in the second lowest quartile, 40 percent in the 
third quartile, and 45 percent in the highest episode payment quartile. 
This proportion resulted in the selection of the 75 originally selected 
MSAs out of the 196 eligible. The number of MSAs originally chosen as 
well as the final selection counts within the eight selection groups is 
shown in Table 3.

[[Page 73298]]



                      Table 3--Number of MSAs To Be Chosen From the Eight Selection Groups
----------------------------------------------------------------------------------------------------------------
                                                                                    Payment in
                                    Payment in    Payment in 2nd  Payment in 3rd      highest     Total eligible
                                  lowest quarter  lowest quarter  lowest quarter      quarter          MSAs
----------------------------------------------------------------------------------------------------------------
Selection Proportion............             30%             35%             40%             45%  ..............
Less Than Median Population                  (1)             (2)             (3)             (4)  ..............
 (Group #)......................
    Number Eligible MSAs per                  33              19              22              24              98
     Proposed Rule (80 FR 41198)
    Proportion x Number.........             9.9            6.65             8.8            10.8
    Number initially selected                 10               7               9              11              37
     from group.................
    Number finally selected from               8               6               8              11              33
     group......................
More Than Median Population                  (5)             (6)             (7)             (8)
 (Group #)......................
    Number Eligible MSAs per                  16              30              27              25              98
     NPRM.......................
    Proportion x Number.........             4.8            10.5            10.8           11.25
    Number initially selected                  5              11              11              11              38
     from group.................
    Number finally selected from               5              10               9              10              34
     group......................
Total Eligible MSAs per Proposed              49              49              49              49             196
 Rule (80 FR 41198).............
    Number initially selected...              15              18              20              22              75
    Number finally selected from              13              16              17              21              67
     group......................
----------------------------------------------------------------------------------------------------------------

    We selected the proposed MSAs for the CJR model through random 
selection. In the proposed method of selection, each MSA was assigned 
to one of the eight selection groups previously identified. Based on 
this sampling methodology, SAS Enterprise Guide 7.1 software was used 
to run a computer algorithm designed to randomly select MSAs from each 
strata. SAS Enterprise Guide 7.1 and the computer algorithm used to 
conduct selection represents an industry standard for generating 
advanced analytics and provides a rigorous, standardized tool by which 
to satisfy the requirements of randomized selection. The key SAS 
commands employed include a ``PROC SURVEYSELECT'' statement coupled 
with the ``METHOD=SRS'' option used to specify simple random sampling 
as the sample selection method. A random number seed was generated for 
each of the eight strata by using eight number seeds corresponding to 
birthdates and anniversary dates of parties present in the room. The 
random seeds for stratum one through eight were as follows: 907, 414, 
525, 621, 1223, 827, 428, 524. Note that no additional stratification 
was used in any of the eight groupings so as to produce an equal 
probability of selection within each of the eight groups. For more 
information on this procedure and the underlying statistical 
methodology, please reference SAS support documentation at: https://support.sas.com/documentation/cdl/en/statug/63033/HTML/default/viewer.htm#statug_surveyselect_sect003.htm/ We also considered a 
potential alternative approach to this random selection in which we 
would generate a starting number within SAS and then choose every third 
MSA within a group starting at this point until the relevant number of 
MSAs were chosen. We opted to not utilize this feature for simplicity's 
sake and alignment with other randomization methodologies used for CMS 
models.
    The selection of an MSA means that all hospitals are included whose 
address associated with their CCN is physically located anywhere within 
the counties that make up the MSA. By definition, the entire county is 
included in an MSA and hospitals that are in the relevant counties will 
be impacted even if they are not part of the core urban area.
    We stated in the proposed rule, should the methodology we propose 
in this rule change as a result of comments received during the 
rulemaking process, it could result in different areas being selected 
for the model. In such an event, we would apply the final methodology 
and announce the selected MSAs in the final rule. Therefore we sought 
comment from all interested parties in every MSA on the randomized 
selection methodology proposed in this section.
    The following is a summary of the comments received and our 
responses.
    Comment: Two commenters raised concerns regarding the number of 
MSAs selected for inclusion in the model. One noted that, given the 
range between 50 and 150 treatment MSAs to be able to reliably detect a 
2 percent reduction in payments, CMS could drop some of the 75 selected 
MSAs without jeopardizing the ability to produce generalizable results 
from the CJR model. Another commenter suggested that the approach to 
the model should focus on an intense analysis within fewer markets 
prior to expansion into a larger representative sample.
    Response: As discussed in the proposed rule, a variety of 
considerations were made in the determination of what would be an 
appropriate sample size. The initially proposed 75 MSAs represented the 
25 percentage points of the acceptable range of MSAs to be included as 
determined by sample size calculations. We believe that using a number 
near the bottom of the range would represent an unnecessary risk to our 
ability to draw conclusions from the model in a timely manner. While we 
would prefer to have 75 MSAs in the model in order to increase the 
likelihood of being able to make definitive statements about the impact 
of the model at an earlier date, we believe the loss of the 8 MSAs now 
deemed not eligible for selection constitutes an acceptable risk.
    With respect to the request to test the model in a limited pool of 
MSAs prior to testing it in the full set of selected MSAs, we believe 
that the testing of this model broadly is crucial to achieving the 
model's desired objectives and does not believe that proceeding in a 
few test MSAs prior to testing it in a broader set of MSAs would yield 
the same degree of information in the same time period.
    Comment: A commenter was concerned that the selection strata used 
did not use MSA-level demographic measures in its selection process, 
including distributions of population by age, gender, or race; percent 
of population dually-eligible; percent of population with specific 
health conditions or other demographic composition measures. They 
believed these areas associated with more at-risk populations should be 
represented less in the selection. Another commenter did not question 
the selection strata but contended that the random selection happened 
to choose fewer areas with lower income and minority Medicare 
beneficiaries than they thought desirable. They specifically inquired

[[Page 73299]]

after the lack of inclusion of MSAs in Alabama and Georgia.
    Response: We considered but ultimately decided against including 
the dimension based on the demographic characteristics of an MSA 
incorporated in the selection strata. If we were to have done so, the 
purpose would have been to ensure an adequate representation along the 
range of these demographic considerations rather than to eliminate them 
from possible selection. While these factors are not explicitly part of 
the selection strata used, the resulting selected MSAs provide an 
adequate representation of a variety of circumstances including the 
experiences of areas with a higher degree of non-white populations, 
MSAs with a range in average income level, and other key 
characteristics. With regards to the specific concerns regarding under-
representation in the MSAs selected from specific states, we note that 
Alabama, which has relatively high episode costs, had three of its 
seven eligible MSAs selected while Georgia, whose MSAs had episode 
payments that indicated relatively more efficient patterns of care, had 
two of its six eligible MSAs selected. As such, we believe that the 
experiences of these states and MSAs that are similar in nature to them 
are adequately represented in the selected MSAs.
    Comment: A commenter requested clarification regarding how to 
interpret which MSAs are included in the model.
    Response: We refer readers to Table 4 for a final list of the MSAs 
that are in the CJR model.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal, with modification to include 
67 of the originally selected 75 MSAs. We used updated BPCI 
participation level information in the application of the MSA exclusion 
rules for this final rule, resulting in the exclusion of an additional 
8 MSAs that were previously selected. We note that we are posting the 
list of the participant hospitals in the selected MSAs on the CJR Web 
site at https://innovation.cms.gov/initiatives/CJR/. This list will be 
updated throughout the model, to account for circumstances such as 
hospital mergers, BPCI termination, and new hospitals within the 
selected MSAs.
    We set forth this final policy in Sec.  510.100 and Sec.  510.105.

                 Table 4--MSAs Included in the CJR Model
------------------------------------------------------------------------
          MSA                                MSA Name
------------------------------------------------------------------------
10420..................  Akron, OH
10740..................  Albuquerque, NM
11700..................  Asheville, NC
12020..................  Athens-Clarke County, GA
12420..................  Austin-Round Rock, TX
13140..................  Beaumont-Port Arthur, TX
13900..................  Bismarck, ND
14500..................  Boulder, CO
15380..................  Buffalo-Cheektowaga-Niagara Falls, NY
16020..................  Cape Girardeau, MO-IL
16180..................  Carson City, NV
16740..................  Charlotte-Concord-Gastonia, NC-SC
17140..................  Cincinnati, OH-KY-IN
17860..................  Columbia, MO
18580..................  Corpus Christi, TX
19500..................  Decatur, IL
19740..................  Denver-Aurora-Lakewood, CO
20020..................  Dothan, AL
20500..................  Durham-Chapel Hill, NC
22420..................  Flint, MI
22500..................  Florence, SC
23540..................  Gainesville, FL
23580..................  Gainesville, GA
24780..................  Greenville, NC
25420..................  Harrisburg-Carlisle, PA
26300..................  Hot Springs, AR
26900..................  Indianapolis-Carmel-Anderson, IN
28140..................  Kansas City, MO-KS
28660..................  Killeen-Temple, TX
30700..................  Lincoln, NE
31080..................  Los Angeles-Long Beach-Anaheim, CA
31180..................  Lubbock, TX
31540..................  Madison, WI
32820..................  Memphis, TN-MS-AR
33100..................  Miami-Fort Lauderdale-West Palm Beach, FL
33340..................  Milwaukee-Waukesha-West Allis, WI
33700..................  Modesto, CA
33740..................  Monroe, LA
33860..................  Montgomery, AL
34940..................  Naples-Immokalee-Marco Island, FL
34980..................  Nashville-Davidson-Murfreesboro-Franklin, TN
35300..................  New Haven-Milford, CT
35380..................  New Orleans-Metairie, LA
35620..................  New York-Newark-Jersey City, NY-NJ-PA
35980..................  Norwich-New London, CT
36260..................  Ogden-Clearfield, UT
36420..................  Oklahoma City, OK
36740..................  Orlando-Kissimmee-Sanford, FL
37860..................  Pensacola-Ferry Pass-Brent, FL
38300..................  Pittsburgh, PA
38940..................  Port St. Lucie, FL
38900..................  Portland-Vancouver-Hillsboro, OR-WA
39340..................  Provo-Orem, UT
39740..................  Reading, PA
40980..................  Saginaw, MI
41860..................  San Francisco-Oakland-Hayward, CA
42660..................  Seattle-Tacoma-Bellevue, WA
42680..................  Sebastian-Vero Beach, FL
43780..................  South Bend-Mishawaka, IN-MI
41180..................  St. Louis, MO-IL
44420..................  Staunton-Waynesboro, VA
45300..................  Tampa-St. Petersburg-Clearwater, FL
45780..................  Toledo, OH
45820..................  Topeka, KS
46220..................  Tuscaloosa, AL
46340..................  Tyler, TX
48620..................  Wichita, KS
------------------------------------------------------------------------

B. Episode Definition for the CJR Model

1. Background
    CJR model is an episode payment model, focused on incentivizing 
health care providers to improve the efficiency and quality of care for 
an episode of care as experienced by a Medicare beneficiary by bundling 
payment for services furnished to the beneficiary for an episode of 
care for a specific clinical condition over a defined period of time. 
Key policies of such a model include the definition of episodes of 
care. Episodes of care have two significant dimensions--(1) A clinical 
dimension that describes what clinical conditions and associated 
services comprise the episode; and (2) a time dimension that describes 
the beginning, middle, and end of an episode. We present our proposals, 
summarize public comments and provide our responses, and finalize the 
policies for these two dimensions of CJR episodes in this section.
2. Clinical Dimension of Episodes of Care
a. Definition of the Clinical Conditions Included in the Episode
    As discussed previously in section I.A. of this final rule, we 
identified LEJR episodes, primarily hip and knee replacements, as the 
focus of this model. In the proposed rule, we stated our belief that a 
straightforward approach for hospitals and other providers to identify 
Medicare beneficiaries in this payment model is important for the care 
redesign that is required for model success, as well as to 
operationalize the proposed payment and other model policies.
    The vast majority of LEJRs are furnished in the inpatient hospital 
setting, with a small fraction of partial knee replacements occurring 
in the hospital outpatient department (HOPD) setting. Most of the 
Current Procedural Terminology (CPT) codes that physicians report for 
LEJR are on the hospital OPPS inpatient only list. The CY 2015 OPPS 
inpatient only list is Addendum E of the CY 2015 Hospital Outpatient 
Prospective Payment--Final Rule with Comment Period, which is available 
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/ASCPayment/ASC-Regulations-and-Notices-Items/CMS-

[[Page 73300]]

1613-FC.html. Thus, under current FFS payment policy, Medicare pays 
hospitals for the facility services required for most LEJR procedures 
only when those procedures are furnished in the inpatient hospital 
setting. Therefore, in our proposal we stated our belief that an 
episode payment model most appropriately focuses around an inpatient 
hospitalization for these major surgical procedures, as there is little 
opportunity for shifting the procedures under this model to the 
outpatient setting.
    We noted further that LEJRs are paid for under the IPPS through the 
following two Medicare Severity-Diagnosis Related Groups (MS-DRGs):
     MS-DRG 469 (Major joint replacement or reattachment of 
lower extremity with Major Complications or Comorbidities (MCC)).
     MS-DRG 470 (Major joint replacement or reattachment of 
lower extremity without MCC).
    Multiple International Classification of Diseases, 9th Revision, 
Clinical Modification (ICD-9-CM) procedure codes that describe LEJR 
procedures and other less common lower extremity procedures group to 
these MS-DRGs, with their percentage distribution within the IPPS MS-
DRGs 469 and 470 for the past 4 years outlined in Table 5.

      Table 5--Distribution of Hospital Claims for ICD-9-CM Procedure Codes Mapping to MS-DRGs 469 and 470
----------------------------------------------------------------------------------------------------------------
      ICD-9-CM  procedure code            Code descriptor     FY 2014 (%)  FY 2013 (%)  FY 2012 (%)  FY 2011 (%)
----------------------------------------------------------------------------------------------------------------
81.54...............................  Total knee replacement           57           58           58           58
81.51...............................  Total hip replacement.           30           29           29           28
81.52...............................  Partial hip                      12           13           13           14
                                       replacement.
81.56...............................  Total ankle                       0            0            0            0
                                       replacement.
00.85...............................  Resurfacing hip,                  0            0            0            0
                                       total, acetabulum and
                                       femoral head.
00.86...............................  Resurfacing hip,                  0            0            0            0
                                       partial, femoral head.
00.87...............................  Resurfacing hip,                  0            0            0            0
                                       partial, acetabulum.
84.27...............................  Lower leg or ankle                0          N/A          N/A          N/A
                                       reattachment.
84.28...............................  Thigh reattachment....          N/A          N/A          N/A            0
----------------------------------------------------------------------------------------------------------------
Note: Percentages or claim counts with ``N/A'' had no claims. Percentages of 0% represent less than 0.5% of
  total claims.

    Additionally, we noted that there are various types of claims-based 
information available to CMS, hospitals, and other providers, that 
could be used to identify beneficiaries in the model who receive LEJRs, 
including the MS-DRGs for the acute care hospitalization for the 
procedure, the ICD-9-CM procedure code on the hospital claim, or the 
CPT code(s) reported by the orthopedic surgeon who furnishes the 
surgical procedure. While we could utilize ICD-9-CM procedure codes or 
CPT codes to identify beneficiaries included in the model, over 85 
percent of procedures that group to MS-DRGs 469 and 470 are hip or knee 
replacements. Additionally, the hospitals that would be participating 
in this model receive payment under the IPPS, which is not determined 
by CPT codes and is based on clinical conditions and procedures that 
group to MS-DRGs. Finally, our review of the other low volume 
procedures that group to these same MS-DRGs, aside from total or 
partial hip and knee replacements, did not suggest that there is 
significant clinical or financial heterogeneity within these two MS-
DRGs such that we would need to define care for included beneficiaries 
by ICD-9-CM procedure codes.
    Therefore, we proposed that an episode of care in the CJR model 
would be triggered by an admission to an acute care hospital stay 
(hereinafter ``the anchor hospitalization'') paid under MS-DRG 469 or 
470 under the IPPS during the model performance period. This approach 
offers operational simplicity, for providers and CMS, and is consistent 
with the approach taken by the BPCI initiative to identify 
beneficiaries whose care is included in the LEJR episode for that 
model. We sought public comments on this proposal to define the 
clinical conditions that are the target of CJR.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters expressed support for CMS' proposal to 
define the clinical conditions included in the CJR model episode by 
discharge from an anchor hospitalization that is paid under MS-DRG 469 
or 470 under the IPPS, although a commenter claimed that the cases 
within each MS-DRG are too heterogeneous to form the basis of a single 
target price as CMS proposed. The commenter added that risk adjustment 
could take the form of case exclusions, stratifying cases within each 
MS-DRG to create separate target prices, or adjusting the target prices 
based on principal procedure and patient characteristics. Most 
commenters recommended that CMS limit the model to a subset of 
beneficiaries that were discharged from these two MS-DRGs, effectively 
excluding certain cases as form of risk adjustment to reduce the 
heterogeneity of the cases in the model. The commenters asserted that 
CMS' proposal, which did not include risk adjustment beyond setting 
different target prices for episodes based on discharges from the two 
different MS-DRGs, failed to take into consideration the variability of 
service needs of beneficiaries discharged from these two MS-DRGs 
related to the specific procedure performed, the elective or urgent/
emergent nature of the procedure, and the beneficiary's clinical and 
demographic characteristics, including underlying medical conditions 
and age. Several commenters recommended that CMS define the clinical 
conditions included in the model by discharges only from MS-DRG 470, 
claiming that these beneficiaries represented a more homogeneous group 
that had less complex health care needs. Some commenters urged CMS to 
define the clinical conditions in the model based on specific MS-DRG 
and ICD-9-CM procedure code combinations for hip and knee arthroplasty, 
and stated that CMS should exclude low volume procedures that also map 
to MS-DRGs 469 and 470 including ankle replacement; lower leg, ankle, 
and thigh reattachment; and hip resurfacing procedures. The commenters 
stated that these uncommon procedures display substantial heterogeneity 
in the clinical characteristics and needs of the beneficiary, as well 
as the associated Medicare payment for services throughout an episode. 
They contended that the rationale for CMS' proposal addressed hip and 
knee replacement in

[[Page 73301]]

detail but failed to consider the different PAC patterns of other 
beneficiaries discharged from the same MS-DRGs but who had different 
surgical procedures. A commenter recommended that CMS specifically 
exclude episodes for conversion total joint arthroplasty procedures, 
which require removal of previously placed hardware followed by THA or 
TKA in the same operative session, arguing that these beneficiaries had 
more complex needs.
    Many commenters recommended that CMS define the clinical conditions 
in the model as episodes specific to elective total hip arthroplasty 
(THA) and total knee arthroplasty (TKA) procedures. The commenters 
stated that this group of beneficiaries is more homogeneous than 
beneficiaries undergoing emergent joint replacement procedures for hip 
fractures or undergoing the other low volume procedures that map to the 
MS-DRGs. Given that CMS did not propose risk adjustment under the model 
based on procedure or patient characteristics, the commenters contended 
that limiting the model to these clinical conditions, that represent 
about 85 percent of beneficiaries discharged for the two MS-DRGs, would 
provide a sufficient number of cases to test LEJR episode payment and 
allow hospitals to create efficient, effective clinical pathways for 
these beneficiaries. The commenters also observed that CMS' quality 
measures, specifically the THA/TKA readmissions and complications 
measures, as well as the voluntary data collection for patient-reported 
outcomes, would represent only the quality of care for beneficiaries 
undergoing elective THA and TKA procedures. Several commenters 
recommended that CMS only include episodes in the model for 
beneficiaries discharged from MS-DRG 469 or 470 whose data would be 
used to determine the model's quality measures for the participant 
hospital.
    The commenters suggested several different approaches to defining 
the clinical conditions included in the model as elective THA or TKA. 
One approach would be to eliminate from the model beneficiaries with 
reported ICD-9-CM procedure codes other than THA or TKA, and then 
further exclude some remaining beneficiaries with ICD-9-CM codes for 
hip fracture on their claim for the anchor hospitalization. Other 
commenters asserted that CMS should exclude the beneficiaries receiving 
the low volume procedures as well as those receiving partial hip 
arthroplasty (PHA) procedures. The commenters pointed out that almost 
all of the beneficiaries receiving PHA would have hip fractures and 
observed that the average Medicare episode payment for beneficiaries 
undergoing PHA was similar to beneficiaries discharged from MS-DRG 469 
or 470 with hip fracture diagnoses, almost twice the payment for 
beneficiaries undergoing elective THA and TKA. Several commenters 
presented analyses that demonstrated that beneficiaries with hip 
fracture, regardless of their discharge from MS-DRG 469 or 470, when 
compared to beneficiaries with elective procedures, experience twice as 
high readmissions and PAC utilization rates, as well as higher 
morbidity and mortality.
    The commenters in favor of excluding clinical conditions involving 
hip fractures from the model stated that the number of hip fracture 
cases treated by individual hospitals can vary significantly on an 
annual basis, both due to random variation and practice or population 
changes. Moreover, different hospitals provide care for different 
percentages of beneficiaries with hip fracture and, according to some 
commenters, academic medical centers and small hospitals care for 
disproportionate percentages of these cases for reasons of medical 
complexity and the urgent nature of the procedure, respectively, 
because beneficiaries who fall and experience a hip fracture are 
commonly transported to their local hospital for emergent treatment. 
Furthermore, in addition to the variation a hospital itself may 
experience regarding the percentage of hip fracture cases, which could 
lead to the hospital-specific historical data used for a portion of the 
target price to not be reflective of the health care needs of the 
hospital's episode population in a given performance year, some 
commenters observed that the increasing percentage of the target price 
contributed by regional data exacerbated their concerns. Hospitals in a 
region that care for a disproportionately high percentage of hip 
fracture patients compared to the regional average would be 
disadvantaged due to the more intense service needs of hip fracture 
patients, whereas hospitals caring for a disproportionately low 
percentage of hip fracture patients compared to the regional average 
would be advantaged. The commenters contended that excluding clinical 
conditions involving hip fractures from the CJR model would ensure 
homogeneity in the beneficiaries in the model such that hospitals would 
be treated fairly with respect to episode pricing based on the 
hospital-specific and regional historical CJR episode data for only 
those beneficiaries undergoing elective THA and TKA.
    Response: We appreciate the analyses and suggestions provided by 
the commenters regarding the most appropriate approach to defining the 
clinical conditions included in the CJR model. As discussed in section 
III.C.4.b. of this final rule, we have decided to risk stratify the 
target price for each MS-DRG-anchored episode based on a beneficiary's 
hip fracture status. This policy allows us to maintain beneficiaries 
who receive LEJR procedures due to hip fractures in the CJR model, 
while acknowledging their typically greater health care needs by 
providing a target price that is based on payment for services 
furnished in the historical CJR episode data for Medicare beneficiaries 
with hip fractures in order to account for a significant amount of 
beneficiary-driven episode expenditure variation. While beneficiaries 
with hip fractures may present a more costly population due to greater 
health care needs, and CJR participant hospitals may vary in their 
percentages of such beneficiaries, we believe that beneficiaries with 
hip fracture have the potential to benefit substantially from the care 
pathways and improved care coordination among providers and suppliers 
that is incentivized by an episode payment model. In addition, we 
believe there are opportunities for increased efficiency in the care of 
beneficiaries with hip fracture who receive LEJR procedures with 
respect to appropriate PAC utilization and care coordination and 
management of chronic conditions that may be affected by the LEJR 
procedure or post-surgical care. Thus, we are finalizing our proposal 
to include LEJR procedures that result from hip fracture treatment in 
the clinical conditions that are part of the CJR model episodes, rather 
than limiting the model conditions to only elective THA and TKA.
    We are also finalizing our proposal to include clinical conditions 
represented by discharge from both MS-DRG 469 and 470 in the CJR model. 
We believe that providing separate prices for episodes anchored by the 
two different MS-DRGs accounts for the differences in typical health 
care needs of the two groups of beneficiaries, specifically the higher 
IPPS payment for the anchor hospitalization for beneficiaries 
discharged under MS-DRG 469, as well as the pattern of service 
utilization for this group of beneficiaries in the 90 days following 
discharge.
    Additionally, we are finalizing our proposal to include any lower 
extremity joint procedure that results in discharge from MS-DRG 469 or 
470 in the CJR

[[Page 73302]]

model, including ankle replacement; lower leg, ankle, and thigh 
reattachment; and hip resurfacing procedures. While the model 
beneficiaries with these less common clinical conditions are likely to 
be a small number at any specific participant hospital, they too may 
benefit from care redesign resulting in improved care coordination and 
quality that are goals of the CJR model. These beneficiaries share the 
experience of undergoing major surgical procedures involving the lower 
extremity with the majority of CJR model beneficiaries undergoing THA 
or TKA, and they too are likely to require PAC services and care 
coordination and management of chronic medical conditions to optimize 
their return to function. We expect that the Medicare actual episode 
payments for these clinical conditions may be highly variable given the 
small numbers and variable clinical characteristics of these 
beneficiaries such that historical episode data may have little 
predictive power regarding the actual episode payment for the 
beneficiaries in a model performance year. We do not believe this small 
number of beneficiaries will put participant hospitals at undue 
financial risk and further note that our payment policies as discussed 
in section III.C.3.c. and III.C.8. of this final rule provide a pricing 
adjustment for high payment episodes and limit hospital financial 
responsibilities to provide participant hospitals with additional 
protections.
    We note that our final policy to include all clinical conditions 
that result in a discharge from MS-DRGs 469 or 470 in the CJR model 
allows us to continue to rely on MS-DRGs to define the clinical 
conditions included in the LEJR episode being widely tested under the 
CJR model, consistent with the BPCI methodology to define clinical 
conditions included in 48 different episodes based on the MS-DRGs for 
the anchor hospitalization. This approach provides greater certainty 
from the perspective of participant hospitals or CMS regarding the 
clinical conditions included in episodes, since the discharge MS-DRG is 
the defining parameter, and includes the greatest number of 
beneficiaries with similar clinical conditions in the CJR model test.
    Comment: Several commenters urged CMS to include in the CJR model 
LEJR procedures where the procedure that would result in a 
beneficiary's discharge from MS-DRG 469 or 470 if furnished in the 
inpatient hospital setting is furnished in the HOPD, ambulatory 
surgical center (ASC), or other dedicated facility that is not an acute 
care facility. The commenters explained that elective procedures are 
commonly furnished in the HOPD, ASC, or other dedicated facilities that 
are not acute care facilities for certain beneficiaries covered by 
commercial insurance, while Medicare covers and pays for the procedures 
only when they are furnished in the inpatient hospital settings. The 
commenters disputed CMS' assertion in the proposed rule that there is 
little opportunity for shifting these procedures to the outpatient 
setting. They urged CMS to permit these LEJR procedures to be furnished 
to Medicare beneficiaries in other settings under the CJR model to 
improve episode efficiency. The commenters contended that physicians 
should be able to select the most appropriate inpatient hospital or 
outpatient setting based on the beneficiary's clinical condition.
    Response: We appreciate the interest of the commenters in providing 
LEJR procedures under the CJR model to Medicare beneficiaries in 
alternative outpatient settings as a further opportunity to test 
strategies to provide high quality, efficient episode care for 
beneficiaries undergoing LEJR procedures. As we discussed in the 
proposed rule, the vast majority of LEJR procedures are furnished to 
Medicare beneficiaries in the inpatient hospital setting, with a small 
fraction of partial knee replacements occurring in the hospital 
outpatient department (HOPD). Most of the CPT codes that physicians 
report for LEJR procedures are on the hospital OPPS inpatient only 
list. Thus, under current Medicare program policy, Medicare generally 
pays hospitals for the facility services required for LEJR only when 
those procedures are furnished in the inpatient hospital setting. When 
we stated our belief in the proposed rule that an episode payment model 
such as the CJR model most appropriately focuses around an inpatient 
hospitalization for these major surgical procedures, as there is little 
opportunity for shifting the procedures under the model to the 
outpatient setting, we meant that this would be true under current 
Medicare policy. Because Medicare generally does not pay hospitals if 
procedures that would be assigned to MS-DRG 469 or 470 when furnished 
to inpatients are performed on hospital outpatients, these procedures 
would not be able to be shifted under the CJR model to the outpatient 
setting.
    Because most LEJR procedures are on the OPPS inpatient list and CMS 
has, therefore, determined that Medicare beneficiaries require an 
inpatient hospitalization for payment of these procedures to hospitals, 
we are not changing the current inpatient only list designation of 
these LEJR procedures for the CJR model. CJR is an episode payment 
model, not a model designed to test different sites of services for 
procedures that CMS has thus far determined may not be safely performed 
on Medicare beneficiaries in the outpatient setting. Therefore, we are 
finalizing our proposal that the CJR model will continue to focus 
around an inpatient hospitalization for these major surgical procedures 
that result in a discharge from MS-DRG 469 or 470, and a procedure 
furnished in the outpatient setting will not be included in the model.
    Comment: Several commenters maintained that because the procedures 
that result in discharge from MS-DRG 469 and 470 that define the 
clinical conditions included in the CJR model are on the OPPS inpatient 
only list, CMS should commit to keeping these procedures on the 
inpatient only list for the 5-year performance period of the model. The 
commenters pointed out that CMS has previously proposed, but not 
finalized, the removal of TKA procedures from the inpatient only list. 
The commenters stated that if any additional procedures that would 
otherwise result in discharge from one of the two MS-DRGs in the CJR 
model were to be removed from the inpatient only list during a year 
when the CJR model is being tested, the beneficiaries who would be 
included in the model performance year due to a procedure in the 
inpatient hospital setting would be sicker and more complex than those 
included in the historical CJR episodes used to set target prices. 
Therefore, the commenters reasoned that in order to establish target 
prices that reflect the health care needs and medical complexity of the 
CJR model beneficiaries in a model performance year, CMS should not 
remove any LEJR procedures from the OPPS inpatient only list until 
after the CJR model ends.
    Response: We share the commenters' interest in ensuring that the 
historical CJR episodes that are used to set the target prices for CJR 
model episodes during a performance year reflect the health care needs 
and medical complexity of beneficiaries who are comparable to those 
actually included in the CJR model. If we were to remove an LEJR 
procedure from the OPPS inpatient only list at any point during the 5-
year model test, we agree with the commenters that we would need to 
consider the effects of such a change on the CJR model pricing 
methodology, taking into consideration the characteristics of the 
beneficiaries expected to be in the model due to a

[[Page 73303]]

procedure furnished in the inpatient hospital setting after the change 
to the inpatient only list. If we concluded that changes in our pricing 
methodology were necessary because the beneficiaries in the historical 
CJR episodes used to set target prices would no longer be similar to 
those in the model performance year, we would propose such changes 
through notice and comment rulemaking.
    Comment: Several commenters claimed that different states were 
testing different LEJR episode payment models. A commenter provided the 
example of Tennessee mandatory Medicaid bundles that utilize a 
different episode definition than proposed for the CJR model. The 
commenters encouraged CMS to move toward standard episode definitions 
for mandatory models, noting that each of the inconsistent mandatory 
models is being tested under the Innovation Center's statutory 
authority. The commenters contended that different episode payment 
models lead to excessive burden and greater cost for health care 
providers.
    Response: We appreciate the perspective of the commenters on the 
challenges related to testing mandatory bundled payments with different 
episode definitions in the same community. We note, however, that the 
CJR model and various state episode payment models are all in various 
stages of testing and have used different strategies to arrive at the 
episode definitions for each model. By definition, models being tested 
have not yet produced evidence of improved quality and/or cost savings, 
so we lack the necessary evaluation results from various approaches to 
consider standardizing episode definitions. We believe there is value 
in testing different episode definitions given the current state of 
knowledge about bundled payment. We also believe that, regardless of 
the specific definitions for episodes that address the same clinical 
conditions in various different payment models, episode payment models 
share a common focus on improving the quality of care and increasing 
the efficiency of care through a variety of well-established 
strategies, such as increased communication among health care providers 
along the continuum of acute and PAC and improved care coordination and 
care management to promote beneficiary engagement that leads to 
adherence to treatment plans and, correspondingly, reductions in 
hospital readmissions and complications. As we gain more experience 
with episode payment models and examine their results, we will consider 
the potential benefits of standardizing episode definitions to the 
extent possible.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing our proposal to define the 
clinical conditions included in the CJR model by admission to an IPPS 
hospital that results in a discharge from MS-DRG 469 or 470.
    The final policies for defining the clinical conditions are set 
forth in Sec.  510.100 and Sec.  510.200.
b. Definition of Related Services Included in the Episode
    For purposes of this model, as in BPCI, given the frequent 
comorbidities experienced by Medicare beneficiaries and the generally 
elective nature of LEJR, we are interested in testing inclusive 
episodes to incentivize comprehensive, coordinated patient-centered 
care for the beneficiary throughout the episode. We proposed to exclude 
only those Medicare items and services furnished during the episode 
that are unrelated to LEJR procedures based on clinical justification. 
During our experience with BPCI implementation, we reviewed a number of 
narrow episode definitions for LEJR episodes that were recommended by 
BPCI participants and other interested parties during the design phase 
for this project. We concluded that these narrow definitions commonly 
exclude many services that may be linked to the LEJR, as LEJR 
beneficiaries, on average, are at higher risk for more clinical 
problems than Medicare beneficiaries who have not recently undergone 
such procedures.
    Therefore, we proposed that all CJR episodes, beginning with the 
admission for the anchor hospitalization under MS-DRG 469 or 470 
through the end of the proposed episode, include all items and services 
paid under Medicare Part A or Part B with the exception of certain 
exclusions that would be excluded because they are unrelated to the 
episode. The items and services ultimately included in the episode 
after the exclusions are applied are called related items and services. 
As discussed in sections III.C.4. and III.C.6. of this final rule, 
Medicare spending for related items and services would be included in 
the historical data used to set target prices, as well as in the 
calculation of actual episode spending that would be compared against 
the target price to assess the performance of participant hospitals. In 
contrast, Medicare spending for unrelated items and services (excluded 
from the episode definition) would not be included in the historical 
data used to set target prices or in the calculation of actual episode 
spending.
    We proposed that related items and services included in CJR 
episodes would be the following items and services paid under Medicare 
Part A or Part B, after the exclusions are applied:
     Physicians' services.
     Inpatient hospital services (including readmissions), with 
certain exceptions discussed later in this section.
     Inpatient psychiatric facility (IPF) services.
     Long Term Care Hospital (LTCH) services.
     IRF services.
     SNF services.
     HHA services.
     Hospital outpatient services.
     Independent outpatient therapy services.
     Clinical laboratory services.
     Durable medical equipment (DME).
     Part B drugs.
     Hospice.
    We noted that under our proposed definition of related services 
included in the episode, the episode could include certain per-member-
per-month model payments, as discussed in section III.C.7.d. of this 
final rule.
    We proposed to exclude from CJR drugs that are paid outside of the 
MS-DRG, specifically hemophilia clotting factors (Sec.  412.115), 
identified through HCPCS code, diagnosis code, and revenue center on 
IPPS claims. Hemophilia clotting factors, in contrast to other drugs 
that are administered during an inpatient hospitalization and paid 
through the MS-DRG, are paid separately by Medicare in recognition that 
clotting factors are costly and essential to appropriate care for 
certain beneficiaries. Thus, in the proposed rule we stated our belief 
that there are no efficiencies to be gained in the variable use of 
these high cost drugs when particular beneficiaries receive LEJR 
procedures who have significantly different medical needs for clotting 
factors under an episode payment model, so we proposed to exclude these 
high cost drugs from the actual historical episode expenditure data 
used to set target prices and from the hospital's actual episode 
spending that is reconciled to the target price. Similarly, we proposed 
to exclude IPPS new technology add-on payments for drugs, technologies, 
and services from CJR episodes, excluding them from both the actual 
historical episode expenditure data used to set target prices and from 
the hospital's actual episode spending that is reconciled to the target 
price. This proposal would apply to both the anchor hospitalization

[[Page 73304]]

and any related readmissions during the episode. New technology add-on 
payments are made separately and in addition to the MS-DRG payment 
under the IPPS for specific new drugs, technologies, and services that 
substantially improve the diagnosis or treatment of Medicare 
beneficiaries and would be inadequately paid otherwise under the MS-DRG 
system. Medicare pays a marginal cost factor of 50 percent for the 
costs to hospitals of the new drugs, technologies, or services. We did 
not believe it would be appropriate for the CJR model to potentially 
hamper beneficiaries' access to new technologies that are receiving new 
technology add-on payments or to burden hospitals who choose to use 
these new drugs, technologies, or services with concern about these 
payments counting toward actual episode expenditures. In addition, 
because new drugs, technologies, or services approved for the add-on 
payments vary unpredictably over time in their application to specific 
clinical conditions, in the proposed rule we stated our belief that we 
should exclude IPPS new technology add-on payments from CJR episodes.
    We followed a number of general principles in determining other 
proposed excluded services from the CJR episodes in order to promote 
coordinated, high-quality, patient-centered care. Based on the broad 
nature of these episodes, we proposed to identify excluded (unrelated) 
services rather than included (related) services based on the rationale 
that all Part A and Part B services furnished during the episode are 
related to the episode, unless they are unrelated based on clinical 
justification as described in more detail later in this section. In 
developing our proposals for exclusions for this model, we stated our 
belief that no Part A services, other than certain excluded hospital 
readmissions during the episode as described in this section, furnished 
post-hospital discharge during the episode should be excluded, as post-
hospital discharge Part A services are typically intended to be 
comprehensive in nature. We also stated our belief that no claims for 
services with diagnosis codes that are directly related to the LEJR 
procedure itself (for example, loosening of the joint prosthesis) based 
on clinical judgment, and taking into consideration coding guidelines, 
should be excluded. Furthermore, we stated our belief that no claims 
for diagnoses that are related to the quality and safety of care 
furnished during the episode, especially the anchor hospitalization 
under MS-DRG 469 or 470, should be excluded, such as direct 
complications of post-surgical care during the anchor hospitalization. 
Examples of diagnoses that would not be excluded on this basis include 
surgical site infection and venous thromboembolism. Finally, in the 
proposed rule we stated our belief that no claims for services for 
diagnoses that are related to preexisting chronic conditions such as 
diabetes, which may be affected by care furnished during the episode, 
should be excluded. However, severe exacerbations of chronic conditions 
(for example, some surgical readmissions) that are unlikely to be 
affected by care furnished during the episode should be excluded; thus, 
when a beneficiary is admitted to the hospital during the episode for 
these circumstances, we would not consider it to be a related 
readmission for purposes of CJR. We also stated our belief that 
services for clinical conditions that represent acute clinical 
conditions not arising from an existing chronic clinical condition or 
complication of LEJR surgery occurring during an episode of care, which 
would not be covered by the previous principles about included 
services, should be excluded.
    To operationalize these principles for CJR, we proposed to exclude 
unrelated inpatient hospital admissions during the episode by 
identifying MS-DRGs for exclusion. We proposed to exclude unrelated 
Part B services based on the ICD-9-CM diagnosis code (or their 
International Classification of Diseases, 10th Revision, Clinical 
Modification (ICD-10-CM) equivalents when ICD-10-CM codes are 
implemented) that is the principal diagnosis code reported on claims 
for services furnished during the episode. More specifically, we 
proposed to exclude specific inpatient hospital admissions and services 
consistent with the LEJR episode definition (also triggered by MS-DRGs 
469 and 470) that is currently used in BPCI Model 2. We note that the 
list of exclusions was initially developed over 2 years ago for BPCI 
through a collaborative effort of CMS staff, including physicians from 
medical and surgical specialties, coding experts, claims processing 
experts, and health services researchers. The list has been shared with 
thousands of entities and individuals participating in one or more 
phases of BPCI, and has undergone refinement over that time in response 
to stakeholder input about specific diagnoses or MS-DRGs for exclusion, 
resulting in only minimal changes over the last 2 years. Thus, the BPCI 
list of exclusions for LEJR procedures has been vetted broadly in the 
health care community; refined based on input from a wide variety of 
providers, researchers and other stakeholders; and successfully 
operationalized in the BPCI models. We proposed its use in CJR based on 
our confidence related to our several of years of experience that this 
definition is reasonable and workable for LEJR episodes, for both 
providers and CMS.
    With respect to the proposed inpatient hospital admission 
exclusions for this model, we proposed that all medical MS-DRGs for 
readmissions be included in CJR episodes as related services, with the 
exception of oncology and trauma medical MS-DRGs. We proposed that 
admissions for oncology and trauma medical MS-DRGs be excluded from CJR 
episodes. Readmissions for medical MS-DRGs are generally linked to the 
hospitalization for the LEJR procedure as a complication of the illness 
that led to the surgery, a complication of treatment or interactions 
with the health care system, or a chronic illness that may have been 
affected by the course of care. We refer readers to section III.D. of 
this final rule for background and discussion of the complication rate 
measure proposed for CJR that includes common medical complications 
resulting from the previously stated circumstances following LEJR 
procedures and that may result in related hospital readmissions. For 
readmissions for medical MS-DRGs, the selection of the primary 
diagnosis code is not clear-cut, so in the proposed rule we stated our 
belief that all should be included because providers should focus on 
comprehensive care for beneficiaries during episodes. We proposed to 
include all disease-related surgical MS-DRGs for readmissions, such as 
hip/knee revision, in CJR episodes. We also proposed to include 
readmissions for all body system-related surgical MS-DRGs as they are 
generally related to complications of the LEJR procedures. An example 
of a readmission of this type would be for an inferior vena cava filter 
placement for treatment of thromboembolic complications of the LEJR. We 
proposed to exclude hospital admissions for chronic disease surgical 
MS-DRGs, such as prostatectomy (removal of the prostate gland), as they 
are unrelated to the clinical condition that led to the LEJR and they 
would not have been precipitated by the LEJR. Finally, we proposed that 
hospital admissions for acute disease surgical MS-DRGs, such as 
appendectomy, be excluded because they are highly unlikely to be 
related to, or precipitated by, LEJR procedures and would not be 
affected by LEJR episode care redesign.

[[Page 73305]]

    With respect to the LEJR proposed diagnosis code exclusions for 
Part B services for this model, we proposed that ICD-9-CM codes be 
excluded or included as a category and as identified by code ranges. We 
proposed that disease-related diagnoses, such as osteoarthritis of the 
hip or knee, are included. We also proposed that body system-related 
diagnoses are included because they relate to complications that may 
arise from interactions with the health care system. An example of this 
would be pressure pre-ulcer skin changes. Additionally, we proposed 
that all common symptom diagnoses are included because providers have 
significant discretion to select these as principal diagnosis codes. We 
proposed that acute disease diagnoses, such as severe head injury, are 
excluded. Finally, we proposed that chronic disease diagnoses be 
included or excluded based on specific clinical and coding judgment as 
described previously with respect to the original development of the 
exclusions for LEJR episodes under BPCI, taking into consideration 
whether the condition was likely to have been affected by the LEJR 
procedure and recovery period and whether substantial services were 
likely to have been provided for the chronic condition during the 
episode. Thus, chronic kidney disease and cirrhosis would be included 
in the episode, but glaucoma and chemotherapy would be excluded.
    Proposed exclusions from CJR episodes were based on care for 
unrelated clinical conditions represented by MS-DRGs for readmissions 
during the episode and ICD-9 CM codes for Part B services furnished 
during the episode after discharge from the anchor hospitalization. The 
complete lists of proposed excluded MS-DRGs for readmissions and 
proposed excluded ICD-9-CM codes for Part B services are posted on the 
CMS Web site at https://innovation.cms.gov/initiatives/cjr/.
    In the proposed rule, we noted that as CMS moves to implement ICD-
10-CM we would make the CJR exclusions that would map to the final ICD-
9-CM exclusions for CJR available in the ICD-10-CM format as well. We 
proposed that all Part A and B-covered items and services that would 
not be excluded based on the exclusions list are included in the 
episode. Furthermore, we proposed to update the exclusions list without 
rulemaking on an annual basis, at a minimum, to reflect annual changes 
to ICD-CM coding and annual changes to the MS-DRGs under the IPPS, as 
well as to address any other issues that are brought to our attention 
by the public throughout the course of the model test.
    We would first develop potential exclusions list revisions of MS-
DRGs for readmissions and ICD-9-CM (or ICD-10-CM, as applicable) 
diagnosis codes for Part B services based on our assessment against the 
following standards:
     We would not exclude any items or services that are--
    ++ Directly related to the LEJR procedure itself (such as loosening 
of the joint prosthesis) or the quality or safety of LEJR care (such as 
post-surgical wound infection or venous thromboembolism); and
    ++ For chronic conditions that may be affected by the LEJR 
procedure or post-surgical care (such as diabetes). By this we mean 
that where a beneficiary's underlying chronic condition would be 
affected by the LEJR procedure, or where the beneficiary's LEJR or 
post-LEJR care must be managed differently as a result of the chronic 
condition, then those items and services would be related and would be 
included in the episode.
     We would exclude items and services for--
    ++ Chronic conditions that are generally not affected by the LEJR 
procedure or post-surgical care (such as removal of the prostate). By 
this we mean that where a beneficiary's underlying chronic condition 
would not be affected by the LEJR procedure, or where the beneficiary's 
LEJR or post-LEJR care need not be managed differently as a result of 
the chronic condition, then those items and services would not be 
related and would not be included in the episode; and
    ++ Acute clinical conditions not arising from existing episode-
related chronic clinical conditions or complications of LEJR surgery 
from the episode (such as appendectomy).
    We proposed to post the potential revised exclusions, which could 
include additions to or deletions from the exclusions list, to the CMS 
Web site to allow for public input on our planned application of these 
standards, and then adopt changes to the exclusions list with posting 
to the CMS Web site of the final revised exclusions list after our 
consideration of the public input.
    We sought comment on our proposals for identifying excluded 
readmissions and Part B-covered items and services, as well as our 
proposed process for updating the exclusions list.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters recommended that CMS clarify the 
proposal that named ``independent outpatient therapy services'' in the 
episode definition list of related Part A and Part B services included 
in the episode. The commenters pointed out that while this list 
specified ``independent outpatient therapy services,'' which would 
appear to only represent services furnished by therapists in private 
practices included in CMS data under certain supplier specialty codes, 
the commenters believe that CMS should refer to the services as 
outpatient therapy services in order to include all outpatient physical 
therapy, occupational therapy, and speech-language pathology therapy 
services in the definition of related Part A and Part B services 
included in the episode. The commenters noted that in the proposed rule 
discussion of CJR collaborators CMS referred to financial arrangements 
with outpatient therapy providers, a category of providers that was not 
defined in the proposed rule and has not otherwise been previously 
defined in the Medicare program. Therefore, the commenters recommended 
that CMS define outpatient therapy providers in regulation in the CJR 
final rule as a physician, supplier, or provider furnishing outpatient 
physician therapy services, outpatient occupational therapy services, 
or outpatient speech-language pathology services. The commenters 
suggested that CMS should then clarify that services furnished by these 
outpatient therapy providers (outpatient therapy services) would be 
included in the episode definition, thereby including these payments in 
the CJR historical episode data used to set target prices and in the 
calculation of actual episode spending that would be compared against 
the target price.
    Response: We agree with the commenters' suggestion that we define 
outpatient therapy providers in regulation to ensure consistent and 
accurate reference to certain providers and services under the CJR 
model, and that we should include services furnished by outpatient 
therapy providers as related services in the CJR model after the 
exclusions are applied. Therefore, we are adding the following new 
definition to Sec.  510.2: Provider of outpatient therapy services 
means a provider or supplier furnishing--(1) Outpatient physical 
therapy services as defined in 410.60 of this chapter, or (2) 
outpatient occupational therapy services as defined in 410.59 of this 
chapter, or (3) outpatient speech-language pathology services as 
defined in 410.62 of this chapter. We are also revising Sec.  
510.200(b)(10) to remove the word ``independent'' preceding outpatient 
therapy services.

[[Page 73306]]

    Comment: Several commenters recommended that CMS add to the list of 
related services included in CJR model episodes drugs covered under 
Medicare Part D. The commenters asserted that Part D-covered drugs make 
important contributions to beneficiary health, especially for 
beneficiaries with chronic medical conditions and, therefore, should be 
included in a broadly defined episode payment model such as the CJR 
model to provide opportunities for improved quality and efficiency of 
care for beneficiaries.
    Response: We appreciate the interest expressed by the commenters in 
including drugs covered under Part D in the LEJR episode definition 
used for the CJR model. However, while we agree with the commenters 
that the appropriate use of Part D-covered drugs can play an important 
role in improving a beneficiary's health, we will not be expanding our 
list of Part A and Part B items and services related to the episode to 
add Part D-covered drugs. We proposed to require all beneficiaries 
included in the CJR model to have both Part A and Part B coverage 
throughout the duration of the episode in order to ensure we had 
comprehensive episode payment data to calculate actual episode spending 
to be compared against the target price. However, enrollment in Part D 
is voluntary and a substantial percentage of Medicare beneficiaries do 
not have Part D coverage, so we would lack comprehensive payment 
information for all beneficiaries in the model in order to determine an 
episode target price and calculate actual episode spending. In 
addition, beneficiary-specific information about Part D drug spending 
that could be attributed to episodes would not be available in a 
timeframe consistent with the time periods for claims used to set 
target prices and the timeline for reconciliation where actual episode 
spending is aggregated and compared against the target price. Finally, 
given that the CJR model is testing LEJR episodes, we believe there is 
limited opportunity to shift spending from Part B to Part D to reduce 
actual episode spending, even though we have not included Part D 
payments in the episode definition. Most beneficiaries with chronic 
conditions would be taking similar drugs before and during the episode, 
and, other than pain medications, Part D-covered drugs are not commonly 
used to manage the direct post-surgical and PAC rehabilitation needs of 
most LEJR beneficiaries, who rarely experience significant 
complications from the surgery. Therefore, we are finalizing our 
proposal to not include all Part D-covered drugs from the list of 
related items and services included in CJR episodes.
    Comment: Several commenters recommended that CMS exclude Inpatient 
Psychiatric Facility (IPF) services from CJR episodes because they 
would be unlikely to be related to the LEJR procedure. The commenters 
suggested that the services are always medically necessary with no 
opportunities for efficiency and would be more likely to be associated 
with injury that led to the need for LEJR procedure, rather than 
related to the surgical procedure or recovery. Several commenters 
stated that CMS should exclude these services from the episode 
definition because they were excluded under LEJR episodes in BPCI. 
Another commenter suggested that CMS exclude IPF services furnished 
more than 14 days after surgery because after than point, the commenter 
believes these services would be unlikely to be related to the surgery 
or recovery.
    Response: We are clarifying that under BPCI, IPF services furnished 
following discharge from the LEJR episode anchor hospitalization but 
during the episode are included in the LEJR episode definition, unless 
they fall into one of the excluded MS-DRGs. Thus, we include inpatient 
psychiatric services whether paid under the IPPS or the IPF PPS in LEJR 
episodes under BPCI according to the same policy that would exclude 
readmissions paid under either payment system based on the same 
exclusion list. We see no reason under the CJR model not to apply the 
standard we proposed to define related and unrelated Part A and Part B 
services with respect to CJR episodes. Therefore, we believe the list 
of excluded MS-DRGs identifies those IPF admissions during the episode 
that would be clinically unrelated to the LEJR episode so we exclude 
them from the episode definition, whereas IPF services any time during 
a CJR episode that result in discharge from an MS-DRG that is not 
excluded would be related and included in the CJR model episode 
definition. We disagree with the commenter that all IPF services 
furnished more than 14 days after surgery are unlikely to be related to 
the LEJR procedure or complications of the procedure or to a chronic 
condition that must be managed differently as a result of the 
procedure. Regardless of the time IPF services are furnished following 
discharge from the anchor hospitalization, we believe the MS-DRG 
exclusions identify those circumstances when IPF services are unrelated 
to the CJR model episode. Therefore, consistent with the BPCI policy, 
we are finalizing our proposal to include IPF services in the CJR model 
episode definition when they are assigned to an MS-DRG that is not 
excluded from episode definition.
    Comment: Several commenters commended CMS for proposing to include 
hospice services in the episode definition for the CJR model, which 
provides recognition of hospice services as an essential element of the 
health care continuum. They stated that they looked forward to CMS 
sharing data resulting from the model that provides insight into the 
impact of incorporating hospice as part of a bundled care model and 
coordinated approach to post-hospital care. However, the commenters 
asserted that generally hospice services would be unrelated to the LEJR 
episode because they would most commonly address a serious and 
unanticipated complication of surgery or the hospitalization, discovery 
during or immediately after the surgery of a previously undetected 
terminal prognosis, or an unrelated accident following the procedure. 
While acknowledging that some hospice services would be related to the 
LEJR episode under uncommon circumstances, the commenters encouraged 
CMS to include in the final rule the process that would be used to 
identify included and excluded hospice services from CJR episodes. The 
commenters urged CMS to further describe its rationale for including 
hospice services in the episode definition, and supply data that 
relates to hospice services and the CJR model. Finally the commenters 
recommended that CMS establish a data acquisition system on hospice use 
in the final model. Some commenters expressed confusion about CMS' 
proposal to include hospice services in the episode definition and 
inquired about whether CMS intended to include all hospice services or 
to exclude certain hospice services as unrelated to the LEJR episode 
according to the beneficiary's diagnosis.
    A number of other commenters recommended that CMS exclude all 
hospice services from the CJR episode definition, except for the post-
episode spending calculation that analyzes all Part A and Part B 
spending for model beneficiaries, both for consistency with BPCI and to 
ensure no incentives for underutilization of the hospice benefit were 
created by the CJR model. The commenters asserted that all hospice 
services were unrelated to the LEJR episode, and encouraged CMS to 
exclude hospice services in order to ensure timely access to hospice 
for CJR model beneficiaries.

[[Page 73307]]

    Response: We appreciate the interest of the commenters in ensuring 
continuing beneficiary access to hospice services under the CJR model. 
We note that while we exclude all hospice services under BPCI, our 
proposal for the CJR model would exclude no hospice services. 
Specifically, we proposed no exclusions of Part A services furnished 
during the 90 day period after discharge from the anchor 
hospitalization other than certain hospital readmissions identified by 
excluded MS-DRGs. We understand that CJR model beneficiaries could 
receive hospice services during an episode under several different 
types of clinical circumstances. For example, the beneficiary could be 
enrolled in hospice prior to the LEJR episode, experience a pathologic 
hip fracture, and require THA to stabilize the beneficiary's hip. 
Alternatively, the beneficiary could have an LEJR procedure and enter 
into hospice at some point during the episode in the 90 days following 
discharge from the anchor hospitalization, either after experiencing a 
surgical complication leading to a terminal prognosis or based on a new 
diagnosis of a terminal stage of an illness. We note that given the 
pre-surgical screening that patients must undergo before an LEJR 
procedure, it would be rare for a new diagnosis that would render the 
patient terminally ill to occur within 3 months after the LEJR 
procedure that was not already identified during the pre-surgical 
screening process.
    Medicare hospice care is palliative care for individuals with a 
prognosis of living 6 months or less if the terminal illness runs its 
normal course. As referenced in Sec.  418.22(b)(1), to be eligible for 
Medicare hospice services, the patient's attending physician (if any) 
and the hospice medical director must certify that the individual is 
``terminally ill,'' as defined in section 1861(dd)(3)(A) of the Act and 
our regulations at Sec.  418.3 that is, the individual's prognosis is 
for a life expectancy of 6 months or less if the terminal illness runs 
its normal course. When an individual is terminally ill, many health 
problems are brought on by underlying condition(s), as bodily systems 
are interdependent. Section 1861(dd)(1) of the Act establishes the 
services that are to be rendered by a Medicare certified hospice 
program and those services include: nursing care; physical therapy; 
occupational therapy; speech-language pathology therapy; medical social 
services; home health aide services (now called hospice aide services); 
physician services; homemaker services; medical supplies (including 
drugs and biologics); medical appliances; counseling services 
(including dietary counseling); short-term inpatient care (including 
both respite care and care necessary for pain control and acute or 
chronic symptom management) in a hospital, nursing facility, or hospice 
inpatient facility; continuous home care during periods of crisis and 
only as necessary to maintain the terminally ill individual at home; 
and any other item or service which is specified in the plan of care 
and for which payment may otherwise be made under Medicare, in 
accordance with Title XVIII of the Act. The services offered under the 
Medicare hospice benefit must be available, as needed, to beneficiaries 
24 hours a day, 7 days a week (section 1861(dd)(2)(A)(i) of the Act).
    The regulations at Sec.  418.54(c) stipulate that the comprehensive 
hospice assessment must identify the patient's physical, psychosocial, 
emotional, and spiritual needs related to the terminal illness and 
related conditions, and address those needs in order to promote the 
hospice patient's well-being, comfort, and dignity. The comprehensive 
assessment must take into consideration the following factors: The 
nature and condition causing admission (including the presence or lack 
of objective data and subjective complaints); complications and risk 
factors that affect care planning; functional status; imminence of 
death; and severity of symptoms (Sec.  418.54(c)). Additionally, the 
hospice CoPs at Sec.  418.56(c) require that the hospice must provide 
all reasonable and necessary services for the palliation and management 
of the terminal illness, related conditions and interventions to manage 
pain and symptoms. Therapy and interventions must be assessed and 
managed in terms of providing palliation and comfort without undue 
symptom burden for the hospice patient or family. In the December 16, 
1983 Hospice final rule (48 FR 56010 through 56011), regarding what is 
related versus unrelated to the terminal illness, we stated: ``. . . we 
believe that the unique physical condition of each terminally ill 
individual makes it necessary for these decisions to be made on a case-
by-case basis. It is our general view that hospices are required to 
provide virtually all the care that is needed by terminally ill 
patients.''
    Thus, hospice services furnished to CJR model beneficiaries should 
be included in the episode definition for the CJR model, regardless of 
the specific diagnosis of the beneficiary, because hospices are to 
provide virtually all care that is needed by terminally ill patients. 
If a CJR beneficiary was receiving hospice services during an episode, 
either because the beneficiary was enrolled in hospice prior to surgery 
and continued in hospice following surgery or the beneficiary enrolled 
in hospice following surgery that initiated the CJR model episode, we 
believe that hospice services would encompass care related to the LEJR 
episode and should, therefore, be included in the episode definition. 
As previously noted, given the comprehensive nature of the hospice 
benefit and the fact that body systems are interdependent at end of 
life, virtually all care needed by the terminally-ill individual would 
be related to the terminal prognosis and thus the responsibility of the 
hospice. As previously noted, hospices are required, per the Hospice 
CoPs at Sec.  418.56(c), to provide all reasonable and necessary 
services for the palliation and management of the terminal illness, 
related conditions, and interventions to manage pain and symptoms. For 
patients that underwent LEJR procedures as part of the CJR model that 
have also elected the Medicare hospice benefit, hospice services would 
need to adapt and respond to the care needs of the CJR beneficiary 
following surgery. As in the case of other medically necessary services 
that would improve a beneficiary's quality of care and quality of life, 
we expect that CJR model beneficiaries will receive clinically 
appropriate referrals to hospice in a timely manner. Furthermore, we 
also believe hospice services could contribute to episode efficiency 
through improved comprehensive care coordination and management for CJR 
model beneficiaries that have a terminal prognosis. As previously 
stated, hospices are required to provide comprehensive care 
coordination and management per the hospice CoPs at 418.56. As 
discussed in sections III.F.3. and 5. of this final rule, we will be 
monitoring for access to care and delayed care and will take actions as 
described if problems are found. Therefore, we are finalizing our 
proposal to include hospice services in the CJR model episode 
definition.
    With regard to the commenters' request for data regarding hospice 
use and the CJR model, we note that the evaluation approach described 
in IV.D. of this final rule will yield utilization information on CJR 
beneficiaries' episodes for specific types of providers and services. 
As discussed in section IV.E. of this final rule, we plan to evaluate 
the CJR model on an annual basis and release internal periodic 
summaries to offer useful insight, with

[[Page 73308]]

a final analysis after the end of the 5-year performance period. 
Finally, we plan to make available to participant hospitals upon their 
request periodic summary claims data reports or raw claims data, 
including payment information, using type of service categories that 
including hospice. We refer readers to section III.E.2. of this final 
rule for a more detailed discussion of the plans for sharing data under 
the CJR model.
    Comment: Several commenters requested that CMS exclude prosthetic 
limbs, orthopedic braces, and customized durable medical equipment 
(DME) from the related services included in CJR model episodes. The 
commenters stated that these uncommonly furnished items were at risk of 
not being provided to CJR model beneficiaries, and provided historical 
example of access problems during implementation of the SNF PPS that 
eventually resulted in some HCPCS codes for these items being exempted 
from SNF consolidated billing. Another commenter requested 
clarification about included services with respect to the definition of 
DME. The commenter expressed its belief that there would be no need for 
verification by CMS or its contractors about coverage of DME as CMS 
would be making a single episode payment to hospitals. The commenter 
sought clarification that devices that would usually be paid for under 
the MS-DRG payment should be able to be used in the CJR beneficiary's 
home.
    Response: While some commenters recommended that we exclude 
altogether certain prosthetics, braces, and customized DME from the 
episode definition under the CJR model, we believe that our Part B ICD-
9-CM (or equivalent ICD-10-CM) diagnosis code exclusions will allow 
these items to be excluded when they are unrelated to the episode., 
both in determining historical CJR episode payments used to set the 
target price and in calculating actual episode spending during the 
model performance years Just as for other Part B services, when the 
primary ICD-9-CM (or equivalent ICD-10-CM) diagnosis code on the claim 
for the item is not excluded, the prosthetics, orthopedic braces, and 
customized DME will be included in the CJR episode. Because we will 
identify unrelated items when they are furnished, and the Medicare 
payment for those items will not be included in calculating the actual 
episode spending, we believe that CJR model beneficiaries will continue 
to have access to these items when they are furnished for unrelated 
diagnoses on the Part B ICD-10-CM diagnosis code exclusions list. With 
regard to the commenter who discussed a single payment by CMS to 
hospitals for the episode, we want to emphasize that this is a 
retrospective payment model and, thus, payments for all covered items 
and services will continue to be made under the usual Medicare program 
rules to all providers and suppliers furnishing services to CJR model 
beneficiaries, unless we have specifically waived certain Medicare 
program rules under the CJR model. We refer readers to section 
III.C.11. of this final rule for further discussion of waivers of 
Medicare program rules, but note that we have waived no existing 
requirements or conditions about DME. All existing program rules for 
coverage and payment of DME continue to apply. Therefore, we are 
finalizing our proposal to include DME in the CJR model episode 
definition, after application of the exclusions.
    Comment: A number of commenters commended CMS on the proposal to 
exclude IPPS new technology add-on payments from the CJR model episode 
definition, as well as hemophilia clotting agents furnished to hospital 
inpatients. The commenters believe these policies will ensure access to 
these important treatments for CJR model beneficiaries who would 
benefit from them. Several commenters suggested that CMS also exclude 
from the CJR model episode definition OPPS transitional pass-through 
payments for devices, which are paid separately for a limited period of 
time based on their increased cost over existing technologies and 
evidence that they are a substantial clinical improvement, for 
consistency with CMS' proposed treatment of IPPS new technology add-on 
payments which accomplish the same objective for hospital inpatients. 
Other commenters recommended that CMS exclude other innovative 
technologies from the episode definition by establishing a review 
process to see if their cost should be removed from CJR episode 
spending to ensure that the financial incentives under the CJR episode 
payment model did not discourage appropriate use of new technologies 
for CJR model beneficiaries who would benefit from them. These 
commenters stated that such a policy would ensure that beneficiaries in 
the CJR model have access to beneficial new technologies that otherwise 
might be limited because of participant hospitals' concerns over 
providing items and services that would increase actual episode 
spending. A commenter, arguing in support of CMS' proposal to exclude 
IPPS new technology add-on payments from the episode definition, 
suggested that CMS analyze Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) data to see if customized joints 
correlated with HCAHPS scores under the model.
    Response: We agree with the commenters that CJR model beneficiaries 
should have access to beneficial new technologies while they are in CJR 
episodes. We do not believe it would be appropriate for the CJR model 
to potentially hamper beneficiaries' access to new technologies that 
are receiving IPPS new technology add-on payments or to burden 
hospitals who choose to use these new drugs, technologies, or services 
with concern about these payments counting toward actual episode 
expenditures. We also agree with the commenters' recommendation that we 
should exclude OPPS pass-through payments for medical devices from the 
episode definition for the same reasons we proposed to exclude IPPS new 
technology add-on payments. In both of these cases, through the 
established OPPS and IPPS review processes, we have determined that 
these technologies have a substantial cost but also lead to substantial 
clinical improvement for beneficiaries. Therefore, we are finalizing 
our proposal to exclude from the CJR episode definition IPPS new 
technology add-on payments and hemophilia clotting factors paid 
separately during an inpatient hospitalization. In addition, we are 
modifying our proposal and will exclude OPPS transitional pass-through 
payments for medical devices from the CJR model episode definition and 
price determinations.
    We will not establish a new process to review innovative 
technologies and make individual determinations regarding their 
exclusion from the CJR model episode definition, as recommended by some 
commenters. Because the CJR model is a retrospective reconciliation 
model that pays all providers and suppliers under the regular Medicare 
program throughout the episode of care, we believe it is more 
appropriate to rely on the existing processes under the Medicare 
program to make determinations about separate payment for new 
technology items and services. If those existing processes identify new 
technologies that would qualify for add-on payments under the IPPS or 
transitional pass-through payment under the OPPS, we will exclude them 
from the CJR model episode definition to ensure that access to new 
technology items and services for beneficiaries is not influenced by 
their care being include in the CJR model. We note that the evaluation

[[Page 73309]]

approach for the model as discussed in section IV. of this final rule 
will analyze a variety of information about the model to draw 
conclusions about its effects on quality and cost but is not designed 
to examine patient experience as related to specific items or services 
furnished during the episode.
    Comment: Most commenters expressed support for CMS' proposed 
episode definition that would exclude certain readmissions based on a 
list of MS-DRGs, as well as certain Part B services based on the 
principal diagnosis on the claim, consistent with the episode 
definition for LEJR episodes under BPCI that has been used for several 
years. The commenters acknowledged that most services would be included 
in the episode definition under the proposal, thus creating broadly 
defined episodes that should lead to comprehensive care for 
beneficiaries following LEJR procedures. A number of commenters 
characterized the proposed episode definition as clinically reasonable 
and agreed with the proposed lists of services that would be excluded. 
A commenter claimed that the proposed episode definition would 
encourage the integration of post-fracture care coordination, such as 
could be provided through a fracture liaison service, with acute care 
for CJR model beneficiaries with hip fractures, leading to improved 
outcomes. However, some commenters expressed general concern about CMS' 
proposal to hold participant hospitals financially accountable for 
these broadly defined episodes, especially as CMS did not propose to 
risk adjust target prices for the episodes to reflect beneficiaries' 
chronic conditions.
    Several commenters suggested that CMS adopt an episode definition 
for the CJR model that is flexible and condition-specific. A commenter 
questioned the role of the beneficiary's health care provider in 
evaluating relatedness to the episode under the proposal and 
recommended that CMS permit the beneficiary's health care provider to 
make determinations of relatedness of services to the episode on a 
case-by case basis specific to a beneficiary's unique clinical 
condition. A few commenters suggested that CMS' proposed episode 
definition was more consistent with a total cost of care model by 
including beneficiaries with chronic conditions and excluding so few 
services. These commenters stated that if CMS finalizes such a broad 
definition, risk adjustment would be necessary in order to ensure fair 
payment to participant hospitals. Some commenters contended that CMS 
should include in the episode definition only services that are 
directly related to the procedure and complications for which the 
hospital could be held accountable. In the view of some commenters, CMS 
should exclude all chronic conditions from the episode definition, 
especially when the LEJR episode is unavoidable, such as in trauma 
cases. Examples provided by commenters of chronic conditions that 
should be excluded include diabetes and renal failure. Other commenters 
recommended that CMS only exclude care for unrelated chronic conditions 
and acute medical conditions such as urinary tract infection and 
dehydration occurring later than 30 days following discharge from the 
anchor hospitalization or otherwise shorten the episode duration of the 
model to 30 days. They claimed that holding the participant hospital 
accountable through the episode definition for chronic conditions two 
months after surgery is unfair. A commenter recommended that CMS 
include all readmissions for the first 30 days following discharge from 
the anchor hospitalization and thereafter only those hospital 
readmissions for the subsequent 60 days that are directly related to 
the LEJR procedures. Overall, a number of commenters expressed concern 
that unless CMS narrowed the proposed CJR model episode definition to 
exclude more services or diagnoses or shortened the episode duration, 
hospitals may be more cautious about treating patients with complex 
medical status, especially if CMS also does not risk adjust the target 
prices for the episode based on beneficiary characteristics and 
specific procedures.
    A commenter stated that the proposed episode definition was not 
sufficiently broad for frail patients, especially those with multiple 
illnesses who may have had a hip fracture. The commenter contended that 
providers should be paid to provide comprehensive care and treat the 
whole person, who can have many different types of interrelated health 
care needs when he or she is acutely ill due to a hip fracture in the 
face of serious underlying chronic conditions. The commenter stated 
that the CJR model would contribute to the fracturing of comprehensive 
care for vulnerable beneficiaries by excluding some services from the 
episode definition, even if those services are for clinical conditions 
that appear to be clinically unrelated to the LEJR episode, and claimed 
that the solution to this challenge is moving people with complex 
medical needs into a patient-centered medical home or comprehensive 
ACO. The commenter stressed that any existing medical home or ACO 
arrangements that apply to CJR model beneficiaries should be respected 
by the participant hospital managing the CJR episode, so as to not 
disrupt or otherwise interfere with comprehensive care for 
beneficiaries with complex medical needs.
    Response: We appreciate the support of many commenters for our 
proposed overall approach of identifying excluded services by MS-DRGs 
for hospital readmissions and ICD-9-CM (or equivalent ICD-10-CM) 
diagnosis codes for Part B services for LEJR episodes that are broadly 
inclusive of related services. Because the methodology for setting 
episode prices as discussed in section III.C. of this final rule 
requires the construction of historical CJR episodes upon which to base 
target prices that are then compared with actual episode payment during 
each performance year of the model, we must use a standard episode 
definition for the CJR model to ensure comparability of services 
included in the episode in the historical CJR episode data and the 
model performance year. Thus, we are unable to adopt the suggestions of 
commenters that the CJR model episode definition be flexible or that 
health care providers make service-by-service determinations of 
relatedness for individual beneficiaries.
    As discussed in the proposed rule and confirmed by the commenters, 
beneficiaries undergoing LEJR procedures have frequent comorbidities 
where their management may be affected by the surgery and post-
operative recovery period. We do not believe it would be appropriate 
given the frequent comorbidities experienced by Medicare beneficiaries 
and the generally elective nature of LEJR to utilize a narrow episode 
definition for CJR that includes only those services directly related 
to the LEJR procedure or the quality or safety of the LEJR care, as we 
are interested in testing inclusive episodes to incentivize 
comprehensive, coordinated patient-centered care for the beneficiary 
throughout the episode. The care for many chronic conditions and the 
development of acute medical conditions may be affected by the LEJR 
procedure or post-surgical care throughout the post-surgical recovery 
period that extends significantly beyond 30 days following hospital 
discharge, a point in time where beneficiaries are usually still 
receiving PAC services, often including SNF services, and have not 
returned to their level of presurgical function. Therefore, we do not 
believe it would be appropriate to define services for chronic 
conditions and acute medical conditions as related to the CJR

[[Page 73310]]

model episode for 30 days post-discharge from the anchor 
hospitalization, and unrelated for the remaining 60 days in the 
episode. We believe that care for chronic medical conditions affected 
by the LEJR procedure or post-surgical care is related to the episode 
for the full episode duration because the care for these conditions is 
likely to be affected by the procedure and associated recovery for 90 
days post-hospital discharge or even longer as the beneficiary recovers 
function over the course of the episode and returns to the community. 
We note that we have finalized several waivers of Medicare program 
rules as discussed in section III.C.11. of this final rule specifically 
to assist participant hospitals in efficient and effective care 
coordination and care management for CJR beneficiaries with 
significant, ongoing health needs, including chronic medical conditions 
whose care may be affected by the LEJR procedure and post-surgical 
recovery. Thus, we will exclude only those Medicare Part A and B-
covered items and services furnished during the episode that are 
unrelated to LEJR procedures based on clinical justification, and the 
exclusions will apply throughout the episode duration. Finally, we 
believe that the payment policies of the model as described in sections 
III.C.3.c. and III.C.8. of this final rule to adjust pricing for high 
payment episodes and to provide stop-loss limits provide sufficient 
protections for participant hospitals from excessive financial 
responsibility for high payment cases that may result from the broad 
episode definition adopted for the model. We expect that participant 
hospitals, with responsibility for the quality and cost performance of 
CJR model episodes, will work closely with all providers, suppliers, 
and organizations engaged in the care of model beneficiaries, in order 
to ensure that efficient, coordinated care is furnished to the 
beneficiary.
    We appreciate the concerns expressed by commenters about holding 
participant hospitals financially responsible for broad LEJR episodes 
extending 90 days post-discharge from the anchor hospitalization. We 
note that we are finalizing 90 days post-discharge from the anchor 
hospitalization as we proposed for the reasons discussed later in this 
section. Additionally, we refer readers to section III.C.4.b. of this 
final rule for the final policy that will risk stratify the target 
prices based on the presence or absence of a hip fracture for CJR model 
beneficiaries. We believe that this risk stratification policy 
addresses the commenters' concerns that beneficiaries with chronic 
conditions are likely to need more costly care throughout the CJR model 
episode that would have been inadequately paid under our proposal 
because these beneficiaries are those most likely to be present in the 
population receiving LEJR procedures emergently due to a hip fracture. 
Beneficiaries with chronic conditions are more likely to initiate CJR 
episodes due to hip fracture than beneficiaries without chronic 
condition who more likely undergo elective THA or TKA, so the typically 
higher historical spending for chronically ill beneficiaries will be 
reflected in the historical CJR episodes used to risk stratify target 
prices for hip fracture patients. In contrast, beneficiaries undergoing 
elective THA or TKA are less likely to have chronic conditions, so 
their typically lower historical spending will be reflected in the 
historical CJR episodes used to risk stratify target prices for LEJR 
patients without hip fracture. Thus, risk stratification of target 
prices based on a beneficiary's hip fracture status should account for 
patient-specific expenditure variation both directly resulting from 
more intense care due to the hip fracture itself, as well as indirectly 
resulting from the higher prevalence of chronic conditions that must be 
treated and managed in beneficiaries with hip fracture. We also believe 
that risk stratification based on a model beneficiary's hip fracture 
status will help to ensure that participant hospitals continue to treat 
these medically complex patients because target prices for these 
episodes will reflect the more costly care that these beneficiaries are 
likely to require based on historical experience.
    Additionally, while we agree with the commenter that the ongoing 
and acute health care needs of medically complex beneficiaries may be 
addressed through a patient-centered medical home or ACO, many of these 
vulnerable beneficiaries currently are not included in such models or 
programs. In the case of other beneficiaries who are included in 
medical home or ACO models or programs, they may have specific, new 
care management needs arising from an LEJR procedure that may be best 
managed by the participant hospital that has substantial expertise in 
coordinating and managing care throughout LEJR episodes because of the 
hospital's participation in the CJR model, while the ACO or patient-
centered medical home may have less specific expertise in managing 
beneficiaries recovering from major orthopedic surgery. We expect that 
participant hospitals, accountable for LEJR episode quality and cost 
performance under this model, will work closely with all providers and 
other organizations with which a model beneficiary has established 
relationships, toward the mutual goal of high quality, well-coordinated 
care that maximizes the rate of a beneficiary's return of function 
following surgery.
    We are finalizing our proposal to include all Medicare Part A and B 
items and services in the CJR model episode definition, except for 
excluded services identified by the CJR model exclusions list, with 
modification to additionally exclude OPPS transitional pass-through 
payments for devices.
    Comment: Many commenters expressed support for CMS' proposed 
approach to identifying excluded services by MS-DRGs for readmissions 
and ICD-9-CM diagnosis codes on Part B claims. Some commenters 
suggested that CMS consider additional coding sources beyond ICD-9-CM 
diagnosis codes to identify exclusions by adding ICD-9-CM procedure 
codes and HCPCS and/or CPT codes to the list of Part B exclusions.
    Response: We appreciate the commenters' support for our proposal. 
We note that we have successfully used our current approach to identify 
excluded services for 48 clinical episodes under BPCI Models 2, 3, and 
4 for several years. We will consider whether supplementing our current 
approach to identifying excluded services with additional coding 
strategies could help us more accurately identify unrelated services as 
we review future stakeholder input about the CJR model episode 
definition. We would need to also take into consideration the current 
coding requirements for different Part A and Part B services in 
assessing the potential benefit of supplementing our existing 
approaches to identifying excluded services. We would address any 
changes to the current CJR model approach to identifying excluded 
services through rulemaking. Therefore, we are finalizing our proposal 
to identify CJR model excluded services by MS-DRGs for readmissions and 
ICD-9-CM (or equivalent ICD-10-CM) diagnosis codes for Part B services.
    Comment: A number of commenters provided their perspective on 
certain specific proposed related services and exclusion. Several 
commenters expressed support for CMS' proposal to exclude readmissions 
for trauma medical and oncology MS-DRGs from the CJR episode 
definition. The commenters agreed with CMS that readmissions during 
LEJR episodes for

[[Page 73311]]

the clinical conditions that would result in discharge from trauma 
medical or oncology MS-DRGs would be clinically unrelated to the LEJR 
episode. A commenter recommended that CMS exclude rheumatoid arthritis 
care from the LEJR episode definition. While the commenter pointed out 
that rheumatoid arthritis can result in the need for LEJR procedures, 
the commenter observed that including treatment for rheumatoid 
arthritis in the episode would result in the accompanying high payments 
for this care being included in actual episode spending. The commenter 
stated that the high costs of treatment could either affect a 
beneficiary's treatment for rheumatoid arthritis during the CJR model 
episode or reduce the beneficiary's access to a medically necessary 
joint replacement. Several commenters recommended that CMS exclude 
services for which beneficiary claims data are not made available, 
specifically those subject to the regulations governing the 
confidentiality of alcohol and drug abuse patient records (42 Code of 
Federal Regulations (CFR) part 2). Other commenters suggested that CMS 
exclude elective surgery during the CJR model episode, providing 
examples of cataract surgery, hernia repair, gallbladder procedures, 
and transurethral resection of the prostate. A commenter requested that 
CMS add the ICD-9-CM procedure code for chemotherapy administration to 
the Part B exclusions list, because CMS proposed to consider 
chemotherapy to be unrelated and, therefore, excluded from the CJR 
episode definition.
    Several commenters requested further justification of CMS's 
proposals to include all body system-related surgical MS-DRGs and 
medical MS-DRGs except oncology and trauma medical MS-DRGs in the CJR 
episode definition. Several commenters requested further rationale for 
CMS' proposal to include all PAC services in the episode following an 
excluded readmission. Another commenter requested clarification on the 
inclusion of communication, cognitive, and swallowing-related diagnoses 
in the LEJR episode and CMS' intent in bundling services the commenter 
believes to be unrelated. The commenter also requested information 
about how providers could submit clinical justification when an 
exclusion of therapy services from the CJR model episode is needed. 
Finally, several commenters expressed support for excluding patients 
from the model with acute disease diagnoses such as head injury, based 
on their conclusion that CMS proposed to exclude these beneficiaries 
due to CMS' proposed exclusion of Part B claims reporting acute disease 
diagnoses, such as severe head injury.
    Response: We appreciate the specific requests by the commenters for 
clarification and modification of our proposed list of exclusions from 
the CJR model episode definition. We agree with the commenters who 
supported our proposal to exclude readmissions resulting in discharges 
from oncology and trauma medical MS-DRGs. While we believe that 
readmissions for medical MS-DRGs are generally linked to the 
hospitalization for the LEJR procedure as a complication of the illness 
that led to the surgery, a complication of treatment or interactions 
with the health care system, or a chronic illness that may have been 
affected by the course of care, we agree with the commenters that 
hospitalizations resulting in discharge from oncology and trauma 
medical MS-DRGs are not related to the hospitalization for the LEJR 
procedure.
    We do not believe that Part B claims including ICD-9-CM diagnosis 
codes for rheumatoid arthritis should be excluded from CJR model 
episodes. This chronic condition is likely to be affected by care 
during the procedure and recovery period and, therefore, we would 
consider claims reporting these diagnoses codes to be related to the 
LEJR episode. With regard to the commenter's concerns about delays in 
timely treatment as a result of high treatment costs and reduced access 
to joint replacement procedures for beneficiaries with rheumatoid 
arthritis, we refer readers to sections III.F.3. and 5. of this final 
rule for discussion of our plans to monitor for access to care and 
delayed care due to the potential of the CJR model to direct patients 
away from more expensive services at the expense of outcomes and 
quality. We will also not exclude claims for substance abuse and mental 
health services that are not available in beneficiary claims data 
because these services are clinically related to LEJR episodes. Claims 
for substance abuse and mental health services include care for 
clinical conditions that are related to the CJR episode because these 
conditions may be affected by the LEJR procedure or post-surgical care. 
With regard to the commenters' requests that we exclude elective 
procedures such as cataract surgery, hernia repair, gallbladder 
procedures, and transurethral resection of the prostate from the CJR 
model episode definition, while we believe these procedures will be 
uncommon during the post-surgical recovery period for CJR model 
beneficiaries that extends 90 days following discharge from the anchor 
hospitalization, we will not exclude them as unrelated because all of 
the procedures may be related to care furnished during the post-
surgical recovery period. Our exclusion methodology does not allow us 
to identify those procedures that are truly elective; that is, the 
condition was present and surgery was planned prior to the LEJR 
procedure and scheduled during the 90-cay post-hospital discharge 
period.
    While we agree with the commenter that chemotherapy services should 
be excluded from the CJR model episode, our exclusion methodology for 
Part B services does not rely upon ICD-9-CM procedure codes but instead 
upon ICD-9-CM (or equivalent ICD-10-CM) diagnosis codes reported on 
Part B claims. We note that the Part B payment systems, including those 
for physicians' services, Part B drugs, and institutional services, 
reject claims that do not report valid ICD-9-CM diagnosis codes. 
Therefore, we believe that our proposal to base Part B exclusions only 
on ICD-9 diagnosis codes and not additionally upon ICD-9 procedure 
codes should allow us to identify and exclude from the CJR episodes all 
Part B claims for chemotherapy administration services. Providers and 
suppliers do not report ICD-9-CM (or equivalent ICD-10-CM) procedure 
codes on Part B claims because they are paid for their chemotherapy and 
other services on the basis of the CPT or HCPCS codes that describe 
those services. However, these Part B claims must also include ICD-9-CM 
(or equivalent ICD-10-CM) diagnosis codes. CMS requires ICD-9-CM (or 
equivalent ICD-10-CM) procedure codes to be reported only on Part A 
claims, which are excluded from the CJR model on the basis of 
readmission MS-DRG rather than ICD-9 (or equivalent ICD-10) codes, so 
adding ICD-9-CM (or equivalent ICD-10-CM) procedure codes to the Part B 
exclusions list is not necessary.
    As we stated in the proposed rule, for readmissions to medical MS-
DRGs the selection of the primary diagnosis code is not clear-cut so we 
believe they should all be included in the episode definition so that 
providers focus on comprehensive care to beneficiaries in episodes. We 
reiterate our belief that readmissions to medical MS-DRGs are generally 
linked to the hospitalization for the procedure as a complication of 
the illness that led to the surgery, a complication of treatment or 
interactions with the health care system, or a chronic illness that may 
have been affected by the course of care. Moreover,

[[Page 73312]]

we believe that all body-system related surgical MS-DRGs for 
readmissions are also related to the LEJR episode because these 
readmissions are generally related to complications of the LEJR 
procedure. Such surgeries result from the treatment of systemic 
conditions that arise from the LEJR procedure or its complications. 
Examples include placement of an inferior vena cava filer or a 
percutaneous coronary intervention for treatment of thromboembolic 
complications of the LEJR procedure.
    We did not propose to exclude any PAC services in the 90-day post-
hospital discharge period, even when those PAC services follow an 
excluded readmission. As Part A services are generally intended to be 
comprehensive in nature and because the beneficiary in a CJR model 
episode would still be in the post-operative recovery period following 
LEJR surgery, we believe any PAC services provided during the episode 
would be related to the LEJR procedure. Regardless of the reason for 
the hospitalization immediately preceding the initiation of PAC 
services, the PAC provider would need to address the beneficiary's 
post-surgical recovery from the LEJR procedure, even if the PAC 
services immediately followed an unrelated readmission to the hospital.
    We did not propose to exclude claims for Part B services for 
communication, cognitive, or swallowing-related diagnoses from the CJR 
model episode definition because we believe these diagnoses are due 
either to chronic conditions whose care may be affected by the LEJR 
procedure or post-surgical care or to complications of the procedure, 
such as stroke, that result in these diagnoses. Therefore, we consider 
all Part B claims reporting these diagnoses in the principal diagnosis 
field to be related to the CJR episode. Providers are unable to submit 
clinical justification or other special requests for services to be 
designated as unrelated to the episode if one of these diagnoses is in 
the principal diagnosis field on claims. The CJR model is testing LEJR 
episode payment and we need consistency in the scope of the episode for 
the model. We will include all related Part A and Part B services as 
identified in this final rule in the calculation of episode target 
prices based on historical CJR episode data and in the calculation of 
actual episode spending for a model performance year.
    Finally, in response to the commenters who supported the exclusion 
of beneficiaries with acute disease diagnoses, such as head injury, 
from the CJR model, we want to clarify that we did not propose to 
exclude these beneficiaries from the model. Instead, we proposed to 
exclude Part B claims reporting acute disease diagnoses from the 
episode because we consider these services to be unrelated under the 
episode definition. Therefore, we will not include claims for Part B 
services reporting excluded acute disease ICD-9-CM (or equivalent ICD-
10-CM) diagnosis codes in calculating target prices based on historical 
CJR episodes or in calculating actual episode spending that will be 
compared to the episode's target price in the CJR model.
    We are finalizing our proposal to exclude the specific list of MS-
DRGs for readmissions and ICD-9-CM (or equivalent ICD-10-CM) diagnosis 
codes that is posted on the CMS Web site at: https://innovation.cms.gov/initiatives/cjr/.
    Comment: A commenter requested that CMS clarify how it will address 
hospital-acquired conditions that should never occur, when these 
conditions are part of CMS' Hospital-Acquired Condition Reduction 
Program and experienced by CJR model beneficiaries. The commenter 
explained that under current Medicare program policy, Medicare will not 
pay the higher MS-DRG arising from a specified list of non-reimbursable 
hospital-acquired conditions. The commenter pointed out that CMS 
proposed to not exclude claims for diagnoses related to the quality and 
safety of care furnished during the episode in the CJR model episode 
definition, but CMS' list of non-reimbursable hospital-acquired 
conditions includes surgical site infections after certain orthopedic 
procedures. In addition to clarifying how never events will be 
addressed in setting payments under the CJR model, the commenter 
recommended that CMS incorporate an analysis of never events and their 
incidence into the reconciliation process and review whether to expand 
the list of never events for elective surgeries.
    Another commenter recommended that the CJR episode include a 
warranty for complications associated with surgery and other treatment, 
that is, if complications occur, they should be treated at no 
additional cost to the patient or Medicare.
    Response: We appreciate the commenter's request for clarification 
about treatment of IPPS claims that include hospital-acquired 
conditions under the CJR model. Our model policy as discussed in 
section III.C.4. of this final rule bases the CJR target prices on 
historical CJR episodes that reflect discharge MS-DRGs and paid claim 
amounts for those beneficiaries who would have begun episodes by 
admission to an IPPS hospital that resulted in a discharge from MS-DRG 
469 and 470. To the extent that Medicare does not pay the higher MS-DRG 
amount due to a hospital-acquired condition that was not present on 
admission, the lower payment for the hospitalization due to the 
hospital-acquired condition would be used in setting the episode target 
price for the MS-DRG that anchored the episode. This same would hold 
true for related readmissions during the episode. When calculating 
actual episode spending during a performance year, we would use, once 
again, the paid claim amount that, in the case of a hospital-acquired 
condition that was not present on admission, would be at the level of 
the lower paying MS-DRG for the anchor hospitalization or related 
readmission, as applicable. We further note that if a CJR beneficiary 
experiences a hospital-acquired condition that was not present on 
admission during an anchor hospitalization and has no other comorbid 
conditions other than the HAC that would result in assignment of MS-DRG 
469, the beneficiary's episode would be considered an MS-DRG 470-
anchored episode (initiated by the MS-DRG for LEJR procedures without 
complications). Therefore, the hospital-acquired condition penalty 
would not itself inflate the target price such that CMS would pay back 
the hospital-acquired condition penalty through a reconciliation 
payment.
    Our proposal not to exclude claims for diagnoses related to the 
quality and safety of care during the episode is the basis for our 
excluded list of MS-DRGs for readmissions and ICD-9-CM (or equivalent 
ICD-10-CM) diagnosis codes for Part B services and, therefore, this 
list would not apply to the anchor hospitalization itself where 
hospital-acquired conditions that were not present on admission could 
be reported.
    As discussed in sections III.C.5. and 6. of this final rule, the 
model evaluation will examine changes in utilization, as well as 
outcomes and quality, in order to assess the impact of the CJR model on 
the aims of improved care quality and efficiency as well as well as 
reduced health care costs. We refer readers to section IV. of this 
final rule for further information on the planned evaluation. We have 
an ongoing process to review claims data regarding potential candidates 
for additions to the list of hospital-acquired conditions, so we do not 
believe there is a need to specifically identify CJR episodes for 
analysis because the IPPS claims included in CJR episodes would already 
be considered in the ongoing process used by CMS in the Hospital-
Acquired Condition Reduction Program.

[[Page 73313]]

    In response to the commenter who recommended for the CJR model that 
if complications due the LEJR procedure occur, they should be treated 
at no additional cost to the patient or Medicare, we note that because 
the CJR model uses a retrospective payment approach, we will rely on 
the existing Medicare program policies under the Hospital-Acquired 
Condition Reduction Program that define the specific circumstances in 
which Medicare will not make additional payment for a condition 
occurring after surgery. When these circumstances occur for CJR model 
beneficiaries in episodes, the existing Medicare program policies apply 
and Medicare would not provide additional payment. We do not believe it 
would be appropriate to establish policies specific to the CJR model 
regarding Medicare nonpayment for other complications, and we further 
note that some complications may not be preventable. The final pay-for-
performance methodology for the CJR model as discussed in section 
III.C.5. of this final rule provides strong financial incentives for 
participant hospitals to coordinate and manage care to reduce 
complications, as the THA/TKA Complications measure (NQF #1550) 
contributes half of the available points for the hospital's composite 
quality score that determines the hospital's eligibility for 
reconciliation payments and quality incentive payments.
    Comment: Several commenters opposed CMS' proposal to make changes 
to CJR model exclusions through an annual, at a minimum, update outside 
of rulemaking. Most commenters recommended that CMS update the 
exclusions annually through rulemaking, at least for routine annual 
updates. Other commenters stated that they did see value in CMS making 
possible additions and deletion to the exclusions list on a quarterly 
basis, especially early in the model. If following a quarterly process 
outside of rulemaking, these commenters urged CMS to seek stakeholder 
comment and input on candidate revisions through the CMS Web site and 
list serves to ensure broad input. The commenters encouraged CMS to 
adopt a transparent process for revisions to the episode definition in 
considering other exclusions. A number of commenters recommended that 
CMS explore other exclusions for the future, such as those inpatient 
hospital admissions or outpatient procedures planned for the 
beneficiary prior to the episode, ongoing care for patients' chronic 
conditions, and PAC following an excluded hospital readmission.
    Response: We appreciate the interest of the commenters' in ensuring 
that any changes to the CJR model episode definition involve a 
transparent process with opportunity for broad stakeholder input. We 
continue to believe that updating the exclusions annually, at a 
minimum, outside of rulemaking, is most appropriate for this 5-year 
model, allowing for more frequent updates than through rulemaking as 
necessary to accommodate timely ICD-CM annual coding changes and the 
transition to ICD-10-CM and annual IPPS MS-DRG changes, as well as to 
address significant issues raised by participant hospitals and other 
stakeholders.
    Commenters who supported an exclusions list update process outside 
of rulemaking did not suggest specific revisions to our proposed 
criteria for updating the exclusions, namely that:
     We would not exclude any items or services that are--
    ++ Directly related to the LEJR procedure itself (such as loosening 
of the joint prosthesis) or the quality or safety of LEJR care (such as 
post-surgical wound infection or venous thromboembolism); and
    ++ For chronic conditions that may be affected by the LEJR 
procedure or post-surgical care (such as diabetes). By this we mean 
that where a beneficiary's underlying chronic condition would be 
affected by the LEJR procedure, or where the beneficiary's LEJR or 
post-LEJR care must be managed differently as a result of the chronic 
condition, then those items and services would be related and would be 
included in the episode.
     We would exclude items and services for--
    ++ Chronic conditions that are generally not affected by the LEJR 
procedure or post-surgical care (such as removal of the prostate). By 
this we mean that where a beneficiary's underlying chronic condition 
would not be affected by the LEJR procedure, or where the beneficiary's 
LEJR or post-LEJR care need not be managed differently as a result of 
the chronic condition, then those items and services would not be 
related and would not be included in the episode; and
    ++ Acute clinical conditions not arising from existing episode-
related chronic clinical conditions or complications of LEJR surgery 
from the episode (such as appendectomy).
    Thus, we continue to believe these criteria provide the appropriate 
clinical review framework for updates to the CJR model exclusions. 
Finally, we believe that our proposed process to post the potential 
revised exclusions, which could include additions to or deletions from 
the exclusions list, to the CMS Web site to allow for public input on 
our planned application of these standards, and then adopt changes to 
the exclusions list with posting to the CMS Web site of the final 
revised exclusions list after our consideration of the public input, is 
consistent with the recommendation of commenters that we use a 
transparent process reflective of robust opportunity for public input. 
Conducting this update process outside of rulemaking based on the 
criteria set forth in this final rule will allow us the greatest 
flexibility to update the exclusions as changes to the MS-DRGs and ICD 
diagnosis codes, upon which our exclusions rely, are released. This 
process will also allow us to respond quickly to any episode definition 
issues that arise during implementation of the model across the broad 
array of participant hospitals in the selected MSAs. We would widely 
publicize the opportunity for review and public input through the CMS 
Web site and listservs. We also note that any changes to our overall 
approach to identifying excluded services or to our criteria for 
evaluating services for exclusion would be addressed through 
rulemaking. Therefore, we are finalizing our proposal to update the 
exclusions list annually, at a minimum, using the process as described.
    Comment: Several commenters referred to the impending change from 
ICD-9-CM to ICD-10-CM coding on claims and identified that this change 
would have implications for the Part B exclusions list. A commenters 
stated that CMS would need to define the excluded ICD-10-CM codes prior 
to implementation of the CJR model and recommended that CMS also 
provide the ICD-10-CM diagnosis code list that would identify included 
Part B services.
    Response: We appreciate the commenters' interest in the list of CJR 
model exclusions that are identified based on ICD-10-CM codes. In the 
proposed rule, we stated that as we move to implement ICD-10-CM we 
would develop the CJR exclusions that would map to the final ICD-9-CM 
exclusions for CJR available in the ICD-10-CM format as well.
    With ICD-10-CM implementation beginning in October 2015, we are 
making available the final CJR model Part B exclusions list in ICD-10-
CM format as additional worksheet tabs to the final exclusions list 
posted on the CMS Web site at: https://innovation.cms.gov/initiatives/cjr/. This is the same list of exclusions that will be used for LEJR 
episodes under BPCI. This list will be applied to claims for services 
furnished on or after October 1, 2015 and that

[[Page 73314]]

report ICD-10-CM codes. For ease of understanding by the public, our 
objective was to present the ICD-10-CM excluded codes as ranges of 
excluded ICD-10-CM categories, just as we present the ICD-9-CM excluded 
codes as ICD-9-CM ranges.
    To develop the ICD-10-CM exclusions list, we began with the list of 
final CJR ICD-9-CM code ranges. From that list of ranges, we generated 
an expanded list of all excluded ICD-9-CM codes. We then compared the 
list of excluded ICD-9-CM codes against both the ICD-9-CM-to-ICD-10-CM 
and ICD-10-CM-to-ICD-9-CM General Equivalence Mappings (GEMs) available 
at: https://www.cms.gov/Medicare/Coding/ICD10/2015-ICD-10-CM-and-GEMs.html. Comparing against both GEM files was necessary because there 
were matches in the ICD-9-CM-to-ICD-10-CM GEM that did not appear in 
the ICD-10-CM-to-ICD-9-CM GEM and vice versa. For example --
     In the ICD-9-CM-to-ICD-10-CM GEM file, ICD-9-CM code 85110 
(Cortex (cerebral) contusion with open intracranial wound, unspecified 
state of consciousness) maps to ICD-10-CM code S0190XA (Unspecified 
open wound of unspecified part of head, initial encounter), but there 
is not a corresponding map from S019XA to 85110 in the ICD-10-CM-to-
ICD-9-CM GEM.
     In the ICD-10-CM-to-ICD-9-CM GEM file, ICD-10-CM code 
A0101 (Typhoid meningitis) maps to ICD-9-CM code 020 (Typhoid), but 
there is not a corresponding map from 020 to A0101 in the ICD-9-CM to-
ICD-10-CM GEM.
    After compiling the results from both GEM files, we created a list 
of every billable ICD-10-CM code and whether each billable ICD-10-CM 
code matched to an excluded ICD-9-CM code. We then moved from the list 
of individual codes to a list of ICD-10-CM three-digit categories (for 
example, ICD-10-CM code A0101 (Typhoid meningitis) is in ICD-10-CM 
category A01 (Typhoid and paratyphoid fevers)) to present the final CJR 
exclusions. We excluded ICD-10-CM categories in which 100 percent of 
billable ICD-10-CM codes matched to an excluded ICD-9-CM code. There 
are 574 such categories, and we consider these CD-10-CM categories 
excluded based on a direct mapping from ICD-9-CM (see the ``Excluded 
Part B ICD10 Direct'' worksheet tab in the final exclusions list file). 
We did not exclude ICD-10-CM categories in which no billable ICD-10-CM 
codes matched to an excluded ICD-9-CM code. There are 1,258 categories, 
and we consider these categories not excluded based on a direct mapping 
from ICD-9-CM. For those 71 categories in which only some billable ICD-
10-CM codes in the category matched to an excluded ICD-9-CM code after 
mapping, we excluded 48 ICD-10-CM categories where all of the ICD-10-CM 
codes in the category met one or more of our two final criteria for 
updating the excluded codes on the exclusions list as described 
previously in this section (see the ``Excluded Part B ICD10 Medical'' 
worksheet tab in the final exclusions list file). Specifically, the 48 
ICD-10-CM categories that are excluded on this basis include ICD-10-CM 
codes that meet one or more of the following two criteria:
     Chronic conditions that are generally not affected by the 
LEJR procedure or post-surgical care (such as removal of the prostate). 
By this we mean that where a beneficiary's underlying chronic condition 
would not be affected by the LEJR procedure, or where the beneficiary's 
LEJR or post-LEJR care need not be managed differently as a result of 
the chronic condition, then those items and services would not be 
related and would not be included in the episode.
     Acute clinical conditions not arising from existing 
episode-related chronic clinical conditions or complications of LEJR 
surgery from the episode (such as appendectomy).
    We did not exclude the 23 other ICD-10-CM categories in which only 
some billable ICD-10-CM codes in the category matched to an excluded 
ICD-9-CM code after mapping because the ICD-10-CM codes in these 
categories met one or more of the following criteria:
     Directly related to the LEJR procedure itself (such as 
loosening of the joint prosthesis) or the quality or safety of LEJR 
care (such as post-surgical wound infection or venous thromboembolism).
     For chronic conditions that may be affected by the LEJR 
procedure or post-surgical care (such as diabetes). By this we mean 
that where a beneficiary's underlying chronic condition would be 
affected by the LEJR procedure, or where the beneficiary's LEJR or 
post-LEJR care must be managed differently as a result of the chronic 
condition, then those items and services would be related and would be 
included in the episode.
    When constructing prices for CJR, we will exclude Part B services 
from target prices and from performance year episodes based on the 
final excluded ICD-9-CM code ranges and final excluded ICD-10-CM code 
categories as appropriate, based on the applicable version of ICD 
diagnosis coding at the time the services was furnished.
    In addition, we have addressed changes to the CJR model exclusion 
list that result from revisions for the FY 2016 IPPS. From FY 2015 to 
FY 2016, there were few changes to IPPS MS-DRGs that appear on the MS-
DRG excluded readmissions list for the CJR model. Specifically, the FY 
2016 IPPS update contains changes to existing MS-DRGs 237 and 238, 
Major Cardiovascular Procedures with MCC and without MCC, respectively, 
which are on the exclusions list for CJR episodes. For discharges after 
October 1, 2015, inpatient stays that previously would have been 
assigned to MS-DRG 237 or 238 will be assigned to one of the following 
MS-DRGs:
     268 Aortic and Heart Assist Procedures Except Pulsation 
Balloon with MCC.
     269 Aortic and Heart Assist Procedures Except Pulsation 
Balloon without MCC.
     270 Other Major Cardiovascular Procedures with MCC.
     271 Other Major Cardiovascular Procedures with CC.
     272 Other Major Cardiovascular Procedures without CC/MCC.
    We also note that the list of excluded readmissions posted with the 
proposed rule inadvertently omitted MS-DRGs 490 and 491, which were 
eliminated in the FY 2015 IPPS Final Rule and from which MS-DRGs 518, 
519, and 520 were created in FY 2015. We are adding MS-DRGs 490 and 491 
to the list of excluded readmissions posted with this final rule as we 
will exclude readmissions in MS-DRGs 490 and 491 for the purposes of 
calculating CJR target prices.
    Additional information on the new MS-DRGs is provided in the FY 
2016 IPPS final rule (80 FR 49371 through 49390, available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page.html). When 
constructing prices for CJR, we will exclude readmissions for MS-DRGs 
237 and 238 in historical data. We will also exclude readmissions for 
MS-DRGs 268, 269, 270, 271, and 272 from performance year episodes.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are adding the following new definition for 
the CJR model: ``Provider of outpatient therapy services'' means a 
provider or supplier furnishing--(1) Outpatient physical therapy 
services as defined in Sec.  410.60 of this chapter, or (2) outpatient 
occupational therapy services as defined in Sec.  410.59 of this 
chapter, or (3) outpatient speech-language pathology

[[Page 73315]]

services as defined in Sec.  410.62 of this chapter.
    We are finalizing our proposal, with modification to remove the 
term ``independent'' preceding outpatient therapy services, that 
related items and services included in CJR episodes, defined by all of 
the clinical conditions requiring an admission to an IPPS hospital that 
results in a discharge from MS-DRG 469 or 470 would be the following 
items and services paid under Medicare Part A or Part B, after the 
final exclusions are applied:
     Physicians' services.
     Inpatient hospital services (including readmissions), with 
certain exceptions, as discussed later in this section.
     IPF services.
     LTCH services.
     IRF services.
     SNF services.
     HHA services.
     Hospital outpatient services.
     Outpatient therapy services.
     Clinical laboratory services.
     DME.
     Part B drugs.
     Hospice.
    Medicare spending for related items and services will be included 
in the historical data used to set episode target prices, as well as in 
the calculation of actual episode spending that would be compared 
against the target price to assess the performance of participant 
hospitals. In contrast, Medicare spending for unrelated items and 
services (excluded from the episode definition) will not be included in 
the historical data used to set target prices or in the calculation of 
actual episode spending.
    Additionally, we are finalizing our proposal to exclude inpatient 
hospital readmissions based on the list of excluded MS-DRGs and Part B 
services that report an excluded ICD-9-CM (or equivalent ICD-10-CM) 
diagnosis code as the principal diagnosis based on the list posted on 
the CMS Web site at: https://innovation.cms.gov/initiatives/cjr/. As we 
proposed, we will exclude IPPS new technology add-on payments for 
drugs, technology, and services and hemophilia clotting factors paid 
separately during an inpatient hospitalization from the CJR model 
episode definition. We are modifying our proposal and, under our final 
policy, we will also exclude OPPS transitional pass-through payments 
for devices. We are also finalizing our proposal to update the 
exclusions list without rulemaking on an annual basis, at a minimum, to 
reflect annual changes to ICD-CM coding and annual changes to the MS-
DRGs under the IPPS, as well as to address any other issues that are 
brought to our attention by the public throughout the course of the 
model test.
    We will first develop potential exclusions list revisions of MS-
DRGs for readmissions and ICD-9-CM (or equivalent ICD-10-CM) diagnosis 
codes for Part B services based on our assessment against the following 
standards:
     We would not exclude any items or services that are--
    ++ Directly related to the LEJR procedure itself (such as loosening 
of the joint prosthesis) or the quality or safety of LEJR care (such as 
post-surgical wound infection or venous thromboembolism); and
    ++ For chronic conditions that may be affected by the LEJR 
procedure or post-surgical care (such as diabetes). By this we mean 
that where a beneficiary's underlying chronic condition would be 
affected by the LEJR procedure, or where the beneficiary's LEJR or 
post-LEJR care must be managed differently as a result of the chronic 
condition, then those items and services would be related and would be 
included in the episode.
     We would exclude items and services for--
    ++ Chronic conditions that are generally not affected by the LEJR 
procedure or post-surgical care (such as removal of the prostate). By 
this we mean that where a beneficiary's underlying chronic condition 
would not be affected by the LEJR procedure, or where the beneficiary's 
LEJR or post-LEJR care need not be managed differently as a result of 
the chronic condition, then those items and services would not be 
related and would not be included in the episode; and
    ++ Acute clinical conditions not arising from existing episode-
related chronic clinical conditions or complications of LEJR surgery 
from the episode (such as appendectomy).
    We will post the potential revised exclusions, which could include 
additions to or deletions from the exclusions list, to the CMS Web site 
to allow for public input on our planned application of these 
standards, and then adopt changes to the exclusions list with posting 
to the CMS Web site of the final revised exclusions list after our 
consideration of the public input. Through the process for public input 
on potential revised exclusions and then posting of the final revised 
exclusions, we will also provide information to the public about when 
the revisions would take effect and to which episodes they would apply. 
These parameters could vary, depending on the relationship of exclusion 
list changes to annual ICD-CM or MS-DRG changes or to other issues 
brought to our attention by the public. While these revised exclusions 
may correspond to the time when we provide new target prices for a 
performance year, depending on the timing of when they would take 
effect and to which episodes they would apply, we would recalculate 
target prices as necessary.
    The final definitions are set forth in Sec.  510.2 which has been 
revised to remove proposed (b)(3) for inpatient hospital readmission 
services because hospital readmissions are already referenced in 
(b)(2). The remaining provisions under Sec.  510.2(b) have been 
renumbered accordingly. The final policies for included services, 
excluded services, and updating the lists of excluded services are set 
forth in Sec.  510.200(b), (d), and (e). We note that Sec.  
510.200(d)(3) has been renumbered to Sec.  510.200(d)(4) and Sec.  
510.200(d)(3) added to state, ``Transitional pass-through payments for 
medical devices as defined in Sec.  419.66 of this chapter.'' In 
addition, Sec.  510.200(b)(10) has been modified to read ``Outpatient 
therapy services.''
3. Duration of Episodes of Care
a. Beginning the Episode and Beneficiary Care Inclusion Criteria
    While we proposed to identify LEJR episodes by an acute care 
hospitalization for MS-DRG 469 and 470, we recognize that the 
beneficiary's care for an underlying chronic condition, such as 
osteoarthritis, which ultimately leads to the surgical procedure, 
typically begins months to years prior to the surgical procedure. 
Because of the clinical variability leading up to the joint replacement 
surgery and the challenge of identifying unrelated services given the 
multiple chronic conditions experienced by many beneficiaries, we did 
not propose to begin the episode prior to the anchor hospitalization 
(that is, the admission that results in a discharge under MS-DRG 469 or 
470). In the proposed rule, we stated our belief that the opportunities 
for care redesign and improved efficiency prior to the inpatient 
hospitalization are limited for an episode payment model of this type 
that focuses on a surgical procedure and the associated recovery once 
the decision to pursue surgery has been made, rather than an episode 
model that focuses on decision-making and management of a clinical 
condition itself (such as osteoarthritis).
    We proposed to begin the episode with an inpatient anchor 
hospitalization for MS-DRG 469 or MS-DRG 470 in

[[Page 73316]]

accordance with the methodology described. This proposal to begin the 
episode upon admission for the anchor hospitalization is consistent 
with LEJR episode initiation under Model 2 of BPCI. While we did not 
propose to begin the episode prior to the inpatient hospital admission, 
we noted that our proposed episode definition includes all services 
that are already included in the IPPS payment based on established 
Medicare policies, such as diagnostic services (including clinical 
diagnostic laboratory tests) and nondiagnostic outpatient services 
related to a beneficiary's hospital admission provided to a beneficiary 
by the admitting hospital, or by an entity wholly owned or wholly 
operated by the admitting hospital (or by another entity under 
arrangements with the admitting hospital), within 3 days prior to and 
including the date of the beneficiary's admission. For more information 
on the 3-Day Payment Window payment policies, see CMS Pub. 100-04, 
Chapter 3, section 40.3 and Chapter 4, section 10.12.
    We proposed that the defined population of Medicare beneficiaries 
whose care will be included in CJR meet the following criteria upon 
admission to the anchor hospitalization. We noted that these criteria 
are also consistent with Model 2 of BPCI, as well as most other 
Innovation Center models that do not target a specific subpopulation of 
beneficiaries. We proposed that the LEJR episodes for all beneficiaries 
in the defined population will be included in CJR (although we proposed 
that certain episodes may be canceled for purposes of determining 
actual episode payments for reasons discussed later in this final 
rule), and we refer readers to section III.F.2. of this final rule for 
further discussion of beneficiary notification and a beneficiary's 
ongoing right under CJR to obtain health services from any individual 
or organization qualified to participate in the Medicare program.
     The beneficiary is enrolled in Medicare Part A and Part B 
throughout the duration of the episode.
     The beneficiary's eligibility for Medicare is not on the 
basis of End Stage Renal Disease (ESRD).
     The beneficiary must not be enrolled in any managed care 
plan (for example, Medicare Advantage, Health Care Prepayment Plans, 
cost-based health maintenance organizations).
     The beneficiary must not be covered under a United Mine 
Workers of America health plan, which provides healthcare benefits for 
retired mine workers.
     Medicare must be the primary payer.
    Our proposal for inclusion of beneficiaries in CJR is as broad as 
feasible, representing all those LEJR episodes for which we believe we 
have comprehensive historical Medicare payment data that allow us to 
appropriately include Medicare payment for all related services during 
the episode in order to set appropriate episode target prices. For 
beneficiaries whose care we proposed to exclude from the model, we are 
unable to capture or appropriately attribute to the episode the related 
Medicare payments because of Medicare's payment methodology. For 
example, if a beneficiary is enrolled in a Medicare Advantage plan, 
Medicare makes capitated payments (and providers do not submit complete 
claims data to CMS), so we would not have a way to identify and 
attribute the portion of those payments related to an LEJR episode. 
More information on setting bundled payment target prices for episodes 
under CJR is available in section III.C.4.b. of this final rule. 
Including the broadest feasible array of Medicare beneficiaries' 
admissions in the model would provide CMS with the most robust 
information about the effects of this model on expenditures and quality 
for beneficiaries of the widest variety of ages and comorbidities, and 
allow the participant hospitals the greatest opportunity to benefit 
financially from systematic episode care redesign because most Medicare 
beneficiaries undergoing an LEJR procedure will be included in the 
model and, therefore, subject to the policies we proposed.
    We sought comment on our proposal on when to begin the CJR episode, 
as well as to identify the care included for beneficiaries.
    The following is a summary of the comments received and our 
responses.
    Comment: Most commenters agreed that the episode should begin with 
the hospital admission for the LEJR procedure. Some of these commenters 
noted that it would not be appropriate to include the period prior to 
the hospital admission as it could include unrelated care and introduce 
variability.
    Several orthopedic surgeons commented that physician treatment and 
care management begin prior to surgery, with the physician continuing 
to manage care during surgery, following surgery, and throughout the 
entire PAC period. These commenters were concerned that beginning the 
episode with the hospital admission would result in beneficiaries 
choosing and initiating care plans designed with their treating 
physicians and later, when hospitalized, the beneficiaries would 
receive conflicting care plans and, ultimately, experience adverse 
outcomes.
    Many commenters recommended starting the episode earlier than the 
hospital admission. Some commenters recommended starting the episode 
once the decision to pursue surgery is made, and some recommended 
specific timeframes that ranged between four to eight weeks prior to 
the surgery. Some commenters provided examples of presurgical services 
that they have found improve patient outcome and satisfaction, improve 
care quality, and reduce costs, such as comprehensive patient 
evaluations to assess a beneficiary's overall condition and chronic 
comorbid conditions; pre[hyphen]surgical counseling for 
non[hyphen]medical pain management; home safety reviews; 
post[hyphen]discharge planning; patient and caregiver education; weight 
loss programs; and physical therapy. Some commenters requested that CMS 
consider additional program rule waivers for the CJR model, beyond 
those specifically proposed, to facilitate the provision of various 
preoperative services and incentives that are not allowed or payable 
under current Medicare rules.
    A few commenters were concerned that starting the episode with the 
hospital admission may lead to participants shifting costs to just 
prior to the start of the episode to receive payments for those 
services in addition to the bundle. To minimize gaming, they 
recommended starting the episode once the surgery has been elected and 
prior to the hospital admission, which is consistent with many private 
sector models.
    Response: We appreciate the interest expressed by the commenters in 
starting comprehensive care coordination prior to the hospital 
admission, and we recognize that the beneficiary's care which 
ultimately leads to the LEJR surgery, including the physician-patient 
relationship, often begins long before the surgical procedure. We also 
appreciate concerns about providers unbundling services and shifting 
costs to just prior to the episode, between the time the surgery has 
been elected and the hospital admission. However, beginning the episode 
too far in advance of the LEJR surgery would make it difficult to avoid 
bundling unrelated items, and starting the episode prior to the 
hospital admission is more likely to encompass costs that vary widely 
among beneficiaries, which would make the episode more difficult to 
price appropriately.
    We appreciate commenters' suggestions of pre-surgical services and

[[Page 73317]]

programs that could support the continuum of care for CJR 
beneficiaries. However, identifying a specific set of related 
presurgical services to include in the episode, as recommended by some 
commenters, would be of little value in the model because many of the 
services that are typically necessary or the standard of care prior to 
surgery are often included in the IPPS payment under the three day 
payment window payment policies and are therefore already included in 
the CJR episode. We note that some of the related services suggested by 
commenters that are not typically included in the three-day payment 
window are intended to more broadly manage the clinical condition(s) 
that may have led to the LEJR, and as discussed previously in this 
section, the CJR model is designed to focus on the surgical procedure 
and the associated recovery. We also note that some of these suggested 
services would be applicable to a subset of CJR beneficiaries and, 
therefore, do not present a significant opportunity for improving 
efficiency and redesigning care management for the typical beneficiary 
receiving an LEJR.
    We believe that using the date of admission as the start of the 
episode is appropriate as hospitals are unlikely to shift related 
services earlier than when is clinically indicated. With respect to 
expanding the waivers to presurgical services that are not currently 
covered or payable, we have finalized several waivers of Medicare 
program rules as discussed in section III.C.11. of this final rule 
specifically to assist participant hospitals in efficient and effective 
care coordination and care management for CJR beneficiaries, and we do 
not believe it would be consistent with the model design or otherwise 
necessary for the model test to implement waivers for the preoperative 
period. While we appreciate commenters' interest in providing 
additional presurgical services that may enhance care coordination and 
care management, the waivers of Medicare program rules are only 
available if the beneficiary is in the episode at the time a service 
under the waiver is furnished. We believe that allowing waivers in the 
preoperative period prior to the anchor hospitalization, based on an 
expectation that a beneficiary will be in a CJR Model episode, would 
not be appropriate as there is no guarantee that the beneficiary will 
actually initiate a CJR Model episode and qualify for services 
furnished under a waiver.
    For purposes of the CJR model, we continue to believe that 
beginning the episode with the anchor hospitalization is most 
appropriate due to the clinical variability leading up to the joint 
replacement surgery and the challenge of distinguishing between related 
and unrelated services. We also believe that beginning the episode with 
the anchor hospitalization, and not prior to admission, would be easier 
to administer and provide more consistent episodes for testing the CJR 
Model. Therefore, we are finalizing our proposal to begin the episode 
with admission to an inpatient anchor hospitalization for MS-DRG 469 or 
MS-DRG 470 in accordance with the methodology described.
    Comment: Commenters generally supported the proposed beneficiary 
inclusion criteria as reasonable and consistent with other programs. 
Some commenters suggested we exclude additional populations from CJR, 
namely beneficiaries with serious conditions or acute diseases, such as 
traumatic brain injury, spinal cord injuries, multiple-limb trauma, 
amputations, moderate to severe strokes, severe neuromuscular and 
musculoskeletal conditions, HIV infection, and cancer. A commenter 
recommended that we design a separate model to address the needs of 
patients with chronic conditions. A few commenters recommended 
excluding all patients on hospice.
    Many commenters recommended that if we did not exclude high risk 
cases, we must develop more robust risk adjustment to account for 
socioeconomic, clinical, or other risk factors that are out of the 
hospital's control and impact patients' health and recovery. Some 
commenters were concerned that without accurate risk adjustment, 
hospitals will have an incentive to avoid higher-risk LEJR candidates. 
A commenter cited a study that found significant differences in 
Medicare spending per beneficiary during the 90-day episode based on 
various patient characteristics, such as type of LEJR surgery; 
emergency versus scheduled surgery; hip fractures versus degenerative 
conditions; patients age 85 or older; patients with multiple 
comorbidities, and patients who were dual eligible. The commenter 
asserted that robust risk adjustment based on the risk profile of each 
hospital's patients is essential for the CJR model because individual 
hospitals will not have enough enrollment to spread their risk. A few 
commenters recommended that at least the initial implementation of the 
Model should exclude vulnerable populations with complicated or 
intensive care needs until the CJR model demonstrates sufficient 
quality outcomes and has developed accurate risk adjustments and 
patient safeguards to ensure high-quality care for populations that the 
commenters believe could face serious care disadvantages in the CJR 
model.
    Response: Many beneficiaries undergoing procedures that result in 
discharge from MS-DRG 469 and 470 have underlying conditions that may 
affect care throughout the episode or that may be influenced by the 
surgical procedure that initiates the episode. We believe it is 
important to include these beneficiaries in the model so that they can 
benefit from care coordination and management throughout the episode, 
and including the broadest feasible array of Medicare beneficiaries in 
the CJR model provides participant hospitals with greater incentive to 
redesign episode care. We also believe that patients in hospice would 
benefit from the improved comprehensive care coordination incentivized 
by the CJR model, and we refer readers to the related discussion in 
section III.B.2. of this final rule regarding our policy to include 
hospice claims in the episode.
    We refer readers to section III.C.4.b. of this final rule for the 
final policy that will risk stratify the target prices based on the 
presence or absence of a hip fracture for CJR model beneficiaries. We 
believe that this risk stratification policy addresses many of the 
commenters' concerns that beneficiaries with serious conditions, acute 
diseases, and chronic conditions are likely to need more costly care 
throughout the CJR model episode that would have been inadequately paid 
under our proposal because these beneficiaries are those most likely to 
be present in the population receiving LEJR procedures emergently due 
to a hip fracture.
    Comment: Several commenters recommended that CMS exclude 
beneficiaries who opted out of data sharing. These commenters asserted 
that it would be virtually impossible to manage risk and improve 
outcomes without claims data.
    Response: As discussed in section III.E. of this final rule, we 
have decided not to finalize our proposal to allow beneficiaries the 
opportunity to decline having their data shared. We refer readers to 
section III.E. of this final rule for additional discussion of data 
sharing.
    Comment: Some commenters suggested that CMS limit the CJR model to 
beneficiaries that live within a limited distance from participant 
hospitals so that the hospital would not be penalized for inadequately 
managing the PAC of medically complex patients from remote or distant 
locations.
    Response: We expect that in some limited circumstances, participant

[[Page 73318]]

hospitals will have limited ability to coordinate care. However, 
following the care coordination that takes place in the hospital, we 
believe that much of the subsequent coordination for PAC can be 
accomplished through telecommunications that do not require the patient 
to remain within geographic proximity of the hospital. Moreover, the 
design of the model does not preclude hospitals from coordinating care 
with local providers outside of their immediate referral area. We also 
note that we have finalized several waivers of Medicare program rules, 
as discussed in section III.C.11. of this final rule, to facilitate 
efficient and effective care coordination for beneficiaries in remote 
or distant locations outside the immediate community. Therefore, we 
will not exclude beneficiaries who are referred to participant 
hospitals from other areas.
    Comment: A commenter requested CMS to consider including 
beneficiaries enrolled in MA plans in the model as they are likely to 
be healthier and their inclusion will help hospitals maintain costs 
within their targets. The commenter recognizes that the CJR payment 
methodology makes it difficult to identify and attribute payment 
related to the LEJR episode. However, the commenter asserts that 
participant hospitals in states with a high percentage of beneficiaries 
enrolled in MA plans are more likely to care for CJR patients with a 
higher than average risk profile, which could make it more difficult 
for a hospital to maintain costs within the target rate.
    Response: We appreciate the commenter's interest in increasing the 
population of beneficiaries included in the CJR model, and we recognize 
that participant hospitals with higher risk CJR beneficiaries may find 
it more challenging to maintain actual aggregate episode payments 
within their target price. However, as discussed previously in this 
section, Medicare makes capitated payments for beneficiaries enrolled 
in MA plans, and providers do not submit complete claims data to CMS. 
Therefore, we are finalizing our proposal not to include beneficiaries 
enrolled in MA plans because we are unable to capture or appropriately 
attribute to the episode the related Medicare payments.
    Comment: A couple of commenters requested that CMS exclude episodes 
where the LEJR surgery was furnished either by an opt-out physician, 
because the principal procedure is not paid by Medicare, or by a non-
participating physician who does not accept assignment. They requested 
that if such episodes are to be included, CMS should establish policies 
under which participant hospitals can provide reconciliation payments 
to and receive alignment payments from opt-out physicians as well as 
non-participating physicians.
    Response: Consistent with the BPCI policy, we do not believe it 
would be appropriate to exclude beneficiaries from the CJR model if a 
physician who opted out of Medicare pursuant to Sec.  405.420 or a non-
participating physician performs the LEJR surgery during the anchor 
hospitalization. We would expect that beneficiaries undergoing LEJR 
procedures, regardless of the Medicare participation or opt-out status 
of the operating surgeon, would have similar needs for care 
coordination and management throughout the episode period that extends 
90 days post-hospital discharge, and we see no reason that hospitals 
should not have the same quality and cost performance responsibility 
for these episodes. We note that less than 15 percent of episode 
spending, on average, would be expected to be paid for physicians' 
services, with more than 80 percent of the episode payment made for 
inpatient hospital and PAC services. Thus, for a beneficiary who 
otherwise meets the CJR model's inclusion criteria, a CJR model episode 
would begin at the time of the beneficiary's admission for the anchor 
hospitalization, regardless of whether an opt-out physician or non-
participating physician performs the LEJR surgery during that stay.
    We refer readers to section III.C.3. of this final rule for 
discussion of the effect on reconciliation payments on services 
furnished by non-participating and opt-out physicians and to section 
III.C.10.a. of this final rule for discussion of issues related to 
gainsharing payments and alignment payments.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing our proposal to begin the 
episode with admission for an inpatient anchor hospitalization for MS-
DRG 469 or MS-DRG 470 in accordance with the methodology described. We 
also are finalizing our proposal as to the criteria for beneficiary 
inclusion in the model as follows:
     The beneficiary is enrolled in Medicare Part A and Part B 
throughout the duration of the episode.
     The beneficiary's eligibility for Medicare is not on the 
basis of ESRD.
     The beneficiary must not be enrolled in any managed care 
plan (for example, Medicare Advantage, Health Care Prepayment Plans, 
cost based health maintenance organizations).
     The beneficiary must not be covered under a United Mine 
Workers of America health plan, which provides healthcare benefits for 
retired mine workers.
     Medicare must be the primary payer.
    The final policies for beginning an episode are set forth in Sec.  
510.210(a). The final policies for beneficiary inclusion are set forth 
in Sec.  510.205.
b. Middle of the Episode
    We proposed that once the episode begins for a beneficiary whose 
care is included, the episode continues until the end as described in 
the next section of this final rule, unless the episode is canceled 
because the beneficiary no longer meets the same inclusion criteria 
proposed for the beginning of the episode at any point during the 
episode. When an episode is canceled, we proposed that the services 
furnished to beneficiaries prior to and following the episode 
cancellation will continue to be paid by Medicare as usual but we will 
not calculate actual episode spending that would otherwise under CJR be 
reconciled against the target price for the beneficiary's care (see 
section III.C.6. of the proposed rule). As discussed in section 
III.C.11.a. of the proposed rule, if the beneficiary is in the episode 
at the time the service under the waiver is furnished, the waiver is 
available, even if the episode is later canceled.
    In the proposed rule, we stated our belief that it would be 
appropriate to cancel the episode when a beneficiary's status changes 
during the episode such that they no longer meet the criteria for 
inclusion because the episode target price reflects full payment for 
the episode, yet we would not have full Medicare episode payment data 
for the beneficiary to reconcile against the target price.
    In addition, we proposed that the following circumstances would 
also cancel the episode:
     The beneficiary is readmitted to an acute care hospital 
during the episode and discharged under MS-DRG 469 or 470 (in this 
case, the first episode would be canceled and a new LEJR episode would 
begin for the beneficiary).
     The beneficiary dies during the anchor hospitalization.
     The beneficiary initiates an LEJR episode under BPCI 
Models 1, 2, 3 or 4.
    In the case of beneficiary death during the anchor hospitalization, 
we stated our belief that it would be appropriate to cancel the episode 
as there are limited efficiencies that could be expected during the 
anchor hospitalization itself. In the case of beneficiary readmission 
during the first

[[Page 73319]]

CJR episode for another LEJR (typically a planned staged second 
procedure), we stated our belief that it would not be appropriate to 
include two episodes in the model with some time periods overlapping, 
as that could result in attribution of the Medicare payment for 2 
periods of PAC to a single procedure.
    We sought comment on our proposals to cancel episodes once they 
have begun but prior to their end.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters were generally supportive of our proposals for 
canceling the episode, though many recommended additional circumstances 
for canceling the episode, such as adverse events which are beyond the 
hospital's control. Many commenters, including MedPAC, recommended that 
CMS cancel the episode if the beneficiary dies at any time during the 
episode, arguing that such cases could be extremely low or high cost 
and spending is, therefore, not typical. These commenters recommended 
that all episodes that end in patient death should be excluded from the 
calculations of the target price and reconciliation amounts, not just 
those episodes where patients die during the initial hospitalization as 
CMS proposed, as this type of episode of care could skew the data. 
Given that hospitals are held financially responsible for the entire 
90-day episode, a few commenters suggested excluding all episodes with 
death for consistency and administrative simplicity. A commenter 
observed that a deceased beneficiary no longer meets all of the 
beneficiary inclusion criteria, and on that basis recommended that CMS 
cancel the episode when the patient dies. A commenter suggested also 
canceling episodes for any beneficiaries that die during the 30 day 
post-episode monitoring period. Some commenters suggested that other 
circumstances should cancel an episode, such as a beneficiary 
geographic move, change in beneficiary residence from a home to a 
facility, and loss of the beneficiary to follow up care.
    Response: While beneficiary deaths during LEJR episodes are 
uncommon, we expect them to vary unpredictably across hospitals and, 
therefore, we agree that it would be appropriate to cancel episodes 
under these circumstances. We also agree that canceling all episodes 
during which a beneficiary dies is consistent with the otherwise 
applicable episode duration as the episode would not extend to 90 days 
hospital post-discharge. However, we would include episodes where the 
patient dies during the 30 days post-episode as this would not affect 
the variability of episode spending, and it would be appropriate to 
monitor for beneficiary death during the immediate post-episode period.
    We expect some limited circumstances where participant hospitals 
will have limited ability to coordinate care. However, we believe that 
participant hospitals will be incentivized to seek creative solutions 
that do not rely on in-person services, and we are finalizing our 
proposal that all other beneficiary episodes would remain in the CJR 
model, regardless of where the beneficiary is located. Payment for 
beneficiaries in these circumstances will be reflected in the target 
prices based on historical utilization.
    Comment: Commenters urged CMS to hold beneficiaries and providers 
financially harmless for care received as part of a CJR episode if the 
episode is later canceled. A few commenters supported the continued 
application of Medicare program waivers if an episode is canceled when 
a beneficiary's status changes, and a few commenters were unclear if 
waivers apply to beneficiaries who are retrospectively identified as 
ineligible for CJR program waivers due to changes in coverage status.
    Response: As discussed previously in this section, we proposed that 
if the beneficiary is in the episode at the time the service under the 
program rule waiver is furnished, the waiver is available, even if the 
episode is later canceled. If the beneficiary is not in the episode at 
the time the service under the waiver is furnished, financial liability 
for these services would be determined in accordance with the policies 
outlined in the Medicare Claims Processing Manual (Pub. L. 100-04), 
Chapter 30. As we gain experience with CJR, we may revisit this issue 
in future rulemaking. We refer readers to section III.C.11. of this 
final rule for additional discussion and our finalized policy to apply 
waivers of programs rules if the beneficiary is in the episode at the 
time the service under the waiver is furnished, even if the episode is 
later canceled.
    Comment: A commenter was concerned that initiation of a BPCI 
episode would cancel a CJR episode, when the CJR episode begins first. 
The commenter also requested clarification whether a BPCI episode for a 
different clinical condition, such as cardiac procedures, would cancel 
a CJR LEJR episode.
    Response: We proposed and are finalizing our policy that a CJR 
episode would be canceled when a beneficiary initiates an LEJR episode 
under BPCI Models 1, 2, 3, or 4. A CJR beneficiary initiating a 
different clinical episode under BPCI Models 1, 2, 3, or 4 would remain 
in a CJR episode. We refer readers to section III.C.7.b. of this final 
rule for additional discussion of CJR beneficiary overlap with BPCI 
episodes.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing our proposal to cancel episodes 
once they have begun but prior to their end if the beneficiary no 
longer meets the same inclusion criteria proposed for the beginning of 
the episode at any point during the episode. We also are finalizing our 
proposal that the following circumstances would also cancel an episode:
     The beneficiary is readmitted to a participant hospital 
during the episode and discharged under MS-DRG 469 or 470.
     The beneficiary initiates an LEJR episode under BPCI 
Models 1, 2, 3 or 4.
    We are modifying our proposal for canceling an episode when a 
beneficiary dies during an anchor hospitalization. Under our final 
policy, the following circumstance would also cancel an episode:
     The beneficiary dies at any time during the episode.
    The final policies for cancellation of an episode are set forth in 
Sec.  510.210(b). We note that Sec.  510.210(b)(4) has been revised to 
state that an episode is canceled if the beneficiary dies during the 
episode.
c. End of the Episode
    LEJR procedures are typically major inpatient surgical procedures 
with significant associated morbidity and a prolonged recovery period 
that often is marked by significant PAC needs, potential complications 
of surgery, and more intense management of chronic conditions that may 
be destabilized by the surgery. In light of the course of recovery from 
LEJRs for Medicare beneficiaries, we proposed that an episode in the 
CJR model end 90 days after discharge from the acute care hospital in 
which the anchor hospitalization (for MS-DRG 469 or 470) took place. 
Hereinafter, we refer to the proposed CJR model episode duration as the 
``90-day post-discharge'' episode. To the extent that a Medicare 
payment for included services spans a period of care that extends 
beyond the episode duration, we proposed that these payments would be 
prorated so that only the portion attributable to care during the fixed 
duration of the episode is attributed to the episode spending.
    We noted that for the vast majority of beneficiaries undergoing a 
hip or knee joint replacement, a 90-day post-

[[Page 73320]]

discharge episode duration encompasses the full transition from acute 
care and PAC to recovery and return to activities. We stated our belief 
that the 90-day post-discharge episode duration encourages acute care 
hospitals, physicians, and PAC providers to promote coordinated, 
quality care as the patient transitions from the inpatient to 
outpatient settings and the community.
    In proposing the 90-day post-discharge duration for LEJR episodes 
in CJR, we took into consideration the literature regarding the 
clinical experiences of patients who have undergone THA or TKA 
procedures. In 2007-2008, the 30-day all-cause readmission rate for 
primary THA among Medicare beneficiaries was 8.5 percent, while the 90-
day all-cause readmission rate was 11.9 percent, indicating that while 
the rate of readmission begins to taper after 30 days, readmissions 
continue to accrue throughout this 90 day window.\6\ In single center 
studies, Schairer et al found unplanned 30-day hospital readmission 
rates were 3.5 percent and 3.4 percent and unplanned 90-day hospital 
admission rates were 4.5 percent and 6 percent for primary THA and TKA, 
respectively, demonstrating that the risk of readmission remains 
significantly elevated from 30 through 90 days post-hospital 
discharge.\7\ \8\ Further exploring the reasons for unplanned admission 
for TKAs within 90 days of a knee replacement procedure, Schairer et al 
found that 75 percent were caused by surgical causes such as 
arthrofibrosis and surgical site infection. Additional information on 
the common reasons for hospital readmission following TKA or THA can be 
obtained from The American College of Surgeons National Surgical 
Quality Improvement Program.\9\ These data identified the top 10 
reasons for readmission within 30 days of a hip or knee arthroplasty:
---------------------------------------------------------------------------

    \6\ Cram P, Lu X, Kates SL, Singh JA, Li Y, Wolf BR. Total Knee 
Arthroplasty Volume, Utilization, and Outcomes Among Medicare 
Beneficiaries, 1 991-2010. JAMA. 2012;308(12):1227-1236. 
doi:10.1001/2012.jama.11153.
    \7\ Schairer WW, et al. Causes and frequency of unplanned 
hospital readmission after total hip arthroplasty. Clin Orthop Relat 
Res. 2014 Feb;472(2):464-70. doi: 1 0.1007/s11999-013-3121-5.
    \8\ Schairer WW, et al. What are the rates and causes of 
hospital readmission after total knee arthroplasty? Clin Orthop 
Relat Res. 2014 Jan;472(1):181-7. doi: 1 0.1007/s11999-013-3030-7.
    \9\ Merkow RP, Ju MH, Chung JW, et al. Underlying Reasons 
Associated With Hospital Readmission Following Surgery in the United 
States. JAMA. 2015;313(5):483-495. doi:10.1001/jama.2014.18614.
---------------------------------------------------------------------------

     Surgical site infections (18.8 percent).
     Prosthesis issues (7.5 percent).
     Venous thromboembolism (6.3 percent).
     Bleeding (6.3 percent).
     Orthopedic related (5.1 percent).
     Pulmonary (3.2 percent).
     Cardiac (2.4 percent).
     CNS or CVA (2.4 percent).
     Ileus or Obstruction (2.3 percent).
     Sepsis (2.1 percent).
    In addition, the authors concluded that ``readmissions after 
surgery were associated with new post-discharge complications related 
to the procedure and not exacerbation of prior index hospitalization 
complications, suggesting that readmissions after surgery are a measure 
of post-discharge complications.'' Finally, with regard to the 
potential for readmission for joint replacement revision within a 90-
day post-discharge episode, in a twelve-year study on Medicare patients 
conducted by Katz, et al., the risk of revision after THA remained 
elevated at approximately 2 percent per year for the first eighteen 
months and then 1 percent per year for the remainder of the follow-up 
period.\10\ This study suggests that a longer episode, as opposed to a 
shorter episode, is more likely to simulate the increased risk of 
revision LEJR patients face.
---------------------------------------------------------------------------

    \10\ Katz JN, et al. Twelve-Year Risk of Revision After Primary 
Total Hip Replacement in the U.S. Medicare Population. J Bone Joint 
Surg Am. 2012 Oct 1 7; 94(20): 1 825-1832. doi: 1 0.2106/
JBJS.K.00569.
---------------------------------------------------------------------------

    In order to address the complication rates associated with elective 
primary total hip or knee arthroplasty, we developed an administrative 
claims-based measure (for a detailed description of the measure see 
section III.D. of the proposed rule). During the development of the 
Hospital-level Risk-Standardized Complication Rate (RSCR) following 
elective primary THA or TKA or both, complications of elective primary 
total hip or knee replacement were identified to occur within specific 
timeframes.\11\ For example, analyses done during the development of 
the measure as well as Technical Expert Panel opinion found that--(1) 
Mechanical complications and periprosthetic joint infection/wound 
infection are still attributable to the procedure for the 90 days 
following admission for surgery; (2) death, surgical site bleeding, and 
pulmonary embolism are still likely attributable to the hospital 
performing the procedure for up to 30 days; and (3) medical 
complications of acute myocardial infarction (AMI), pneumonia, and 
sepsis/septicemia/shock are more likely to be attributable to the 
procedure for up to 7 days.
---------------------------------------------------------------------------

    \11\ Hospital Quality Initiatives. Measure Methodology. 
Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. See Hip and Knee Arthroplasty Complications zip 
file under downloads. Accessed on April 10, 2015.
---------------------------------------------------------------------------

    Other factors further supporting a 90-day post-discharge episode 
duration are the elevated risk of readmission throughout this time 
period, as well as the fact that treatment for pneumonia is considered 
by American Thoracic Society guidelines to be ``health care-
associated'' if it occurs up to 90 days following an acute care 
hospitalization of at least 2 days.\12\ According to the American 
Academy of Orthopedic Surgeons, patients undergoing total hip 
replacement should be able to resume most normal light activities of 
daily living within 3 to 6 weeks following surgery.\13\ In a small 
randomized controlled trial of two approaches to hip arthroplasty, 
average time to ambulation without any assistive device was 22-28 
days.\14\ According to a 2011 systematic review of studies evaluating 
physical functioning following THA, patients have recovered to about 80 
percent of the levels of controls by 8 months after surgery.\15\
---------------------------------------------------------------------------

    \12\ Guidelines for the management of adults with hospital-
acquired, ventilator-associated, and healthcare-associated 
pneumonia. American Thoracic Society, Infectious Diseases Society of 
America. Am J Respir Crit Care Med. 2005;171(4):388.
    \13\ https://orthoinfo.aaos.org/topic.cfm?topic=A00377.
    \14\ Taunton MJ, et al. Direct Anterior Total Hip Arthroplasty 
Yields More Rapid Voluntary Cessation of All Walking Aids: A 
Prospective, Randomized Clinical Trial The Journal of Arthroplasty. 
Volume 29, Issue 9, Supplement, September 2014, Pages 169-172.
    \15\ Vissers MM, et al. Recovery of Physical Functioning After 
Total Hip Arthroplasty: Systematic Review and Meta-Analysis of the 
Literature. Physical Therapy May 2011 vol. 91 no. 5 615-629.
---------------------------------------------------------------------------

    We also refer readers to a study by the Assistant Secretary for 
Planning and Evaluation (ASPE) in the U.S. Department of Health and 
Human Services that assessed the mean payments for acute care, PAC, and 
physician services grouped in the MS-DRG 470.\16\ In this study, CMS 
payment for services following an MS-DRG 470 hospitalization were 
concentrated within the first 30 days following discharge, with 
plateauing of payments between 60- or 90-days post-discharge.
---------------------------------------------------------------------------

    \16\ Post-Acute Care Episodes Expanded Analytic File. Assistant 
Secretary for Planning and Evaluation. U.S. Department of Health and 
Human Services. April 2011.

---------------------------------------------------------------------------

[[Page 73321]]

[GRAPHIC] [TIFF OMITTED] TR24NO15.001

    Finally, payment and length of stay analyses found the average 
length of stay in PAC during a 90-day post-discharge episode for MS-DRG 
470 to be 47.3 days, indicating that a longer period post-discharge of 
90 days is reasonable as a proposal to end the episode of care.\17\ We 
noted that these analyses did not include any time between hospital 
discharge and the start of PAC.
---------------------------------------------------------------------------

    \17\ Analysis of Post-Acute Care Episode Definitions File. 
https://innovation.cms.gov/initiatives/bundled-payments/learning-area.html.

            Table 6--Cost and Length of Stay Statistics for MS-DRG 470 for Various Episode Durations
----------------------------------------------------------------------------------------------------------------
               Statistics for DRG 470  (2006 data)                30-day episode  60-day episode  90-day episode
----------------------------------------------------------------------------------------------------------------
Mean Medicare spending per hospital discharge...................         $18,838         $20,343         $21,125
(acute+PAC+physician)...........................................
Mean payment for anchor hospitalization.........................         $10,463         $10,463         $10,463
Mean payment for PAC............................................          $6,835          $8,339          $9,122
Mean payment for physicians (during anchor hospitalization).....          $1,540          $1,540          $1,540
Mean payment for readmission (includes all PAC users, even if no            $550            $929          $1,242
 readmission occurs during the episode).........................
Mean length of stay (LOS) for PAC...............................       25.5 days       39.6 days       47.3 days
----------------------------------------------------------------------------------------------------------------
Note: Data are per PAC user (88% of beneficiaries hospitalized under MS-DRG 470 are discharged to PAC). PAC
  users are defined as beneficiaries discharged to SNF, IRF, or LTCH within 5 days of discharge from the index
  acute hospitalization, or discharged to HHA or hospital outpatient therapy within 14 days of discharge from
  the index acute hospitalization. Mean LOS for PAC does not include any gap between hospital discharge date and
  start of PAC.

    Other tests of bundled payment models for hip and knee replacement 
have used 90-day post-discharge episodes.\18\ We also noted that 
despite BPCI Model 2 allowing participants a choice between 30-, 60-, 
or 90-day post-discharge episodes, over 86 percent of participants have 
chosen the 90-day post-discharge episode duration for the

[[Page 73322]]

LEJR episode. Furthermore, a 90-day post-discharge episode duration 
aligns with the 90-day global period included in the Medicare Physician 
Fee Schedule (MPFS) payment for the surgical procedure.
---------------------------------------------------------------------------

    \18\ Ridgely MS, et al. Bundled Payment Fails To Gain A Foothold 
In California: The Experience Of The IHA Bundled Payment 
Demonstration. Health Affairs, 33, no.8 (2014):1345-1352.
---------------------------------------------------------------------------

    We also considered proposing a 60-day post-discharge episode 
duration, but the full transition of care following LEJR would exceed 
this window for some beneficiaries, especially those who are discharged 
to an institutional PAC provider initially and then transition to home 
health or outpatient therapy services for continued rehabilitation. 
According to a report from ASPE on Medicare beneficiaries receiving PAC 
following major joint replacement in 2006, 13 percent first receive SNF 
services and then receive HHA services--with a total mean episode 
duration of 56.8 days.\19\ An additional 9.2 percent receive HHA 
services first and then receive outpatient therapy services--with a 
total mean episode duration of 78.7 days. Finally, 6.7 percent receive 
IRF services first and then HHA services (total mean length of stay 
55.3 days), and 4.8 percent receive SNF services first and then 
outpatient therapy services (total mean length of stay 71.5 days). The 
remainder only receives one type of PAC.
---------------------------------------------------------------------------

    \19\ Examining Post-Acute Care Relationships in an Integrated 
Hospital. Assistant Secretary for Planning and Evaluation. U.S. 
Department of Health and Human Services. February 2009
---------------------------------------------------------------------------

    Therefore, in order to be inclusive of most possible durations of 
recovery, and services furnished to reach recovery, we proposed the 90-
day post-discharge episode duration for CJR. We stated our belief that 
beneficiaries will benefit from aggressive management and care 
coordination throughout this episode duration, and hospitals will have 
opportunities under CJR to achieve efficiencies from care redesign 
during the 90-day post-discharge episode period.
    We sought comment on our proposal to end the episode 90 days after 
the date of discharge from the anchor hospitalization, as well as on 
the alternative we considered of ending the CJR episode 60 days after 
the date of discharge.
    The following is a summary of the comments received and our 
responses.
    Comment: Most commenters supported the 90-day post-discharge 
episode duration. Many of these commenters provided rationales for 
supporting the 90-day duration (as compared to 60 days or other shorter 
durations), such as: It is a clinically appropriate length to manage an 
LEJR to recovery; it creates strong incentives for collaboration for 
multiple providers across the care continuum that improves care 
transitions and care coordination; it will promote better long-term 
results; it aligns with quality measures; and it is the most popular 
timeframe selected for BPCI Model 2. Some of these commenters asserted 
that a shorter duration is not sufficiently long to capture the vast 
majority of issues arising directly from LEJR procedures and could put 
beneficiary care at risk by encouraging providers to reduce utilization 
inappropriately or shift utilization outside of an episode.
    A few commenters supported a 90-day episode duration, but 
recommended that we revise the 90-day post-discharge episode duration 
to begin from the date of surgery instead of discharge, thereby 
aligning the episode with the MPFS global surgical period and billing 
policies. A commenter who appeared to believe that CMS proposed to 
begin the CJR episode immediately after discharge from the anchor 
hospitalization and extend the episode 90 days post-hospital discharge, 
rather than upon admission for the anchor hospitalization as CMS 
actually proposed, asserted that beginning the episode after hospital 
discharge would make it difficult to understand and account for patient 
acuity changes within the episode in the post-discharge period as the 
hospital length-of-stay is related to the PAC acuity of the beneficiary 
following hospital discharge, especially if the beneficiary has 
comorbidities. In other words, the commenter believed that 
beneficiaries with comorbidities would be more likely to have longer 
anchor hospitalizations and associated higher intensity of PAC 
services, yet CMS would not understand these relationships if the 
anchor hospitalization was not included in the episode.
    Several commenters supported a 60-day post-discharge episode 
duration because LEJR patients are nearly fully recovered within 60 
days. Some commenters asserted that PAC services associated with LEJR 
rarely occur after 60 days post-discharge; some commenters cited data 
that the majority of services for patients with LEJR surgery occur 
within two months of discharge with only a 6.2 percent change in the 
total cost of an episode between a 60-day episode and a 90-day episode. 
Some of these commenters asserted that a 60-day episode would be 
sufficient to evaluate quality and cost, and a longer duration would 
increase the financial risk for hospitals without providing significant 
value to CMS. Some commenters asserted that a 90-day duration increases 
the risk that unrelated random events that occur well after surgery 
will disadvantage the hospitals by unfairly impacting participants' 
performance.
    Some commenters recommended a hybrid approach, with every service 
within the first 30 days post-discharge assumed to be related unless 
specifically excluded, and services in days 31-90 included only if they 
meet specified criteria for relatedness.
    Some commenters recommended that the episode end prior to 60 days 
post-discharge. A commenter recommended an episode length of 45 to 60 
days, asserting that hospital admissions past the 45 to 60 day window 
would be for chronic medical admissions that are unrelated to the LEJR 
procedure. A few commenters recommended that we limit the episode to 30 
days citing various rationales, such as: A SNF stay must commence 
within 30 days of a hospitalization; 30 days better aligns with other 
quality improvement initiatives such as readmissions; analyses by 
Medicare Payment Advisory Commission (MedPAC) and the Congressional 
Budget Office that found that the majority of a bundled payment's 
episode costs are incurred during the first 30 days; and hospitals may 
find it difficult to manage follow-up care after 30 days if patients 
have more than one residence. Several commenters asserted that multiple 
factors can exacerbate comorbidities in the period beyond 30 days post-
operatively, and a model of longer duration that broadly defines 
related services could result in participant hospitals being more 
cautious about selecting patients for LEJR and complex patients being 
discouraged from seeking LEJR procedures in a participant hospital. A 
few of these commenters noted that Tennessee and Arkansas only include 
30 days post-discharge for unrelated chronic conditions in their 
bundled payment episodes. A commenter shared its experience that, while 
nearly all patients are diligent about keeping 14-day and 30-day post-
operative appointments, those with good outcomes are less likely to 
return for appointments at 90 days and beyond, resulting in potentially 
skewed outcomes as patients with complications are much more likely to 
keep a follow-up appointment at 90 days.
    Some commenters recommended giving participant hospitals the 
flexibility to define the episode duration, either as a duration for 
all of a participant hospital's LEJR episodes, or to choose a duration 
based on a patient's clinical condition and comorbidities. A couple of 
commenters

[[Page 73323]]

recommended that if CMS offers participants the option to choose the 
duration, consistent with BPCI, CMS should lower the discount 
percentage for those willing to take the longer episodes. A commenter 
disagreed with CMS' cited rationale of the operational simplicity of a 
single duration for all LEJR episodes by noting that BPCI Model 2 
operationalized a variety of different bundles and gave participants 
the choice of three durations for 48 different clinical episodes.
    Other commenters suggested even longer episode durations. A 
commenter recommended increasing the episode duration to 150 days post-
discharge to promote better long-term results and reduce the likelihood 
of delaying care beyond the end of the episode, specifically urging CMS 
to adopt a longer episode period for certain clinically-complex 
subpopulations with predictably longer recovery timeframes. For outcome 
and quality measurement purposes, some commenters recommended that 
participant hospitals be held accountable for a longer period, with 
suggestions of six months, a year, and even two to three years. A 
commenter recommended increasing the episode duration to two years to 
better manage the improvements for the entirety of the treatment. A 
commenter recommended increasing the episode duration to five years to 
account for the late effects of sub-optimal implant selection.
    Response: We appreciate the support of many commenters for the 
proposed 90-day post-hospital discharge CJR model episode duration. We 
agree with the commenters that this relatively long episode duration 
should capture the great majority of health care services that are 
related to the episode, as well as the beneficiary's return to function 
and short- and medium-term health outcomes. We believe this episode 
duration provides participant hospitals with a substantial period of 
time in which to work to improve the quality and efficiency of LEJR 
episode performance for beneficiaries who undergo LEJR surgery at their 
hospital. We have substantial BPCI Model 2 experience with Awardees 
engaged in testing 90-day LEJR episodes, and note that the vast 
majority of Awardees have selected the 90-day episode duration, 
compared to the 30-day and 60-day alternative durations that are 
available in the model. Our goal is to incentivize efficient high 
quality care that returns people to the community, and we believe that 
a 90-day post-discharge duration reflects a full continuum of clinical 
services and transition of care following LEJR procedures for the 
average beneficiary, at which time the patient's functional recovery is 
relatively complete and the patient is able to resume most normal 
activities of daily living.
    Due to the concentration of Medicare spending in the earlier part 
of the episode, we also believe that a 90-day episode duration only 
nominally increases the hospital's financial risk when compared to 30 
or 60 days. While we understand that uncommon events during the 90-day 
episode may occur for an individual beneficiary, resulting in an 
unanticipated or unavoidable need for costly health care services, we 
believe that our episode definition that excludes unrelated items and 
services and our payment policies, namely the adjustment for high 
payment episodes and stop-loss policies discussed in sections III.C.3. 
and III.C.8. of this final rule, provide sufficient protections for 
participant hospitals from undue financial responsibility for the care 
of unrelated clinical conditions as well as for unusual circumstances. 
We also believe that shorter episode durations may incur a higher 
clinical risk for beneficiaries if participants delay services beyond 
the episode, and the risk to beneficiaries of this response by 
providers to episode payment that can be minimized by the longer 90-day 
episode duration that we proposed. We refer readers to sections 
III.F.3. and 5. of this final rule for discussion of our plans to 
monitor for access to care and delayed care.
    In response to those commenters requesting a hybrid approach where 
CMS would include a broader set of related services in the 30 days 
following discharge from the anchor hospitalization and a more limited 
set of related services from days 31 to 90 because of the closer 
clinical link of a beneficiary's clinical conditions in the first 30 
days to the events during the anchor hospitalization itself, we 
emphasize that the CJR model is an episode payment model where many 
Medicare beneficiaries who receive PAC services as part of their post-
operative recovery from surgery will also have underlying health 
conditions that may be affected by the surgery itself and care 
throughout the recovery period and that require attentive, flexible 
management if good health outcomes are to be achieved. Because PAC 
services are designed to be comprehensive in nature, we believe that 
the same Part A and Part B services should be included throughout the 
episode duration because PAC providers should broadly address the 
beneficiary's health care needs in high quality, efficient episodes, 
even though the anchor hospitalization itself may be more remote from 
the beneficiary's health needs as the time from hospital-discharge 
increases. As discussed in section III.A.3. of this final rule, we have 
identified hospitals as the financially responsible organization for 
the episode, although episode quality and cost performance will clearly 
be related in part to the quality and efficiency of care furnished by 
other providers and suppliers treating the beneficiary throughout the 
episode. We expect that participant hospitals will develop the care 
pathways and partnerships with other providers and suppliers necessary 
for the hospital to be successful in this responsibility, and this 
model provides a variety of tools that should be helpful to participant 
hospitals, such as waivers of Medicare program rules, the opportunity 
to engage in certain financial arrangements, and the ability to offer 
certain beneficiary incentives (as discussed in sections III.C.11. and 
III.C.10. of this final rule, respectively).
    We appreciate the interest of some commenters in significantly 
longer episodes than the 90 days post-hospital discharge period we 
proposed, in order to include the longer recovery period that some 
beneficiaries may require as well as to account for longer term health 
outcomes, because the timing or frequency of joint replacement 
revisions may be related to implant selection, surgical technique, or 
other aspects of the primary joint replacement procedure. However, as 
previously noted, we believe that a 90-day post-discharge duration 
reflects a full continuum of clinical services and transition of care 
following LEJR procedures for the average CJR beneficiary, and we do 
not believe it would be an appropriate test of the model to extend the 
CJR episode duration beyond 90 days post-hospital discharge to reflect 
the longer recovery needed by some beneficiaries. Moreover, as noted 
previously in this section, the CJR model focuses on the surgical 
procedure and the associated recovery, and at this time, we are not 
testing a model of longer term outcomes. Therefore, we are not going to 
incorporate a longer time period in the episode, and will not include 
periods beyond then, other than to monitor the 30-day post-episode 
period. The 30-day post-episode period is discussed in section 
III.C.8.d. of this final rule, where we describe the CJR model policy 
that holds participant hospitals financially responsible for 
significantly increased Medicare Parts A and B spending in the 30 days 
immediately following the end of the episode. We note that the

[[Page 73324]]

evaluation described in section IV. of this final rule will focus on a 
variety of key topics including potential unintended consequences such 
as cost shifting beyond the CJR model episode period and stinting on 
medically necessary and appropriate care. As such, CMS anticipates the 
examination of claims submitted beyond the 90-day episode will be 
incorporated in the evaluation strategy. Finally, we maintain that 
allowing for multiple durations would be administratively complex for a 
model of this scope as it would be akin to implementing multiple models 
concurrently, each with its own customized payment calculations, risk 
adjustments, and other elements. We do not believe a variable approach 
such as is used in BPCI, which is a voluntary model, is appropriate for 
this large test of LEJR episode payment for all IPPS hospitals in the 
selected MSAs, as it would greatly increase the administrative 
complexity of the CJR model. We also believe that a standard duration 
for all episodes is important for this test of LEJR episode payment in 
providing us with a larger sample of episodes of the same duration from 
which we can learn.
    Regarding the request to align the CJR model episode duration with 
the MPFS by beginning the 90-day duration on the date of surgery, 
rather than on the date of discharge from the hospital, we do not agree 
with this suggestion. We believe that the 90-day global surgical period 
for LEJR procedures under the MPFS lends support for an episode 
duration under the CJR model that is similar, because beneficiaries 
have a significant post-operative recovery period throughout which 
close care coordination and management among treating providers is 
important to beneficiary return to function. The MPFS global payment 
policy sets an expectation that the operating surgeon plays a 
significant role in caring for beneficiaries in the typical case that 
extends up to 90 days following surgery. However, using this same 90-
day accounting methodology under the CJR episode would lead to model 
episodes including variable post-discharge lengths because the duration 
of the anchor hospitalization, which can vary substantially, would 
count toward the 90 days. We are interested in testing under the CJR 
model an episode duration that is most likely to cover the time for the 
beneficiary's full recovery and return to the community so we believe 
that including a standard length of 90 days post-hospital discharge is 
the best way to ensure that each CJR beneficiary's episode includes the 
same length of post-hospital discharge recovery in the episode. We do 
not believe the minor 90-day definitional differences between this 
model and the MPFS global billing policies for LEJR procedures should 
create significant problems for physicians collaborating with 
participant hospitals in the episode care of CJR model beneficiaries.
    In response to the commenter concerned that starting the bundle 
after hospital discharge would make it difficult to account for patient 
acuity changes post-discharge under the CJR model, we want to emphasize 
that the CJR model episode actually begins on the day of admission for 
the anchor hospitalization and extends 90 days post-hospital discharge, 
with the day of hospital discharge counting as the first day in the 90-
day post-hospital discharge period. Thus, the episode includes the full 
anchor hospital length-of-stay that may affect changes in patient 
acuity in the post-discharge period. We note that according to this 
episode duration definition, episodes for individual beneficiaries will 
have a variable total length that depends on the length of the anchor 
hospitalization. For example, the average length-of-stay for MS-DRG 470 
is 3 days, so the average CJR model episode length for an individual 
beneficiary would be 92 days. The average length-of-stay for MS-DRG 569 
is 6 days, so the average CJR model episode length for an individual 
beneficiary would be 95 days. Despite their variable total length, all 
CJR model episodes will include the complete anchor hospitalization and 
90 days post-hospital discharge and, therefore, will include all 
related items and services furnished to the beneficiary throughout the 
episode, including those provided to address beneficiary acuity changes 
during the hospitalization and post-discharge period.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing our proposal to end the episode 
90 days after discharge from the anchor hospitalization. We are 
revising the definition of Episode of care to clarify that the day of 
discharge itself counts as the first day of the post-discharge period 
and adding the same clarification to Sec.  510.210(a)
    The final definitions policies for ending an episode are set forth 
in Sec.  510.2 and


Sec.  510.210(a).  

C. Methodology for Setting Episode Prices and Paying Model Participants 
Under the CJR Model

1. Background
    As described in section II.B. of the proposed rule, we proposed to 
use the CJR episode payment model to incentivize participant hospitals 
to work with other health care providers and suppliers to improve 
quality of care for Medicare beneficiaries undergoing LEJR procedures 
and post-operative recovery, while enhancing the efficiency with which 
that care is provided. We proposed to apply this incentive by paying 
participant hospitals or holding them responsible for repaying Medicare 
based on their CJR episode quality and Medicare expenditure 
performance. The following sections describe our final decisions for 
the--
     Performance years covered by the model, the retrospective 
methodology that will be applied, and the application of two-sided risk 
beginning in the second year of the model;
     Adjustments that will be made to payments included in the 
episode;
     Episode price setting methodology;
     Use of quality performance in the payment methodology;
     Process for reconciliation;
     Adjustments for overlaps with other CMMI models and CMS 
programs;
     Limits and adjustments on hospitals' financial 
responsibility;
     Appeal procedures for reconciliation;
     Financial arrangements and beneficiary incentives; and
     Waivers of Medicare program rules.
2. Performance Years, Retrospective Episode Payment, and Two-Sided Risk 
Model
a. Performance Period
    We proposed that the CJR model would have 5 performance years. The 
performance years would align with calendar years, beginning January 1, 
2016. Table 7 includes details on which episodes would be included in 
each of the 5 performance years.

[[Page 73325]]



            Table 7--Proposed Performance Years for CJR Model
------------------------------------------------------------------------
                                                  Episodes included in
      Performance year         Calendar year        performance year
------------------------------------------------------------------------
1...........................  2016...........  Episodes that start on or
                                                after January 1, 2016,
                                                and end on or before
                                                December 31, 2016.
2...........................  2017...........  Episodes that end between
                                                January 1, 2017, and
                                                December 31, 2017,
                                                inclusive.
3...........................  2018...........  Episodes that end between
                                                January 1, 2018, and
                                                December 31, 2018,
                                                inclusive.
4...........................  2019...........  Episodes that end between
                                                January 1, 2019, and
                                                December 31, 2019,
                                                inclusive.
5...........................  2020...........  Episodes that end between
                                                January 1, 2020, and
                                                December 31, 2020,
                                                inclusive.
------------------------------------------------------------------------

    Under our proposal, all episodes tested in this model would have 
begun on or after January 1, 2016 and ended on or before December 31, 
2020. We noted that this definition would result in performance year 1 
being shorter than the later performance years in terms of the length 
of time over which an anchor hospitalization could occur under the 
model. We also noted that some episodes that began in a given calendar 
year may be captured in the following performance year due to the 
episodes ending after December 31st (for example, episode beginning in 
December 2016 and ending in March 2017 would be part of performance 
year 2). We stated our belief that 5 years would be sufficient time to 
test the CJR model and gather sufficient data to evaluate whether it 
improves the efficiency and quality of care for an LEJR episode of 
care. Further, having fewer than 5 performance years may not provide 
sufficient time or data for evaluation. The 5-year performance period 
is consistent with the performance period used for other CMMI models 
(for example, the Pioneer Accountable Care Organization (ACO) Model).
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters supported our proposal for a 5-year 
performance period as well as our proposed start date of January 1, 
2016. However, a substantial number of commenters expressed concerns 
over the proposed start date and requested that we delay implementation 
of the model. Most of these commenters expressed concerns about the 
ability of participants to successfully participate in the model, given 
the proposed timeframes. Commenters noted that participants would need 
additional time for activities such as developing a new infrastructure 
with respect to provider networks, which would include identifying and 
establishing contracts with collaborators as well as determining 
appropriate incentives and gainsharing structures; identifying and 
developing new care pathways and performance metrics; and developing as 
well as modifying accounting and IT systems. In particular, a number of 
commenters expressed concern with the proposed start date in light of 
the requirement that hospitals begin to assume risk in the second year 
of the model, which is discussed further later in this section. 
Moreover, given variation in hospital preparedness, these kinds of 
issues could be particularly acute for certain kinds of hospitals, for 
example, smaller hospitals or those with more limited resources. Also, 
as discussed in section III.E of this final rule, commenters noted that 
their ability to implement the previously stated changes would be 
impeded by not having received baseline and episode-level data from CMS 
until after the proposed start date. Commenters indicated that these 
data would be essential to identifying opportunities and strategies for 
quality and efficiency improvement, and that the model should be 
delayed until after they have had a chance to review and understand 
their own episode data.
    We also received comments suggesting that implementation of the 
model is premature and that it should be delayed until certain actions 
or events have occurred, for example, until certain quality measures 
have been developed, data required under the Improving Medicare Post 
Acute Care Transformation Act of 2014 (Pub. L. 113-185, enacted October 
6, 2014) (IMPACT Act) have been collected or analyzed, or CMS has 
considered the results of other bundled payment models such as BPCI. 
For example, several commenters requested a phased implementation of 
the CJR model, due to the limited evaluation results that have been 
publicly released to date for BPCI, and to allow for testing and 
monitoring of the CJR model prior to full implementation. Another 
commenter asserted that a phased-in approach to implementing CJR is 
appropriate, given that while episode-based payment models have shown 
potential to reduce cost, rigorous studies and evaluation data on 
episode-based payment models are limited. Some commenters expressed the 
view that CMS' timeline ignores multiple competing mandates that 
hospitals and other providers have, for example, ICD-10-CM 
implementation as well as EHR Meaningful Use and other quality-related 
programs.
    In addition, we received a comment urging a delayed start date due 
to concerns on how requirements with respect to the civil monetary 
penalty (CMP) law (sections 1128A(a)(5), (b)(1) and (b)(2) of the Act), 
the Federal Anti-kickback statute (section 1128B(b)(1) and (2) of the 
Act), or the physician self-referral prohibition (section 1877 of the 
Act) would apply under the model. For example, a commenter noted that 
the proposed rule offered insufficient protection from certain 
statutory and regulatory risks associated with developing coordinated 
care arrangements among providers and that significant ambiguity and 
challenges existed with respect to compliance with these requirements.
    Commenters also stated that in contrast to our proposed start date 
for the CJR model, CMS allowed voluntary BPCI participants, who were 
more likely to be well positioned to participate in an episode-based 
payment model, at least one year to consider their episode data, yet 
many of them likely found the program and timing demands challenging. 
Further, mandating the program, especially for unprepared participants, 
could result in even greater challenges, and increase the chance of 
failure and disruption of health care services for Medicare 
beneficiaries.
    Some commenters offered examples of how, in their view, 
implementing the model by the proposed start date could result in 
unintended consequences such as reduced access for beneficiaries or 
lower care quality. For example, commenters suggested that the proposed 
timeframe could cause hospitals to make care redesign choices that 
reduced access for beneficiaries or certain kinds of beneficiaries such 
as those who posed greater risk or that care quality could be 
compromised because participants would have had insufficient time to 
implement new care practices.
    Given these concerns, commenters generally requested that we delay 
the start date by a specific period of time, for example, by three 
months, six months, nine months or a year, with most commenters 
requesting a delay of nine months to a year. Some

[[Page 73326]]

commenters recommended delay periods of two years or more. In some 
cases, commenters tied their proposed delay period to an event, for 
example, some period of time subsequent to having received baseline and 
episode-level data from CMS. Some commenters requested that only the 
mandatory aspect of the model be delayed, allowing providers willing to 
participate the opportunity to do so or, in the event of a delayed 
start date, providers be permitted to voluntarily opt-in to the model 
prior to the date of implementation. As such, providers who had begun 
to prepare for the model could begin to generate cost savings while 
driving improvements in quality and patient experience for LEJR 
patients.
    Response: We appreciate the comments we received in support of our 
proposed performance period and start date. We also appreciate and are 
persuaded by comments expressing concerns that our proposed start date 
does not provide sufficient time for participants to implement the 
kinds of changes needed to successfully participate in the model, 
particularly given that baseline data would not be available until 
after our proposed start date of January 1, 2016. Accordingly, this 
final rule will delay the start date of the model to April 1, 2016. 
Also, as indicated in section III.E.4 of this rule, we intend to make 
participating hospitals' baseline data available upon request in 
advance of the April 1, 2016 start date, which will allow participants 
the opportunity to assess their baseline data as they consider changes 
to their care practices in advance of the model's start date. Also, as 
discussed in section III.C.8. of this final rule, we are reducing the 
potential risk to participants in Year 2 by lowering the stop-loss 
limit from 10 percent to 5 percent (and from 20 percent to 10 percent 
in Year 3). We believe that these changes will both facilitate 
participants' abilities to be successful under this model and allow for 
a more gradual transition to full financial responsibility under the 
model.
    Table 8 includes details on which episodes would be included in 
each of the 5 performance years under this delay.

                Table 8--Performance Years for CJR Model
------------------------------------------------------------------------
                                                  Episodes included in
      Performance year         Calendar year        performance year
------------------------------------------------------------------------
1...........................  2016...........  Episodes that start on or
                                                after April 1, 2016, and
                                                end on or before
                                                December 31, 2016.
2...........................  2017...........  Episodes that end between
                                                January 1, 2017, and
                                                December 31, 2017,
                                                inclusive.
3...........................  2018...........  Episodes that end between
                                                January 1, 2018, and
                                                December 31, 2018,
                                                inclusive.
4...........................  2019...........  Episodes that end between
                                                January 1, 2019, and
                                                December 31, 2019,
                                                inclusive.
5...........................  2020...........  Episodes that end between
                                                January 1, 2020, and
                                                December 31, 2020,
                                                inclusive.
------------------------------------------------------------------------

    Under this revised schedule, all episodes tested in this model will 
have begun on or after April 1, 2016 and ended on or before December 
31, 2020. Additional discussion on how this revised performance year 
schedule affects the use of quality measures for the model and the 
timeline for the reconciliation process is included in sections 
III.C.5. and III.C.6. of this final rule.
    We do not agree that a longer delay is needed. Hospital 
participants will not be financially responsible for repayment to 
Medicare until the second performance year of the model. In addition, 
as discussed in section III.C.8. of this final rule, we have further 
limited financial risk to hospitals in performance years 2 and 3 by 
lowering stop-loss limits; specifically, from 10 percent to 5 percent 
in Year 2, and from 20 percent to 10 percent in Year 3. Finally, while 
we note that commenters are correct that voluntary BPCI participants 
received claims data prior to taking on risk under the BPCI model, and 
in some cases had more than a year to prepare for participation in 
BPCI, we believe that providing claims data to CJR participants in 
early 2016 and beginning the model April 1, 2016 is appropriate for 
several reasons. First, we note that under BPCI, voluntary participants 
in Phase I had the option of receiving claims data for multiple 
episodes, up to the 48 clinical episodes included in the BPCI 
initiative. The CJR model will only include one type of episode, and as 
such we believe it is reasonable for hospitals to begin to analyze data 
and identify care patterns and opportunities for care redesign for this 
episode in our stated implementation timeline. We also note that due to 
the gradual implementation of downside risk, we expect that hospitals 
would spend the first performance year of the model analyzing data, 
identifying care pathways, forming clinical and financial relationships 
with other providers and suppliers, and assessing opportunities for 
savings under the model, utilizing the quarterly claims data we provide 
to them. This is similar to the approach we took to allow hospitals to 
participate in Phase I of BPCI prior to entering Phase II (the risk-
bearing phase). As noted in this section, participant hospitals would 
also be eligible to receive reconciliation payments for performance 
year 1 if actual spending is below the target price. We believe that 
our implementation timeline is reasonable, given the financial 
opportunity for hospitals to earn reconciliation payments for 
performance year 1 and the gradual transition to financial 
responsibility.
    We are also not persuaded by commenters that implementation of the 
model is premature or that it should be delayed until results for BPCI 
or other episode-based payment models are available. While we 
anticipate that the BPCI model will offer valuable information that 
should assist CMS in developing bundling payment models, the CJR model 
will offer additional insights that are not available under the BPCI 
model; in particular, insights with respect to bundling payment models 
on a mandatory rather than voluntary basis. Thus, we will be able to 
observe how a bundling payment model might work with participants that 
would otherwise not participate in such a model. As such, we expect the 
results from this model should produce data that are more broadly 
representative than what might be achieved under a voluntary model. 
Also, this model tests a different target pricing approach than the one 
used in BPCI. BPCI uses a purely participant-specific pricing approach, 
rewarding participants for improving based on their historical 
performance. While this may incentivize historically less efficient 
participants to improve, there may not be as much incentive for already 
efficient participants. The regional target pricing approach for this 
model, though, would consider a participant hospital's performance 
relative to its regional peers. As part of this test, we will learn 
whether our alternative pricing approach in this model will better 
incentivize participants who are already delivering high quality and 
efficient care while

[[Page 73327]]

still incentivizing historically less efficient providers to improve. 
We would not be able to test such a regional pricing approach under a 
purely voluntary model because it is likely that only the already high 
quality and efficient providers would sign up.
    We would note that we have released final evaluation results from 
the ACE demonstration, which determined that the demonstration led to 
reduced episode spending with no adverse impact on quality of care. 
Further, we note that the significant level of voluntary participation 
in BPCI, as well as high participation in LEJR episodes in particular 
in all BPCI models, signify the potential for financial opportunity for 
both hospitals and CMS to achieve savings and improve quality of care 
through an episode-based payment model targeting LEJR procedures. As 
further evaluation results for BPCI and other models are available, we 
will make such information available to the public, and if necessary, 
could incorporate lessons learned into the CJR model. In addition, in 
section III.F. of this final rule, we detail our plans to monitor care 
to ensure beneficiaries' access to quality and timely health care is 
maintained under the CJR model.
    While we acknowledge the benefits of having more rigorous evidence 
to support the success of episode-based payment models, we believe that 
the aforementioned findings and encouraging preliminary evaluation data 
from our prior and current bundled payment models and demonstrations 
support our plan to more broadly test the model's effectiveness at this 
time. Moreover, the mission of the Innovation Center is to test models 
of care that reduce spending while maintaining or improving the quality 
of care furnished to Medicare, Medicaid and CHIP beneficiaries. Testing 
this model will provide additional information for CMS and providers on 
successful payment structures and care redesign strategies.
    We also disagree that the model should be delayed simply because 
other similar efforts are currently ongoing. Rather, we would note that 
it is not uncommon for CMS to test multiple similar models concurrently 
rather than sequentially. For example, CMS currently has multiple 
primary care-focused models in testing, the Comprehensive Primary Care 
Initiative (CPCI) and the Multi-Payer Advanced Primary Care Practice 
(MAPCP) models. In addition, CMS has a permanent ACO program (the 
Medicare Shared Savings Program), as well as multiple other ACO models 
in the testing phase. We believe our decision to test the CJR model at 
this time is consistent with the approach taken for other models and 
programs to test payment models that may be similar in design but are 
targeted at different groups of providers. Such an approach provides 
CMS with additional information on the potential success of various 
model and program aspects and design features.
    Likewise, we do not agree that the model should be delayed until 
certain other actions have occurred (for example, after additional 
quality measures have been developed or data required under the IMPACT 
Act have been analyzed) or because of the multiple competing mandates 
faced by hospitals and other providers. Since the Medicare program's 
inception, providers have and will continue to contend with constantly 
evolving statutory and administrative requirements that often require 
them to make concurrent changes in their practices and procedures. We 
do not believe the CJR model is dissimilar to those requirements.
    As stated previously, some commenters urged a delayed start date 
due to concerns on how requirements with respect to the CMP law 
(sections 1128A(a)(5), (b)(1) and (b)(2) of the Act), the Federal Anti-
kickback statute (section 1128B(b)(1) and (2) of the Act), or the 
physician self-referral prohibition (section 1877 of the Act) would 
apply under the model. In response, we would note that for programmatic 
reasons discussed elsewhere in this final rule and to give providers 
additional time to ensure compliance with applicable laws, we are 
delaying the start date of the model to April 1, 2016.
    Also as discussed earlier in this section, some commenters pointed 
to the potential for unintended consequences that could result from our 
proposed start date, including impediments to beneficiary access and 
reduced quality of care. As discussed in section III.D of this final 
rule, we are including quality measures for purposes of evaluating 
hospitals' performance both individually and in aggregate across the 
model. Also, as discussed in section III.F of this final rule, we are 
making final policies and actions to monitor both care access and 
quality. We believe these features will help ensure that beneficiary 
access to high quality care is not compromised under the model.
    Final Decision: We are modifying our proposed policy on the model 
performance years and establishing April 1, 2016 as the start date for 
the model. Accordingly, we are replacing ``January 1, 2016'' in Sec.  
510.200(a) with ``April 1, 2016.''
b. Retrospective Payment Methodology
    As described in section III.B. of the proposed rule, we proposed 
that an episode in the CJR model begins with the admission for an 
anchor hospitalization and ends 90 days post-discharge from the anchor 
hospitalization, including all related services covered under Medicare 
Parts A and B during this timeframe, with limited exclusions and 
adjustments, as described in sections III.B., III.C.3., and III.C.7. of 
the proposed rule. The episodes would be attributed to the participant 
hospital where the anchor hospitalization occurred.
    We proposed to apply the CJR episode payment methodology 
retrospectively. Under this proposal, all providers and suppliers 
caring for Medicare beneficiaries in CJR episodes would continue to 
bill and be paid as usual under the applicable Medicare payment system. 
After the completion of a CJR performance year, Medicare claims for 
services furnished to beneficiaries in that year that were included in 
the model would be grouped into episodes and aggregated, and 
participant hospitals' CJR episode quality and actual payment 
performance would be assessed and compared against episode quality 
thresholds and target prices, as described in sections III.C.5. and 
III.C.4. of the proposed rule, respectively. After the participant 
hospitals' actual episode performance in quality and spending are 
compared against the previous episode quality thresholds and target 
prices, we would determine if Medicare would make a payment to the 
hospital (reconciliation payment), or if the hospital owes money to 
Medicare (resulting in Medicare repayment). The possibility for 
hospitals to receive reconciliation payments or be subject to repayment 
(note: participant hospitals would not be subject to repayment for 
performance year 1) was further discussed in section III.C.2.c. of the 
proposed rule.
    We considered an alternative option of paying for episodes 
prospectively by paying one lump sum amount to the hospital for the 
expected costs of the 90-day episode. However, we believed such an 
option would be challenging to implement at this time given the payment 
infrastructure changes for both hospitals and Medicare that would need 
to be developed to pay and manage prospective CJR episode payments. We 
noted that a retrospective episode payment approach is currently being 
utilized under BPCI Model 2. Also, we expressed our belief that a 
retrospective payment approach can accomplish the objective of testing 
episode payment in

[[Page 73328]]

a broad group of hospitals, including financial incentives to 
streamline care delivery around that episode, without requiring core 
billing and payment changes by providers and suppliers, which would 
create substantial administrative burden. However, we sought comment on 
potential ways to implement a prospective payment approach for CJR in 
future performance years of the model.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters submitted mixed responses on our proposed 
retrospective payment methodology. Many comments we received expressed 
support for our proposed retrospective model. Some of these commenters 
indicated that, since it would build upon existing payment system 
infrastructures and processes, a retrospective model would be most 
administratively feasible and straightforward as well as involve fewer 
infrastructure changes and logistical challenges than would be required 
under a prospective model. A commenter noted that a retrospective model 
would allow providers to gain experience with a bundling payment model 
without altering existing revenue cycle practices. Further, the 
availability of fee-for-service payments under a retrospective model 
would maintain a predictable cash flow for participants in the model.
    Some commenters expressed support for the proposed retrospective 
methodology provided that certain conditions existed. For example, a 
commenter expressed support for this methodology provided that payment 
reconciliation could be available on a quarterly basis. Another 
commenter supported the retrospective methodology provided that 
beneficiaries had access to any provider they chose and were not 
limited to those with whom a hospital had a contractual arrangement.
    Response: We appreciate the comments we received that were in 
support of our proposed retrospective payment methodology, and concur 
with commenters' views on some of the benefits of this model. As 
discussed further in section III.C.6. of this final rule, we are making 
final our proposed reconciliation on an annual basis. Also, as further 
discussed in section III.F.2. of this final rule, because hospitals in 
selected geographic areas will be required to participate in the model, 
individual beneficiaries will not be able to opt out of the CJR model. 
However, the payment model does not limit a beneficiary's ability to 
choose among Medicare providers and suppliers or the range of services 
that are available to them. Beneficiaries may continue to choose any 
Medicare enrolled provider or supplier, or any physician or 
practitioner who has opted out of Medicare, with the same costs, 
copayments and responsibilities as they have with other Medicare 
services. Also, although the proposed model would allow participant 
hospitals to enter into sharing arrangements with certain providers and 
suppliers and these preferred providers and suppliers may be 
recommended to beneficiaries as long as those recommendations are made 
within the constraints of current law, hospitals may not restrict 
beneficiaries to any list of preferred or recommended providers and 
suppliers that surpass any restrictions that already exist under 
current statutes and regulations.
    Comment: In addition to the many commenters supporting our proposed 
retrospective methodology, we received many other comments that opposed 
our proposal and expressed support for some type of prospective payment 
model. Some commenters expressed the view that our proposed model was 
complex, complicated by variation in payment policies across Medicare 
FFS payment models, and needed further refinement. Others stated that 
as compared to a prospective payment model, a retrospective model is 
less effective at holding providers accountable or in stimulating the 
kinds of behavior changes that are needed to achieve the goals of the 
program. For example, because providers are expected to change their 
behavior in anticipation of a reward that might occur several months 
later, the model diminishes the incentive for providers to change their 
behavior. Moreover, bonuses and penalties are not sufficiently 
correlated with performance. Further, a retrospective model could limit 
the availability of resources for providers to invest in the changes 
needed to support and sustain behavior change and high-quality care.
    Some of the criticisms we received focused on the potential effects 
of a retrospective model on beneficiaries' costs. For example, some 
commenters expressed concerns on whether beneficiaries would or even 
could see cost-sharing reductions when a provider achieves savings 
under a retrospective model. Another comment suggested that as compared 
to a prospective model, payments under a retrospective model are more 
difficult to be incorporated into tools designed to help consumers shop 
for facilities and providers and reduced pricing predictability for the 
consumer.
    In light of these concerns, many commenters proposed that CMS adopt 
or eventually transition to some kind of prospective payment model or 
hybrid model. Commenters suggested that doing so would improve 
accountability for costs and quality, strengthen risk/reward 
relationships, better support efforts to transition away from FFS, 
encourage providers to adhere to evidence-based clinical guidelines, 
reduce unnecessary or duplicative care, and help participants invest 
early in supportive resources, such as health information technology, 
care coordination tools, and infrastructure development to support 
accountability for quality and costs. A commenter offered the view that 
information technology solutions are now available that support 
prospective payment models with minimal burden and disruption to 
hospitals--concerns that have discouraged the adoption of prospective 
models.
    Some examples of prospective models that were suggested would be 
for CMS to--
     Establish an extended DRG that includes hospital, 
physician, and PAC services for some period of time (for example, 30, 
60, 90 days);
     Make a prospective payment to hospitals that are then 
distributed to their partners based on volume, acuity, quality, and 
efficiency;
     Withhold some percentage of the total payment that would 
be intended for downstream partners. Hospitals would subsequently 
distribute these payments to partners based on their ability to meet 
quality and efficiency targets;
     Move toward a prospectively negotiated case rate to foster 
collaboration among all clinicians involved in patient care and provide 
predictable pricing. For example, give facilities a financial incentive 
to assume the greater risk and uncertainty inherent in a prospective 
bundle by reducing or eliminating the two percent discount from the 
payment benchmark or narrowing the definition of ``related care'' in 
the 90-day post-discharge; and
     Allow physicians to lead a team where the participating 
physician and their patient decide which other providers and suppliers 
would be involved in and what the treatment plan would be for the 
episode. The team would designate or create a jointly governed 
management organization that would be paid through new prospective 
episode codes. Other providers, including the hospital, could be paid 
by that same organization or through existing Medicare payment systems. 
Medicare would pay a single bundled

[[Page 73329]]

payment amount to cover the costs of all of the services in that 
episode. The hospital and other providers and suppliers on the team 
could be paid either through the management organization or through 
traditional Medicare payment systems, but only by one of these sources. 
Amounts paid through traditional payment systems would be deducted from 
the amount paid to the management organization.
    In addition to comments supporting a prospective payment model, we 
received comments explicitly expressing concern about adopting such a 
model. For example, a commenter expressed the view that non-hospital 
providers and suppliers, including physicians and PAC providers, would 
likely be concerned with a policy that would allow hospitals complete 
authority to allocate payments among participating providers and 
suppliers or to be empowered with functions and authorities typically 
associated with Medicare Administrative Contractors (MACs). Moreover, a 
prospective payment methodology would exacerbate anti-competitive 
concerns with respect to the proposed model in general.
    Response: We appreciate the comments we received in opposition to 
our proposed retrospective model. While we believe that our proposed 
retrospective payment model would be effective in encouraging providers 
to improve care quality while better controlling the costs of the care, 
we also share commenters' optimism on the potential benefits and 
effectiveness of prospective models with respect to improving 
accountability for costs and quality, strengthening risk/reward 
relationships, better supporting efforts to transition away from FFS, 
and encouraging providers to adhere to evidence-based clinical 
guidelines while reducing unnecessary or duplicative care. We also are 
pleased that information technology solutions are being developed to 
support prospective payment models.
    We agree with commenters that there are complexities and potential 
complications associated with a retrospective model and anticipate that 
further refinements will likely be needed with whatever kind of 
bundling model that is implemented. Therefore, we do not believe that 
the complexities and potential complications with our proposed model 
are significantly different than what occurs with other Medicare 
payment models, particularly any of the more novel ones. Likewise, we 
do not believe that such complexities or complications would be 
mitigated simply by adopting a prospective model. Moreover, both CMS 
and some of the commenters have noted that adoption of a prospective 
model could result in potentially significant complexities and 
logistical issues as well.
    We also do not agree with the view suggesting that adoption of a 
retrospective model could limit the availability of resources for 
providers to invest in the changes needed to improve care quality and 
costs. Under our retrospective model, participant hospitals and other 
providers and suppliers will continue to bill and be paid under FFS 
Medicare as they would in the absence of the model that should result 
in a revenue stream comparable to what they would be absent the model, 
all else equal.
    While we agree with the comment stating that beneficiaries will not 
see a reduction in their cost-sharing for joint replacement services 
under this model, we do not see this as being unique to the CJR model 
or a reason to not test it. To the contrary, if successful, our model 
will improve the quality of care and outcomes for these beneficiaries 
as well as better control costs of care. For example, if successful, we 
believe the model could help to limit or mitigate avoidable costs 
incurred by these beneficiaries such as costs associated with avoidable 
hospital readmissions. Last, we also do not see the potential 
challenges of integrating a retrospective payment methodology into 
sites designed to compare health care options as a reason to not test 
our proposed model or as being an insurmountable problem.
    Based on the comments that we received, we believe there is support 
for both prospective and retrospective payment models. We also continue 
to believe that a retrospective payment model can accomplish the 
objective of testing episode payments with a broad group of hospitals, 
by including financial incentives that will streamline care delivery 
while producing less administrative burden for providers than would be 
possible with a prospective model. Accordingly, we will be implementing 
a retrospective payment model at this time as we had proposed. We 
appreciate the various examples of prospective models that commenters 
suggested for CMS' consideration, and will consider these examples 
along with other options to potentially be tested in the future.
    Final Decision: After considering the public comments we received, 
we are finalizing our proposal to implement a retrospective payment 
model.
c. Two-Sided Risk Model
    We proposed to establish a two-sided risk model for hospitals 
participating in the CJR model. We proposed to provide episode 
reconciliation payments to hospitals that meet or exceed quality 
performance thresholds and achieve cost efficiencies relative to CJR 
target prices established for them, as was defined later in sections 
III.C.4. and III.C.5. of the proposed rule. Similarly, we proposed to 
hold hospitals responsible for repaying Medicare when actual episode 
payments exceed their CJR target prices in each of performance years 2 
through 5, subject to certain proposed limitations discussed in section 
III.C.8. of the proposed rule. Target prices would be established for 
each participant hospital for each performance year.
    We proposed that hospitals will be eligible to receive 
reconciliation payments from Medicare based on their quality and actual 
episode spending performance under the CJR model in each of CJR 
performance years 1 through 5. Additionally, we proposed to phase in 
the responsibility for hospital repayment of episode actual spending if 
episode actual spending exceeds their target price starting in 
performance year 2 and continuing through performance year 5. Under 
this proposal in performance year 1, participant hospitals would not be 
required to pay Medicare back if episode actual spending is greater 
than the target price.
    We considered an episode payment structure in which, for all 5 
performance years of the model, participant hospitals would qualify for 
reconciliation payments if episode actual spending was less than the 
episode target price, but would not be required to make repayments to 
Medicare if episode actual spending was greater than the episode target 
price. However, we noted our belief that not holding hospitals 
responsible for repaying excess episode spending would reduce the 
incentives for hospitals to improve quality and efficiency. We also 
considered starting the CJR payment model with hospital responsibility 
for repaying excess episode spending in performance year 1 to more 
strongly align participant hospital incentives with care quality and 
efficiency. However, we stated our view that hospitals may need to make 
infrastructure, care coordination and delivery, and financial 
preparations for the CJR episode model, and that those changes can take 
several months or longer to implement. With this consideration in mind, 
we proposed to begin hospitals' responsibility for repayment of excess 
episode spending

[[Page 73330]]

beginning in performance year 2 to afford hospitals time to prepare, 
while still beginning some incentives earlier (that is, reconciliation 
payments in year 1) to improve quality and efficiency of care for 
Medicare beneficiaries. We solicited comment on the proposed incentive 
structure for CJR.
    In an effort to further ensure hospital readiness to assume 
responsibility for circumstances that could lead to a hospital repaying 
to Medicare actual episode payments that exceed the episode target 
price, we proposed to begin to phase in this responsibility for 
performance year 2, with full responsibility for excess episode 
spending (as proposed in the proposed rule) applied for performance 
year 3 through performance year 5. To carry out this ``phase in'' 
approach, we proposed during the first year of any hospital financial 
responsibility for repayment (performance year 2) to set an episode 
target price that partly mitigates the amount that hospitals would be 
required to repay (see section III.C.4.b. of the proposed rule), as 
well as more greatly limits (as compared to performance years 3 through 
5) the maximum amount a hospital would be required to repay Medicare 
across all of its episodes (see section III.C.8. of the proposed rule).
    Comment: Several commenters expressed support for our proposal to 
establish downside risk for participants as well as our proposal to 
gradually phase-in risk beginning in year 2. We received very few 
comments requesting the elimination of risk from the model. A commenter 
suggested that it was unfair to require hospitals to bear risk given 
that there were no limitations on beneficiary choices. Also, some 
commenters suggested that CMS consider excluding specific kinds of 
hospitals from the model, for example small hospitals or hospitals with 
low volume.
    Most of the comments we received, however, requested that CMS ease 
the glide path to downside risk by either delaying the requirement for 
two to three years or by incorporating features to better limit risk, 
for example, by adjusting stop-loss caps. Some commenters requested 
that we modify the CJR model to be more like a shared savings model as 
is used in Shared Savings Program or the Pioneer ACO model. In their 
view, this option would be particularly attractive to smaller 
organizations with lower episode volumes that face a higher risk of 
random episode cost variation or those with limited financial 
resources.
    Some commenters requested these changes because of concerns that 
hospitals have little or no experience bearing risk and thus need 
additional time to be ready to do so. Other commenters stated that our 
proposed timeframe for implementing the model and requiring hospitals 
to assume risk was simply too aggressive and offered too little time 
for hospitals to put in place the care procedures and infrastructure 
needed to be successful in the model and in a position to bear risk. In 
recommending that CMS delay downside risk, a commenter observed that 
payment features of other Medicare efforts such as BPCI and the Pioneer 
ACO model have been refined more than once since their implementation, 
which suggested that more can be learned about the appropriate 
framework for a risk model, particularly given that the CJR model is 
untested.
    Response: We appreciate the comments we received in support of our 
proposal to phase-in downside risk to CJR participants beginning in 
Year 2 of the model. We are also encouraged that very few commenters 
opposed a requirement for participants to assume downside risk at some 
point in the model.
    We disagree with the view that it is unfair to require hospitals to 
bear risk while beneficiaries retain the ability to choose among 
providers. As is the case with other new payment models such as the 
Shared Savings Program, the CJR model is intended to identify ways to 
improve care quality and better control costs in the Medicare FFS 
program. While Medicare beneficiaries may choose between Medicare FFS 
and Medicare Advantage, the majority of beneficiaries--roughly two-
thirds in 2015--continue to choose the former. Accordingly, it is in 
the interest of the Medicare program and its beneficiaries for CMS to 
identify new models that both maintain beneficiary choice while 
improving care quality and costs. Also, while we appreciate suggestions 
to exclude certain kinds of hospitals, for example, small hospitals or 
hospitals with a low-volume of cases, we believe our methodology for 
selecting geographic units, as discussed in section III.A.4.of this 
final rule, as well as additional protections for certain kinds of 
these hospitals, as discussed in section III.C.8.c. of this final rule 
sufficiently address these concerns.
    We also understand that commenters would like a more gradual 
transition to downside risk, and in response to the commenters' 
concerns, CMS has taken steps for hospitals to do so. As discussed in 
section III.C.8. of this final rule, we are reducing the potential risk 
to participants in Year 2 by lowering the stop-loss limit from 10 
percent to 5 percent (and from 20 percent to 10 percent in Year 3). We 
believe these actions should assist participants both with respect to 
preparing for the assumption of risk as well as reducing the level of 
risk they must initially bear. We do not support the proposal to change 
the CJR model to a shared savings model as it is inconsistent with our 
intent of testing whether a bundled payments model will promote quality 
and financial accountability for episodes of care surrounding an LEJR 
or reattachment of a lower extremity procedure. Last, we recognize that 
our model, as would any model or program, will evolve and may require 
some adjustments over time. To the extent that this occurs with the CJR 
model, we would make adjustments that were deemed necessary, as we 
would do with any of these other models and programs; however, we do 
not believe the potential for model adjustments is a reason to delay 
the requirement for hospitals to bear risk in the absence of data 
suggesting that a problem actually exists.
    Final Decision: After considering the public comments we received, 
we are finalizing our proposal to phase-in risk beginning in Year 2 of 
the model.
3. Adjustments to Payments Included in Episode
    We proposed to calculate the actual episode payment amount by 
summing together Medicare payments for each non-cancelled CJR episode 
during the model's performance year for Parts A and B claims for 
services included in the episode definition, as discussed in section 
III.B. of this final rule. We proposed three adjustments to this 
general approach for--(1) Special payment provisions under existing 
Medicare payment systems; (2) payment for services that straddle the 
end of the episode; and (3) high payment episodes. We noted there would 
be further adjustments to account for overlaps with other Innovation 
Center models and CMS programs; we refer readers to section III.C.7. of 
the proposed rule.
    We did not propose to adjust hospital-specific or regional 
components of target prices for any Medicare repayment or 
reconciliation payments made under the CJR model; CJR repayment and 
reconciliation payments would be not be included per the episode 
definition in section III.B. of this final rule. We stated in the 
proposed rule our belief that including reconciliation payments and 
Medicare repayments in target price calculations would perpetuate the 
initial set of target prices once CJR performance years are captured in 
the 3-historical-years of data used to set target

[[Page 73331]]

prices, as described in section III.C.4. of this final rule, beginning 
with performance year 3 when performance year 1 would be part of the 3-
historical-years. Including any prior performance years' 
reconciliations or repayments in target price calculations would 
approximately have the effect of Medicare paying hospitals the target 
price, regardless of whether the hospital went below, above, or met the 
target price in the prior performance years before accounting for the 
reconciliation payments or repayments. We stated in the proposed rule 
our intent for target prices to be based on historical patterns of 
service actually provided, so we did not propose to include 
reconciliation payments or repayments for prior performance years in 
target price calculations.
a. Treatment of Special Payment Provisions Under Existing Medicare 
Payment Systems
    Many of the existing Medicare payment systems have special payment 
provisions that have been created by regulation or statute to improve 
quality and efficiency in service delivery. IPPS hospitals are subject 
to incentives under the HRRP, the Hospital Value-Based Purchasing 
(HVBP) Program, the Hospital-Acquired Condition (HAC) Reduction 
Program, and the Hospital Inpatient Quality Reporting Program (HIQR) 
and Outpatient Quality Reporting Program (OQR). IPPS hospitals and CAHs 
are subject to the Medicare EHR Incentive Program. Additionally, the 
majority of IPPS hospitals receive additional payments for Medicare 
Disproportionate Share Hospital (DSH) and Uncompensated Care, and IPPS 
teaching hospitals can receive additional payments for Indirect Medical 
Education (IME). IPPS hospitals that meet a certain requirements 
related to low volume Medicare discharges and distance from another 
hospital receive a low volume add-on payment. As previously stated in 
section III.B.2.b. of this final rule, acute care hospitals may receive 
new technology add-on payments to support specific new technologies or 
services that substantially improve the diagnosis or treatment of 
Medicare beneficiaries and would be inadequately paid otherwise under 
the MS-DRG system. Also, some IPPS hospitals qualify to be sole 
community hospitals (SCHs) or MDHs, and they may receive enhanced 
payments based on cost-based hospital-specific rates for services; 
whether a SCH or MDH receives enhanced payments may vary year to year, 
in accordance with Sec.  419.43(g) and Sec.  412.108(g), respectively.
    Medicare payments to providers of PAC services, including IRFs, 
SNFs, IPFs, HHAs, LTCHs, and hospice facilities, are conditioned, in 
part, on whether the provider satisfactorily reports certain specified 
data to CMS: The Inpatient Rehabilitation Facility Quality Reporting 
Program (IRF QRP), the Skilled Nursing Facility Quality Reporting 
Program (SNF QRP), the Inpatient Psychiatric Facility Quality Reporting 
Program (IPF QRP), the Home Health Quality Reporting Program (HH QRP), 
the Long-Term Care Hospital Quality Reporting Program (LTCH QRP), and 
the Hospice Quality Reporting Program. Additionally, IRFs located in 
rural areas receive rural add-on payments, IRFs serving higher 
proportions of low-income beneficiaries receive increased payments 
according to their low-income percentage (LIP), and IRFs with teaching 
programs receive increased payments to reflect their teaching status. 
SNFs receive higher payments for treating beneficiaries with human 
immunodeficiency virus (HIV). HHAs located in rural areas also receive 
rural add-on payments.
    ASCs have their own Quality Reporting Program (ASC QRP). Physicians 
also have a set of special payment provisions based on quality and 
reporting: The Medicare EHR Incentive Program for Eligible 
Professionals, the Physician Quality Reporting System (PQRS), and the 
Physician Value-based Modifier Program.
    In the proposed rule we stated our intent with the CJR model is not 
to replace the various existing incentive programs or add-on payments, 
but instead to test further episode payment incentives towards 
improvements in quality and efficiency beyond Medicare's existing 
policies. Therefore, we proposed that the hospital performance and 
potential reconciliation payment or Medicare repayment be independent 
of, and not affect, these other special payment provisions.
    We proposed to exclude the special payment provisions as discussed 
previously when calculating actual episode payments, setting episode 
target prices, comparing actual episode payments with target prices, 
and determining whether a reconciliation payment should be made to the 
hospital or funds should be repaid by the hospital.
    Not excluding these special payment provisions would create 
incentives that are not aligned with the intent of the CJR model. Not 
excluding the quality and reporting-related special payment provisions 
could create situations where a high-quality or reporting compliant 
hospital or both receiving incentive payments, or those hospitals that 
discharge patients to PAC providers that receive incentives for being 
reporting compliant, may appear to be ``high episode payment'' under 
CJR. Conversely, lower quality or hospitals not complying with 
reporting programs or both that incur payment reduction penalties, or 
hospitals that discharge to PAC providers that are not reporting 
compliant, may appear to be ``low episode payment'' under CJR. Such 
outcomes would run counter to CJR's goal of improving quality. Also, 
not excluding add-on payments for serving more indigent patients, 
having low Medicare hospital volume, being located in a rural area, 
supporting greater levels of provider training, choosing to use new 
technologies, and having a greater proportion of CJR beneficiaries with 
HIV from CJR actual episode payment calculations may inappropriately 
result in hospitals having worse episode payment performance. 
Additionally, not excluding enhanced payments for MDHs and SCHs may 
result in higher or lower target prices just because these hospitals 
received their enhanced payments in one historical year but not the 
other, regardless of actual utilization. In the proposed rule we stated 
our belief that excluding special payment provisions would ensure a 
participant hospital's actual episode payment performance is not 
artificially improved or worsened because of payment reduction 
penalties or incentives or enhanced or add-on payments, the effects of 
which we are not intending to test with CJR.
    In addition to the various incentive, enhanced and add on payments, 
sequestration came into effect for Medicare payments for discharges on 
or after April 1, 2013, per the Budget Control Act of 2011 and delayed 
by the American Taxpayer Relief Act of 2012. Sequestration applies a 2 
percent reduction to Medicare payment for most Medicare FFS services.
    In order to operationalize the exclusion of the various special 
payment provisions in calculating episode expenditures, we proposed to 
apply the CMS Price (Payment) Standardization Detailed Methodology 
described on the QualityNet Web site at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350. This pricing standardization approach is the same as used for 
the HVBP program's Medicare spending per beneficiary metric.
    We sought comment on this proposed approach to treating special 
payment

[[Page 73332]]

provisions in the various Medicare payment systems.
    Comment: Several commenters supported the exclusion of the various 
special payment provisions in calculating episode expenditures. They 
agreed that doing so would help isolate the effect of utilization and 
quality of delivered care differences and remove any distortions due to 
Medicare payment policies outside the control of providers.
    A few commenters expressed concern about how hospitals would be 
paid the special payment adjustments that are removed in calculating 
episode expenditures. A commenter inquired whether CMS would account 
for vendor rebates for hip and knee implants and medical devices, 
because rebates are not uncommon and can impact the cost of an LEJR 
procedure to a hospital.
    Response: We appreciate commenters' support to exclude the various 
special payment provisions in calculating episode expenditures.
    As discussed in section III.C.2.b. of this final rule, we are 
finalizing our proposal such that all providers and suppliers caring 
for Medicare beneficiaries in CJR episodes will continue to bill and be 
paid as usual under the applicable Medicare payment system, and 
determination of any reconciliation payments or repayments to Medicare 
will be made retrospectively after the end of each performance year. 
Therefore, special payment adjustments will continue to be paid as 
usual under the applicable Medicare payment systems, but their effects 
will be excluded when reconciliation payment and repayment to Medicare 
determinations are made retrospectively. This final rule will not 
affect how hospitals are currently paid special payment adjustments.
    Payments for hip and knee implants and medical devices will also 
continue as usual under the applicable Medicare payment systems. For 
inpatient admissions paid under IPPS, in particular, implants and 
medical devices not categorized as new technology add-on payment would 
be included in the MS-DRG payment and would not be reimbursed 
separately. To mirror the IPPS approach, we will not separately account 
for vendor rebates in the LEJR episode.
    We note that as previously stated, we plan to utilize the CMS Price 
(Payment) Standardization approach in order to remove the effects of 
special payment provisions from calculations of historical and 
performance period episode spending. We will follow the methodology, 
with modifications as necessary to be consistent with our episode 
definition in section III.B. of this final rule and to ensure timely 
reporting of reconciliation results, for the performance year 
reconciliations, which begin 2 months after the conclusion of a 
performance year. We will account for the information available at the 
time due to claims runout, payment system updates, and the calculations 
necessary to fully implement the standardization methodology. We will 
utilize the methodology, consistent with our episode definition, for 
the target price calculations and subsequent reconciliation 
calculations 14 months after the conclusion of the performance year, in 
which we incorporate full claims runout and further account for overlap 
with other models. This approach will provide feedback and 
reconciliation payments, as available, to hospitals in a timely manner 
and as accurately as feasible, while ensuring the standardization 
approach is utilized for the subsequent calculation, which represents 
the final calculation for a given performance period.
    Comment: Many commenters requested that CJR reconciliation payments 
made to participant hospitals be included when updating the set of 3-
historical-years used for calculating CJR episode target prices. They 
stated that the participant hospitals would be providing care 
coordination services that may not be directly reimbursed under 
applicable Medicare FFS payment systems. These services would then, 
instead, be funded by reconciliation payments. While historical 
Medicare FFS claim payments would account for hospitals' costs for 
providing services reimbursed under Medicare FFS, they would not 
account for hospitals' costs for care coordination services not 
reimbursed under Medicare FFS. Commenters contended that if we do not 
include reconciliation payments when calculating target prices using 
the updated set of historical years, we may underestimate hospital 
costs and target prices.
    Response: We agree that participant hospitals may undertake 
activities that promote care coordination and improved quality of care 
but are not directly reimbursed under applicable Medicare FFS payment 
systems. We appreciate commenters' suggestions to include 
reconciliation payments when updating the set of historical years used 
to calculate target prices. We also believe this logic could be 
extended to include repayments to Medicare to mirror the inclusion of 
reconciliation payments. However, in the proposed rule we did not 
propose an alternative to include reconciliation payments and 
repayments when updating the set of historical years used to calculate 
target prices, and because the first time this policy would take effect 
would be for performance year 3 (2018), we may revisit this policy in 
future rulemaking and allow for public comment on the aforementioned 
alternative. At this time we are not modifying our proposal to exclude 
CJR reconciliation payments and repayments to Medicare when updating 
the set of historical years used to set target prices.
    Comment: A few commenters inquired whether claims from non-
participating physicians or payments to physicians who have opted out 
of Medicare would be included for purposes of setting target prices and 
calculating actual episode spending for reconciliation and repayment 
amount calculations. Commenters contended that if claims from non-
participating providers or payments to physicians who have opted out of 
Medicare are not included, target prices and actual episode spending 
may be underestimated.
    Response: With the exception of those physicians and practitioners 
who have complied with our opt-out procedures (see 42 CFR 405.400 
through 405.455), when a physician or supplier furnishes a service that 
is covered by Medicare, the physician or supplier is subject to the 
mandatory claim submission provisions of section 1848(g)(4) of the 
Social Security Act (the Act). Therefore, if a physician or supplier 
charges or attempts to charge a beneficiary for a service that is 
covered by Medicare, then the physician or supplier must submit a claim 
to Medicare. As a result, claims from both participating and non-
participating physicians would be included in our target price and 
actual episode spending calculations.
    Opt-out physicians are prohibited from billing and receiving 
payment (either directly or indirectly) from Medicare except for 
emergency and urgent care services provided the physician has not 
previously entered into a private contract with the beneficiary. 
Therefore, we agree that payments for services furnished by physicians 
who have opted out of Medicare would not be included in target price 
and actual episode expenditure calculations. However, we estimate only 
a small portion of physicians furnishing services to beneficiaries 
captured in the CJR model will have opted out of Medicare, and we 
estimate that physician services comprise less than 15 percent of the 
average CJR episode expenditure, and therefore we believe the impact of 
not capturing expenditures from physicians

[[Page 73333]]

who have opted out of Medicare will be small.
    Additionally, there may be some participant hospitals with a 
disproportionately higher share of episodes for which services were 
furnished by physicians who have opted out of Medicare. Such 
participant hospitals would experience lower actual episode 
expenditures because payments for physicians who have opted out of 
Medicare would not be included. These hospitals' lower actual episode 
expenditures would be balanced by lower target prices because the 
payments for physicians who have opted out of Medicare would also be 
excluded in the historical episode expenditures, though this argument 
is primarily relevant in the early years of the CJR model before we 
move to 100 percent regional pricing as discussed in section 
III.C.4.b.(5) of this final rule. In the later years of this model, 
participant hospitals with disproportionately greater share of episodes 
for which services were furnished by Medicare opt-out physicians may 
unfairly benefit from regional target prices that are primarily based 
on the inclusion of expenditures for physician services. However, we 
believe this advantage to be small because physician expenditures 
comprise only a small portion of the average episode, and we expect 
very few physicians to opt out of Medicare.
    Comment: A commenter inquired whether CMS would include IPPS 
capital payments in calculating target prices and actual episode 
expenditures, and if CMS' plan was to include them, they requested that 
such payments be excluded. The commenter stated that capital payments 
may vary by hospitals, and excluding capital payments would be 
consistent with the pricing standardization approach we proposed to 
reduce variations due to Medicare payment policies. The commenter also 
noted that excluding capital payments would be consistent with the 
approach taken in BPCI.
    Response: In response to comments, we clarify that we will include 
IPPS capital payments in target price and actual episode expenditure 
calculations. IPPS capital payments are included in Medicare FFS 
payments, which we proposed to use to calculate target prices and 
actual episode expenditures. Consistent with our proposed treatment of 
special payment provisions, we do not intend to distort incentives 
based on IPPS capital payments that may vary across hospitals due to 
Medicare payment policies, as opposed to practice pattern and quality 
differences. By using the claims standardization approach previously 
described in this section, though, we will be able to remove the effect 
of variations due to Medicare payment policies (including wage index 
differences). We recognize that this approach of including IPPS capital 
payments would be different than the approach taken in BPCI. However, 
we note that other Medicare FFS payment systems, such as those for SNF 
and IRF, also are intended to cover providers' capital costs. Carving 
out the capital portion for IPPS payments would not be consistent with 
the inclusion of the capital portion for other Medicare FFS payment 
systems. Lastly, including IPPS capital payments affords participant 
hospitals an opportunity to achieve greater reconciliation payments if 
they are able to achieve efficiencies for the costs that the capital 
portion of IPPS payments would cover, which may or may not actually be 
capital costs.
    Comment: Several commenters expressed concern about the regions 
that were selected for both the CJR model and the proposed HHVBP model.
    Response: We refer readers to comments and responses to comments in 
section III.A.3 of this final rule for further discussion on the 
inclusion of regions selected for both the CJR model and the proposed 
HHVBP model, and we reference it here because the proposed HHVBP model 
would be another special payment provision that could affect Medicare 
payment amounts. We reemphasize that the intent of the CJR model is not 
to replace the various existing incentive programs or add on payments, 
and the claims standardization approach previously described in this 
section will remove the effect of any special payment provision, 
whether they currently exist or may be introduced in the future. 
Therefore, we do not believe any special payment provisions due to the 
proposed HHVBP model or other potential future special payment 
provisions to have an impact on the payments included in the CJR model 
target price and reconciliation calculations.
    Comment: A commenter requested clarification on how the CJR model 
would interact with Medicare beneficiaries who have exhausted their 
benefits, and recommended that we modify Medicare beneficiaries' 
benefits so as to not allow their benefits to be exhausted while part 
of a CJR episode.
    Response: We appreciate the commenter's suggestion. However, we did 
not propose any changes to Medicare beneficiaries' benefits, and we 
will not finalize any such changes in this final rule.
    Final Decision: We are finalizing our proposal, without 
modification, to exclude special payment provisions from episode 
calculations. We clarify that we will include IPPS capital payments in 
target price and actual episode expenditure calculations. We also 
clarify that we will utilize the CMS Price Standardization approach 
previously referenced to remove the effect of any current and potential 
future special payment provisions. We may revisit in future rulemaking 
any modification to our policy to exclude reconciliation and recoupment 
payments when updating the historical data used to set target prices.
b. Treatment of Payment for Services That Extend Beyond the Episode
    As we proposed a fixed 90-day post-discharge episode as discussed 
in section III.B. of the proposed rule, we stated our belief that there 
would be some instances where a service included in the episode begins 
during the episode but concludes after the end of the episode and for 
which Medicare makes a single payment under an existing payment system. 
An example would be a beneficiary in a CJR episode who is admitted to a 
SNF for 15 days, beginning on Day 86 post-discharge from the anchor CJR 
hospitalization. The first 5 days of the admission would fall within 
the episode, while the subsequent 10 days would fall outside of the 
episode.
    We proposed that, to the extent that a Medicare payment for 
included episode services spans a period of care that extends beyond 
the episode, these payments would be prorated so that only the portion 
attributable to care during the episode is attributed to the episode 
payment when calculating actual Medicare payment for the episode. For 
non-IPPS inpatient hospital (for example, CAH) and inpatient PAC (for 
example, SNF, IRF, LTCH, IPF) services, we proposed to prorate payments 
based on the percentage of actual length of stay (in days) that falls 
within the episode window. Prorated payments would also be similarly 
allocated to the 30-day post-episode payment calculation in section 
III.C.8.d. of this final rule. In the prior example, one-third of the 
days in the 15-day length of stay would fall within the episode window, 
so under the proposed approach, one-third of the SNF payment would be 
included in the episode payment calculation, and the remaining two-
thirds (because the entirety of the remaining payments fall within the 
30 days after the episode ended) would be included in the post-episode 
payment calculation.
    For HHA services that extend beyond the episode, we proposed that 
the

[[Page 73334]]

payment proration be based on the percentage of days, starting with the 
first billable service date (``start of care date'') and through and 
including the last billable service date, that fall within the CJR 
episode. Prorated payments would also be similarly allocated to the 30-
day post-episode payment calculation in section III.C.8.d. of the 
proposed rule. For example, if the patient started receiving services 
from an HHA on day 86 after discharge from the anchor CJR 
hospitalization and the last billable home health service date was 55 
days from the start of home health care date, the HHA claim payment 
amount would be divided by 55 and then multiplied by the days (5) that 
fell within the CJR episode. The resulting, prorated HHA claim payment 
amount would be considered part of the CJR episode. Services for the 
prorated HHA service would also span the entirety of the 30 days after 
the CJR episode spends, so the result of the following calculation 
would be included in the 30-day post-episode payment calculation: HHA 
claim payment amount divided by 55 and then multiplied by 30 days (the 
number of days in the 30-day post-episode period that fall within the 
prorated HHA service dates).
    There may also be instances where home health services begin prior 
to the CJR episode start date, but end during the CJR episode. In such 
instances, we also proposed to prorate HHA payments based on the 
percentage of days that fell within the episode. Because these services 
end during the CJR episode, prorated payments for these services would 
not be included in the 30-day post-episode payment calculation 
discussed in section III.C.8.d. of the proposed rule. For example, if 
the patient's start of care date for a home health 60-day claim was 
February 1, the anchor hospitalization was March 1 through March 4 
(with the CJR episode continuing for 90 days after March 4), and the 
patient resumed home care on March 5 with the 60-day home health claim 
ending on April 1 (that is, April 1 was the last billable service 
date), we would divide the 60-day home health claim payment amount by 
60 and then multiply that amount by the days from the CJR admission 
through April 1 (32 days) to prorate the HHA payment. This proposed 
prorating method for HHA claims is consistent with how partial episode 
payments (PEP) are paid for on home health claims.
    For IPPS services that extend beyond the episode (for example, 
readmissions included in the episode definition), we proposed to 
separately prorate the IPPS claim amount from episode target price and 
actual episode payment calculations as proposed in section III.C.8. of 
the proposed rule, called the normal MS-DRG payment amount for purposes 
of this final rule. The normal MS-DRG payment amount would be pro-rated 
based on the geometric mean length of stay, comparable to the 
calculation under the IPPS PAC transfer policy at Sec.  412.4(f) and as 
published on an annual basis in Table 5 of the IPPS/LTCH PPS Final 
Rules. Consistent with the IPPS PAC transfer policy, the first day for 
a subset of MS-DRGs (indicated in Table 5 of the IPPS/LTCH PPS Final 
Rules) would be doubly weighted to count as 2 days to account for 
likely higher hospital costs incurred at the beginning of an admission. 
If the actual length of stay that occurred during the episode is equal 
to or greater than the MS-DRG geometric mean, the normal MS-DRG payment 
would be fully allocated to the episode. If the actual length of stay 
that occurred during the episode is less than the geometric mean, the 
normal MS-DRG payment amount would be allocated to the episode based on 
the number of inpatient days that fall within the episode. If the full 
amount is not allocated to the episode, any remainder amount would be 
allocated to the 30 day post-episode payment calculation discussed in 
section III.C.8.d. of the proposed rule. The proposed approach for 
prorating the normal MS-DRG payment amount is consistent with the IPPS 
transfer per diem methodology.
    The following is an example of prorating for IPPS services that 
extend beyond the episode. If beneficiary has a readmission for MS-DRG 
493--lower extremity and humerus procedures except hip, foot, and 
femur, with complications--into an IPPS hospital on the 89th day after 
discharge from a CJR anchor hospitalization, and is subsequently 
discharged after a length of stay of 5 days, Medicare payment for this 
readmission would be prorated for inclusion in the episode. Based on 
Table 5 of the IPPS/LTCH PPS Final Rule for FY 2015, the geometric mean 
for MS-DRG 493 is 4 days, and this MS-DRG is indicated for double-
weighting the first day for proration. This readmission has only 2 days 
that falls within the episode, which is less than the MS-DRG 493 
geometric mean of 4 days. Therefore, the normal MS-DRG payment amount 
associated with this readmission would be divided by 4 (the geometric 
mean) and multiplied by 3 (the first day is counted as 2 days, and the 
second day contributes the third day), and the resulting amount is 
attributed to the episode. The remainder one-fourth would be captured 
in the post-episode spending calculation discussed in section III.C.8. 
of the proposed rule. If the readmission occurred on the 85th day after 
discharge from the CJR anchor hospitalization, and the length of stay 
was 7 days, the normal MS-DRG payment amount for the admission would be 
included in the episode without proration because length of stay for 
the readmission falling within the episode (6 days) is greater than or 
equal to the geometric mean (4 days) for the MS-DRG.
    We considered an alternative option of including the full Medicare 
payment for all services that start during the episode, even if those 
services did not conclude until after the episode ended, in calculating 
episode target prices and actual payments. Previous research on bundled 
payments for episodes of PAC services noted that including the full 
payment for any claim initiated during the fixed episode period of time 
will capture continued service use. However, prorating only captures a 
portion of actual service use (and payments) within the bundle.\20\ As 
discussed in section III.B. of this final rule, the CJR model proposed 
an episode length that extends 90 days post-discharge, and Table 5 in 
section III.B.3.c. of the proposed rule demonstrates that the average 
length of stay in PAC during a 90-day episode with a MS-DRG 470 anchor 
hospitalization is 47.3 days. Therefore, the length of the episode 
under CJR (90 days) should be sufficient to capture the vast majority 
of service use within the episode, even if payments for some services 
that extend beyond the episode duration are prorated and only partly 
attributed to the episode.
---------------------------------------------------------------------------

    \20\ https://aspe.hhs.gov/health/reports/09/pacepifinal/report.pdf.
---------------------------------------------------------------------------

    The following is a summary of comments received and our responses.
    Comment: Several commenters supported the pro-rating of payments 
for services that extend beyond the episode. They agreed that pro-
rating would help ensure target prices and actual episode payments 
reflect services that were furnished during the episode. A commenter 
requested clarification on how payments for IRFs would be pro-rated. 
Another commenter stated that the first day for pro-rated surgical MS-
DRGs paid under IPPS should be weighted by more than the two-times 
weight proposed; the commenter believed that a multiplier of up to 4.5 
would more accurately describe hospitals' costs for the first day of 
surgical inpatient admissions reimbursed under Medicare IPPS.

[[Page 73335]]

    Response: We appreciate commenters' support for pro-rating payments 
for services that extend beyond the episode. As described in section 
III.C.3.b of this final, IRF payments will be pro-rated based on the 
percentage of actual length of stay (in days) that falls within the 
episode window. Prorated IRF payments would also be similarly allocated 
to the 30 day post episode payment calculation in section III.C.8.d. of 
this final rule.
    We agree that costs for inpatient stays may not be equal for each 
day of an inpatient admission, and the distribution of costs may differ 
between surgical and non-surgical inpatient stays. We acknowledge there 
may be different methodologies to calculate how much more costs are 
incurred on the first day of a stay. However, we will maintain 
consistency with the IPPS per diem transfer policy that uses a two-
times weight for the first day for a subset of MS-DRGs as described in 
Sec.  412.4(f) and published on an annual basis in Table 5 of the IPPS/
LTCH PPS Final Rules. We also note that many surgical readmissions are 
excluded from the episode definition described in section III.B. of 
this final rule, which should mitigate the impact of this prorating 
approach on surgical readmissions that extend beyond the episode.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to prorate payments for 
services that extend beyond the episode when calculating actual episode 
payments, setting episode target prices, and calculating reconciliation 
and repayment amounts.
c. Pricing Adjustment for High Payment Episodes
    Given the broad proposed LEJR episode definition and 90-day post-
discharge episode duration proposed for CJR, we want to ensure that 
hospitals have some protection from the variable repayment risk for 
especially high payment episodes, where the clinical scenarios for 
these cases each year may differ significantly and unpredictably. We 
did not believe the opportunity for a hospital's systematic care 
redesign of LEJR episodes has significant potential to impact the 
clinical course of these extremely disparate high payment cases.
    The BPCI Model 2 uses a generally similar episode definition as 
proposed for CJR and the vast majority of BPCI episodes being tested 
for LEJR are 90 days in duration following discharge from the anchor 
hospitalization. Similarly in the proposed rule, we stated our belief 
that the distribution of 90-day LEJR episode payment amounts utilizing 
the BPCI Model 2 episode definition as displayed in Figure 2 provides 
information that is relevant to policy development regarding CJR 
episodes.
[GRAPHIC] [TIFF OMITTED] TR24NO15.002


[[Page 73336]]


    As displayed, the mean episode payment amount is approximately 
$26,000. Five percent of all episodes are paid at two standard 
deviations above the mean payment or greater, an amount that is 
slightly more than 2 times the mean episode payment amount. While these 
high payment cases are relatively uncommon, we stated in the proposed 
rule our belief that incorporation of the full Medicare payment amount 
for such high payment episodes in setting the target price and 
correspondingly in Medicare's aggregate actual episode payment that is 
compared to the target price for the episode may lead in some cases to 
excessive hospital responsibility for these episode expenditures. This 
may be especially true when hospital responsibility for repayment of 
excess episode spending is introduced in performance year 2. The 
hospital may have limited ability to moderate spending for these high 
payment cases. Our proposal to exclude IPPS new technology add-on 
payments and separate payment for clotting factors for the anchor 
hospitalization from the episode definition limits excessive financial 
responsibility under this model of extremely high inpatient payment 
cases that could result from costly hospital care furnished during the 
anchor hospitalization. However, in the proposed rule we stated our 
belief that an additional pricing adjustment in setting episode target 
prices and calculating actual episode payments is necessary to mitigate 
the hospital responsibility for the actual episode payments for high 
episode payment cases resulting from very high Medicare spending within 
the episode during the period after discharge from the anchor 
hospitalization, including for PAC, related hospital readmissions, and 
other items and services related to the LEJR episode.
    Thus, in order to limit the hospital's responsibility for the 
previously stated high episode payment cases, we proposed to utilize a 
pricing adjustment for high payment episodes that would incorporate a 
high payment ceiling at two standard deviations above the mean episode 
payment amount in calculating the target price and in comparing actual 
episode payments during the performance year to the target prices.
    Specifically, when setting target prices, we would first identify 
for each anchor MS-DRG in each region (discussed further in section 
III.C.4. of this final rule) the episode payment amount that is two 
standard deviations above the mean payment in the historical dataset 
used (discussed further in section III.C.4. of the proposed rule). Any 
such identified episode would have its payment capped at the MS-DRG 
anchor and region-specific value that is two standard deviations above 
the mean, which would be the ceiling for purposes for calculating 
target prices. We note that the calculation of the historical episode 
high payment ceiling for each region and MS-DRG anchor would be 
performed after other steps, including removal of effects of special 
payment provisions and others described in section III.C.4.c. of this 
final rule.
    When comparing actual episode payments during the performance year 
to the target prices, episode payments for episodes in the performance 
year would also be capped at two standard deviations above the mean. 
The high episode payment ceiling for episodes in a given performance 
year would be calculated based on MS-DRG anchor-specific episodes in 
each region. We discuss further how the high episode payment ceiling 
would be applied when comparing episode payments during the performance 
year to target prices in section III.C.6. of this final rule.
    While this approach generally lowers the target price slightly, it 
provides a basis for reducing the hospital's responsibility for actual 
episode spending for high episode payment cases during the model 
performance years. When performing the reconciliation for a given 
performance year of the model, we would array the actual episode 
payment amounts for all episodes being tested within a single region, 
and identify the regional actual episode payment ceiling at two 
standard deviations above the regional mean actual episode payment 
amount. If the actual payment for a hospital's episode exceeds this 
regional ceiling, we would set the actual episode payment amount to 
equal the regional ceiling amount, rather than the actual amount paid 
by Medicare, when comparing a hospital's episode spending to the target 
price. Thus, a hospital would not be responsible for any actual episode 
payment that is greater than the regional ceiling amount for that 
performance year. We proposed to adopt this policy for all years of the 
model, regardless of the reconciliation payment opportunity or 
repayment responsibility in a given performance year, to achieve 
stability and consistency in the pricing methodology. We stated in the 
proposed rule our belief that this proposal provides reasonable 
protection for hospitals from undue financial responsibility for 
Medicare episode spending related to the variable and unpredictable 
course of care of some Medicare beneficiaries in CJR episodes, while 
still fully incentivizing increased efficiencies for approximately the 
95 percent of episodes for which we estimate actual episode payments to 
fall below this ceiling.\21\ We sought comment on our proposal to apply 
a pricing adjustment in setting target prices and reconciling actual 
episode payments for high payment episodes.
---------------------------------------------------------------------------

    \21\ Medicare FFS Parts A and B claims, CJR episodes as 
proposed, between October 1, 2013 and September 30, 2014.
---------------------------------------------------------------------------

    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters supported the proposal for a high episode 
payment ceiling at two standard deviations above the mean episode 
payment amount in calculating the target price and in comparing actual 
episode payments during the performance year to the target prices. They 
agreed that such a ceiling would help limit financial exposure to 
participant hospitals from outlier episodes. Some commenters requested 
the option of choosing specific risk tracks as provided under BPCI (for 
example, high episode payment ceiling at 75th, 95th, or 99th 
percentile).
    Response: We appreciate commenters' support for a high episode 
payment ceiling. We acknowledge that BPCI offers different risk tracks 
with different outlier protection features from which participants can 
choose, and that we did not propose to provide CJR participant 
hospitals with choice of risk tracks or outlier protection policy. 
However, with the blending of regional and hospital-specific historical 
episode expenditure data that we are finalizing in section 
III.C.4.b.(5) of this final rule to calculate target prices, applying 
different risk tracks or outlier protection policies to different 
hospitals would distort target price calculations; this is not an issue 
in BPCI because target prices are calculated using only hospital-
specific historical episode expenditure data. Additionally, we continue 
to believe that setting a high episode payment ceiling at two standard 
deviations above the mean episode payment amount, along with the 
phasing in of responsibility for hospital repayment in performance year 
1 as discussed in section III.C.2 of this final rule, will be 
sufficient to limit financial exposure due to outlier episodes. We will 
finalize our proposal to use a common outlier policy for all 
participant hospitals.
    Comment: Many commenters requested that CMS risk adjust episode 
spending based on patients' hip fracture status, among other clinical 
and demographic dimensions.
    Response: We refer readers to comments and responses to comments

[[Page 73337]]

in section III.C.4.b.(1) of this final rule for further discussion on 
risk stratification for hip fracture status, and we reference it here 
because changes to risk stratification would impact how a high payment 
episode ceiling would function. As discussed in the responses to 
comments in section III.C.4.b.(1) of this final rule, we will modify 
our policy in this final rule so as to set different target prices both 
for episodes anchored by MS-DRG 469 vs. MS-DRG 470 and for episodes 
with hip fractures vs. without hip fractures. Given this change, we 
will also modify the proposed approach to apply the high payment 
episode ceiling. Specifically, instead of calculating and applying high 
payment episode ceilings for each region and anchor MS-DRG combination, 
we will now calculate and apply high payment episode ceilings for each 
region, anchor MS-DRG, and hip fracture status combination.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to apply high episode payment 
ceilings when calculating actual episode payments, setting episode 
target prices, and calculating reconciliation and repayment amounts. 
However, we do note that the approach to calculate and apply the high 
episode payment ceilings will be adapted to account for the risk 
stratification based on hip fracture status discussed in section 
III.C.4.b. of this final rule.
4. Episode Price Setting Methodology
a. Overview
    Whether a participant hospital receives reconciliation payments or 
is made responsible to repay Medicare for the CJR model will depend on 
the hospital's quality and actual payment performance relative to 
episode quality and target prices. Quality performance and its tie to 
payments is further discussed in section III.C.5. of this final rule, 
and the remainder of this section will discuss the proposed approach to 
establishing target prices.
    We proposed to establish CJR target prices for each participant 
hospital. For episodes beginning in performance years 1, 3, 4, and 5, a 
participant hospital would have eight target prices, one for each of 
the following:
     MS-DRG 469 anchored episodes that were initiated between 
January 1 and September 30 of the performance year, if the participant 
hospital successfully submits data on the voluntary patient-reported 
outcome measure proposed in section III.C.5. of the proposed rule.
     MS-DRG 470 anchored episodes that were initiated between 
January 1 and September 30 of the performance year, if the participant 
hospital successfully submits data on the proposed voluntary patient-
reported outcome measure.
     MS-DRG 469 anchored episodes that were initiated between 
October 1 and December 31 of the performance year, if the participant 
hospital successfully submits data on the proposed voluntary patient-
reported outcome measure.
     MS-DRG 470 anchored episodes that were initiated between 
October 1 and December 31 of the performance year, if the participant 
hospital successfully submits data on the proposed voluntary patient-
reported outcome measure.
     MS-DRG 469 anchored episodes that were initiated between 
January 1 and September 30 of the performance year, if the participant 
hospital does not successfully submit data on the voluntary patient-
reported outcome measure.
     MS-DRG 470 anchored episodes that were initiated between 
January 1 and September 30 of the performance year, if the participant 
hospital does not successfully submit data on the proposed voluntary 
patient-reported outcome measure.
     MS-DRG 469 anchored episodes that were initiated between 
October 1 and December 31 of the performance year, if the participant 
hospital does not successfully submit data on the proposed voluntary 
patient-reported outcome measure.
     MS-DRG 470 anchored episodes that were initiated between 
October 1 and December 31 of the performance year, if the participant 
hospital does not successfully submit data on the proposed voluntary 
patient-reported outcome measure.
    For episodes beginning in performance year 2, a participant 
hospital would have 16 target prices. These would include the same 
combinations as for the other 4 performance years, but one set for 
determining potential reconciliation payments, and the other for 
determining potential Medicare repayment amounts, as part of the 
phasing in of two-sided risk discussed later in this section. Further 
discussion on our proposals for different target prices for MS-DRG 469 
versus MS-DRG 470 anchored episodes, for episodes initiated between 
January 1 and September 30 versus October 1 and December 31, and for 
participant hospitals that do and do not successfully submit data on 
the proposed patient-reported outcome measure can be found in sections 
III.C.4.b. and III.C.5. of the proposed rule.
    We intend to calculate and communicate episode target prices to 
participant hospitals prior to the performance period in which they 
apply (that is, prior to January 1, 2017, for target prices covering 
episodes initiated between January 1 and September 30, 2017; prior to 
October 1, 2017 for target prices covering episodes initiated between 
October 1 and December 31, 2017). We stated in the proposed rule our 
belief that prospectively communicating prices to hospitals will help 
them make any infrastructure, care coordination and delivery, and 
financial refinements they may deem appropriate to prepare for the new 
episode target prices.
    The proposed approach to setting target prices incorporated the 
following features:
     Set different target prices for episodes anchored by MS-
DRG 469 versus MS-DRG 470 to account for patient and clinical 
variations that impact hospitals' cost of providing care.
     Use 3 years of historical Medicare payment data grouped 
into episodes of care according to the episode definition in section 
III.B. of the proposed rule, hereinafter termed historical CJR 
episodes. The specific set of 3-historical-years used would be updated 
every other performance year.
     Apply Medicare payment system (for example, IPPS, OPPS, 
IRF PPS, SNF, MPFS, etc.) updates to the historical episode data to 
ensure we incentivize hospitals based on historical utilization and 
practice patterns, not Medicare payment system rate changes that are 
beyond hospitals' control. Because different Medicare payment system 
updates become effective at two different times of the year, we would 
calculate separate target prices for episodes initiated between January 
1 and September 30 versus October 1 and December 31.
     Blend together hospital-specific and regional historical 
CJR episode payments, transitioning from primarily provider-specific to 
completely regional pricing over the course of the 5 performance years, 
to incentivize both historically efficient and less efficient hospitals 
to furnish high quality, efficient care in all years of the model. 
Regions would be defined as each of the nine U.S. Census divisions.
     Normalize for provider-specific wage adjustment variations 
in Medicare payment systems when combining provider-specific and 
regional historical CJR episodes. Wage adjustments would

[[Page 73338]]

be reapplied when determining hospital-specific target prices.
     Pool together CJR episodes anchored by MS DRGs 469 and 470 
to use a greater historical CJR episode volume and set more stable 
prices.
     Apply a discount factor to serve as Medicare's portion of 
reduced expenditures from the CJR episode, with any remaining portion 
of reduced Medicare spending below the target price potentially 
available as reconciliation payments to the participant hospital where 
the anchor hospitalization occurred.
    Further discussion on each of the individual features can be found 
in section III.C.4.b. of this final rule. In section III.C.4.c. of this 
final rule, we also provide further details on the proposed sequential 
steps to calculate target prices and how each of the pricing features 
would fit together.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters responded on several of the proposed pricing 
features, including how quality performance would affect payment, and 
we refer readers to comments and responses to comments in sections 
III.C.4.b and III.C.5 for further discussion on changes to how quality 
would be tied to payment as described in the proposed rule. We 
reference these comments here because any changes to the proposed 
episode price setting methodology and link between quality performance 
and payment would impact the number of target prices for each 
participant hospital.
    Response: As further discussed in section III.C.4.b.(1) of this 
final rule, we are modifying the proposed rule to risk stratify (and 
set different prices) based on not just different anchor MS-DRGs but 
also patients' hip fracture status. As discussed in section 
III.C.4.b.(9) of this final rule, we are modifying our policy in this 
final rule so as to use lower discount factors for purposes of 
determining the hospital's responsibility for excess episode spending 
not only in performance year 2, but also in performance year 3. 
Additionally, as discussed in section III.C.5 of this final rule, we 
are modifying the proposed rule so as to provide different levels of 
quality incentive payments that would modulate participant hospitals' 
effective target price discount factor based on their quality 
performance. Because of these changes, each participant hospital in 
performance years 1, 4, and 5 will have 8 potential target prices for 
each combination of anchor MS-DRG (469 vs. 470), hip fracture status 
(with hip fracture vs. no hip fracture), and episode initiation date 
(between April 1 and September 30 vs. between October 1 and December 31 
for performance year 1, and between January 1 and September 30 vs. 
between October 1 and December 31 for performance years 2 through 5). 
Each participant hospital in performance years 2 and 3 will have 16 
target prices for the same combinations in performance years 1, 4, and 
5, but with one group of 8 potential target prices for purposes of 
calculating reconciliation payments and another group of 8 potential 
target prices for purposes of determining hospital's responsibility for 
excess episode spending.
b. Pricing Features
(1) Different Target Prices for Episodes Anchored by MS-DRG 469 Versus 
MS-DRG 470
    For each participant hospital we proposed to establish different 
target prices for CJR episodes initiated by MS-DRG 469 versus MS-DRG 
470. MS-DRGs under the IPPS account for some of the clinical and 
resource variations that exist and that impact hospitals' cost of 
providing care. Specifically, MS-DRG 469 is defined to identify, and 
provide hospitals a higher Medicare payment to reflect the higher 
hospital costs for, hip and knee procedures with major complications or 
comorbidities. Therefore, we proposed to risk stratify and calculate 
separate target prices for each participant hospital for CJR episodes 
with MS-DRG 469 versus MS-DRG 470 anchor hospitalizations.
    We considered risk adjusting the episode target prices by making 
adjustments or setting different prices based on patient-specific 
clinical indicators (for example, comorbidities). However, we did not 
believe there is a sufficiently reliable approach that exists suitable 
for CJR episodes beyond MS-DRG-specific pricing, and there is no 
current standard on the best approach. At the time of developing the 
proposed rule Tennessee, Ohio, and Arkansas are launching multi-payer 
(including Medicaid and commercial payers, excluding Medicare) bundles 
and include hip and knee replacement as an episode.22 23 24 
These states' hip and knee episode definitions and payment models are 
consistent with, though not the same as, the proposed CJR episode 
described in the proposed rule. However, each of these three states 
uses different risk adjustment factors. This variation across states 
supported our stated belief in the proposed rule that there is 
currently no standard risk adjustment approach widely accepted 
throughout the nation that could be used under CJR, a model that would 
apply to hospitals across multiple states. Therefore, we did not 
propose to make risk adjustments based on patient-specific clinical 
indicators.
---------------------------------------------------------------------------

    \22\ Tennessee Health Care Innovation Initiative. https://www.tn.gov/HCFA/strategic.shtml. Accessed on April 16, 2015.
    \23\ Ohio Governor''s Office of Health Transformation. 
Transforming Payment for a Healthier Ohio, June 8, 2014. https://www.healthtransformation.ohio.gov/LinkClick.aspx?fileticket=TDZUpL4a-SI%3d&tabid=138, Accessed on 
April 16, 2014.
    \24\ Total Joint Replacement Algorithm Summary, Arkansas Health 
Care Payment Improvement Initiative, November 2012. https://www.paymentinitiative.org/referenceMaterials/Documents/TJR%20codes.pdf. Accessed on April 17, 2015.
---------------------------------------------------------------------------

    We also considered making risk adjustments based on the participant 
hospital's average Hierarchical Condition Category (HCC) score for 
patients with anchor CJR hospitalizations. The CMS-HCC risk adjustment 
model quantifies a beneficiary's risk by examining the beneficiary's 
demographics and historical claims data and predicting the 
beneficiary's total expenditures for Medicare Parts A and B in an 
upcoming year. However, the CMS-HCC risk adjustment model's intended 
use is to pay Medicare Advantage (MA) plans appropriately for their 
expected relative costs. For example, MA plans that disproportionately 
enroll the healthy are paid less than they would have been if they had 
enrolled beneficiaries with the average risk profile, while MA plans 
that care for the sickest patients are paid proportionately more than 
if they had enrolled beneficiaries with the average risk profile. The 
CMS-HCC risk adjustment model is prospective. It uses demographic 
information (that is, age, sex, Medicare/Medicaid dual eligibility, 
disability status) and a profile of major medical conditions in the 
base year to predict Medicare expenditures in the next year.\25\ As 
previously noted, the CMS-HCC risk adjustment model is used to predict 
total Medicare expenditures in an upcoming year, and may not be 
appropriate for use in predicting expenditures over a shorter period of 
time, such as the CJR episode, and may not be appropriate in instances 
where its use is focused on LEJRs. Therefore, since we have not 
evaluated the validity of HCC scores for predicting Medicare 
expenditures for shorter episodes of care or for specifically LEJR 
beneficiaries, we did not propose to risk

[[Page 73339]]

adjust the target prices using HCC scores for the CJR model.
---------------------------------------------------------------------------

    \25\ Pope, C. et al., Evaluation of the CMS-HCC Risk Adjustment 
Model Final Report. Report to the Centers for Medicare & Medicaid 
Services under Contract Number HHSM-500-2005-00029I. RTI 
International. Research Triangle Park, NC. March, 2011.
---------------------------------------------------------------------------

    We also considered risk stratifying or setting different prices for 
different procedures, such as different prices for hip versus knee 
replacements, but we did not believe there would be substantial 
variation in episode payments for these clinical scenarios to warrant 
different prices or adjustments. Moreover, Medicare IPPS payments, 
which account for approximately 50 percent \26\ of CJR episode 
expenditures, do not differentiate between hip and knee procedures, 
mitigating procedure-specific variation for the anchor hospitalization. 
Furthermore, there are no widely accepted clinical guidelines to 
suggest that PAC intensity would vary significantly between knee and 
hip replacements. We sought comment on our proposal to price episodes 
based on the MS-DRG for the anchor hospitalization, without further 
risk adjustment.
---------------------------------------------------------------------------

    \26\ Medicare FFS Parts A and B claims, CJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters stated that proper risk adjustment is 
necessary for the success of this model, and that anchor MS-DRG-
specific pricing can help but is not sufficient on its own. Proper risk 
adjustment would account for differences in episode spend due to 
patient variations that are out of providers' control. They stated that 
MS-DRGs may capture variations within the inpatient setting, but do not 
reflect patient variations post-discharge. Inappropriate risk 
adjustment could lead to access issues for higher risk patients and 
increased volume of LEJR procedures for younger/healthier patients by 
participant hospitals looking to lower their average episode 
expenditures.
    Most commenters who wrote on the issue suggested risk adjustment or 
complete exclusion for episodes with hip fractures, partial hip 
replacements, and emergent (versus non-emergent or elective) 
procedures. Some commenters provided analysis on hip fractures, in 
particular, and demonstrated episodes with hip fractures are 
significantly more expensive than those without hip fractures. Other 
clinical and demographic dimensions offered for risk adjustment or 
exclusion include the following: Procedure (total hip [THA] vs. total 
knee [TKA] vs. partial hip [PHA] vs. ankle vs. limb reattachment); 
socioeconomic status; patient functional status; age; and 
comorbidities. Requests from commenters for risk adjustment based on 
the previously stated dimensions were usually paired with requests to 
also exclude patients from the CJR model, and we encourage readers to 
read comments in section III.B.2.a. of this final rule for additional 
details on the clinical and demographic dimensions requested for risk 
adjustment or exclusion.
    Some commenters who wrote on the issue of risk adjustment disputed 
CMS' statement in the proposed rule that there is no standard risk 
adjustment approach widely accepted throughout the nation. They pointed 
to examples of existing risk adjustment approaches that could be used 
for CJR episodes, such as Optum's Procedure Episode Grouper (PEG), 
Truven's Medical Episode Grouper (MEG), Health Care Incentives 
Improvement Institute's (HCI3) risk adjustment model, CMS's HCCs model, 
and CMS's risk-adjusted quality/efficiency metric for elective LEJR 
episodes: Hospital-Level, Risk-Standardized Payment Associated with a 
90-Day Episode of Care for Elective Primary Total Hip Arthroplasty 
(THA) and/or Total Knee Arthroplasty (TKA).
    Response: In response to comments, we undertook further analysis. 
Our analysis showed that episodes with hip fractures, identified by 
historical anchor hospitalization claims with an ICD-9-CM hip fracture 
code as the principal diagnosis, have approximately 70 percent greater 
historical average episode expenditures than episodes without hip 
fractures, even for episodes within the same anchor MS-DRG, confirming 
analyses shared by some commenters that also showed episodes with hip 
fractures to have significantly greater average expenditures.\27\ PHA 
episodes and emergent episodes had similarly higher historical average 
expenditures than TKA and THA episodes and non-emergent episodes, 
respectively. There are clearly patient-specific conditions that lead 
to significant episode expenditure variations, even within the same MS-
DRG.
---------------------------------------------------------------------------

    \27\ Medicare FFS Parts A and B claims, CJR episodes, as 
proposed in the proposed rule, between October 2013 and September 
2014.
---------------------------------------------------------------------------

    On the basis of the comments and our further analysis, we agree 
with commenters that proper risk adjustment is necessary to 
appropriately incentivize participant hospitals to deliver high quality 
and efficient care. We acknowledge that a comprehensive risk adjustment 
methodology beyond just setting different prices by anchor MS-DRGs 
could more accurately risk adjust episodes for patient-specific 
clinical and demographic factors that would drive variations in CJR 
episode expenditures.
    We disagree with commenters, though, that there is an already 
existing, widely accepted risk adjustment methodology for CJR episodes. 
The HCC model, as discussed earlier in this section, is not designed to 
predict costs within CJR episodes and may not accurately predict CJR 
episode expenditures. Commercial claims groupers such as Optum's PEG, 
Truven's MEG, and HCI3's risk adjustment model utilize different 
episode definitions from how we will define CJR episodes. Additionally, 
these commercial groupers have yet to be validated for a Medicare 
population; we believe there may be a different set of risk factors 
that predict episode expenditures for Medicare beneficiaries than those 
used to predict episode expenditures for younger and generally 
healthier individuals with commercial insurance. We also acknowledge 
that CMS has designed a risk-adjusted quality/efficiency metric for 
elective LEJR episodes: Hospital-Level, Risk-Standardized Payment 
Associated with a 90-Day Episode of Care for Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA). This metric, 
though, has been developed for a different episode definition; most 
notably, this risk-adjusted metric excludes emergent episodes while the 
CJR episode definition does not exclude emergent episodes, as discussed 
in section III.B. of this final rule.
    We do believe that there are opportunities to learn from existing 
comprehensive risk adjustment models, and we may explore how a 
comprehensive risk adjustment model such as these may be adapted for 
the CJR model in the future.
    In the meantime, though, we also believe we can improve upon the 
proposed approach of only setting different target prices by anchor MS-
DRG. Specifically, we can account for the impact of hip fracture status 
(with hip fracture vs. without hip fracture), procedure choice (PHA vs. 
TKA or THA), and emergence status (emergent vs. non-emergent) on 
episode expenditures. According to our analysis, though, there was 
significant correlation between incidence of hip fractures, partial hip 
procedures, and emergent procedures--94 percent of partial hip 
replacement episodes and 93 percent of emergent episodes are for 
patients with hip fractures. Because of the correlation between these 
three factors, we believe we can account for all three by risk 
stratifying based on hip fracture status alone. We believe hip fracture 
status is a more appropriate dimension on which

[[Page 73340]]

to risk stratify because it reflects patients' clinical status, as 
opposed to partial hip replacements and emergent procedures which are 
influenced by providers' care delivery decisions.
    In light of the comments and our additional analysis, we will 
modify our proposed policy to risk stratify, or set different target 
prices, both for episodes anchored by MS-DRG 469 vs. MS-DRG 470 and for 
episodes with hip fractures vs. without hip fractures. By adding hip 
fracture status to our risk stratification approach, we believe we can 
capture a significant amount of patient-driven episode expenditure 
variation. Additionally, because of the high correlation between 
incidence of hip fractures, partial hip procedures, and emergent 
procedures, we do not believe we need to add any procedure-specific and 
emergent status factors for risk stratification. We still believe, as 
stated in the proposed rule that PAC intensity would not vary 
significantly between TKA and THA for beneficiaries without hip 
fractures.
    We will identify episodes with hip fractures using ICD-9-CM or ICD-
10-CM diagnosis codes, where the hip fracture diagnosis is the 
principal diagnosis on the anchor hospitalization claim for an LEJR 
procedure. Our goal is to identify those CJR episodes where the primary 
surgical treatment for the hip fracture is an LEJR procedure furnished 
during the anchor hospitalization. The historical episodes with hip 
fracture diagnosis codes on the anchor hospitalization claim will be 
used to set the hip fracture episode target prices under the CJR model, 
and episodes during the CJR model with hip fracture diagnosis codes on 
the anchor hospitalization claim will be reconciled at the hip fracture 
episode target prices.
    In order to develop the initial list of ICD-9-CM hip fracture 
diagnosis codes used to identify those historical episodes with hip 
fracture for calculating hip fracture episode target prices, to 
implement changes to the list to account for the transition to the ICD-
10-CM diagnosis code set that will be used to identify episodes during 
the model performance years that will receive fracture episode target 
prices, and to make other changes as necessary based on annual ICD-10-
CM coding changes or to address issues raised by the public throughout 
the model performance years, we are implementing the following 
subregulatory process, which mirrors the subregulatory process we will 
use for the episode definition exclusions list described in section 
III.B.2 of this final rule. We will use this process on an annual, or 
more frequent, basis to update the ICD-CM hip fracture diagnosis code 
list and to address issues raised by the public.
    As part of this process, we will first develop the potential ICD-CM 
hip fracture diagnosis codes based on our assessment according to the 
following standards:
     The ICD-CM diagnosis code is sufficiently specific that it 
represents a bone fracture for which a physician could determine that a 
hip replacement procedure, either a PHA or a THA, could be the primary 
surgical treatment.
     The ICD-CM diagnosis code is the primary reason (that is, 
principal diagnosis code) for the anchor hospitalization.
    We will then post a list of potential hip fracture diagnosis codes 
(whether ICD-9-CM diagnosis codes, as necessary to develop initial 
target prices, or ICD-10-CM diagnosis codes to be utilized during the 
model performance years) to the CMS Web site at https://innovation.cms.gov/initiatives/cjr/ to allow for public input on our 
planned application of these standards, and then we will adopt the ICD-
CM hip fracture diagnosis code list with posting to the CMS Web site of 
the final ICD-CM hip fracture diagnosis code list after our 
consideration of the public input.
    With public release of this final rule, we are initiating this 
subregulatory process to develop a final ICD-9-CM hip fracture 
diagnosis code list that will be used to identify historical anchor 
hospitalizations for beneficiaries with hip fracture for purposes of 
determining episode spending in the historical period and developing 
initial target prices for the model. The potential ICD-9-CM hip 
fracture diagnosis code list is posted on the CJR Web site at https://innovation.cms.gov/initiatives/cjr/. Given our objective to quickly 
develop target prices and provide them to participant hospitals in the 
timeframe described in section III.C.4. of this final rule, we will 
allow for public input on this list for 14 days after the public 
release of this final rule. Public comments will be submitted via an 
email address posted on the CJR Web site along with the list of 
potential ICD-9-CM hip fracture diagnosis codes previously referenced. 
We will consider the public's input and then, after consideration, we 
will post the final ICD-9-CM hip fracture diagnosis code list to the 
CMS Web site. This list will be used to calculate the first set of 
target prices communicated to participant hospitals. Within 30 days of 
public release of the final rule, we will again initiate this 
subregulatory process to identify ICD-10-CM hip fracture diagnosis 
codes by posting the potential ICD-10-CM hip fracture diagnosis code 
list on the CMS Web site and seeking public input, so we can provide in 
a timely manner the final list of ICD-10-CM hip fracture diagnosis 
codes prior the beginning of the first model performance year.
    Final Decision: After consideration of the public comments we 
received, we are modifying the proposed rule to risk stratify (and set 
different target prices) based on not just different anchor MS-DRGs but 
also patients' hip fracture status. We will identify episodes with hip 
fractures using ICD-9-CM or ICD-10-CM diagnosis codes in the principal 
position on the claim for the anchor hospitalization. We are 
instituting a subregulatory process in order to allow for public 
comment and to finalize the ICD-9-CM and ICD-10-CM diagnosis codes to 
be used in identifying hip fracture cases in the CJR model, which we 
are initiating as of the public release of this final rule. We refer 
readers to the list of ICD-9-CM diagnosis codes posted on the CJR model 
Web site at https://innovation.cms.gov/initiatives/cjr/.
    This policy is codified at Sec.  510.300(a).
(2) Three Years of Historical Data
    We proposed to use 3 years of historical CJR episodes for 
calculating CJR target prices. The set of 3-historical-years used would 
be updated every other year. Specifically--
     Performance years 1 and 2 would use historical CJR 
episodes that started between January 1, 2012 and December 31, 2014;
     Performance years 3 and 4 would use historical episodes 
that started between January 1, 2014 and December 31, 2016; and
     Performance year 5 would use episodes that started between 
January 1, 2016 and December 31, 2018.
    We considered using fewer than 3 years of historical CJR episode 
data, but we are concerned with having sufficient historical episode 
volume to reliably calculate target prices. We also considered not 
updating the historical episode data for the duration of the model. 
However, we stated in the proposed rule our belief that hospitals' 
target prices should be regularly updated on a predictable basis to use 
the most recent available claims data, consistent with the regular 
updates to Medicare's payment systems, to account for actual changes in 
utilization. We are not proposing to update the data annually, given 
the uncertainty in pricing this could introduce for participant 
hospitals. We also note that the effects of updating hospital-specific 
data on the target price could be limited

[[Page 73341]]

as the regional contribution to the target price grows, moving to two-
thirds in performance year 3 when the first historical episode data 
update would occur.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters generally supported using historical 
expenditures to set target prices. Several commenters expressed concern 
that updating the 3 years of historical CJR episode data every other 
year would effectively make participant hospitals compete against 
themselves without consideration of whether they are already efficient. 
Some of these commenters cited that BPCI does not update its historical 
data for the entirety of the BPCI model, and some other commenters 
noted that Medicare Shared Savings Program resets its historical 
benchmark every three years with each new participation agreement. 
There were also a few commenters that supported updating the 3 years of 
historical CJR episode data every 2 years because it was better than 
doing so every year.
    Some commenters also stated that if we do update the historical 
data, we should include previous reconciliation payments and repayments 
to Medicare for the participant hospitals. We refer readers to comments 
and responses to comments in section III.C.3 of this final rule for 
further discussion on this comment.
    Some commenters proposed alternative approaches to getting to 
target prices other than using and updating historical data. Some 
commenters suggested using a negotiations/bidding process approach to 
get to target prices; Medicare would negotiate with or request bids 
from providers for providing services covered under the CJR episode 
definition. Some other commenters suggested applying some sort of 
inflation factor, such as a CMS market basket update, for future years 
of the model instead of updating the 3 years of historical CJR episode 
data. These alternatives to using and updating the historical CJR 
episode data would help prevent a participant hospital from competing 
against its historical self, even if it is already efficient, in order 
to qualify for reconciliation payments.
    Response: We appreciate commenters' support for using historical 
expenditures to set target prices. We acknowledge that BPCI does not 
update participants' historical data and Medicare Shared Savings 
Program does not reset participating entities' benchmark for 3 years 
(until the beginning of a new agreement period). However, these 
programs employ alternative mechanisms to account for recent national 
trends reflecting changes in industry wide practice patterns. BPCI, for 
example, retrospectively applies a national trend factor to trend 
forward historical episode expenditure data and capture changes in 
nationwide practice patterns between the time period used in the 
historical data and the performance period. BPCI participants are not 
penalized or rewarded for mirroring nationwide practice pattern trends. 
In BPCI, however, participants' target prices are determined 
retrospectively after the close of each performance period. We intend 
to calculate and communicate target prices prior to the start of each 
performance year, as discussed in section III.C.4.a of this final rule, 
so we cannot utilize the retrospective national trend factor approach 
as used in BPCI.
    Instead, we proposed to capture changes in nationwide practice 
patterns by updating every other year the historical CJR episode data 
used to set target prices. We recognize that this approach of updating 
the historical episode data every other year effectively assumes a zero 
percent change in utilization between the latest year of historical 
episode data and the performance year. We believe this can be a valid 
estimate for a few years (for example, 2014 as the latest year of 
historical episode data for 2017 target prices; update historical 
episode data for 2018 target prices), but it is less likely to hold 
true for longer periods of time (for example, 2014 as the latest year 
of historical episode data for 2020 target prices; no update to 
historical episode data). Therefore, we believe updating the historical 
episode data is necessary. While updating the historical episode data 
more frequently (that is, every year, instead of every other year) 
would lessen our reliance on an assumption of zero percent utilization 
change, doing so may exacerbate commenters' concerns that already 
efficient hospitals would have to compete against themselves, as 
discussed further later in this section.
    We appreciate commenters' concerns that it may be unsustainable for 
already efficient participant hospitals to continuously improve, and 
that participant hospitals may undertake activities that promote care 
coordination and improved quality of care but are not directly 
reimbursed under applicable Medicare FFS payment systems. If we were 
using 100 percent hospital-specific pricing, updating the historical 
data used to set target prices without including reconciliation 
payments would create a lower and harder to achieve target price for 
participant hospitals that previously increased efficiency. As 
discussed in section III.C.3 of this final rule, we may revisit in 
future rulemaking our decision to exclude reconciliation payments and 
repayment amounts when updating the set of historical years used to set 
target prices. Additionally, as we transition to regional pricing over 
the course of the model, participant hospitals will no longer compete 
against their historical selves but rather strive to outperform their 
regional peers. Under regional pricing, an already efficient hospital 
may be able to achieve actual episode expenditures below the regional 
target price without having to become even more efficient. By 
performance year 3, when the first update to historical episode data 
would occur, the majority of the target price would be based on the 
regional component, not the hospital-specific component, as described 
in section III.C.4.b.(5) of this final rule.
    We appreciate commenters' suggestions on using alternative 
approaches to setting target prices. We may consider such approaches 
for future model tests.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal, without modification, to use 
three years of historical expenditures, updated every other year, to 
set target prices.
(3) Trending of Historical Data to the Most Recent Year of the Three
    We acknowledge that some payment variation may exist in the 3 years 
of historical CJR episodes due to updates to Medicare payment systems 
(for example, IPPS, OPPS, IRF PPS, SNF PPS, etc.) and national changes 
in utilization patterns. Episodes in the third of the 3-historical-
years may have higher average payments than those from the earlier 2 
years because of Medicare payment rate increases over the course of the 
3-historical-years. We do not intend to have CJR incentives be affected 
by Medicare payment system rate changes that are beyond hospitals' 
control. In addition to the changes in Medicare payment systems, 
average episode payments may change year over year due to national 
trends reflecting changes in industry-wide practice patterns. For 
example, readmissions for all patients, including those in CJR 
episodes, may decrease nationally due to improved industry-wide 
surgical protocols that reduce the chance of infections. We do not 
intend to provide reconciliation payments to (or require repayments 
from) hospitals for achieving lower (or higher) Medicare expenditures 
solely because they followed national changes in practice

[[Page 73342]]

patterns. Instead, we aim to incentivize hospitals based on their 
hospital-specific inpatient and PAC delivery practices for LEJR 
episodes.
    To mitigate the effects of Medicare payment system updates and 
changes in national utilization practice patterns within the 3 years of 
historical CJR episodes, we proposed to apply a national trend factor 
to each of the years of historical episode payments. Specifically, we 
proposed to inflate the 2 oldest years of historical episode payments 
to the most recent year of the 3-historical-years described in section 
III.C.4.b.(2) of the proposed rule. We proposed to trend forward each 
of the 2 oldest years using the changes in the national average CJR 
episode payments. We also proposed to apply separate national trend 
factors for episodes anchored by MS-DRG 469 versus MS-DRG 470 to 
capture any MS-DRG-specific payment system updates or national 
utilization pattern changes. For example, when using CY 2012-2014 
historical episode data to establish target prices for performance 
years 1 and 2, under our proposal we would calculate a national average 
MS-DRG 470 anchored episode payment for each of the 3-historical-years. 
The ratio of the national average MS-DRG 470 anchored episode payment 
for CY 2014 to that of CY 2012 would be used to trend 2012 MS-DRG 470 
anchored episode payments to CY 2014. Similarly, the ratio of the 
national average MS-DRG 470 anchored episode payment for CY 2014 to 
that of CY 2013 would be used to trend 2013 episode payments to CY 
2014. The previously stated process would be repeated for MS-DRG 469 
anchored episodes. Trending CY 2012 and CY 2013 data to CY 2014 would 
capture updates in Medicare payment systems as well as national 
utilization pattern changes that may have occurred.
    We considered adjusting for regional trends in utilization, as 
opposed to national trends. However, we stated in the proposed rule our 
belief that any Medicare payment system updates and significant changes 
in utilization practice patterns would not be region-specific but 
rather be reflected nationally.
    We sought comment on our proposal to nationally trend historical 
data to the most recent year of the 3 being used to set the target 
prices.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters supported the use of national trends for 
trending historical data to the most recent of the 3 being used to set 
the target prices. Some commenters suggested blending regional, instead 
of national, trends to be consistent with how target prices will be 
blended, as discussed in section III.C.4.b.(5) of this final rule. Some 
commenters inquired how trending historical data would capture changes 
in Medicare FFS fee schedules.
    Response: We appreciate commenters' support for the use of national 
trends for trending historical data. This trending of historical data 
to the most recent of the 3 being used to set target prices would 
capture both Medicare FFS fee schedule and practice pattern changes. 
Medicare FFS fee schedule changes would be captured in the trend factor 
calculations; for example, if Medicare FFS fee schedules change so as 
to increase overall payments by 4 percent between the oldest and most 
recent year of historical episode data, the national trend factor 
applied to the oldest year of historical episode data would be 1.04 
(assuming no change in utilization patterns). Medicare FFS fee schedule 
changes apply across the nation, and we believe that major changes to 
practice patterns would be nationwide and not constrained to any one 
region.
    Comment: Many commenters requested for risk adjustment based on 
patients' hip fracture status, among other clinical and demographic 
dimensions.
    Response: We refer readers to comments and responses to comments in 
section III.C.4.b.(1) of this final rule for further discussion on risk 
stratification, and we reference it here because changes to risk 
stratification would impact how we would trend historical data to the 
most recent year of the three being used. As discussed in the responses 
to comments in section III.C.4.b.(1) of this final rule, we will modify 
our proposal so as to set different target prices both for episodes 
anchored by MS-DRG 469 vs. MS-DRG 470 and for episodes with hip 
fractures vs. without hip fractures. Given this change, we must also 
modify the proposed approach to apply national trend factor. 
Specifically, instead of calculating different national trend factors 
just for anchor MS-DRGs 469 vs. 470, we will calculate different 
national trend factors for each combination of anchor MS-DRG (469 vs. 
470) and hip fracture status (with hip fracture vs. without hip 
fracture) using the methodology we proposed.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to trend historical data to 
the most recent of the 3 being used to set target prices, though 
instead of calculating different national trend factors just for anchor 
MS-DRGs 469 vs. 470, we will calculate different national trend factors 
for each combination of anchor MS-DRG (469 vs. 470) and hip fracture 
status (with hip fracture vs. without hip fracture).
(4) Update Historical Episode Payments for Ongoing Payment System 
Updates
    We proposed to prospectively update historical CJR episode payments 
to account for ongoing Medicare payment system (for example, IPPS, 
OPPS, IRF PPS, SNF, MPFS, etc.) updates to the historical episode data 
and ensure we incentivize hospitals based on historical utilization and 
practice patterns, not Medicare payment system rate changes that are 
beyond hospitals' control. Medicare payment systems do not update their 
rates at the same time during the year. For example, IPPS, the IRF PPS, 
and the SNF payment system apply annual updates to their rates 
effective October 1, while the hospital OPPS) and MPFS apply annual 
updates effective January 1. To ensure we appropriately account for the 
different Medicare payment system updates that go into effect on 
January 1 and October 1, we proposed to update historical episode 
payments for Medicare payment system updates and calculate target 
prices separately for episodes initiated between January 1 and 
September 30 versus October 1 and December 31 of each performance year. 
The target price in effect as of the day the episode is initiated would 
be the target price for the whole episode. Note that in performance 
year 5, the second set of target prices would be for episodes that 
start and end between and including October 1 and December 31 because 
the fifth performance period of the CJR model would end on December 31, 
2020. Additionally, a target price for a given performance year may 
apply to episodes included in another performance year. For example, an 
episode initiated in November 2016, and ending in February 2017 would 
have a target price based on the second set of 2016 target prices (for 
episodes initiated between October 1 and December 31, 2016), and it 
would be captured in the CY 2017 performance year (performance year 2) 
because it ended between January 1 and December 31, 2017. We refer 
readers to section III.C.3.c. of the proposed rule for further 
discussion on the definition of performance years.
    We proposed to update historical CJR episode payments by applying 
separate Medicare payment system update factors each January 1 and 
October 1 to each of the following six components of each hospital's 
historical CJR payments:
     Inpatient acute.
     Physician.

[[Page 73343]]

     IRF.
     SNF.
     HHA.
     Other services.
    A different set of update factors would be calculated for January 1 
through September 30 versus October 1 through December 31 episodes each 
performance year. The six update factors for each of the previously 
stated components would be hospital-specific and would be weighted by 
the percent of the Medicare payment for which each of the six 
components accounts in the hospital's historical episodes. The weighted 
update factors would be applied to historical hospital-specific average 
payments to incorporate ongoing Medicare payment system updates. A 
weighted update factor would be calculated by multiplying the 
component-specific update factor by the percent of the hospital's 
historical episode payments the component represents, and summing 
together the results. For example, let us assume 50 percent of a 
hospital's historical episode payments were for inpatient acute care 
services, 15 percent for physician services, 35 percent for SNF 
services, and 0.0 percent for the remaining services. Let us also 
assume for this example that the update factors for inpatient acute 
care services, physician services, and SNF services are 1.02, 1.03, and 
1.01, respectively. The weighted update factor in this example would be 
the following: (0.5 * 1.02) + (0.15*1.03) + (0.35*1.01) = 1.018. The 
hospital in this example would have its historical average episode 
payments multiplied by 1.018 to incorporate ongoing payment system 
updates. The specific order of steps, and how this step fits in with 
others, is discussed further in section III.C.4.c. of this final rule.
    Each of a hospital's six update factors would be based on how 
inputs have changed in the various Medicare payment systems for the 
specific hospital. Additional details on these update factors will be 
discussed later in this section.
    Region-specific update factors for each of the previously stated 
components and weighted update factors would also be calculated in the 
same manner as the hospital-specific update factors. Instead of using 
historical episodes attributed to a specific hospital, region-specific 
update factors would be based on all historical episodes initiated at 
any CJR eligible hospital within the region. For purposes of this rule, 
CJR eligible hospitals are defined as hospitals that are paid under 
IPPS and not a participant in BPCI Model 1 or in the risk-bearing 
period of Models 2 or 4 for LEJR episodes, regardless of whether or not 
the MSAs in which the hospitals are located were selected for inclusion 
in the CJR model. CJR episodes initiated at a CJR eligible hospital 
will for purposes of this rule be referred to as CJR episodes 
attributed to that CJR eligible hospital.
    We considered an alternative option of trending the historical 
episode payments forward to the upcoming performance year using ratios 
of national average episode payment amounts, similar to how we proposed 
to trend the 2 oldest historical years forward to the latest historical 
year for historical CJR episode payments in section III.C.4.b.(3) of 
the proposed rule. Using ratios of national average episode payment 
amounts would have the advantage of also capturing changes in national 
utilization patterns in addition to payment system updates between the 
historical years and the performance year. However, such an approach 
would need to be done retrospectively, after average episode payments 
can be calculated for the performance year, because it would rely on 
the payments actually incurred in the performance period, data that 
would be not be available before the performance period. While the 
proposed approach of using component-specific weighted update factors 
may be more complicated than the previously stated alternative to use 
ratios of national average episode payment amounts, we stated in the 
proposed rule our belief that the additional complication is outweighed 
by the value to hospitals of knowing target prices before the start of 
an episode for which the target price would apply. We sought comment on 
this proposed approach of updating historical episode payments for 
ongoing Medicare payment system changes.
    We did not propose to separately and prospectively apply an 
adjustment to account for changes in national utilization patterns 
between the historical and performance years. If a prospective 
adjustment factor for national utilization pattern changes were 
applied, it may only be meaningful in performance years 2 and 4, when 
the historical data used to calculate target prices would not be 
updated, but another year of historical data would be available. In any 
of the other 3 performance years, the latest available historical year 
of data would already be incorporated into the target prices. Given 
that we proposed to refresh the historical data used to calculate 
target prices every 2 years, we did not believe an additional 
adjustment factor to account for national practice pattern changes is 
necessary to appropriately incentivize participant hospitals to improve 
quality of care and reduce episode payments.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters noted that the Medicare payment system 
update factors were complicated to calculate. Some commenters supported 
the use of calculating Medicare payment system update factors at the 
hospital-specific and regional levels to reflect practice pattern 
variations, while some others proposed using national update factors to 
incentivize reduction in medically unnecessary and/or inappropriate 
practice pattern variations.
    A couple of commenters also inquired whether the Medicare payment 
system update factors accounted for changes Medicare FFS payment system 
changes. A commenter requested we freeze MS-DRG weights for MS-DRGs 469 
and 470 if the weights decrease in any given year as part of the annual 
Medicare FFS IPPS payment system updates.
    Response: We acknowledge that the Medicare payment system update 
factor calculations are complex, but we believe the complexity is 
necessary to account for Medicare FFS payment system changes. We will 
use these payment system update factors to ensure that we incentivize 
hospitals based on utilization and practice patterns, not Medicare 
payment system rate changes. While changes to Medicare FFS rates for 
individual services would be applicable nationwide, the relative 
composition of each service in historical episodes will likely vary by 
hospital and region. Calculating payment system update factors at the 
hospital-specific and regional levels will more accurately capture the 
effects of payment system changes.
    We also note that we are finalizing a modification to the equations 
used to calculate update factors for those payment systems that apply 
annual updates to their rates effective October 1 of each year. In lieu 
of calculating the update factors for inpatient acute, SNF, and IRF 
services using the values applicable at the end of latest historical 
year used to calculate target prices, we will use a blend of the values 
applicable during the latest historical year. Such a change will 
account for the payment systems that update payment rates on a fiscal 
year cycle, ensure we are calculating update factors based on the 
payment rates that apply to a given period to the extent feasible, and 
result in more accurate target price calculations. We reflect this 
change in the sections III.C.4.b.(4)(a),

[[Page 73344]]

III.C.4.b.(4)(c), and III.C.4.b.(4)(d) of this final rule
    We believe freezing MS-DRG weights would run counter to our 
objective to accurately account for the effects of Medicare FFS payment 
system changes. If we freeze MS-DRG weights and the weights decrease, 
we may inappropriately overestimate target prices.
    Comment: Some commenters requested to have a single set of target 
prices for the entire calendar year, as opposed to two different sets 
of target prices that would account for intra-year Medicare FFS payment 
systems updates: one set for January 1 through September 30, and a 
second set for October 1 through December 31. These commenters stated 
that a single target price for the entire year may be easier to 
communicate to participant hospitals, and that the effect of mid-
calendar year changes in Medicare FFS (for example, October 1 IPPS 
changes) could be estimated and reconciled against a single set of 
target prices for the entire calendar year.
    Response: We appreciate commenters' desire for simplicity. However, 
we would not know the extent of October 1 Medicare FFS payment system 
updates prior to January of the same year. Additionally, the October 
update includes payment system updates for IPPS, which accounts for the 
plurality of historical CJR episode expenditures. Without knowing the 
magnitude of Medicare FFS payment system updates, we do not believe we 
could reliably calculate target prices. Any estimate would likely 
require corrections after the end of the performance year, rendering 
the initial target price unreliable and unrepresentative of the target 
price used for reconciliation.
    Comment: Several commenters recommended that we modify the 
definition of `CJR eligible hospitals,' the term used to identify 
hospitals included in calculations for the regional component of target 
prices (discussed further in section III.C.4.b.(5) of this final rule), 
to not exclude hospitals that are participants in BPCI Model 1 or in 
the risk bearing period of Models 2 or 4 for LEJR episodes. They 
recommended that some regions may have a greater proportion of these 
BPCI participants, and excluding them from the calculations for the 
regional component of target prices would not accurately reflect the 
region's historical expenditures. Additionally, with fewer hospitals 
included, the region component of target prices would be more 
significantly impacted by the performance of just CJR participant 
hospitals.
    Response: We agree with commenters' arguments to include hospitals 
that are participants in BPCI Model 1 or in the risk bearing period of 
Models 2 or 4 for LEJR episodes when calculating the regional component 
of CJR target prices. Including these BPCI hospitals would more 
accurately reflect the region's historical expenditures, independent of 
the level of BPCI participation in the region. Therefore, we are not 
finalizing our proposal to exclude these hospitals from the regional 
calculation. We will modify the definition of ``CJR eligible 
hospitals'' to include these BPCI hospitals so that their data is 
included in the regional component of target prices. We will treat 
these BPCI participants as though they were any other non-BPCI-
participating hospital--we would not apply the BPCI discount factor to 
claims payments nor include BPCI reconciliation or repayments for these 
BPCI hospitals. We do not intend to reduce target prices for 
participant hospitals just because they are located in a region with 
greater BPCI participation; instead, we want to ensure that we are 
calculating a representative regional component for target prices. In 
order to reduce potential confusion, we will also rename ``CJR eligible 
hospitals'' to be ``CJR regional hospitals''.
    We also clarify that BPCI LEJR episodes will be included in the 
historical data used to calculate the hospital-specific component of 
target prices. There may be some CJR participant hospitals who were 
previously participants in BPCI Model 2; there may be some BPCI Model 2 
episodes in the historical data initiated by PGPs for which the LEJR 
procedure took place at the CJR participant hospital; or there may be 
some BPCI Model 3 episodes in the historical data for which the LEJR 
procedure took place at the CJR participant hospital. Including the 
BPCI LEJR episodes from the historical data used to calculate the 
hospital-specific component of target prices would parallel the 
previously discussed approach to include BPCI LEJR episodes in the 
regional component of target prices. Again, as previously discussed for 
the regional component of target prices, we would not apply the BPCI 
discount factor to claim payments nor include BPCI reconciliation or 
repayments for the hospital-specific component of target prices.
    Final Decision: After consideration of the public comments we 
received, we are modifying our proposal to update historical episode 
payments for ongoing payment system updates so as to include in the 
definition of ``CJR eligible hospitals'' that are participants in BPCI 
Model 1 or in the risk bearing period of Models 2 or 4 for LEJR 
episodes, and rename ``CJR eligible hospitals'' to be ``CJR regional 
hospitals.'' We are also finalizing a modification to how we calculate 
update factors to more accurately capture payment system rate changes 
throughout the calendar year for inpatient acute, IRF, and SNF 
services. The modification is reflected in III.C.4.b.(4)(a), 
III.C.4.b.(4)(c), and III.C.4.b.(4)(d) of this final rule.
(a) Inpatient Acute Services Update Factor
    The proposed inpatient acute services update factor would apply to 
payments for services included in the episode paid under the IPPS. This 
would include payments for the CJR anchor hospitalization and related 
readmissions at hospitals paid under IPPS, but not payments for related 
readmissions at CAHs during the episode window. Payments for related 
readmissions at CAHs would be captured under the update factor for 
other services in section III.C.4.b.(4)(f) of the proposed rule.
    The update factor applied to the inpatient acute services component 
of each participant hospital and region's historical average episode 
payments would be based on how inputs for the Medicare IPPS have 
changed between the latest year used in the historical 3 years of 
episodes and the upcoming performance period under CJR. We proposed to 
use changes in the following IPPS inputs to calculate the inpatient 
acute services update factor: IPPS base rate and average of MS-DRG 
weights, as defined in the IPPS/LTCH Final Rules for the relevant 
years. The average MS-DRG weight would be specific to each participant 
hospital and region to account for hospital and region-specific 
inpatient acute service utilization patterns. Hospital-specific and 
region-specific average MS-DRG weights would be calculated by averaging 
the MS-DRG weight for all the IPPS MS-DRGs included in the historical 
episodes attributed to each participant hospital and attributed to CJR 
eligible hospitals in the region, respectively; including MS-DRGs for 
anchor admissions as well as those for subsequent readmissions that 
fall within the episode definition. Expressed as a ratio, the inpatient 
acute services adjustment factor would equal the following:
     The numerator is based on values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.

[[Page 73345]]

     The denominator is based on a blend of values applicable 
in the latest of the 3 historical years used in the target price (TP) 
calculations, weighted to account for the values applicable prior to 
October 1, and values applicable starting October 1 when IPPS updates 
for the new fiscal year are in effect. Note that this weighting 
incorporates a modification to our proposed methodology for calculating 
update factors, as previously discussed in section III.C.4.(b)(4) of 
this final rule.
    Therefore, the inpatient acute services update factor formula is 
shown as--
[GRAPHIC] [TIFF OMITTED] TR24NO15.003

(b) Physician Services Update Factor
    The proposed physician services update factor would apply to 
payments for services included in the episode paid under the MPFS for 
physician services. We proposed to use changes in the following MPFS 
inputs to calculate the physician services update factor of each 
participant hospital and region's historical average episode payments: 
RVUs; work, practice expense, and malpractice (MP) liability geographic 
practice cost indices (GPCIs); and national conversion factor, as 
defined in the MPFS Final Rule for the relevant years. Hospital-
specific and region-specific RVU-weighted GPCIs would be calculated to 
account for hospital and region-specific physician service utilization 
patterns. Hospital-specific and region-specific RVU-weighted GPCIs 
would be calculated by taking the proportion of RVUs for work, practice 
expense, and MP liability for physician services included in the 
historical episodes and attributed to each participant hospital and 
attributed to CJR eligible hospitals in the region, respectively, and 
multiplying each proportion by the relevant GPCI.
    Expressed as a ratio, the physician services update factor would 
equal the following:
     The numerator is based on GPCI values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.
     The denominator is based on GPCI values applicable at the 
end of the latest of the 3 historical years used in the target price 
(TP) calculations.
    Therefore, the proposed physician services update factor formula is 
shown as--
[GRAPHIC] [TIFF OMITTED] TR24NO15.004

(c) IRF Services Update Factor
    The proposed IRF services update factor applies to payments for 
services included in the episode paid under the Medicare inpatient 
rehabilitation facility prospective payment system (IRF PPS). We 
proposed to use changes in the IRF Standard Payment Conversion Factor, 
an input for the IRF PPS and defined in the IRF PPS Final Rule for the 
relevant years, to update Medicare payments for IRF services provided 
in the episode. The IRF Standard Payment Conversion Factor is the same 
for all IRFs and IRF services, so there is no need to account for any 
hospital-specific or region-specific IRF utilization patterns; each 
participant hospital and region would use the same IRF services update 
factor.
    Expressed as a ratio, the IRF PPS update factor would equal the 
following:
     The numerator is based on values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.
     The denominator is based on a blend of values applicable 
in the latest of the 3 historical years used in the target price (TP) 
calculations, weighted to account for the values applicable prior to 
October 1, and values applicable starting October 1 when IRF PPS 
updates for the new fiscal year are in effect. Note that this weighting 
incorporates a modification to our proposed methodology for calculating 
update factors, as previously discussed in section III.C.4.(b)(4) of 
this final rule.
    Therefore, the IRF services update factor formula is shown as--
    [GRAPHIC] [TIFF OMITTED] TR24NO15.005
    
(d) SNF Services Update Factor
    The proposed SNF services update factor would apply to payments for 
services included in the episode and paid under the SNF PPS, including 
payments for SNF swing bed services. The update factor applied to the 
SNF services component of each participant hospital and region's 
historical average episode payments would be based on how average 
Resource Utilization Group (RUG-IV) Case-Mix Adjusted Federal Rates for 
the Medicare SNF PPS (defined in the SNF PPS Final Rule) have changed 
between the latest year used in the historical 3 years of episodes and 
the upcoming performance period under CJR. The average RUG-IV Case-Mix 
Adjusted Federal Rates would be specific to each participant hospital 
and region to account for hospital and region-specific SNF service 
utilization patterns. Hospital-specific and region-specific average 
RUG-IV Case-Mix Adjusted Federal Rates would be calculated by averaging 
the RUG-IV Case-Mix Adjusted Federal Rates for all SNF services 
included in the historical episodes attributed to each participant 
hospital and attributed to CJR eligible hospitals in the region, 
respectively. We note that the RUG-IV Case-Mix Adjusted Federal Rate 
may vary for the same RUG, depending on whether the SNF was categorized 
as urban or rural.
    Expressed as a ratio, the SNF services update factor would equal 
the following:
     The numerator is based on values applicable for the 
upcoming

[[Page 73346]]

performance period (PP) for which a target price is being calculated.
     The denominator is based on a blend of values applicable 
in the latest of the 3 historical years used in the target price (TP) 
calculations, weighted to account for values applicable prior to 
October 1, and values applicable starting October 1 when SNF PPS 
updates for the new fiscal year are in effect. Note that this weighting 
incorporates a modification to our proposed methodology for calculating 
update factors, as previously discussed in section III.C.4.(b)(4) of 
this final rule.
    Therefore, the SNF services update factor formula is shown as--
    [GRAPHIC] [TIFF OMITTED] TR24NO15.006
    
(e) HHA Services Update Factor
    The proposed HHA services update factor would apply to payments for 
services included in the episode and paid under the HH PPS, but exclude 
payments for Low Utilization Payment Adjustment (LUPA) claims (claims 
with four or fewer home health visits) because they are paid 
differently and would instead be captured in the update factor for 
other services in section III.C.4.b.(f) of the proposed rule. The 
update factor applied to the home health services component of each 
participant hospital and region's historical average episode payments 
would be based on how inputs for the Medicare HH PPS have changed 
between the latest year used in the historical 3 years of episodes and 
the upcoming performance period under CJR. We proposed to use changes 
in the HH PPS base rate and average of home health resource group 
(HHRG) case-mix weight, inputs for the HHA PPS and defined in the HHA 
PPS Final Rule for the relevant years, to calculate the home health 
services update factor. The average HHRG case-mix weights would be 
specific to each participant hospital and region to account for 
hospital and region-specific home health service utilization patterns. 
Hospital-specific and region-specific HHA services update factors would 
be calculated by averaging the HHRG case-mix weights for all home 
health payments (excluding LUPA claims) included in the historical 
episodes attributed to each participant hospital and attributed to CJR 
eligible hospitals in the region, respectively.
    Expressed as a ratio, the HHA adjustment factor would equal the 
following:
     The numerator is based on values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.
     The denominator is based on values applicable at the end 
of the latest of the 3 historical years used in the target price (TP) 
calculations.
    Therefore, the proposed HHA services update factor formula is shown 
as--
[GRAPHIC] [TIFF OMITTED] TR24NO15.007

(f) Other Services Update Factor
    The other services update factor would apply to payments for 
services included in the episode and not paid under the IPPS, MPFS, IRF 
PPS, or HHA PPS (except for LUPA claims). This component would include 
episode payments for home health LUPA claims and CJR related 
readmissions at CAHs. For purposes of calculating the other services 
update factor, we proposed to use the Medicare Economic Index (MEI), a 
measure developed by CMS for measuring the inflation for goods and 
services used in the provision of physician services.\28\ We would 
calculate the other services update factor as the percent change in the 
MEI between the latest year used in the TP calculation and its 
projected value for the upcoming performance period. Because MEI is not 
hospital or region-specific, each participant hospital and region would 
use the same other services update factor.
---------------------------------------------------------------------------

    \28\ Medicare Market Basket Data. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketData.html.
---------------------------------------------------------------------------

(5) Blend Hospital-Specific and Regional Historical Data
    We proposed to calculate CJR episode target prices using a blend of 
hospital-specific and regional historical average CJR episode payments, 
including CJR episode payments for all CJR eligible hospitals in the 
same U.S. Census division as discussed further in section III.C.4.b.(6) 
of the proposed rule. Specifically, we proposed to blend two-thirds of 
the hospital-specific episode payments and one-third of the regional 
episode payment to set a participant hospital's target price for the 
first 2-performance years of the CJR model (CY 2016 and CY 2017). For 
performance year 3 of the model (CY 2018), we proposed to adjust the 
proportion of the hospital-specific and regional episode payments used 
to calculate the episode target price from two-thirds hospital-specific 
and one-third regional to one-third hospital-specific and two-thirds 
regional. Finally, we proposed to use only regional historical CJR 
episode payments for performance years 4 and 5 of the model (CY 2019 
and CY 2020) to set a participant hospital's target price, rather than 
a blend between the hospital-specific and regional episode payments. 
The specific order of steps, and how this step fits in with others, is 
discussed further in section III.C.4.c. of the proposed rule. We 
welcome comment on the appropriate blend between hospital-specific and 
regional episode payments and the change in that blend over time.
    We considered establishing episode target prices using only 
historical CJR hospital-specific episode payments for all 5 performance 
years of the model (that is, episode payments for episodes attributed 
to the participant hospital, as previously described in section 
III.C.2. of the proposed rule). Using hospital-specific historical 
episodes may be appropriate in other models such as BPCI Model 2 where 
participation is voluntary and setting a region-wide target price could 
lead to a pattern of selective participation in which inefficient 
providers decline to participate, undermining the model's ability to 
improve the efficiency and quality of care delivered by those 
providers, while already-efficient providers receive windfall gains 
even if they do not further improve efficiency. Because CJR model 
participants will be required to participate in the model,

[[Page 73347]]

solely using hospital-specific historical episode data is not necessary 
to avoid this potential concern. Furthermore, using only hospital-
specific historical CJR episode payments may provide little incentive 
for hospitals that already cost-efficiently deliver high quality care 
to maintain or further improve such care. These hospitals could receive 
a relatively low target price because of their historical performance 
but have fewer opportunities for achieving additional efficiency under 
CJR. They would not receive reconciliation payments for maintaining 
high quality and efficiency, while other hospitals that were less 
efficient would receive reconciliation payments for improving, even if 
the less historically efficient hospitals did not reach the same level 
of high quality and efficiency as the more historically efficient 
hospitals. Using only hospital-specific historical CJR episode payments 
may also not be sufficient to curb inefficient care or overprovision of 
services for hospitals with historically high CJR episode payments. In 
such instances, using hospital-specific historical episode payments for 
the CJR model could result in Medicare continuing to pay an excessive 
amount for episodes of care provided by inefficient hospitals, and 
inefficient hospitals would stand to benefit from making only small 
improvements. Thus, we did not propose to set target prices based 
solely on hospital-specific data for any performance years of the 
model.
    We considered establishing the episode target price using only 
historical CJR regional episode payments for all 5 performance years of 
the model. Though regional target pricing would reward the most 
efficient hospitals for continuing to provide high quality and cost 
efficient care, we are concerned about providing achievable incentives 
under the model for hospitals with high historical CJR average episode 
payments. We stated in the proposed rule our belief that a lower 
regional price for such hospitals would leave them with little 
financial incentive in performance year 1, especially without any 
responsibility to repay payments in excess of the target price as 
described in section III.C.3. of the proposed rule. Thus, we did not 
propose to set target prices solely on regional data for the entire 
duration of the model.
    Therefore, we proposed initially to blend historical hospital-
specific and regional-historical episode payments and then transition 
to using regional-only historical episode payments in establishing 
target prices to afford early and continuing incentives for both 
historically efficient and less efficient hospitals to furnish high 
quality, efficient care in all years of the model. Our proposal more 
heavily weights a hospital's historical episode data in the first 2 
years of the model (two-thirds hospital-specific, one-third regional), 
providing a reasonable incentive for both currently efficient and less 
efficient hospitals to deliver high quality and efficient care in the 
early stages of model implementation. Beginning in performance year 3, 
once hospitals have engaged in care redesign and adapted to the model 
parameters, we proposed to shift to a more heavily weighted regional 
contribution (one-third hospital-specific, two-thirds regional in 
performance year 3) and ultimately to a regional target price for 
performance years 4 and 5. We stated in the proposed rule our belief 
that by performance year 4, setting target prices based solely on 
regional historical data would be feasible because hospitals would have 
had 3 years under this model to more efficiently deliver high quality 
care, thereby reducing some of the variation across hospitals. We 
stated in the proposed rule our belief that transitioning to regional 
only pricing in the latter years of the model would provide important 
information about the reduction in unnecessary variation in LEJR 
episode utilization patterns within a region that can be achieved.
    We stated in the proposed rule our belief that transitioning to 
regional-only pricing in the latter years of the model may provide 
valuable information regarding potential pricing strategies for 
successful episode payment models that we may consider for expansion in 
the future. As discussed previously, substantial regional and hospital-
specific variation in Medicare LEJR episode spending currently exists 
for beneficiaries with similar demographic and health status, so we are 
proposing that the early CJR model years will more heavily weight 
historical hospital-specific experience in pricing episode for a 
participant hospital. Once the hospital has substantial experience with 
care redesign, we expect that unnecessary hospital-specific variation 
in episode spending will be minimized so that regional-only pricing 
would be appropriate as we have proposed. We noted that, like episode 
payment under the CJR model, Medicare's current payment systems make 
payments for bundles of items and services, although of various 
breadths and sizes depending on the specific payment system. For 
example, the IPPS pays a single payment, based on national prices with 
geography-specific labor cost adjustments, for all hospital services 
furnished during an inpatient hospitalization, such as nursing 
services, medications, medical equipment, operating room suites, etc. 
Under the IPPS, the national pricing approach incentivizes efficiencies 
and has, therefore, led to a substantial reduction in unnecessary 
hospital-specific variation in resource utilization for an inpatient 
hospitalization. On the other hand, the episode payment approach being 
tested under BPCI Model 2 relies solely on provider-specific pricing 
over the lifetime of the model, assuming the number of episode cases is 
sufficient to establish a reliable episode price, an approach that has 
potential limitations were expansion to be considered. Thus, we stated 
in the proposed rule our belief that our proposal for CJR will provide 
new, important information regarding pricing for even larger and 
broader bundles of services once unnecessary provider-specific 
variation has been minimized that would supplement our experience with 
patterns and pricing under existing payment systems and other episode 
payment models. We expect that testing of CJR will contribute further 
information about efficient Medicare pricing strategies that result in 
appropriate payment for providers' resources required to furnish high 
quality, efficient care to beneficiaries who receive LEJR procedures. 
This is essential information for any consideration of episode payment 
model expansion, including nationally, in the future, where 
operationally feasible and appropriate pricing strategies, including 
provider-specific, regional, and national pricing approaches would need 
to be considered.
    We proposed an exception to the blended hospital-specific and 
regional pricing approach for hospitals with low historical CJR episode 
volume. We proposed to define hospitals with low CJR episode volume as 
those with fewer than 20 CJR episodes in total across the 3-historical-
years used to calculate target prices. We stated in the proposed rule 
our belief that calculating the hospital-specific component of the 
blended target price for these historically low CJR episode volume 
hospitals may be subject to a high degree of statistical variation. 
Therefore, for each performance year, we proposed to use 100 percent 
regional target pricing for participant hospitals who have fewer than 
twenty historical CJR episodes in the 3-historical-years used to 
calculate target prices, as described in section III.C.4.b.(2) of the 
proposed rule. We note that the 3-historical-years used

[[Page 73348]]

to calculate target prices would change over the course of the model, 
as described in section III.C.4.b.(2) of the proposed rule, and when 
that happens, the twenty episode threshold would be applied to the new 
set of historical years. If all IPPS hospitals nationally participated 
(for estimation purposes, only) in CJR, we estimate about 5 percent of 
hospitals would be affected by this proposed low historical CJR episode 
volume provision.\29\ A minimum threshold of twenty episodes is almost 
equal to the minimum number of admissions required in the Medicare 
HRRP. HRRP payment adjustment factors are, in part, determined by 
procedure/condition-specific readmission rates for a hospital. HRRP 
requires at least 25 procedure/condition-specific admissions to 
calculate the procedure/condition-specific readmission rate and to be 
included in the hospital's overall HRRP payment adjustment factor. 
Though the proposed minimum threshold of twenty episodes is slightly 
less than the 25 admissions required for HRRP, we stated in the 
proposed rule our belief that because we would not be calculating 
infrequent events such as readmissions, we can achieve a stable price 
with slightly fewer episodes.
---------------------------------------------------------------------------

    \29\ Medicare FFS Parts A and B claims, CJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    We also proposed an exception to the blended hospital-specific and 
regional pricing approach for participant hospitals that received new 
CCNs during the 24 months prior to the beginning of, or during, the 
performance year for which target prices are being calculated. These 
participant hospitals with new CCNs may have formed due to a merger 
between or split from previously existing hospitals, or may be new 
hospitals altogether. As a general principle, we aim to incorporate 
into the target prices all the historical episodes that would represent 
our best estimate of CJR historical payments for these participant 
hospitals with new CCNs. For participant hospitals with new CCNs that 
formed from a merger between or split from previously existing 
hospitals, we proposed to calculate hospital-specific historical 
payments using the episodes attributed to the previously existing 
hospitals. These hospital-specific historical payments would then be 
blended with the regional historical payments according to the approach 
previously described in this section. For participant hospitals with 
new CCNs that are new hospitals altogether, we proposed to use the 
approach previously described in this section for hospitals with fewer 
than 20 CJR episodes across the 3-historical-years used to calculate 
target prices. In other cases, due to an organizational change a 
hospital may experience a change to an already existing CCN during the 
24 months prior to the beginning of, or during, the performance year 
for which target prices are being calculated. For example, one hospital 
with a CCN may merge with a second hospital assigned a different CCN, 
and both hospitals would then be identified under the single CCN of the 
second hospital. While there may be more than 20 CJR episodes under the 
second hospital's CCN in total across the 3-historical-years used to 
calculate target prices, in this scenario our use of only those cases 
under the second hospital's CCN in calculating hospital-specific 
historical payments would fail to meet our general principle of 
incorporating into target prices all the historical episodes that would 
represent our best estimate of CJR historical payments for these now 
merged hospitals. In this scenario, we proposed to calculate hospital-
specific payments for the remaining single CCN (originally assigned to 
the second hospital only) using the historical episodes attributed to 
both previously existing hospitals. These hospital-specific historical 
payments would then be blended with the regional historical payments 
according to the approach previously described in this section in order 
to determine the episode price for the merged hospitals bearing a 
single CCN.
    We sought comment on this proposed approach for blending hospital-
specific and regional historical payments.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters supported the proposal to blend hospital-
specific and regional historical episode data to calculate target 
prices. They explained that this balanced the incentivizes for already 
efficient hospitals to continue great performance, and allowed 
hospitals with historically high episode expenditures sufficient time 
to create care pathways and implement practice pattern changes before 
getting to 100 percent regional pricing in years 4 and 5 of the CJR 
model. Some other commenters recommended for hospital-specific pricing 
only because any definition of region would not properly account for 
variations due to factors such as patient characteristics, 
socioeconomic factors, and access to care.
    Some commenters recommended that instead of blending regional and 
hospital-specific historical average CJR episode payments, we use the 
higher of the two to reward hospitals that are already efficient.
    Some commenters recommended that we delay the transition to 
regional pricing in order to afford more time for hospitals with high 
historic episode expenditures, some commenters supported our proposal 
to get to 100 percent regional pricing by year 4, and some others 
recommended that we accelerate the transition to regional pricing to 
appropriately reward already efficient participant hospitals.
    Response: We appreciate commenters' support for blending hospital-
specific and regional historical episode data to calculate target 
prices. We appreciate that the pace of transitioning to regional 
pricing may benefit some participant hospitals more than others. 
However, we believe that the proposed approach to get to 100 percent 
regional pricing by year 4 strikes an appropriate balance between 
providing participant hospitals time to adapt while providing important 
information about the reduction in unnecessary variation in LEJR 
episode utilization patterns within a region that can be achieved.
    We believe that only using hospital-specific pricing would not 
reward already efficient participant hospitals for maintaining high 
performance; participant hospitals that are already delivering 
efficient and high quality care would find it challenging to improve 
upon their own historical performance in order to qualify for 
reconciliation payments. Similarly, we believe that using the higher of 
regional and hospital-specific prices would not sufficiently 
incentivize inefficient participant hospitals to become more efficient; 
participant hospitals that have historically high episode expenditures 
would have less of an incentive to become significantly more efficient 
over the course of the model if they can qualify for reconciliation 
payments by improving only slightly relative to their own historical 
performance, while still being less efficient than their regional 
peers.
    We acknowledge the importance of properly accounting for variations 
in patient-specific clinical characteristics, socioeconomic conditions, 
and access to care to appropriately incentivize participant hospitals 
to deliver high quality and efficient care. We refer readers to 
response to comments in section III.C.4.b.(1) of this final rule for 
further discussion on risk stratification to account for such 
variations. We also acknowledge that incorporating a regional component 
of historical episode data into a participant hospital's target prices 
may increase the presence of the variations as

[[Page 73349]]

commenters stated, thereby making appropriate risk adjustment and/or 
risk stratification that much more important. As discussed in the 
response to comments in section III.C.4.b.(1) of this final rule, we 
will risk stratify based on anchor MS-DRG and hip fracture status, and 
we may explore more comprehensive risk adjustment approaches.
    Comment: Several commenters recommended modifying the definition of 
low volume as it is used to determine which participant hospitals 
receive 100 percent regional target prices because they do not have a 
sufficient number of CJR episodes in the 3-historical-years of data 
used to calculate target prices. Commenters suggested increasing the 
low volume threshold for hospital-specific and regional target pricing 
from 20 to, for example, 100 episodes, because 20 episodes was not 
sufficient to remove random variation.
    Response: We agree with commenters that a greater number of 
participant hospital-specific episodes would better remove the effects 
of random variation. However, if we increase the low volume threshold 
for blending hospital-specific and regional target prices, more 
participant hospitals would receive 100 percent regional prices in the 
first three performance years of the model, and their target prices 
would not incorporate any data from hospital-specific historical 
experience. Let us take as an example a participant hospital that has 
50 episodes in the 3-historical-years of data used to calculate target 
prices for performance year 1, and let us assume that the hospital-
specific portion of its target price is higher than the regional 
component. This participant hospital would need to become more 
efficient so as to achieve actual episode expenditures below its target 
prices. By blending the hospital-specific and regional components of 
the target price, this hospital has a higher target price than it would 
have had it received a 100 percent regional price. With the higher 
target price, the participant hospital has a greater opportunity to 
improve its efficiency and qualify for reconciliation payments. The 
blending of regional and hospital-specific target prices affords 
historically less efficient hospitals an opportunity to be rewarded for 
improvement in the earlier performance years, while they prepare for 
transitioning to 100 percent regional pricing by performance year 4. We 
want to afford this transition opportunity to as many participant 
hospitals as possible, while minimizing the effect of random variations 
for hospitals with few historical episodes. In the proposed rule, we 
compared our proposed low volume threshold of 20 episodes to the 
threshold used for Medicare's HRRP program. We continue to believe that 
20 episodes in the 3-historical-years of data used to calculate target 
prices is the appropriate ``low volume'' threshold for blending target 
prices that mitigates effects of random variation while still 
incorporating hospital-specific historical experience and affording 
participant hospitals an opportunity to transition to 100 percent 
regional pricing.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to blend hospital-specific and 
regional historical expenditures in setting target prices, though we 
note that the term ``CJR eligible hospitals' is being renamed to ``CJR 
regional hospitals'' as discussed in response to comments in section 
III.C.4.b.(4) of this final rule.
(6) Define Regions as U.S. Census Divisions
    In all 5 performance years we proposed to define ``region'' as one 
of the nine U.S. Census divisions \30\ in Figure 3.
---------------------------------------------------------------------------

    \30\ There are four census regions--Northeast, Midwest, South, 
and West. Each of the four census regions is divided into two or 
more ``census divisions''.''. Source: https://www.census.gov/geo/reference/gtc/gtc_census_divreg.html.. Accessed on April 15, 2015.
[GRAPHIC] [TIFF OMITTED] TR24NO15.008


[[Page 73350]]


    We considered using states, HRRs, and the entire U.S. as 
alternative options to U.S. Census divisions in defining the region 
used in blending provider-specific and regional historical episode data 
for calculating target prices. However, HRR definitions are 
specifically based on referrals for cardiovascular surgical procedures 
and neurosurgery, and may not reflect referral patterns for orthopedic 
procedures. Using the entire U.S. would not account for substantial 
current regional variation in utilization, which is significant for 
episodes that often involve PAC use, such as LEJR procedures.\32\ 
Finally, we considered using states as regions but were concerned that 
doing so would not allow for sufficient LEJR episode volume to set 
stable regional components of target prices, especially for participant 
hospitals in small states. We believe U.S. Census divisions provide the 
most appropriate balance between very large areas with highly disparate 
utilization patterns and very small areas that would be subject to 
price distortions due to low volume or hospital-specific utilization 
patterns.
---------------------------------------------------------------------------

    \31\ https://www.eia.gov/consumption/commercial/census_maps.cfm.
    \32\ Hussey PS, Huckfeldt P, Hirshman S, Mehrotra A. Hospital 
and regional variation in Medicare payment for inpatient episodes of 
care [published online April 13, 2015]. JAMA Intern Med. 
doi:10.1001/jamainternmed.2015.0674.
---------------------------------------------------------------------------

    We sought comment on our proposal to define a region as the U.S. 
Census division for purposes of the regional component of blended 
target prices under CJR.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters supported the use of U.S. Census divisions 
as regions. Some commenters, though, stated U.S. Census divisions are 
too large with significant practice and PAC access variations, 
resulting in different average historical expenditures across hospitals 
in the same U.S. Census division. Some commenters suggested an 
alternative of using MSAs as regions; MSAs would align with the 
provider selection process, and the smaller unit for regions would 
better capture regional practice pattern differences. Other commenters, 
including MedPAC, stated that we should define the entire nation as the 
region (that is, national pricing) because we should be striving 
towards eliminating regional variations in practice patterns.
    Response: We appreciate commenters' support for the use of U.S. 
Census divisions as regions. Especially given that commenters proposed 
both larger regions (that is, national pricing) and smaller regions 
(that is, MSAs), we still believe U.S. Census divisions provide the 
most appropriate balance between very large areas with highly disparate 
utilization patterns and very small areas that would be subject to 
price distortions due to low volume or hospital specific utilization 
patterns.
    Comment: Several commenters noted that some of the selected MSAs 
for participation in CJR span two different U.S. Census divisions. 
These commenters stated that the true cost for hospitals in the same 
MSA would likely not be different, and significant differences in 
pricing would create unfair market advantages due to a hospital's 
address within an MSA. They suggested blending the regional target 
price component of the two U.S. Census divisions that are being spanned 
for each of these MSAs, reflecting the distribution of the population 
within the MSA/census regions.
    Response: We agree with commenters that the true cost for hospitals 
in the same MSA may not be different, and significant differences in 
pricing may create unfair market advantages due to a hospital's address 
within an MSA. We will modify our proposal and apply the same regional 
target price component to target pricing for all participant hospitals 
within an MSA, even if the MSA spans two U.S. Census divisions. There 
are three selected MSAs for participation in CJR that span two U.S. 
Census divisions: St. Louis, Cincinnati, and Cape Girardeau.
    We considered the approach suggested by commenters--blending the 
two regional target price components based on the population 
distribution. However, using 2010 U.S. Census data, we determined that 
at least 75 percent of the population in the previously mentioned MSAs 
resides in just one of the U.S. Census divisions that the MSA spans. 
For simplicity, we will completely group MSAs that span U.S. Census 
divisions together with the U.S. Census divisions in which the Census 
estimates the majority of people reside, as shown in Table 9:

                   Table 9--Region Grouping for Selected MSAS That Span U.S. Census Divisions
----------------------------------------------------------------------------------------------------------------
                                        Original U.S. Census divisions
                  MSA                       spanned by MSA  (state         U.S. Census division used  for CJR
                                               included in MSA)                          region
----------------------------------------------------------------------------------------------------------------
St. Louis, MO[dash]IL.................  West North Central (MO), East   West North Central.
                                         North Central (IL).
Cincinnati, OH[dash]KY[dash]IN........  East North Central (OH, IN),    East North Central.
                                         East South Central (KY).
Cape Girardeau, MO[dash]IL............  West North Central (MO), East   West North Central.
                                         North Central (IL).
----------------------------------------------------------------------------------------------------------------

    Final Decision: After consideration of the public comments we 
received, we are modifying our proposal to define regions as U.S. 
Census divisions so as to ascribe the same regional component of target 
prices for participant hospitals in MSAs that span U.S. Census 
divisions. Specifically, as described in Table 9, selected MSAs that 
span U.S. Census divisions will be attributed to one U.S. Census 
division for purposes of calculating the regional component of CJR 
target prices.
(7) Normalize for Provider-Specific Wage Adjustment Variations
    We note that some variation in historical CJR episode payments 
across hospitals in a region may be due to wage adjustment differences 
in Medicare's payments. In setting Medicare payment rates, Medicare 
typically adjusts facilities' costs attributable to wages and wage-
related costs (as estimated by the Secretary from time to time) by a 
factor (established by the Secretary) reflecting the relative wage 
level in the geographic area of the facility or practitioner (or the 
beneficiary residence, in the case of home health and hospice services) 
compared to a national average wage level. Such adjustments are 
essential for setting accurate payments, as wage levels vary 
significantly across geographic areas of the country. However, having 
the wage level for one hospital influence the regional-component of 
hospital-specific and regional blended target prices for another 
hospital with a different wage level would introduce unintended pricing 
distortions not based on utilization pattern differences.

[[Page 73351]]

    In order to preserve how wage levels affect provider payment 
amounts, while minimizing the distortions introduced when calculating 
the regional-component of blended target prices, we proposed to 
normalize for wage index differences in historical episode payments 
when calculating and blending the regional and hospital-specific 
components of blended target prices. Calculating blended target prices 
from historical CJR episodes would help ensure we incentivize hospitals 
based on historical utilization and practice patterns, not Medicare 
payment system rate changes that are beyond hospitals' control.
    We proposed to normalize for provider-specific wage index 
variations using the IPPS wage index applicable to the anchor 
hospitalization (that is, the IPPS wage index used in the calculation 
of the IPPS payment for the anchor hospitalization). The anchor 
hospitalization accounts for approximately 50 percent of the total 
episode expenditures, and the IPPS wage index is applied to IPPS 
payments in a similar manner as wage indices for other Medicare payment 
systems are applied to their respective payments.\33\ Therefore, we 
proposed that the IPPS wage index applicable to the anchor 
hospitalization for each historical episode be used to normalize for 
wage index variations in historical episode payments across hospitals 
when calculating blended target prices. We proposed to specifically 
perform this normalization using the wage normalization factor (0.7 * 
IPPS wage index + 0.3) to adjust the labor-related portion of payments 
affected by wage indices. The 0.7 approximates the labor share in IPPS, 
IRF PPS, SNF, and HHA Medicare payments. We would normalize for 
provider-specific wage index variations by dividing a hospital's 
historical episode payments by the wage normalization factor.
---------------------------------------------------------------------------

    \33\ Medicare FFS Parts A and B claims, CJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    We proposed to reintroduce the hospital-specific wage variations by 
multiplying episode payments by the wage normalization factor when 
calculating the target prices for each participant hospital, as 
described in section III.C.4.c. of the proposed rule. When 
reintroducing the hospital-specific wage variations, the IPPS wage 
index would be the one that applies to the hospital during the period 
for which target prices are being calculated (for example, FY 2016 wage 
indices for the target price calculations for episodes that begin 
between January 1 and September 30, 2016). The specific order of steps, 
and how this step fits in with others, is discussed further in section 
III.C.4.c. of the proposed rule. We sought comment on our proposal to 
normalize for wage index differences using participant hospitals' wage 
indices in order to calculate blended target prices.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters emphasized the need to account for wage index 
differences. Not accounting for these differences accurately may 
unfairly disadvantage some hospitals. Some commenters expressed concern 
about using 0.7 as the labor share for the labor related portions of 
Medicare FFS payments; the weight index weight varies by Medicare FFS 
payment system, and in IPPS in particular, the weight can be either 
0.688 or 0.620, depending on the IPPS hospital's wage index. Some other 
commenters noted that using only the IPPS wage index for the anchor 
hospital would not accurately normalize expenditures for PAC providers 
who have their own wage indices. Some of these commenters recommended 
we blend hospital and PAC providers' wage indices. Some commenters 
requested clarification on how we would account for wage index 
differences between baseline and performance periods.
    Response: We acknowledge the need to accurately account for wage 
index differences so that we incentivize based on practice patterns and 
not Medicare FFS fee schedule differences. We recognize that the 
proposed approach of using the anchor hospital's wage index and 0.7 as 
the labor share for the labor related portions of Medicare FFS payments 
would only approximately normalize and reapply wage indices.
    In response to commenters, we will modify our proposal and 
normalize for wage indices at the claim level for both historical 
episode expenditures and actual episode expenditures in each 
performance year by using the wage index normalization algorithm 
included in the CMS Price (Payment) Standardization Detailed 
Methodology discussed in section III.C.3 of this final rule, the same 
methodology we finalized to exclude the various special payment 
provisions in calculating episode expenditures. By normalizing claims 
for wage indices in the historical episode expenditure data at the 
claim level, we will accurately account for wage indices and labor 
shares for various providers and suppliers under the different Medicare 
FFS payment systems. This will be a more accurate way than what we 
proposed to achieve the same goal of accounting for wage index 
differences so that we incentivize based on practice patterns and not 
Medicare FFS wage adjustment differences. We will also normalize claims 
for wage indices in performance year data, as we discuss further in 
response to comments in section III.C.6.a. of this final rule.
    We believe it is still important to reintroduce wage index 
variations near the end of the target price calculation methodology. 
Participant hospitals may use their reconciliation payments to invest 
in care coordination or care delivery infrastructure, and we expect 
that the costs for such investments would vary by geography due to 
differences in local wages. For example, we expect that hiring a care 
coordinator would cost a participant hospital more in the New York 
metro region than in a rural part of New Mexico. If we do not 
reintroduce wage index variations into target price calculations, we 
would calculate reconciliation and repayment amounts that would not 
capture labor cost variation throughout the country, and participant 
hospitals in higher labor cost regions may see relatively less 
financial incentive to invest in improved care quality and efficiency. 
We intend to incentivize all hospitals to reduce episode spending under 
the CJR model, regardless of local labor cost variations.
    We will use the proposed approach to reintroduce wage index 
variations--apply the participant hospital's wage index to episode 
spending, using 0.7 as the labor share. While commenters are correct 
that the IPPS labor share can be 0.688 or 0.620, depending on the 
participant hospital's wage index, the labor share for PAC providers 
also varies across Medicare FFS payment systems: ~0.695 for SNF PPS and 
IRF PPS, and ~0.785 for HH PPS. Given this range for the labor share 
across Medicare FFS payment systems, we believe that using 0.7 is an 
appropriate estimate of the labor share for reintroducing wage index 
variations. Additionally, as commenters pointed out, PAC providers have 
their own wage indices. Because wage index variations are reintroduced 
near the end of the target price calculation methodology and after 
other features, such as blending, pooling, and update factors are 
applied, we do not believe there is a simple approach to reintroduce 
wage index variations at the claim level. We acknowledge that using the 
participant hospital's wage index and 0.7 as the labor share would only 
be an approximation of the wage index variations, but this 
approximation would not change whether a participant hospital qualifies 
for reconciliation

[[Page 73352]]

payments or is obligated to repay Medicare because we would apply wage 
index normalization at the claim level for both target price 
calculations (as previously discussed) as well as calculations of 
actual episode spending (as discussed in response to comments in 
section III.C.6.a. of this final rule), and the wage index variation 
would be reintroduced in the same manner to both target price 
calculations (as previously discussed) and actual episode spending 
calculations (as discussed in response to comments in section 
III.C.6.a. of this final rule). We believe that this approach to 
reintroducing wage index variations is sufficient to modulate the 
reconciliation and repayment amounts to reflect local labor cost 
variations.
    Final Decision: After consideration of the public comments we 
received, we are modifying our proposal so as to normalize for wage 
indices at the claim level by using the wage index normalization 
algorithm included in the CMS Price (Payment) Standardization Detailed 
Methodology discussed in section III.C.3., the same claim-level 
standardization methodology we finalized in section III.C.3.a. to 
exclude the various special payment provisions in calculating episode 
expenditures. We are finalizing the proposal to reintroduce wage index 
differences into calculations of historical and actual episode spending 
based on the participant hospital's wage index and 0.7 as the labor 
cost share.
(8) Combination of CJR Episodes Anchored by MS-DRGs 469 and 470
    We proposed to pool together CJR episodes anchored by MS-DRGs 469 
and 470 for target price calculations to use a greater historical CJR 
episode volume and set more stable target prices. We note that we would 
still calculate separate target prices for episodes anchored by MS-DRGs 
469 versus 470, described later in this section.
    To pool together MS-DRG 469 and 470 anchored episodes, we proposed 
to use an anchor factor and hospital weights. The anchor factor would 
equal the ratio of national average historical MS-DRG 469 anchored 
episode payments to national average historical MS-DRG 470 anchored 
episode payments. The national average would be based on episodes 
attributed to any CJR eligible hospital. The resulting anchor factor 
would be the same for all participant hospitals. For each participant 
hospital, a hospital weight would be calculated using the following 
formula, where episode counts are participant hospital-specific and 
based on the episodes in the 3-historical-years used in target price 
calculations:
[GRAPHIC] [TIFF OMITTED] TR24NO15.009

    A hospital-specific pooled historical average episode payment would 
be calculated by multiplying the hospital's hospital weight by its 
combined historical average episode payment (sum of MS-DRG 469 and 470 
anchored historical episode payments divided by the number of MS-DRG 
469 and 470 historical episodes).
    The calculation of the hospital weights and the hospital-specific 
pooled historical average episode payments would be comparable to how 
case mix indices are used to generate case mix-adjusted Medicare 
payments. The hospital weight essentially would count each MS-DRG 469 
triggered episode as more than one episode (assuming MS-DRG 469 
anchored episodes have higher average payments than MS-DRG 470 anchored 
episodes) so that the pooled historical average episode payment, and 
subsequently the target price, is not skewed by the hospital's relative 
breakdown of MS-DRG 469 versus 470 anchored historical episodes.
    The hospital-specific pooled historical average payments would be 
modified by blending and discount factors, as described in section 
III.C.4.c. of the proposed rule. Afterwards, the hospital-specific 
pooled calculations would be ``unpooled'' by setting the MS-DRG 470 
anchored episode target price to the resulting calculations, and by 
multiplying the resulting calculations by the anchor factor to produce 
the MS-DRG 469 anchored target prices.
    We would calculate region-specific weights and region-specific 
pooled historical average payments following the same steps proposed 
for hospital-specific weights and hospital-specific pooled average 
payments. Instead of grouping episodes by the attributed hospital as is 
proposed for hospital-specific calculations, region-specific 
calculations would group together episodes that were attributed to any 
CJR eligible hospital located within the region. The hospital-specific 
and region-specific pooled historical average payments would be blended 
together as discussed in section III.C.4.b.(3) of the proposed rule. 
The specific order of steps, and how this step fits in with others, is 
discussed further in section III.C.4.c. of the proposed rule.
    We considered an alternative option of independently setting target 
prices for MS-DRG 470 and 469 anchored episodes without pooling them. 
However, hospital volume for MS-DRG 469 was substantially less than for 
MS-DRG 470. In 2013 across all IPPS hospitals, there were more than 10 
times as many MS-DRG 470 anchored episodes as compared to MS-DRG 469 
anchored episodes.\34\ In the same analysis, the median number of 
episodes for a hospital with at least 1 episode for the MS-DRG anchored 
episode was more than 80 for MS-DRG 470 anchored episodes, though fewer 
than 10 for MS-DRG 469 anchored episodes. Calculating target prices for 
MS-DRG 469 anchored episodes separately for each participant hospital 
may result in too few historical episodes to calculate reliable target 
prices. We also considered pooling together MS-DRG 469 and 470 anchored 
episodes without any anchor factor or hospital weights. However, 
internal analyses suggest that average episode payments for these two 
MS-DRG anchored episodes significantly differed; CJR episodes initiated 
by MS-DRG 469 had payments almost twice as large as those initiated by 
MS-DRG 470.\35\ This difference is reasonable given that Medicare IPPS 
payments differ for MS-DRG 469 and 470 admissions, and inpatient 
payments comprise approximately 50 percent of CJR episode payments. 
Thus, pooling together MS-DRG 469 and 470 anchored episodes without any 
anchor factor or hospital weights would introduce distortions due only 
to case-mix differences.
---------------------------------------------------------------------------

    \34\ Source: CCW Part A and Part B claims for CJR episodes 
beginning in CY 2013.
    \35\ Medicare FFS Parts A and B claims, CJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    The following is a summary of the comments received and our 
responses.

[[Page 73353]]

    Comment: Many commenters requested for risk adjustment based on 
patients' hip fracture status, among other clinical and demographic 
dimensions.
    Response: We refer readers to comments and responses to comments in 
section III.C.4.b.(1) of this final rule for further discussion on risk 
stratification, and we reference it here because changes to risk 
stratification would impact how we would combine CJR episodes anchored 
by MS-DRGs 469 and 470. As discussed in the responses to comments in 
section III.C.4.b.(1) of this final rule, we will modify our proposal 
so as to risk stratify and set different target prices both for 
episodes anchored by MS-DRG 469 vs. MS-DRG 470 and for episodes with 
hip fractures vs. without hip fractures. To fully incorporate this 
change, we will also modify the proposed approach to calculate anchor 
factors and hospital and regional weights so as to apply them to four 
groups of target prices, instead of two groups; otherwise, the approach 
will be the same as proposed. Specifically, we will have three anchor 
factors, instead of one:
[GRAPHIC] [TIFF OMITTED] TR24NO15.010

    Additionally, hospital and regional weights will be calculated 
using the following formula:
[GRAPHIC] [TIFF OMITTED] TR24NO15.011

    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, with modification to 
calculate anchor factors and hospital and regional weights while 
incorporating the previously discussed changes to risk adjust not only 
on anchor MS-DRG but also hip fracture status. Additionally, note that 
the term ``CJR eligible hospitals'' is being renamed to ``CJR regional 
hospitals'' as discussed in response to comments in section 
III.C.4.b.(4) of this final rule.
(9) Discount Factor
    When setting an episode target price for a participant hospital, we 
proposed to apply a discount to a hospital's hospital-specific and 
regional blended historical payments for a performance period to 
establish the episode target price that would apply to the participant 
hospital's CJR episodes during that performance period and for which 
the hospital would be fully, or partly, accountable for episode 
spending in relationship to the target price, as discussed in section 
III.C.3. of the proposed rule. We expect participant hospitals to have 
significant opportunity to improve the quality and efficiency of care 
furnished during episodes in comparison with historical practice, 
because this model would facilitate the alignment of financial 
incentives among providers caring for beneficiaries throughout the 
episode. This discount would serve as Medicare's portion of reduced 
expenditures from the CJR episode, with any episode expenditure below 
the target price potentially available as reconciliation payments to 
the participant hospital where the anchor hospitalization occurred. We 
proposed to apply a 2 percent discount for performance years 1 through 
5 when setting the target price. We stated our belief in the proposed 
rule that applying a 2 percent discount in setting the episode target 
price allows Medicare to partake in some of the savings from the CJR 
model, while leaving considerable opportunity for participant hospitals 
to achieve further episode savings below the target price that they 
would be paid as reconciliation payments, assuming they meet the 
quality requirements as discussed in section III.C.5 of the proposed 
rule.
    The proposed 2 percent discount is similar to the range of the 
discounts used for episodes in the ACE demonstration.\36\ In the 
Medicare ACE,

[[Page 73354]]

a demonstration program that included orthopedic procedures such as 
those included in CJR, participant hospitals negotiated with Medicare 
discounts of 2.5 to 4.4 percent of all Part A orthopedic services and 
0.0 to 4.4 percent of all Part B orthopedic services during the 
inpatient stay (excluding PAC). Hospitals received the discounted 
payment and reported that they were still able to achieve savings.\37\ 
We stated our belief in the proposed rule that there is similar, if not 
potentially more, opportunity for savings in the CJR payment model 
because it includes acute inpatient, as well as PAC, an area of episode 
spending that accounts for approximately 25 percent of CJR episode 
payments and exhibits more than 2 times the episode payment variation 
\38\ than that of acute inpatient hospitalization.\39\ We stated in the 
proposed rule our belief that with the proposed 2 percent discount, 
participant hospitals have an opportunity to create savings for 
themselves as well as Medicare, while also maintaining or improving 
quality of care for beneficiaries.
---------------------------------------------------------------------------

    \36\ IMPAQ International. Evaluation of the Medicare Acute Care 
Episode (ACE) Demonstration: Final Evaluation Report. Columbia, MD: 
IMPAQ International; May 2013. https://downloads.cms.gov/files/cmmi/ACE-EvaluationReport-Final-5-2-14.pdf. Accessed April 16, 2015.
    \37\ IMPAQ International. Evaluation of the Medicare Acute Care 
Episode (ACE) Demonstration: Final Evaluation Report. Columbia, MD: 
IMPAQ International; May 2013. https://downloads.cms.gov/files/cmmi/ACE-EvaluationReport-Final-5-2-14.pdf. Accessed April 16, 2015.
    \38\ Variation for purposes of this calculation refers to 
standard deviation of inpatient and institutional post-acute episode 
payments as a percentage of average inpatient and post-acute episode 
payments, respectively.
    \39\ Medicare FFS Parts A and B claims, CJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    The proposed 2 percent discount also matches the discount used in 
the BPCI Model 2 90-day episodes, and is less than the discount used in 
BPCI Model 2 30-day and 60-day episodes (3 percent). Hundreds of 
current BPCI participants have elected to take on responsibility for 
repayment in BPCI Model 2 with a 2 to 3 percent discount. Because many 
BPCI participants volunteered to participate in a bundled payment model 
with a discount, we stated in the proposed rule our belief that a 
discount percent that is within, and especially a discount of 2 percent 
that is at the lower end of, the BPCI discount range would allow CJR 
participant hospitals to create savings for both themselves and 
Medicare.
    As stated previously in section III.C.3. of the proposed rule, we 
proposed to phase in the financial responsibility of hospitals for 
repayment of actual episode spending that exceeds the target price 
starting in performance year 2. In order to help hospitals transition 
to taking on this responsibility, we proposed to apply a reduced 
discount of one percent in performance year 2 for purposes of 
determining the hospital's responsibility for excess episode spending, 
but maintain the 2 percent discount for purposes of determining the 
hospital's opportunity to receive reconciliation payment for actual 
episode spending below the target price. For example, under this 
proposal in performance year 2, a hospital that achieves CJR actual 
episode payments below a target price based on a 2 percent discount 
would retain savings below the target price, assuming the quality 
thresholds for reconciliation payment eligibility are met (discussed in 
section III.C.5. of the proposed rule) and the proposed performance 
year stop-gain limit (discussed in section III.C.8. of the proposed 
rule) does not apply. Medicare would hold responsible for repayment 
hospitals whose CJR actual episode payments exceed a target price based 
on a one percent discount, assuming the proposed performance year 2 
stop-loss limit (discussed in section III.C.8. of the proposed rule) 
does not apply. Hospitals that achieve CJR actual episode payments 
between a 2 percent-discounted target price and 1 percent-discounted 
target price would neither receive reconciliation payments nor be held 
responsible for repaying Medicare. The decision on which percent-
discounted target price applies will be made by evaluating actual 
episode payments in aggregate after the completion of performance year 
2, and the same percent-discounted target price would apply to all 
episodes that are initiated in performance year 2. We proposed to apply 
this reduced one percent discount for purposes of hospital repayment 
responsibility only in performance year 2 and apply the 2 percent 
discount for excess episode spending repayment responsibility for 
performance years 3 through 5. Under this proposal, the discount for 
determination of reconciliation payment for episode actual spending 
below the target price would not deviate from 2 percent through 
performance years 1 through 5.
    In section III.C.5. of the proposed rule, we proposed voluntary 
submission of data for a patient-reported outcome measure. We proposed 
to incent participant hospitals to submit data on this measure by 
reducing the discount percentage by 0.3 percentage points for 
successfully submitting data, as defined in section III.D. of the 
proposed rule. By successfully submitting data on this metric for 
episodes ending in performance years 1, 2, 3, 4, and or 5, we would 
adjust the discount percentage in the corresponding year(s) as follows:
     For episodes beginning in performance year 2, set the 
discount percentage in a range from 2 percent to 1.7 percent for 
purposes of determining the hospital's opportunity to receive 
reconciliation payment for actual episode spending below the target 
price, and set the discount percentage in a range from 1 percent to 0.7 
percent for purposes of determining the amount the hospital would be 
responsible for repaying Medicare for actual episode spending above the 
target price.
     For episodes beginning in performance years 3 through 5, 
set the discount percentage in a range from 2 percent to 1.7 percent 
for purposes of reconciliation payment and Medicare repayment 
calculations.
    The determination of whether the hospital successfully submitted 
data on the patient-reported outcome measure cannot be made until after 
the performance year ends and data is reported. Therefore, participant 
hospitals would be provided target prices for both scenarios whether 
the successfully submit data or not and such determination will happen 
at the time of payment reconciliation (discussed further in section 
III.C.6. of the proposed rule).
    We sought comment on our proposed discount percentage of 2 percent 
for CJR episodes, our proposal to reduce the discount to 1 percent on a 
limited basis in performance year 2, and our proposal to reduce the 
discount by 0.3 percentage points for successfully reporting patient-
reported outcomes data in the corresponding year.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters expressed concern about participant 
hospitals taking on financial risk in the CJR model. We refer readers 
to comments in section III.C.2, of this final rule for more discussion 
of such comments, and we reference them here because these comments may 
impact how the proposed discount factor is used to phase in risk for 
participant hospitals.
    Response: As discussed in the responses to comments in section 
III.C.2. of this final rule, we appreciate commenters' concerns about 
participant hospitals' ability to manage risk. In the proposed rule, we 
proposed to use several design elements to phase in risk to better help 
transition participant hospitals. One of these design elements to phase 
risk in was the use of a reduced discount factor by 1 percentage point 
for

[[Page 73355]]

purposes of calculating repayment amounts in performance year 2, as 
discussed earlier in this section. In response to commenters' concerns, 
we will extend the use of a reduced discount factor for purposes of 
calculating repayment amounts to apply not only in performance year 2, 
but also in performance year 3.
    Comment: Many commenters offered a variety of suggestions to CMS's 
proposal and alternatives considered to link quality and payment in the 
CJR model, including varying the discount percentage incorporated in 
the target price at reconciliation based on the participant hospital's 
quality performance. We refer readers to comments in section III.C.5 of 
this final rule for greater discussion of comments on linking quality 
and payment in the CJR mode.
    Response: As discussed in the responses to comments later in this 
final rule in section III.C.5. of this final rule, we are modifying the 
proposed rule so as to use a composite score methodology to link 
quality and payment in the CJR model. With this composite score 
methodology, each hospital will receive a discount factor of 3 percent, 
though the discount factor would be 2 percent for purposes of 
calculating repayments to Medicare in performance years 2 and 3, 
reflecting the proposed discount factor reduction by 1 percentage point 
and the extension to performance year 3 of this reduction, to phase in 
downside risk, as discussed in the previous response.
    Each participant hospital may qualify for a quality incentive 
payment. The quality incentive payment would not be a separate payment 
stream, but rather it would alter a hospital's effective discount 
factor used to calculate its target prices. Depending on a participant 
hospital's quality performance, in performance years 1, 4, and 5, the 
quality incentive payments could result in effective discount factors 
ranging from 3 percent to 1.5 percent. In performance years 2 and 3, 
the quality incentive payments could result in effective discount 
factors for purposes of calculating reconciliation payments ranging 
from 3 percent to 1.5 percent, and for purposes of calculating 
repayment amounts from 2 percent to 0.5 percent. We note that the lower 
effective discount factors for calculating repayment amounts in 
performance years 2 and 3 reflect the reduction by 1 percentage point 
in discount factor to phase in downside risk.
    If hospitals' quality performance during the CJR model mirrors 
historical quality performance, we expect the majority of the 
participant hospitals to qualify for an effective discount factor of 2 
percent each performance year for purposes of reconciliation payment 
calculations, the same discount factor proposed for all participant 
hospitals in the proposed rule. By using a range of discount factors, 
we will offer more participant hospitals an opportunity to qualify for 
reconciliation payments, and we will be able to better reward the 
highest quality participant hospitals.
    We refer readers to responses to comments in section III.C.5 of 
this final rule for more details on quality incentive payments, 
effective discount factors, the link between quality and payment, and 
how participant hospitals may perform based on historical quality 
performance.
    Comment: Some commenters recommended that we not apply a discount 
factor to any hospital because it would effectively function as a rate 
cut for MS-DRGs 469 and 470. Some of these commenters suggested we 
could achieve savings using a shared savings methodology (for example, 
participant hospitals would receive 50 percent of actual episode 
performance below undiscounted target prices, and would repay 50 
percent of actual episode performance above undiscounted target 
prices).
    Response: We disagree with commenters that a discount factor is the 
equivalent of a rate cut. We are providing participant hospitals the 
opportunity to qualify for reconciliation payments for delivering high 
quality and efficient care for LEJR episodes, and reconciliation 
payments may likely exceed the value of the discount factor.
    The discount factor will serve as Medicare's portion of reduced 
expenditures from the CJR episode. We acknowledge that there are other 
potential mechanisms, including shared savings methodologies, to 
provide savings to Medicare while also incentivizing participant 
hospitals. However, we also believe that a discount model, as proposed, 
can also incentivize participant hospitals to deliver high quality and 
efficient care while also providing savings to Medicare. We appreciate 
commenters' suggestions and we may consider alternative methodologies, 
such as shared savings, in the future.
    Comment: Several commenters requested that we not apply a discount 
factor to hospitals that are already efficient because they would not 
be able to achieve further efficiencies. It would be challenging for 
these efficient hospitals to qualify for reconciliation payments if 
benchmarked against a target price that incorporates a discount factor.
    Response: Commenters' concerns could be valid if we were basing 
target prices only on hospital-specific episode expenditure data. 
However, because we are blending hospital-specific and regional 
components in the target price calculation, and transitioning to 
completely regional target prices by performance year 4, target prices 
for more efficient hospitals likely would be higher than what they 
would be under a hospital-specific only pricing approach. We believe 
that with the blending and transition to regional pricing, historically 
efficient and high quality participant hospitals have a significant 
opportunity to qualify for reconciliation payments. Additionally, as 
discussed in the response to comments in section III.C.5. of this final 
rule, we are modifying our proposal to provide lower effective discount 
factors used to calculate target prices for participant hospitals with 
better quality performance. Therefore, high quality participant 
hospitals will have a lower hurdle to overcome to qualify for 
reconciliation payments. We will continue to incorporate a discount 
percentage into the target price for every participant hospital, and we 
will use a reduced discount factor for participant hospitals with high 
quality performance, as stated previously in this section's responses 
to comments and in section III.C.5. of this final rule.
    Comment: Commenters requested upfront investments to fund care 
delivery (for example, care coordination), infrastructure, and quality 
reporting changes that participant hospitals may need to make, similar 
to how some ACOs use upfront investments in other models and programs 
(for example, an initiative similar to the ACO Investment Model for 
Medicare Shared Savings Program participants). Commenters suggested we 
fund these upfront investments in a number of ways, including the 
following: a supplemental lump sum payment at the start of the model; 
increase, instead of discount, historical episode expenditures by 2 
percent; or transition in an increasing discount factor, getting to 2 
percent by the end of the model.
    Response: We thank the commenter for the suggestion and for 
recognizing the importance of potential care delivery, infrastructure, 
and quality reporting changes participant hospitals may need to make 
for an episode-based payment model such as CJR. However, we do not 
believe that an additional upfront payment mechanism such as a per-
beneficiary-per-month payment or an additional payment per episode will 
be necessary for hospitals to

[[Page 73356]]

successfully participate in this model. In BPCI, a similar episode-
based payment model, participants have been able to improve episode 
expenditure performance without such additional upfront payment 
mechanisms.
    Additionally, we believe there may be low investment opportunities 
for participant hospitals to achieve high quality and efficiency and 
qualify for reconciliation payments in this model. For example, 
participant hospitals may refer to high quality and efficient PAC 
providers when appropriate, and updates to discharge and referral 
patterns may be informed using already publicly available quality data 
and historical episode expenditure data provided by CMS and discussed 
in section III.E. of this final rule. PAC expenditures account for a 
significant proportion of historical CJR episode expenditures 
(approximately 30 percent \40\), and changes to discharge and referral 
patterns could have significant impact on participant hospitals' actual 
episode expenditure performance. We note that this rationale may not 
hold true for other models (for example, patient-centered medical 
homes, ACOs) where providers are responsible for beneficiaries' cost of 
care over a longer period of time.
---------------------------------------------------------------------------

    \40\ Medicare FFS Parts A and B claims, CJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    We also reiterate that as discussed in section III.C.5.b. of this 
final rule, the quality measures selected for this model are already in 
use for mandatory CMS quality reporting programs, such as the IQR 
program. Hospitals will not experience an additional reporting burden 
under this model for such measures. In addition, while we are including 
testing of a voluntary patient-reported outcomes measures, as discussed 
in section III.C.5.b.2. of this final rule, reporting of this measure 
will be voluntary. We do not believe there is any required additional 
burden on participant hospitals to report quality data.
    Given the success of participants in a similar model, the 
possibility to achieve reconciliation payments with relatively low 
investment approaches, and the lack of required additional quality 
reporting burden, we will not make additional upfront payments through 
mechanisms such as per-beneficiary-per-month payments or additional 
payments per episode.
    Final Decision: After consideration of the public comments we 
received, we are modifying our proposal to use a composite score 
methodology to link quality and payment in the CJR model. With this 
composite score methodology, a participant hospital may qualify for a 
reconciliation payment and for different effective discount factors 
depending on its quality performance. We refer readers to section 
III.C.5. of this final rule more details on how quality and payment 
will be linked.
c. Approach To Combine Pricing Features
    In section III.C.4.(b) of the proposed rule we discuss the various 
features we proposed to incorporate into our approach to set target 
prices. We refer readers to that section for more information on 
rationale and alternatives considered for each feature. In this section 
we discuss how the different pricing features, as well as the episode 
definition (section III.B. of the proposed rule) and adjustments to 
payments included in the episodes (section III.C.3. of the proposed 
rule), would fit together and be sequenced to calculate CJR episode 
target prices for participant hospitals. The following steps would be 
used to calculate MS-DRG 469 and 470 anchored episode target prices for 
both January 1 through September 30 and October 1 through December 31 
each performance year. The output of each step would be used as the 
input for the subsequent step, unless otherwise noted.
     (1) Calculate historical CJR episode payments for episodes 
that were initiated during the 3-historical-years (section 
III.C.4.b.(2) of the proposed rule) for all CJR eligible hospitals for 
all Medicare Part A and B services included in the episode. We note 
that specific Per Beneficiary Per Month (PBPM) payments may be excluded 
from historical episode payment calculations as discussed in section 
III.C.7.d. of the proposed rule.
     (2) Remove effects of special payment provisions (section 
III.C.3.a. of the proposed rule).
     (3) Prorate Medicare payments for included episode 
services that span a period of care that extends beyond the episode 
(section III.C.3.b of the proposed rule.).
     (4) Normalize for hospital-specific wage adjustment 
variation by dividing the episodes outputted in step (3) by the 
hospital's corresponding wage normalization factor described in section 
III.C.4.b.(7) of the proposed rule.
     (5) Trend forward 2 oldest historical years of data to the 
most recent year of historical data. As discussed in section 
III.C.4.b.(3) of the proposed rule, separate national trend factors 
would be applied to episodes anchored by MS-DRG 469 versus MS-DRG 470.
     (6) Cap high episode payment episodes with a region and 
MS-DRG anchor-specific high payment ceiling as discussed in section 
III.C.3.c. of the proposed rule, using the episode output from the 
previous step. We have posted region-specific historical average 
episode payments on the CJR Web site at https://innovation.cms.gov/
initiatives/CJR/. Note that these historical average episode payments 
were based on our proposed policies and do not represent actual target 
prices or the regional portion of actual target prices under the model.
     (7) Calculate anchor factor and participant hospital-
specific weights (section III.C.4.b.(8) of the proposed rule) using the 
episode output from the previous step to pool together MS-DRG 469 and 
470 anchored episodes, resulting in participant hospital-specific 
pooled historical average episode payments. Similarly, calculate 
region-specific weights to calculate region-specific pooled historical 
average episode payments.
     (8) Calculate participant hospital-specific and region-
specific weighted update factors as described in section III.C.4.b.(4) 
of the proposed rule. Multiply each participant hospital-specific and 
region-specific pooled historical average episode payment by its 
corresponding participant hospital-specific and region-specific 
weighted update factors to calculate participant hospital-specific and 
region-specific updated, pooled, historical average episode payments.
     (9) Blend together each participant hospital-specific 
updated, pooled, historical average episode payment with the 
corresponding region-specific updated, pooled, historical average 
episode payment according to the proportions described in section 
III.C.4.b.(5) of the proposed rule. Participant hospitals that do not 
have the minimum episode volume across the historical 3 years would use 
0.0 percent and 100 percent as the proportions for hospital and region, 
respectively.
     (10) Reintroduce hospital-specific wage variations by 
multiplying the participant hospital-specific blended, updated, and 
pooled historical average episode payments by the corresponding 
hospital-specific wage normalization factor, using the hospital's IPPS 
wage index that applies to the hospital during the period for which 
target prices are being calculated (section III.C.4.b.(7) of the 
proposed rule).
     (11) Multiply the appropriate discount factor, as 
discussed in section III.C.4.b.(9) of the proposed rule to each 
participant hospital's wage-adjusted, blended, updated, and pooled 
historical

[[Page 73357]]

average episode payment. For performance years 1, 3, 4, and 5, two 
discount factors would be used, one if the hospital successfully 
submits data on the patient-reported outcomes measure proposed in 
section III.C.5. of the proposed rule, and one if the hospital does not 
successfully submit the data. For performance year 2, 4 discount 
factors would be used to account for the 4 combinations of the 
following: (a) Whether or not the hospital successfully submits data on 
the patient-reported outcomes measure; and (b) for the different 
discount factors proposed for purposes of calculating reconciliation 
payments vs. calculating repayment amounts. The result of this 
calculation would be the participant hospital-specific target prices 
for MS-DRG 470 anchored episodes.
     (12) Multiply participant hospitals' target prices for MS-
DRG 470 anchored episodes by the anchor factor (section III.C.4.b.(8) 
of the proposed rule) to calculate hospitals' target prices for MS-DRG 
469 anchored episodes.
    The previously stated twelve steps would be used to calculate 
target prices for episodes that begin between January 1 and September 
30, as well as for episodes that begin between October 1 and December 
31, for each performance year. The target price calculations for the 
two different time periods each performance year would differ by the 
IPPS wage index used in step (11) and the update factors used in step 
(8). By following these twelve steps, we would calculate target prices 
for each participant hospital for each performance year. We refer 
readers to section III.C.4.b. of the proposed rule for further details 
on each of the specific steps.
    We sought comment on the proposed approach to sequence and fit 
together the different pricing features, the episode definition 
(section III.B. of the proposed rule), and adjustments to payments 
included in the episodes (section III.C.3. of the proposed rule) to 
calculate CJR episode target prices for participant hospitals.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters requested for risk adjustment based on 
patients' hip fracture status, among other clinical and demographic 
dimensions. Commenters also recommended that we modify the definition 
of ``CJR eligible hospitals'', the term used to identify hospitals 
included in calculations for the regional component of target prices, 
to not exclude hospitals that are participating in BPCI.
    Response: We refer readers to comments and responses to comments in 
sections III.C.4.b.(1) and III.C.4.b.(4) of the final rule for further 
discussion on risk stratification and CJR eligible hospitals, 
respectively. We reference them here because changes to risk 
stratification and CJR eligible hospitals would impact how we would 
combine CJR pricing features. Given the changes to the proposed rule 
described in sections III.C.3, III.C.4.b, and III.C.5, we are modifying 
the different pricing features would fit together and be sequenced to 
calculate CJR episode target prices for participant hospitals. The 
following steps would be used to calculate different target prices in 
each performance year for each combination of anchor MS-DRG (469 vs. 
470), hip fracture status (with hip fracture vs. without hip fracture), 
and period during which target prices are applicable within a 
performance year (episodes initiated January 1 through September 30 vs. 
October 1 through December 31 each performance year). The output of 
each step would be used as the input for the subsequent step, unless 
otherwise noted.
     (1) Calculate historical CJR episode payments for episodes 
that were initiated during the 3-historical-years (section 
III.C.4.b.(2) of this final rule) for all CJR eligible hospitals for 
all Medicare Part A and B services included in the episode. We note 
that specific PBPM payments may be excluded from historical episode 
payment calculations as discussed in section III.C.7.d. of this final 
rule.
     (2) Remove effects of special payment provisions (section 
III.C.3.a. of this final rule) and normalize for wage index differences 
(section III.C.4.b.(7) of this final rule) by standardizing Medicare 
FFS payments at the claim-level.
     (3) Prorate Medicare payments for included episode 
services that span a period of care that extends beyond the episode 
(section III.C.3.b of this final rule.).
     (4) Trend forward 2 oldest historical years of data to the 
most recent year of historical data. As discussed in section 
III.C.4.b.(3) of this final rule, separate national trend factors would 
be applied for each combination of anchor MS-DRG (469 vs. 470) and hip 
fracture status (with hip fracture vs. no hip fracture).
     (5) Cap high episode payment episodes with a region and MS 
DRG anchor specific high payment ceiling as discussed in section 
III.C.3.c. of this final rule, using the episode output from the 
previous step. We have posted region specific historical average 
episode payments on the CJR final rule Web site at https://
innovation.cms.gov/initiatives/CJR/.
     (6) Calculate anchor factor and participant hospital 
specific weights (section III.C.4.b.(8) of this final rule) using the 
episode output from the previous step to pool together MS DRG 469 and 
470 anchored episodes with and without hip fracture, resulting in 
participant hospital specific pooled historical average episode 
payments. Similarly, calculate region specific weights to calculate 
region specific pooled historical average episode payments.
     (7) Calculate participant hospital specific and region 
specific weighted update factors as described in section III.C.4.b.(4) 
of this final rule. Multiply each participant hospital specific and 
region specific pooled historical average episode payment by its 
corresponding participant hospital specific and region specific 
weighted update factors to calculate participant hospital specific and 
region specific updated, pooled, historical average episode payments.
     (8) Blend together each participant hospital specific 
updated, pooled, historical average episode payment with the 
corresponding region specific updated, pooled, historical average 
episode payment according to the proportions described in section 
III.C.4.b.(5) of this final rule. Participant hospitals that do not 
have the minimum episode volume across the historical 3 years would use 
0.0 percent and 100 percent as the proportions for hospital and region, 
respectively. For purposes of this final rule, we will define the 
output of this step as the pre-discount target price for MS DRG 470 
anchored episodes without hip fracture.
     (9) Multiply the output of step (8) by the appropriate 
anchor factors (step (6) of this target price calculation process and 
detailed in section III.C.4.b.(8) of this final rule) for MS DRG 469 
anchored episodes with hip fracture, MS DRG 469 anchored episodes 
without hip fracture, and MS DRG 470 anchored episodes with hip 
fracture. For purposes of this final rule, we will define the outputs 
of this step as the pre-discount target prices for MS DRG 469 anchored 
episodes with hip fracture, MS DRG 469 anchored episodes without hip 
fracture, and MS DRG 470 anchored episodes with hip fracture.
     (10) Multiply the pre-discount target prices for MS DRGs 
469 and 470 episodes with and without hip fracture by the appropriate 
effective discount factor that incorporates any quality incentive 
payment, as briefly described in section III.C.4.b.(9) of this final 
rule

[[Page 73358]]

and more specifically detailed in the response to comments in section 
III.C.5. of this final rule and Tables 19, 20, and 21. The results of 
these calculations will be participant hospitals' target prices for MS 
DRG 469 anchored episodes with hip fracture, MS DRG 469 anchored 
episodes without hip fracture, MS DRG 470 anchored episodes with hip 
fracture, and MS DRG 470 anchored episodes without hip fracture.
    The previously stated 10 steps will be used to calculate target 
prices for episodes that begin between January 1 and September 30 
(between April 1 and September 30 for performance year 1), as well as 
for episodes that begin between October 1 and December 31, for each 
performance year. The target price calculations for the two different 
time periods each performance year will differ by the update factors 
used in the seventh step. By following these ten steps, we will 
calculate target prices for each participant hospital for each 
performance year. We refer readers to section III.C.4.b. of this final 
rule for further details on each of the specific steps.
    Final Decision: After consideration of the public comments we 
received, we are modifying our proposal to incorporate changes 
described in sections III.C.3, III.C.4.b, and III.C.5 of this final 
rule when fitting together and sequencing episode target price features 
used to calculate CJR episode target prices for participant hospitals.
    These final policies are set forth at Sec.  510.300 and Sec.  
510.305.
5. Use of Quality Performance in the Payment Methodology
a. Background
    Over the past several years Medicare payment policy has moved away 
from FFS payments unlinked to quality and towards payments that are 
linked to quality of care. Through the Affordable Care Act, we have 
implemented specific IPPS programs like the HVBP program (subsection 
(o) of section 1886 of the Act), the Hospital Acquired Condition 
Reduction Program (HACRP) (subsection (q) of section 1886) and the HRRP 
(subsection (p) of section 1886), where quality of care is linked with 
payment. We have also implemented the Shared Savings Program, an ACO 
program that links shared savings payment to quality performance. Since 
the implementation of the HRRP in October 2012, readmission rates for 
various medical conditions like THA and TKA (THA/TKA) have improved. 
Trend analyses show a decrease in readmission rates and specifically 
with THA/TKA risk-standardized readmissions rates (RSRR) from 5.4 
percent (July 2010-June 2011) to 4.8 percent (July 2012-June 2013).\41\ 
Additionally, hospital THA/TKA RSCR decreased from 3.4 percent (April 
2010 through March 2011) to 3.1 percent (April 2012 through March 
2013). Despite the downward trend of THA/TKA RSRRs and RSCRs, the wide 
dispersion in these readmission rates suggests there is still room for 
hospitals to improve their performance on these measures as illustrated 
by a THA/TKA RSRR distribution of 2.8 to 9.4 percent (July 2010-June 
2013) and a THA/TKA RSCR distribution of 1.5 to 6.4 percent (April 
2010-March 2013). In the proposed rule, we stated our belief that the 
CJR model would provide another mechanism for hospitals to improve 
quality of care, while also achieving cost efficiency. Incentivizing 
high-value care through episode-based payments for LEJR procedures is a 
primary objective of CJR. Therefore, incorporating quality performance 
into the episode payment structure is an essential component of the CJR 
model. We also stated our belief that the financial opportunity 
discussed in section III.C.2. of the proposed rule would provide the 
appropriate incentives necessary to reward a participant hospital's 
achievement of episode savings when the savings are greater than the 
discounted target price. For the reasons stated previously, we 
discussed our belief that it would be important for the CJR model to 
link the financial reward opportunity with achievement in quality of 
care for Medicare beneficiaries undergoing LEJR.
---------------------------------------------------------------------------

    \41\ Hospital Quality Initiatives. CMS Hospital Quality 
Chartbook 2014. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf. Accessed 
April 21, 2015.
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    As discussed in section III.C. of this final rule, which outlines 
the payment structure proposed for the CJR model, each participant 
hospital would have target prices calculated for MS-DRG 469 and 470 
anchored episodes; each anchored episode would include an anchor 
hospitalization for an LEJR procedure and a 90-day period after the 
date of discharge from the anchor hospitalization. These episode target 
prices represent expected spending for all related Part A and Part B 
spending for such episodes, with a discount applied. Hospitals who 
achieve actual episode spending below a target price for a given 
performance period would be eligible for a reconciliation payment from 
CMS, subject to the proposed stop-gain limit policy as discussed in 
section III.C.8. of this final rule.
    In the proposed rule, we proposed quality performance standards 
that must also be met in order for a hospital to be eligible to receive 
a reconciliation payment under CJR. Specifically, we described our 
proposal to include a performance measure result threshold on select 
outcomes-based quality measures as a requirement for participants to 
receive a reconciliation payment if actual episode spending is less 
than the target price under CJR in a performance year, in addition to a 
payment adjustment for successful reporting of a voluntary measure in 
development. Beginning in performance year one and continuing 
throughout the duration of the model, we proposed to make 
reconciliation payments only to those CJR hospital participants that 
met or exceeded a minimum measure result threshold. We also discussed 
an alternative approach to determining CJR reconciliation payment 
eligibility and adjusting payment based on a quality score developed 
from performance on three outcomes-based quality measures and success 
in reporting the voluntary measurement in development.
b. Implementation of Quality Measures in the Payment Methodology
    In section III.D. of the proposed rule, we proposed three measures 
to assess quality of care of the hospitals participating in the CJR 
model. We also proposed voluntary data submission for a patient-
reported outcome measure in development. In section III.C.5. of the 
proposed rule, we proposed using three measures to determine 
eligibility for a reconciliation payment, as well as proposed rewarding 
hospitals that voluntarily submit data for the patient-reported outcome 
measure. We also discussed an alternative approach to determining 
reconciliation payment eligibility and adjusting payment based on a 
composite quality score calculated from the three required outcome 
measures and success on reporting voluntary data on the patient-
reported outcome measure.
(1) General Selection of Quality Measures
    The CJR model is designed to provide financial incentives to 
improve coordination of care for beneficiaries that we expect to lead 
to avoidance of post-surgical complications and hospital readmissions, 
as well as to improve patient experience through care redesign and 
coordination. Furthermore, we acknowledge that achievement of savings 
while ensuring high-quality care for Medicare FFS beneficiaries in LEJR 
episodes would require close collaboration among hospitals,

[[Page 73359]]

physicians, PAC providers, and other providers and suppliers. In order 
to encourage care collaboration among multiple providers of patients 
undergoing THA and TKA, we proposed three measures, as described in 
detail in section III.D.2. of this final rule, to determine hospital 
quality of care and to determine eligibility for a reconciliation 
payment under the CJR model. The measures we proposed are as follows:
     Hospital-level 30-day, all-cause RSRR following elective 
primary THA and/or TKA (National Quality Forum (NQF)#1551), an 
administrative claims-based measure.
     Hospital-level RSCR following elective primary THA and/or 
TKA (NQF #1550), an administrative claims-based measure.
     HCAHPS Survey measure (NQF #0166).
    Beginning in performance year 1 and continuing throughout the 
duration of the model, we proposed to make reconciliation payments only 
to those CJR participant hospitals that met or exceeded a minimum 
performance threshold on the measures previously listed. We proposed 
that hospitals must meet or exceed the measure reporting thresholds and 
other requirements described in section III.C.5 and III.D. of this 
final rule on all three measures in order to be eligible for a 
reconciliation payment.
    These three outcome measures were chosen due to their: (1) 
Alignment with the goals of the CJR model; (2) hospitals' familiarity 
with the measures due to their use in other CMS hospital quality 
programs, including programs that tie payment to performance such as 
HVBP and HRRP; and (3) assessment of CMS priorities to improve the rate 
of LEJR complications and readmissions, while improving patient 
experience. In the proposed rule, we stated our belief that the three 
quality measures we proposed for reconciliation payment eligibility 
reflected these goals and accurately measured hospitals' level of 
achievement on such goals.
(2) Adjustment to the Payment Methodology for Voluntary Submission of 
Data for Patient-Reported Outcome (PRO) Measure
    During our consideration of quality metrics for the CJR model, we 
examined the feasibility of linking voluntary data submission of 
patient-reported outcomes, beyond the current three required measures 
discussed in section III.D.2. of this final rule for use in the model, 
with the possibility of incentivizing participant hospitals under the 
episode payment model to participate in this voluntary submission of 
data. We specifically examined potential patient-reported outcome 
measures since this type of outcome measure aligns with the CJR model 
goal of improving LEJR episode quality of care, including a heightened 
emphasis on patient-centered care where patients provide meaningful 
input to their care. Furthermore, the availability of patient reported 
outcome data would provide additional information on a participant 
hospital's quality performance, especially with respect to a patient's 
functional status, beyond the current three required measures discussed 
in section III.D.2. of this final rule for use in the model. We noted 
that we have a measure in development, the Hospital-Level Performance 
Measure(s) of Patient-Reported Outcomes Following Elective Primary THA 
or TKA measure or both (hence forth referred to as ``THA/TKA patient-
reported outcome-based measure''), that would support the National 
Quality Strategy domain of patient and family engagement, and could 
capture meaningful information that would not otherwise be available on 
patient outcomes that are related to the quality of LEJR episodes under 
CJR. In the proposed rule, we stated our belief that incorporating this 
measure into CJR by adjusting the payment methodology for successful 
voluntary data submission on the THA/TKA patient-reported outcome-based 
measure (henceforth referred to as ``THA/TKA voluntary data'') would 
provide participant hospitals with valuable information on functional 
outcomes that would assist them in assessing an important patient-
centered outcome, engaging other providers and suppliers in care 
redesign for LEJR episodes, as well as provide them with the potential 
for greater financial benefit from improved LEJR episode efficiencies. 
We did not believe it would be appropriate at this time to hold any 
participant hospitals financially accountable for their actual THA/TKA 
voluntary data, as we proposed to require for the three measures 
described in section III.C.5.b.(5) of this final rule.
    Instead, we proposed to adjust the episode payment methodology for 
participant hospitals that successfully submit THA/TKA voluntary data 
by reducing the discount percentage used to set the target price from 
2.0 percent to 1.7 percent of expected episode spending based on 
historical CJR episode data, hereinafter referred to as the voluntary 
reporting payment adjustment. The proposed payment policies with 
respect to reconciliation payment eligibility and the discount 
percentage based on hospital voluntary data submission are summarized 
in Table 10 for performance years 3 through 5 where we proposed that 
hospitals have full repayment responsibility. The proposed specific 
percentages that would apply for purposes of the repayment amount and 
reconciliation payment are outlined for performance years 1 and 2 in 
the discussion that follows.

   Table 10--Proposed Reconciliation Payment Eligibility and Discount
  Percentage Included in the Target Price for Each Participant Hospital
      Based on Quality Performance in Performance Years 3 Through 5
------------------------------------------------------------------------
                                                         Does not meet
 Discount percentage included in   Meets thresholds   thresholds for one
   target price/reconciliation    for all 3 required     or more of 3
       payment eligibility         quality measures    required quality
                                                           measures
------------------------------------------------------------------------
Successfully submits THA/TKA      1.7%/eligible.....  1.7%/ineligible.
 voluntary data.
Does not successfully submit THA/ 2.0%/eligible.....  2.0%/ineligible.
 TKA voluntary data.
------------------------------------------------------------------------

    We refer readers to section III.D.3.a. of this final rule for 
further discussion of the THA/TKA patient-reported outcome-based 
measure and our proposed definition of successful reporting. In 
addition, we refer readers to section III.C.4.b.(9) of this final rule 
for discussion of the proposed discount of 2.0 percent (without the 
voluntary reporting payment adjustment) to establish the target price. 
In the proposed rule, we stated our belief that a voluntary reporting 
payment adjustment of 0.3 percent of expected episode spending would, 
on average, cover the participant hospitals' additional administrative 
costs of voluntarily reporting patient risk variables and patient-
reported reported function for outcome calculation. We estimated the 
value of this discount

[[Page 73360]]

reduction, on average, to be about $75 per LEJR episode at a 
participant hospital, which we believed would be sufficient to pay 
hospitals for the resources required to survey beneficiaries pre- and 
post-operatively about functional status and report this information 
required for measure development to CMS. We also believed that 
voluntary reporting on this patient-reported outcome measure would be 
integral to implementation of the CJR model, as it would allow us to 
further develop and evaluate the measure for potential use in this 
model in the future as a measure of quality that is important and not 
captured in any other available measures.
    We proposed that the voluntary reporting payment adjustment would 
be available for all years of the model, unless we find the measure to 
be unfeasible or have adequately developed the measure such that 
continued voluntary data collection is no longer needed for measure 
development during the course of the model. In those situations, we 
would notify participant hospitals that the voluntary reporting payment 
adjustment was no longer available as we would cease collecting the 
data.
    We proposed that when we provide the episode target price to each 
participant hospital at 2 times during the performance year, we would 
provide different target prices reflecting the 2.0 percent and 1.7 
percent discounts. At the time of reconciliation for the performance 
year, we would determine which participant hospitals successfully 
reported the THA/TKA voluntary data for that performance year. The 
effects of this voluntary reporting payment adjustment would vary for 
each year of the model, depending on the proposed reconciliation 
payment and repayment policies for that performance year. For hospitals 
that achieved successful reporting of the THA/TKA voluntary data in 
performance year 3, 4, or 5, we would use the target price reflecting 
the 1.7 percent discount (compared with the 2.0 percent discount for 
nonreporting or unsuccessfully reporting hospitals) to calculate the 
hospital's reconciliation payment or repayment amount. Based on this 
comparison, consistent with the proposal described in section III.C.6. 
of this final rule, we would make a reconciliation payment if actual 
episode spending was less than the target price (and the thresholds for 
reconciliation payment eligibility are met for the three required 
quality measures) or make participant hospitals responsible for 
repaying Medicare if actual episode spending exceeded the target price. 
For performance year 2, when we proposed that repayment responsibility 
would be phased-in, for participant hospitals with successful THA/TKA 
voluntary data reporting, we would use a target price reflecting the 
1.7 percent discount (compared with the 2.0 percent discount for 
nonreporting or unsuccessfully reporting hospitals) to determine if 
actual episode spending was below the target price, whereupon the 
participant hospital would receive a reconciliation payment if the 
quality thresholds on the three required measures were met. In order to 
help hospitals transition to taking on repayment responsibility, we 
proposed to apply a reduced discount of 0.7 percent for successful THA/
TKA voluntary data reporting hospitals (compared with 1.0 percent for 
nonreporting or unsuccessfully reporting hospitals) in performance year 
2 for purposes of determining the hospital's repayment responsibility 
for excess episode spending. For performance year 1, when we proposed 
that there would be no repayment responsibility, for participant 
hospitals with successful THA/TKA voluntary data reporting, we would 
use a target price reflecting the 1.7 percent discount (compared with 
the 2.0 percent discount for nonreporting or unsuccessfully reporting 
hospitals) to determine if actual episode spending was below the target 
price, whereupon the participant hospital would receive a 
reconciliation payment if the quality thresholds on the three required 
measures were met. In the proposed rule, we stated our belief that this 
proposed voluntary reporting payment adjustment would provide the 
potential for increased financial benefit for participant hospitals due 
to a higher target price (that reflects a lower discount percentage) 
that successfully report the measure. Participant hospitals that 
successfully reported the voluntary data would be subject to a lower 
repayment amount (except for performance year 1 when hospitals have no 
repayment responsibility) or a higher reconciliation payment (assuming 
the thresholds are met on the three required measures for 
reconciliation payment eligibility), than hospitals that did not 
successfully report the voluntary data.
    In general, we proposed that participant hospitals that met the 
performance thresholds for the three required quality measures and 
reduced actual episode spending below the target price, as well as 
successfully reported the THA/TKA voluntary data, would be eligible to 
retain an additional 0.3 percent of the reduced episode expenditures 
relative to participant hospitals that successfully reported the three 
required quality measures but did not report voluntary data, funds 
which would offset additional administrative costs that the participant 
hospitals would incur in reporting on the measure. Additionally, for 
performance years 2-5 where we proposed that participant hospitals 
would have payment responsibility, participant hospitals with increased 
actual episode spending above the target price would not be required to 
repay 0.3 percent of the increased episode expenditures (relative to 
participant hospitals that do not report voluntary data), funds that 
would offset additional administrative costs that the participant 
hospitals would incur in reporting on the measure. These costs would 
include the hospital staff time required for training on the measure, 
as well as then gathering and reporting on multiple patient risk 
variables from LEJR episode beneficiaries' medical records and locating 
beneficiaries and administering via phone survey questions on 
functional status, which would also then be reported to CMS. Thus, we 
expected that the proposal would encourage reporting by a number of 
participant hospitals, and it would have the potential to benefit those 
hospitals that successfully reported on the measure. Therefore, this 
proposal could financially benefit reporting hospitals that would also 
collect valuable information on patient functional outcomes that could 
inform their LEJR care redesign. While this measure remains in 
development from our perspective to ensure translation of data across 
care settings and the respective hospital communities during the 90-day 
post-discharge episode of care, participant hospitals would gain 
anecdotal, locally relevant information regarding the patient-reported 
outcomes of their own patients that could inform participant hospitals' 
continuous quality improvement efforts.
    We considered two alternative options to adjust the CJR payment 
methodology by modifying the required quality measure thresholds for 
reconciliation payment eligibility for those participant hospitals that 
successfully submit the THA/TKA voluntary data. First, we considered 
adjusting the threshold that hospitals must meet on the three required 
quality measures for reconciliation payment eligibility if reduced 
episode spending was achieved from the unadjusted 30th percentile 
threshold to the adjusted 20th percentile threshold for performance 
years 1, 2, and 3, and from the unadjusted 40th percentile to the 
adjusted 30th percentile for performance years 4 and 5. Second, we

[[Page 73361]]

considered only requiring hospitals to meet the 30th percentile 
threshold on two of three outcome measures for performance years 1, 2, 
and 3, and the 40th percentile threshold on two of three outcome 
measures for performance years 4 and 5. These options would provide the 
opportunity for some participant hospitals, specifically those that 
missed the unadjusted percentile for one or more of the three required 
quality measures by a specified margin, to receive reconciliation 
payments if actual episode spending was less than the target price. 
However, these options could benefit only a subset of participant 
hospitals that successfully reported the THA/TKA voluntary data. For 
the majority of participant hospitals that we expect would meet the 
unadjusted thresholds for all three required measures, these options 
would not provide any incentive to voluntarily report the data because 
the hospitals would not benefit from voluntarily reporting the 
additional measure. We decided not to propose either of these options 
to adjust the CJR payment methodology for participant hospitals that 
voluntarily report data on the new measure because the limited benefit 
could result in few hospitals choosing to report on the measure, 
thereby limiting our progress in developing the measure. We noted that 
these two considered options and our proposal were not mutually 
exclusive.
    We sought comment on the proposed voluntary reporting payment 
adjustment of reducing the discount percentage from 2.0 percent to 1.7 
percent for CJR participant hospitals that voluntarily and successfully 
report on the THA/TKA voluntary data. Given our interest in robust 
hospital participation in reporting on the THA/TKA voluntary data under 
CJR, we were specifically interested in information on the additional 
resources and their associated costs that hospitals would incur to 
report THA/TKA voluntary data, as well as the relationship of these 
costs to the potential financial benefit participant hospitals could 
receive from the proposed reduced discount of 1.7 percent. Based on 
such information, we would consider whether a change from the proposed 
discount factor reduction due to successful voluntary data submission 
would be appropriate. We also sought comment on whether the alternative 
payment methodology adjustments considered, or combination of 
adjustments, would more appropriately incentivize CJR participant 
hospitals to submit THA/TKA voluntary data. In the proposed rule, we 
stated our belief that development of the THA/TKA patient-reported 
outcome measure would benefit from reporting by a broad array of 
participant hospitals, including those that currently deliver high 
quality, efficient LEJR episode care and those that have substantial 
room for improvement on quality and or cost-efficiency.
    We summarize the public comments we received on the proposed 
voluntary reporting payment adjustment and provide our responses in 
section III.C.5.b.(5)(c)(iii) of this final rule. We did not receive 
public comments on the alternative payment methodology adjustments that 
we discussed in the proposed rule. Furthermore, in light of our 
interest in encouraging CJR participant hospital THA/TKA voluntary data 
reporting, we also considered alternative approaches to collect this 
information or provide hospitals with funds to help cover their 
associated administrative costs other than adjustments to the CJR model 
payment methodology. One alternative would be for hospitals to collect 
and report on patient pre-operative information collected 0 to 90 days 
before surgery, while CMS would engage a contractor to collect and 
report the post-operative information collected 9 to 12 months after 
surgery. This approach would reduce some of the administrative burden 
of collection and reporting on hospitals, although participant 
hospitals would need to provide CMS with certain beneficiary 
information, including contact information that would be needed for a 
CMS contractor to contact the beneficiary at a later date. We sought 
comment on this alternative, including whether hospitals would incur 
significant additional administrative costs to report on the data prior 
to surgery and how CMS could best provide funds to offset some of those 
costs, through an adjustment to the CJR payment methodology or other 
means. We also sought comment on the information participant hospitals 
would need to provide to CMS so that a CMS contractor could collect and 
report the post-operative data, and the most efficient ways for 
hospitals to provide this information to us. Finally, we considered an 
approach that would provide hospitals with separate payment outside of 
an adjustment to the CJR payment methodology to specifically assist in 
covering their administrative costs of reporting THA/TKA voluntary 
data, in order to achieve robust hospital participation in reporting. 
We sought comment on the hospital administrative costs that would be 
incurred for reporting, as well as on approaches we could take to 
ensure that hospitals achieved successful reporting under such an 
approach if separate payment was made. Finally, we expressed our 
interest in comments regarding the comparative strength of these 
various alternatives in encouraging hospitals to participate in 
reporting THA/TKA voluntary data.
    We did not receive any public comments on the alternatives we 
discussed other than adjustments to the payment methodology to collect 
THA/TKA voluntary data and provide hospitals with funds to cover the 
required resources. We summarize these comments we received in section 
III.C.5.b.(5)(c)(iii) of this final rule and provide our responses.
(3) Measure Risk-Adjustment and Calculations
    All three proposed outcome measures are risk-adjusted, and we refer 
readers to section III.D.2. of this final rule for a full discussion of 
these measures and risk-adjustment methodologies. We believed that 
risk-adjustment for patient case-mix is important when assessing 
hospital performance based on patient outcomes and experience and 
understanding how a given hospital's performance compares to the 
performance of other hospitals with similar case-mix.
(4) Applicable Time Period
    We proposed to use a 3-year rolling performance or applicable 
period for the Hospital-level 30-day, all-cause RSRR following elective 
primary THA and/or TKA (NQF #1551) and the Hospital-level RSCR 
following elective primary THA and/or TKA (NQF #1550) measures. We also 
specifically proposed to align with the HIQR Program's 3-year rolling 
performance period for the RSRR and RSCR measures since we believed 
that a 3-year performance period yields the most consistently reliable 
and valid measure results (FY 2015 IPPS/LTCH final rule, 79 FR 50208 
through 50209). For the HCAHPS Survey measure, we proposed to follow 
the same performance period as in the HIQR Program (FY 2015 IPPS/LTCH 
final rule, 79 FR 50259). HCAHPS scores are created from 4 consecutive 
quarters of survey data; publicly reported HCAHPS results are also 
based on 4 quarters of data. For the voluntary data collection for the 
proposed THA/TKA patient-reported outcome-based performance measure, 
the optimal reporting time period had not been determined at the time 
of issuance of the CJR model proposed rule. Therefore, we proposed 
defining the applicable time period as

[[Page 73362]]

12 month intervals that may begin between July 1, 2016 and December 31, 
2016, and continue in subsequent performance years for a total of four 
or fewer performance periods. Participant hospitals will submit 
required data to CMS in a mechanism similar to the data submission 
process for the HIQR Program within sixty days of the end of each 12 
month period. As described in section III.C.5.b.(2) of the proposed 
rule, the proposed voluntary reporting payment adjustment of reducing 
the discount percentage from 2.0 percent to 1.7 percent for CJR 
participant hospitals that successfully report on the THA/TKA voluntary 
data would begin in year 2 and also apply to subsequent years of the 
model. We are not finalizing the proposed voluntary reporting payment 
adjustment, as discussed further in section III.C.5.b.(5)(c)(iii) of 
this final rule. We note that we summarize the public comments we 
received on the proposed applicable time period and provide our 
responses in section III.D.3.d. of this final rule, and we summarize 
the public comments we received on the reporting time period for the 
THA/TKA patient-reported outcome and limited risk variable data and 
provide our responses in section III.D.3.a.(9) of this final rule.
(5) Criteria for Applicable Hospitals and Performance Scoring
(a) Identification of Participant Hospitals for the CJR Model
    As discussed in section III.A.2. of this final rule, all CJR 
participant hospitals will be IPPS hospitals.
(b) Methodology To Determine Performance on the Quality Measures
    To determine performance on the quality measures, we proposed to 
calculate measure results for all three measures as outlined in the 
Quality Measures section III.D.2. of this final rule. Performance on 
the three measures for the CJR model participant hospitals would be 
compared to the national distribution of measure results for each of 
these measures obtained through the HIQR Program. The HIQR Program is 
an IPPS program in which public reporting is a focus of the program for 
the nation's acute care hospitals, and we proposed using the absolute 
value of the CJR model participant hospital's result to determine if 
that participant hospital was eligible for a reconciliation payment. In 
essence, we intended to take the HIQR Program measure results (also 
posted publicly) for the proposed measures, identify the proposed 
threshold, and apply the thresholds as outlined in section 
III.C.5.b.(5)(c)(iii) of this final rule. In the proposed rule, we 
stated our belief that it would be reasonable to use the HIQR Program 
distribution of measure results to identify a measure result threshold 
because--(1) The hospitals in the HIQR Program represent most acute 
care hospitals in the nation; (2) the CJR model participant hospitals 
are a subset of the hospitals in the HIQR Program; and (3) the 
expectation that the CJR model participant hospitals meet a measure 
result threshold based on a national distribution of measure results 
would encourage the CJR model participant hospitals to strive to attain 
measure results consistent with or better than hospitals across the 
nation. For a detailed description of how we proposed to determine the 
measure result thresholds for consideration of a reconciliation payment 
adjustment, see section III.C.5.b.(3) and III.C.5.b.(5)(c) of this 
final rule. We would not want to encourage CJR model participant 
hospitals to strive for measure results or quality of care performance 
that may be lower than the national measure results. Given that the CJR 
participant hospitals are a subset of the HIQR Program participant 
hospitals, they are familiar with these three measures and may have put 
into place processes that will help to improve quality of care in the 
LEJR patient population. Finally, once the measure results were 
calculated, we proposed to use these results to determine eligibility 
for reconciliation payment, which is discussed in detail in the next 
section.
    We summarize the public comments we received on the proposed 
calculation of the measure results and application of performance 
thresholds and provide our responses in sections III.D.2 and 
III.C.5.b.(5)(c)(iii) of this final rule, respectively.
    To be considered to have successfully reported the voluntary data 
collection and submission for the THA/TKA voluntary data, we proposed 
that successfully reporting would mean participant hospitals must meet 
all of the following:
     Submit the data elements listed in section III.D.3.a.(2) 
of this final rule.
     Data elements listed in section III.D.3.a.(3) of this 
final rule must be submitted on at least 80 percent of their eligible 
elective primary THA/TKA patients (patients eligible for pre-operative 
THA/TKA voluntary data submission are those described in section 
III.D.3.a.(3) of this final rule); patients eligible for post-operative 
THA/TKA voluntary data submission are those described in section 
III.D.3.a.(3) of this final rule and also having a THA/TKA procedure 
date during the anchor hospitalization at least 366 days prior to the 
end of the data collection period. Therefore, participant hospitals 
would not be expected to collect and submit post-operative THA/TKA 
voluntary data on patients who are fewer than 366 days from the date of 
surgery.
     THA/TKA voluntary data submission must occur within 60 
days of the end of the most recent performance period.
    Hospitals that meet these three standards and successfully submit 
THA/TKA voluntary data would be eligible for the proposed voluntary 
reporting payment adjustment of reducing the discount percentage from 
2.0 percent to 1.7 percent for CJR participant hospitals that 
voluntarily and successfully report on the THA/TKA voluntary data. We 
note that we are not finalizing this voluntary reporting payment 
adjustment proposal as discussed in section III.C.5.b.(5)(c)(iii) of 
this final rule. However, we continue to believe that encouraging 
collection and submission of the THA/TKA voluntary data through the CJR 
model would increase availability of patient-reported outcomes to both 
participant hospitals that collect and submit data on their own 
patients in the model (and their patients as well); further development 
of an outcomes measure that provides meaningful information on patient-
reported outcomes for THA/TKA procedures that are commonly furnished to 
Medicare beneficiaries; provide another quality measure that may be 
incorporated into the CJR model policy linking quality to payment in 
future performance years, pending successful development of the 
measure; and inform the quality strategy of future payment models. 
Collecting data on at least 80 percent of hospital's eligible THA/TKA 
patients would provide sufficiently representative data to allow for 
development and testing of the THA/TKA patient-reported outcome-based 
performance measure.
    We invited public comment on the proposal to calculate measure 
results for all three measures as outlined in the Quality Measures 
section III.D.2. of this final rule. We also sought public comment on 
our proposal for hospitals to meet three requirements, previously 
outlined, in order to be considered as successfully submitting THA/TKA 
voluntary data.
    We summarize the public comments on the proposals to calculate 
measure results and determine measure result thresholds and provide our 
responses in sections III.D.2. and III.C.5.b.(5)(c)(iii) of this final 
rule, respectively. We summarize the public comments on the proposals 
for successful THA/TKA

[[Page 73363]]

voluntary data submission and provide our responses in section 
III.D.3.a. of this final rule.
(c) Methodology To Link Quality and Payment
(i) Background
    In proposing a methodology for linking payment for LEJR episodes to 
quality under this model, we considered several alternatives. 
Specifically, we considered making reconciliation payments to hospitals 
tied to achievement and improvement in quality performance or, 
alternatively, establishing minimum quality performance thresholds for 
selected quality measures from the beginning of the model or a later 
year, which would reward achievement but not necessarily improvement. 
While we proposed as discussed section III.C.5.b.(5)(c) of this final 
rule to establish minimum thresholds for participant hospital 
performance on three selected quality measures for reconciliation 
payment eligibility each performance year from the beginning of the 
model, we also discussed in detail an alternative we considered, which 
would make quality incentive payments related to hospital achievement 
and improvement on the basis of a composite quality score developed for 
each performance year. The composite quality score would affect 
reconciliation payment eligibility and change the effective discount 
included in the target price experienced by a participant hospital at 
reconciliation.
    Similar to the proposal described in section III.C.5.b.(5)(c) of 
this final rule, the alternatives considered would require a 
determination of participant hospital performance on all three proposed 
required quality measures, described in section III.D.2. of this final 
rule, based on the national distribution of hospital measure result 
performance, but instead of identifying the participant hospital's 
performance percentile for comparison with a threshold requirement, we 
would do so for purposes of assigning points toward a hospital 
composite quality score. Both the hospital-level 30-day, all cause 
Risk-Standardized Readmission Rate (RSRR) following elective primary 
THA and/or TKA (NQF #1551) measure and the hospital-level Risk-
Standardized Complication Rate (RSCR) following elective primary THA 
and/or TKA (NQF #1550) measure directly yield rates for which a 
participant hospital performance percentile could be determined and 
compared to the national distribution in a straightforward manner. As 
discussed in section III.D.2.c. of this final rule, we proposed to use 
the HCAHPS Linear Mean Roll Up (HLMR) score calculated using the HCAHPS 
Survey measure (NQF #0166). Once the HLMR scores are calculated, the 
participant hospital performance percentile could also be determined 
and compared to the national distribution in a straightforward manner. 
In addition, the alternatives considered would account for the 
successful submission of voluntary THA/TKA data on the patient-reported 
outcome measure, as discussed in section III.C.5.b.(2) of this final 
rule, in the calculation of the composite quality score.
(ii) Alternatives Considered To Link Quality and Payment
    We considered assigning each participant hospital a composite 
quality score, developed as the sum of the individual quality measure 
scores described later in this section, which were set to reflect the 
intended weights for each of the quality measures and the successful 
submission of THA/TKA voluntary data in the composite quality score. 
The participant hospital's composite quality score would affect 
reconciliation payment eligibility and could also provide the 
opportunity for quality incentive payments under the CJR model. Each 
quality measure would be assigned a weight in the composite quality 
score and possible scores for the measures would be set to reflect 
those weights. A composite quality score for each performance year 
would be calculated for each participant hospital based on its own 
performance that would affect reconciliation payment eligibility and 
the hospital's opportunity to receive quality incentive payments under 
the model. The composite quality score would also change the effective 
discount included in the target price experienced by the hospital at 
reconciliation for that performance year. We would weigh participant 
hospital performance on each of the three measures and successful 
submission of voluntary THA/TKA data according to the measure weights 
displayed in Table 11.

   Table 11--Quality Measure Weights Under the Composite Quality Score
               Alternative Considered in the Proposed Rule
------------------------------------------------------------------------
                                                             Weight in
                                                             composite
                     Quality measure                       quality score
                                                                (%)
------------------------------------------------------------------------
Hospital[dash]level 30[dash]day, all[dash]cause RSRR                  20
 following elective primary THA and/or TKA (NQF #1551)..
Hospital[dash]level RSCR following elective primary THA               40
 and/or TKA (NQF #1550).................................
HCAHPS Survey (NQF #0166)...............................              30
Voluntary THA/TKA data submission on                                  10
 patient[dash]reported outcome measure..................
------------------------------------------------------------------------

    We would assign the lowest weight of 10 percent to the successful 
submission of THA/TKA data on the patient-reported outcome measure 
because these data represent a hospital's meaningful participation in 
advancing the quality measurement of LEJR patient-reported outcomes but 
not actual outcome performance for LEJR episodes under the CJR model. 
In the proposed rule, we stated our belief the three required measures 
that represent LEJR outcomes deserve higher weights in the composite 
quality score. We would assign a modest weight of 20 percent to the 
readmissions measure because, while we believed that readmissions are 
an important quality measure for LEJR episodes, the episode payment 
methodology under the model already provides a strong financial 
incentive to reduce readmissions that otherwise would contribute 
significantly to greater actual episode payments. Furthermore, 
hospitals generally have already made significant strides over the past 
several years in reducing readmissions due to the inclusion of this 
measure in other CMS hospital programs that make payment adjustments 
based on performance on this measure. We believed that a higher weight 
than 20 percent would overvalue the contribution of readmissions 
performance as an indicator of LEJR episode quality in calculating the 
composite quality score. Furthermore, other CMS hospital programs may 
also make a payment adjustment based on hospital performance on the 
readmissions measure, so we would not want this measure to also 
strongly influence reconciliation payment eligibility and the 
opportunity for quality incentive payments under the

[[Page 73364]]

CJR model. We would assign a higher weight of 30 percent to the HCAHPS 
Survey measure because we believed that incorporating this quality 
measure, which reflects performance regarding patients' perspectives on 
care, including communication, care transitions, and discharge 
information, is a highly meaningful outcome measure of LEJR episode 
quality under the CJR model. However, we did not believe it would be 
appropriate assign the HCAHPS Survey measure the highest weight of the 
four measures, as the measure is not specific to LEJR episode care, but 
rather to all clinical conditions treated by participant hospitals. 
Finally, we would assign the highest weight, 40 percent, to the 
complications measure. We believed this measure should be weighted the 
most because it is specific to meaningful outcomes for primary THA and 
TKA that are the major procedures included in LEJR episodes under the 
CJR model. The measure includes important complications of LEJR 
episodes, such as myocardial infarction, pneumonia, surgical site 
bleeding, pulmonary embolism, death, mechanical joint complications, 
and joint infections occurring within various periods of time during 
the LEJR episode. LEJR episodes under the CJR model are broadly defined 
so that reducing complications should be a major focus of care redesign 
that improves quality and efficiency under this model, yet because 
complications may not be as costly as readmissions, the payment 
incentives under the model would not as strongly target reducing 
complications as reducing readmissions. We sought comment on this 
weighting of the individual quality scores in developing a composite 
quality score for each participant hospital.
    Under such an approach, we would first score individually each 
participant hospital on the Hospital-level 30-day, all-cause RSRR using 
the elective primary THA and/or TKA (NQF #1551) measure; Hospital-level 
RSCR following using the elective primary THA and/or TKA measure (NQF 
#1550); and HCAHPS Survey measure (NQF #0166) based on the participant 
hospital's performance percentile as compared to the national 
distribution of hospitals' measure performance, assigning scores 
according to the point values displayed in Table 12. These individual 
measure scores were set to reflect the measure weights included in 
Table 11 so they could ultimately be summed without adjustment in 
calculating the composite quality score.

Table 12--Individual Scoring Under the Composite Quality Score Alternative Considered for Three Required Quality
                                          Measures in the Proposed Rule
----------------------------------------------------------------------------------------------------------------
                                        Complications measure    HCAHPS survey  quality    Readmissions measure
        Performance percentile         quality score  (points)      score  (points)      quality score  (points)
----------------------------------------------------------------------------------------------------------------
>=90th...............................                     8.00                     6.00                     4.00
>=80th and <90th.....................                     7.40                     5.55                     3.70
>=70th and <80th.....................                     6.80                     5.10                     3.40
>=60th and <70th.....................                     6.20                     4.65                     3.10
>=50th and <60th.....................                     5.60                     4.20                     2.80
>=40th and <50th.....................                     5.00                     3.75                     2.50
>=30th and <40th.....................                     4.40                     3.30                     2.20
<30th................................                     0.00                     0.00                     0.00
----------------------------------------------------------------------------------------------------------------

    Given the current national distribution of hospital performance on 
these measures, in the proposed rule we stated our belief that small 
point increments related to higher measure performance deciles would be 
the most appropriate way to assign more points to reflect meaningfully 
higher quality performance on the measures. The absolute differences 
for each decile among the three measures reflect the intended weight of 
the measure in the composite quality score. We would assign any low 
volume participant hospital without a reportable value for the measure 
to the 50th performance percentile of the measure, so as not to 
disadvantage a participant hospital based on its low volume alone 
because that hospital may in actuality provide high quality care. These 
three measures are well-established measures in use under CMS hospital 
programs, so we did not believe that scores below the 30th percentile 
reflect quality performance such that they should be assigned any 
individual quality measure score points for LEJR episodes under CJR. 
However, we also considered reducing scores incrementally across the 
bottom three deciles in order to provide greater incentives for quality 
improvement for hospitals that may not believe they can attain the 30th 
performance percentile on one or more of the three measures and to 
avoid creating a ``cliff'' at the 30th performance percentile. We 
sought comment on this scoring approach to the three required quality 
measures.
    Additionally, we would assign a measure quality score of one point 
for participant hospitals that successfully submit THA/TKA voluntary 
data and 0 points for participant hospitals that do not successfully 
submit these data. Because we would not use the actual THA/TKA 
voluntary data on the patient-reported outcome measure in assessing 
LEJR episode quality performance under the model, we believed this 
straightforward binary approach to scoring the submission of THA/TKA 
voluntary data for the patient-reported outcome measure development 
would be appropriate.
    We note that the Shared Savings Program utilizes a similar scoring 
and weighting methodology, which is described in detail in the CY2011 
Shared Savings Program Final Rule (see Sec.  425.502). The HVBP and 
HACRP programs also utilize a similar scoring methodology, which 
applies weights to various measures and assigns an overall score to a 
hospital (79 FR 50049 and 50102).
    We would sum the score on the three quality measures and the score 
on successful submission of THA/TKA voluntary data to calculate a 
composite quality score for each participant hospital. Then we would 
incorporate this score in the model payment methodology by first, 
requiring a minimum composite quality score for reconciliation payment 
eligibility if the participant hospital's actual episode spending is 
less than the target price and second, by making quality incentive 
payments that change the effective discount percentage included in the 
target price experienced by the hospital in the reconciliation process. 
The payment policies we would apply are displayed in Tables 13, 14, and 
15 for the performance years of the model.

[[Page 73365]]

Under the CJR model as proposed, there would be no participant hospital 
repayment responsibility in performance year 1 and this responsibility 
would begin to be phased-in in performance year 2, with full 
implementation in performance year 3.

 Table 13--Performance Year 1: Relationship of Composite Quality Score To Reconciliation Payment Eligibility and
  the Effective Discount Percentage Experienced at Reconciliation Under the Composite Quality Score Alternative
                                         Considered in the Proposed Rule
----------------------------------------------------------------------------------------------------------------
                                                   Eligible for    Effective discount
                                 Eligible for         quality        percentage for        Effective discount
   Composite quality score      reconciliation       incentive       reconciliation    percentage for  repayment
                                    payment           payment         payment  (%)               amount
----------------------------------------------------------------------------------------------------------------
<=5.00.......................  No..............  No..............                 3.0  Not applicable.
>5.00 and <=9.25.............  Yes.............  No..............                 3.0  Not applicable.
>9.25 and <=15.20............  Yes.............  Yes.............                 2.0  Not applicable.
>15.20.......................  Yes.............  Yes.............                 1.5  Not applicable.
----------------------------------------------------------------------------------------------------------------


 Table 14--Performance Year 2: Relationship of Composite Quality Score to Reconciliation Payment Eligibility and
  the Effective Discount Percentage Experienced at Reconciliation Under the Composite Quality Score Alternative
                                         Considered in the Proposed Rule
----------------------------------------------------------------------------------------------------------------
                                                                          Effective discount  Effective discount
                                     Eligible for        Eligible for       percentage for      percentage for
     Composite quality score        reconciliation     quality incentive    reconciliation     repayment  amount
                                        payment             payment          payment  (%)             (%)
----------------------------------------------------------------------------------------------------------------
<=5.00..........................  No................  No................                 3.0                 2.0
>5.00 and <= 9.25...............  Yes...............  No................                 3.0                 2.0
>9.25 and <= 15.20..............  Yes...............  Yes...............                 2.0                 1.0
>15.20..........................  Yes...............  Yes...............                 1.5                 0.5
----------------------------------------------------------------------------------------------------------------


 Table 15--Performance Years 3-5: Relationship of Composite Quality Score to Reconciliation Payment Eligibility
      and the Effective Discount Percentage Experienced at Reconciliation Under the Composite Quality Score
                                   Alternative Considered in the Proposed Rule
----------------------------------------------------------------------------------------------------------------
                                                                          Effective discount  Effective discount
                                     Eligible for        Eligible for       percentage for      percentage for
     Composite quality score        reconciliation     quality incentive    reconciliation     repayment  amount
                                        payment             payment          payment  (%)             (%)
----------------------------------------------------------------------------------------------------------------
<=5.00..........................  No................  No................                 3.0                 3.0
>5.00 and <= 9.25...............  Yes...............  No................                 3.0                 3.0
>9.25 and <= 15.20..............  Yes...............  Yes...............                 2.0                 2.0
>15.20..........................  Yes...............  Yes...............                 1.5                 1.5
----------------------------------------------------------------------------------------------------------------

    Under this approach, the CJR model discount included in the target 
price without consideration of the composite quality score would be 3.0 
percent, not the 2.0 percent described under our payment proposal in 
section III.C.4.b.(9) of this final rule. In the proposed rule, we 
stated our belief that a discount percentage of 3.0 percent without 
explicit consideration of episode quality is reasonable as it is within 
the range of discount percentages included in the ACE demonstration and 
it is the Model 2 BPCI discount factor for 30 and 60 day episodes, 
where a number of BPCI participants are testing LEJR episodes subject 
to the 3.0 percent discount factor. Hospitals that provide high quality 
episode care would have the opportunity to receive quality incentive 
payments that would reduce the effective discount percentage as 
displayed in Tables 13, 14, and 15. Depending on the participant 
hospital's actual composite quality score, quality incentive payments 
could be valued at 1.0 percent to 1.5 percent of the hospital's 
benchmark episode price (that is, of the expected episode spending 
prior to application of the discount factor to calculate a target 
price).
    Under this methodology, we would require hospitals to achieve a 
minimum composite quality score of greater than 5.00 to be eligible for 
a reconciliation payment if actual episode spending was less than the 
target price. Participant hospitals with below acceptable quality 
performance reflected in a composite quality score less than or equal 
to 5.00 would not be eligible for a reconciliation payment if actual 
episode spending was less than the target price. A level of quality 
performance that is below acceptable would not affect participant 
hospitals' repayment responsibility if actual episode spending exceeds 
the target price. We believed that excessive reductions in utilization 
that lead to low actual episode spending and that could result from the 
financial incentives of an episode payment model would be limited by a 
requirement that this minimum level of LEJR episode quality be achieved 
for reconciliation payments to be made. This policy would encourage 
hospitals to focus on appropriate reductions or changes in utilization 
to achieve high quality care in a more efficient manner. Therefore, 
these hospitals would be ineligible to

[[Page 73366]]

receive a reconciliation payment if actual episode spending was less 
than the target price.
    For hospitals with composite quality scores of less than or equal 
to 5.00, we also considered a potential alternative approach. Under 
this approach, we would still permit this group of hospitals to receive 
reconciliation payments but would impose a quality penalty that would 
increase their effective discount percentage to 4.0 percent for 
purposes of calculating the reconciliation payment or recoupment amount 
in performance years 3 through 5, 4.0 percent for calculating the 
reconciliation payment and 3.0 percent for calculating the repayment 
amount in performance year 2, and 4.0 percent for calculating the 
reconciliation payment in performance year 1 where participant 
hospitals have no repayment responsibility. A potential advantage of 
this approach is that it would provide stronger incentives for quality 
improvement for participant hospitals with low performance on quality, 
even if they did not expect to be able to reduce actual episode 
spending below the target price. In addition, this approach would 
provide financial incentives to improve the efficiency of care even for 
hospitals that did not expect to meet the minimum quality score for 
reconciliation payment eligibility, while still providing strong 
incentives to provide high-quality care. The disadvantage of this 
approach is that it could provide reconciliation payments even to 
hospitals that did not achieve acceptable quality performance.
    Participant hospitals with an acceptable composite quality score of 
>5.00 and <=9.25 would be eligible for a reconciliation payment if 
actual episode spending was less than the target price because their 
quality performance was at the acceptable level established for the CJR 
model. They would not be eligible for a quality incentive payment at 
reconciliation because their episode quality performance, while 
acceptable, was not good or excellent. Therefore, these hospitals would 
be eligible to receive a reconciliation payment if actual episode 
spending was less than the target price.
    Participant hospitals with a good composite quality score of >9.25 
and <=15.20 would be eligible for a quality incentive payment at 
reconciliation if actual episode spending was less than the target 
price because their quality performance exceeded the acceptable level 
required for reconciliation payment eligibility under the CJR model. In 
addition, they would be eligible for a quality incentive payment at 
reconciliation for good quality performance that equals 1.0 percent of 
the participant hospital's benchmark price, thereby changing the 
effective discount percentage included in the target price experienced 
by the hospital at reconciliation. Thus, participant hospitals 
achieving this level of quality for LEJR episodes under CJR would 
either have less repayment responsibility (that is, the quality 
incentive payment would offset a portion of their repayment 
responsibility) or receive a higher payment (that is, the quality 
incentive payment would add to the reconciliation payment) at 
reconciliation than they would have otherwise based on a comparison of 
actual episode spending to the target price that reflects a 3.0 percent 
discount. Therefore, these hospitals would be eligible to receive a 
reconciliation payment if actual episode spending was less than the 
target price and would also receive a quality incentive payment.
    Finally, hospitals with an excellent composite score quality score 
of >15.20 would be eligible to receive a reconciliation payment if 
actual episode spending was less than the target price because their 
quality performance exceeded the acceptable level required for 
reconciliation payment eligibility under the CJR model. In addition, 
they would be eligible for a higher quality incentive payment at 
reconciliation for excellent quality performance that equals 1.5 
percent of the participant hospital's benchmark price, thereby changing 
the effective discount percentage included in the target price 
experienced by the hospital at reconciliation. Thus, participant 
hospitals achieving this level of quality for LEJR episodes under CJR 
would either have less repayment responsibility (that is, the quality 
incentive payment would offset a portion of their repayment 
responsibility) or receive a higher payment (that is, the quality 
incentive payment would add to the reconciliation payment) at 
reconciliation than they would have otherwise based on a comparison of 
actual episode spending to the target price that reflects a 3.0 percent 
discount. Therefore, these hospitals would be eligible to receive a 
reconciliation payment if actual episode spending was less than the 
target price and would also receive a quality incentive payment.
    Under this methodology, the proposed stop-loss and stop-gain limits 
discussed in section III.C.8. of this final rule would not change. We 
believed this approach to quality incentive payments based on the 
composite quality score could have the effect of increasing the 
alignment of the financial and quality performance incentives under the 
CJR model to the potential benefit of participant hospitals and their 
collaborators as well as CMS, although it would substantially increase 
the complexity of the methodology to link quality and payment. We 
sought comment on this alternative approach to basing reconciliation 
payment eligibility and quality incentive payments on the participant 
hospital's composite quality score under the CJR model, as well as the 
composite quality scoring ranges applicable to the respective payment 
policies.
    While we described in detail this alternative considered to link 
quality to payment under CJR, we did not propose this methodology for 
several reasons. First, the Shared Savings Program and HVBP program 
utilize many more measures than we proposed for the CJR model. For 
example, the Shared Savings Program initially incorporated thirty-three 
measures across four quality domains (79 FR 67916 and 67917). The range 
of measures in the Shared Savings Program and the HVBP program lends 
itself to a scoring approach, which can account for many measures and 
allows providers to achieve a high score despite performing well on 
some measures but achieving lower performance on others. There is a 
detailed description of the Shared Savings Program scoring methodology 
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Quality_Measures_Standards.html. 
We believed that given the more limited set of measures chosen for the 
CJR model, a scoring approach such as the alternative described in this 
section could diminish the importance of each measure. Use of a scoring 
approach would not allow hospital performance on two different outcomes 
to be easily reviewed and understood with respect to the impact of 
individual measure performance on Medicare's actual payment for the 
episode under the model. Second, we believed the measures proposed for 
this model represent goals of clinical care that should be achievable 
by all hospitals participating in the model that heighten their focus 
on these measures, especially the readmissions and complications 
measures, for LEJR episodes based on the financial incentives in the 
model. Finally, we believed that a methodology that assesses 
performance based on absolute values of a specific set of measures that

[[Page 73367]]

are already in use, as we proposed for the CJR model, would be the most 
appropriate methodology to provide achievable and predictable quality 
targets for participant hospitals on measures that monitor the most 
meaningful quality of care outcomes in a model where some acute care 
hospitals that might not choose to participate in a voluntary model are 
also included. Our proposed method as discussed in the next section 
reflected our expectation that hospitals achieve a certain level of 
performance on measures to ensure that hospitals provide high-quality 
care under the model.
    Finally, we also considered an approach whereby participant 
hospitals would not be penalized with regard to their eligibility for 
reconciliation payments in CJR for failure to meet the specified 
thresholds for the quality measures in performance year 1 of the model; 
in other words, we would delay the proposal described in the next 
section to performance year 2 rather than beginning in performance year 
1. We considered calculating participant hospital performance on the 
required measures for the model, and, if actual episode spending was 
less than the target price, the participant hospital would receive a 
full reconciliation payment of savings achieved beyond the target 
price, regardless of performance on the quality measures. However, we 
did not believe this would be appropriate for the CJR model, given that 
two of the measures are administrative claims-based and thus impose no 
additional reporting burden on hospitals; rather, these two measures 
are established measures in existing CMS quality programs, and a 
central goal of the model is improving care for Medicare beneficiaries 
in LEJR episodes. We noted that the HCAHPS Survey measure (NQF #0166) 
is also an established measure in the HIQR Program and would not impose 
additional reporting burden on hospitals.
    We summarize the public comments we received on these alternatives 
considered to link quality and payment and provide our responses in 
section III.C.5.b.(5)(c)(iii) of this final rule. We note that we will 
be adopting the composite score methodology for the CJR model, as 
discussed in our responses to comments in section III.C.5.b.(5)(c)(iii) 
of this final rule.
(iii) Threshold Methodology and Final Policy To Link Quality and 
Payment
    For the reasons outlined in the previous section, we did not 
propose to use similar methodologies to other CMS programs that would 
tie CJR episode reconciliation payment eligibility and reconciliation 
payment and Medicare repayment amounts to a composite quality score on 
specified quality measures, but as discussed later in this section, we 
instead proposed to simply assess performance or achievement on a 
quality measure by setting a measure result threshold for each measure 
beginning in performance year 1 of the model.
    We proposed that the CJR measure result threshold would be based on 
the measure results from the HIQR Program, a nationally-established 
program, and would use its national distribution of measure results. 
These are the same measure results posted on Hospital Compare or in the 
Hospital Compare downloadable database (https://data.medicare.gov/data/hospital-compare) for the HIQR Program. We refer readers to the earlier 
discussion of the HIQR Program, which utilizes measures to assess most 
acute care hospitals in the nation. Determining the CJR model target 
thresholds are discussed in the next section.
    As previously described, we proposed for the CJR model the 
following three required measures to assess LEJR episode quality of 
care:
     Hospital-level 30-day, all-cause RSRR following elective 
primary THA and/or TKA (NQF #1551).
     Hospital-level RSCR following elective primary THA and/or 
TKA (NQF #1550).
     HCAHPS Survey (NQF #0166).
    We also proposed to make a voluntary reporting payment adjustment 
for CJR participant hospitals who successfully and voluntarily submit 
data for the THA/TKA patient-reported outcome-based performance measure 
(henceforth referred to as ``THA/TKA voluntary data'') as described in 
sections III.C.5.b.(2) and III.D.3.a. of this final rule. We proposed 
that participant CJR hospitals must meet or surpass a specified 
threshold for each required measure beginning for performance year 1 of 
the model in order to be eligible for a reconciliation payment if 
actual episode payments are less than the target price. The calculation 
of the HCAHPS Survey measure is described in section III.D.2.c. of this 
final rule. We proposed to use the individual measure results 
calculated as specified in section III.D. of this final rule for the 
three required measures to determine hospital eligibility for 
reconciliation payment for each performance year of the CJR model. 
Also, as discussed in section III.C.4. of this final rule, which 
outlines the proposed pricing structure for the CJR model, target 
prices for MS-DRG 470-anchored episodes and for MS-DRG 469-anchored 
episodes would be calculated for hospitals participating in the model 
for an episode of care extending 90 days after discharge from the 
anchor hospitalization. Participant hospitals that achieve actual 
episode payment below the specified target price for a given 
performance period would be eligible for a reconciliation payment, 
provided that the participant hospital also met episode quality 
thresholds on the three required measures for the performance period.
    We proposed to use the following quality criterion to determine if 
a participant hospital qualifies for a reconciliation payment based on 
the episode quality thresholds on the three required measures:
    The hospital's measure result is at or above the 30th percentile of 
the national hospital measure results calculated for all HIQR-Program 
participant hospitals for each of the three required measures for each 
performance period (for a detailed description of how we determined the 
performance period and reconciliation payment eligibility, see section 
III.C.5. of this final rule).
    Using HIQR Program's 3 year rolling period as outlined in section 
III.D.2.d. (Applicable Time Period) of this final rule, if a 
participant hospital performed at or above the 30th percentile of all 
HIQR Program hospitals for each of the three required measures and if 
actual episode payment was less than the target price for the specified 
performance year, we would make a reconciliation payment to the 
hospital. Failure to achieve the threshold on one or more measures 
would result in the participant hospital not receiving a reconciliation 
payment regardless of whether the actual episode payment was less than 
the target price for that performance period. We proposed that for 
hospitals with insufficient volume to determine performance on an 
individual measure, these hospitals would be considered to be 
performing at the threshold level and their results would be publicly 
posted with all other participant hospitals' measure results (for a 
detailed summary of public reporting, see section III.D.5. of this 
final rule). We did not believe it would be appropriate to potentially 
penalize high quality, efficient hospitals due to their low volume, 
given that meeting the required quality measure thresholds would be 
required for reconciliation payment eligibility.
    We also proposed for performance years 4 and 5 to increase the 
measure result threshold to the 40th percentile. We believed that 
increasing the measure result threshold to the 40th percentile

[[Page 73368]]

would encourage participants to strive for continued quality 
improvement throughout the 5 performance years of the model. We sought 
comment on our proposal to make a reconciliation payment to a 
participant hospital that achieves actual episode spending below the 
target price for a performance year and performs at or above the 30th 
percentile of HIQR program participant hospitals for all three required 
quality measures in performance years 1 through 3 or the 40th 
percentile in performance years 4 and 5, as well as our proposal to 
consider low volume hospitals to be performing at the threshold level.
    We proposed to require hospitals to meet the threshold for all 
three measures for the following reasons. The measures proposed for 
this model are fully developed, NQF-endorsed, and implemented measures 
in CMS IPPS programs. These measures are also publicly reported on the 
Hospital Compare Web site. Hospitals are familiar with the 
complications and readmissions quality measures and with the HCAHPS 
Survey, as they are currently included in the HIQR Program, HVBP 
program, and HRRP (79 FR 50031, 50062, 50208, 50209 and 50259), and we 
believed that there would be minimal additional administrative burden 
for hospitals. All three measures are widely utilized nationally; thus, 
a nationally-based threshold would be an appropriate benchmark. In 
addition, the goal of the CJR model is LEJR episode care redesign that 
includes effective care coordination and management of care 
transitions. Strategies to prevent and efficiently manage post-
procedure complications and hospital readmissions following an LEJR 
procedure are consistent with the goals of the model; a hospital cannot 
succeed in this model without engaging in care redesign efforts that 
would address aspects of care included in these measures. Failure to 
perform successfully on these key quality measures (defined by meeting 
the minimum thresholds) would indicate that hospitals are not achieving 
quality consistent with the goals of the model to specifically 
incentivize greater improvement on these measures than hospitals not 
participating in the CJR model, and should not be eligible to receive a 
reconciliation payment from Medicare even if reduced episode spending 
is achieved. Finally, the approach we proposed is consistent with CMS' 
goal of moving hospitals and other providers to value-based payment 
that ties payment to quality. In the 5 performance years of this model, 
performance on quality measures would only be applied to determining 
eligibility for a reconciliation payment; quality measures would not be 
used to determine participant hospitals' financial responsibility, 
except for the proposed voluntary reporting payment adjustment 
described in described in section III.C.5.b.(3) of this final rule. In 
essence, participant hospitals' responsibility to repay Medicare the 
difference between their target price and their actual episode payment, 
should actual episode payments exceed the target price, would not be 
impacted by performance on quality measures.
    Finally, we proposed to increase the measure result thresholds for 
the final 2 performance years of the model, to ensure that CJR 
participant hospitals continue to maintain a high level of quality 
performance or improve performance on these measures as they gain 
experience with implementation of this payment model. More 
specifically, we proposed that in order for a participant hospital to 
receive a reconciliation payment for actual episode spending that is 
less than the target price for performance years 4 and 5, the 
participant hospital's measure result must be at or above the 40th 
percentile of the national hospital measure results calculated for all 
HIQR-Program participant hospitals for each of the three required 
measures for each performance period. As previously noted, we proposed 
to use the most recently available HCAHPS 4-quarter roll-up to 
calculate the HLMR. In the proposed rule, we stated our belief that 
holding the participant hospitals to a set measure result threshold for 
the first 3 years, and increasing this threshold for performance years 
4 and 5, would emphasize the need to maintain and improve quality of 
care while cost efficiencies are pursued. We sought comment on our 
proposed approach to incorporating quality performance into eligibility 
for reconciliation payments under the CJR model for participant 
hospitals.
    Table 16 displays the proposed thresholds that participant 
hospitals must meet on the various measures over the 5 model 
performance years.

      Table 16--Proposed Thresholds for Required Quality Measures To Determine Participant Hospital Reconciliation Payment Eligibility Over 5 Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Measure                     PY1 Threshold           PY2 Threshold          PY3 Threshold          PY4 Threshold          PY5 Threshold
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital-level 30-day, all-cause     30th percentile.......  30th percentile.......  30th percentile......  40th percentile......  40th percentile.
 RSRR following elective primary
 THA and/or TKA (NQF #1551).
Hospital-level RSCR following        30th percentile.......  30th percentile.......  30th percentile......  40th percentile......  40th percentile.
 elective primary THA and/or TKA
 (NQF #1550).
HCAHPS Survey (NQF #0166)..........  30th percentile.......  30th percentile.......  30th percentile......  40th percentile......  40th percentile.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We sought comment on our proposed methodology to utilize quality 
measure performance in the payment methodology for CJR, as well as the 
proposed thresholds for participant hospital reconciliation payment 
eligibility over the performance years of the model.
    As discussed in section III.C.5.b.(2) of this final rule, we stated 
our belief that hospitals that choose to submit THA/TKA voluntary data 
should have the potential to benefit financially through an adjustment 
to the payment methodology of the model. We proposed a voluntary 
reporting payment adjustment for hospitals that successfully submit the 
THA/TKA voluntary data by reducing the discount percentage incorporated 
into the target price from 2.0 percent to 1.7 percent. This voluntary 
reporting payment adjustment would start in performance year 1 and 
would be available through performance year 5 of the model for each 
year that the hospital successfully reports THA/TKA voluntary data. As 
proposed, reporting THA/TKA voluntary data would not affect eligibility 
for a reconciliation payment if actual episode payments are less than 
the target price. Participant hospitals would still need to meet the 
30th or 40th percentile threshold, as applicable to the given 
performance year, on all

[[Page 73369]]

three required quality measures (Table 16).
    We considered, but did not propose, two other alternatives to 
adjust the payment methodology for participant hospitals that 
successfully report the THA/TKA voluntary data as described in section 
III.C.5.b.(2) of this final rule. These alternatives would change the 
threshold percentile for the three required quality measures or, 
alternatively, reduce the number of required measures in which the 
threshold must be met provided that successful THA/TKA voluntary data 
were reported for a performance year. First, we considered reducing the 
threshold for reconciliation payment eligibility that participant 
hospitals must meet on the three required quality measures from the 
30th percentile threshold to the 20th percentile threshold for 
performance years 1, 2, and 3, and from the 40th percentile to the 30th 
percentile for performance year. Second, we considered only requiring 
hospitals to meet the 30th percentile threshold on two of three outcome 
measures for performance years 1, 2, and 3, and the 40th percentile 
threshold on two of three outcome measures in performance years 4 and 
5. Under both of these alternatives, the eligibility for reconciliation 
payments could change based on the THA/TKA voluntary data. We sought 
comment on these alternative payment methodology adjustments that could 
impact reconciliation payment eligibility, unlike the proposed 
voluntary reporting payment adjustment. We note that the other 
alternative approaches to encouraging THA/TKA voluntary data reporting 
for CJR beneficiaries as discussed in section III.C.5.b.(2) of this 
final rule that would not require adjustments to the CJR payment 
methodology would also not affect reconciliation payment eligibility.
    The following is a summary of the comments received and our 
responses on the proposals and alternatives discussed in section 
III.C.5. of the proposed rule, including the proposed threshold 
methodology for reconciliation payment eligibility, as well as the 
alternatives considered that would change the proposed threshold 
requirements for participant hospitals that successfully report 
voluntary THA/TKA data. As cross-referenced several times earlier in 
this section, these comments and our responses also discuss a number of 
other proposals, alternatives considered, and other topics related to 
linking quality and payment under the CJR model for which we sought 
public comment.
    Comment: Some commenters questioned the rationale for linking 
quality to episode payment for participant hospitals under the CJR 
model, arguing that the model should not be focused on individual 
hospital performance but on the overall performance of hospitals within 
the model, with respect to both the cost and quality of LEJR episode 
performance. The commenters observed that BPCI, a bundled payment model 
that includes LEJR as the most commonly selected episode and shares 
many features with the proposed CJR model, does not tie payment to 
quality, although BPCI has quality reporting requirements. They claimed 
that CMS, hospitals, and other providers lack experience with pay-for-
performance in a bundled payment context and, therefore, that the level 
of performance that should be expected from providers under bundled 
payment is not yet understood. A commenter urged CMS to focus on the 
big picture in the CJR model, specifically changes in critical aspects 
of performance versus the national average for all hospitals along the 
continuum, potential changes in the types or nature of services to 
beneficiaries undergoing LEJR procedures, and aggregate changes in 
patient outcomes. Commenters asserted that tying a hospital's payment 
to performance on quality measures was not the only or the best way to 
make maintaining or improving LEJR episode quality performance central 
to the CJR model. Several commenters stated that implementing pay-for-
performance in an episode payment model was premature, and recommended 
that CMS, at most, adopt a pay-for-reporting methodology while quality 
data are being collected and analyzed to determine the appropriate 
level of quality performance that should be specifically rewarded.
    Several commenters urged CMS to delay implementing the proposed 
quality performance thresholds for reconciliation payment eligibility 
until performance year 2, or later, where the performance period for 
measure data would correspond more fully or completely to performance 
years under the model. They recommended that the first year or two of 
the CJR model should be pay-for-reporting and, because the proposed 
THA/TKA Complications measure (NQF #1550) and the THA/TKA Readmissions 
measure (NQF #1551) are claims-based measures and the HCAHPS Survey 
measure (NQF #0166) is currently administered by hospitals, all 
participant hospitals would be expected to meet the CJR model quality 
performance requirements, which would only require public reporting in 
performance year 1 and possibly performance year 2. Several commenters 
in favor of pay-for-reporting in the first performance year asserted 
that such an approach would be consistent with other CMS value-based 
initiatives. A commenter also claimed that a year of pay-for-reporting 
would allow participant hospitals the time to establish internal 
systems for analyzing quarterly claims data and provide them with 
maximal opportunity to achieve savings that could be invested in these 
systems.
    Response: We note that we currently have broad experience with pay-
for-performance in Medicare programs, including the HRRP, HVBP Program, 
HAC Reduction Program, and the Shared Savings Program. These pay-for-
performance programs have improved the quality of care for Medicare 
beneficiaries. For example, since the implementation of HRRP in 2012, 
readmission and complications rates for various medical conditions such 
as elective THA/TKA have been significantly reduced, thereby resulting 
in improvements in the quality of care for Medicare beneficiaries 
undergoing LEJR procedures. Furthermore, pay-for-performance is a 
feature of a number of Innovation Center models currently in testing. 
We refer readers to section III.D.5. of this final rule for further 
discussion of public reporting of pay-for-performance data during 
performance year 1 of the model.
    While the current BPCI models do not specifically link payment to 
quality, the Request for Applications describing the BPCI model design 
features was released over 4 years ago, in August 2011. We now have two 
years of experience with BPCI Model 2 Awardees, the model that most 
closely resembles the CJR model, in the risk-bearing period, and the 
year 1 BPCI annual evaluation and monitoring report from February 2015 
is publicly available on the CMS Web site at: https://innovation.cms.gov/Files/reports/BPCI-EvalRpt1.pdf. We have developed 
and adopted a variety of new quality measures in programs and models 
since 2011, as well as gained experience with pay-for-reporting and 
pay-for-performance in a variety of models and programs involving a 
wide range of health care providers and clinical conditions. Given our 
extensive experience over the past several years with pay-for-
performance approaches, the availability of existing measures that 
reflect the quality of care for elective THA/TKA episodes, and the 
breadth of the CJR model, which reaches

[[Page 73370]]

substantially all IPPS hospitals in the selected MSAs, including those 
hospitals who otherwise would not participate in a voluntary payment 
model, we believe that a pay-for performance approach is necessary and 
appropriate beginning in the model's first performance year. IPPS 
hospitals have substantial experience over multiple years with CMS 
programs that include pay-for-performance and we believe, given the 
proposed quality measures for the CJR model, that CJR pay-for-
performance in an episode payment model is a natural extension to 
bundled payment of pay-for-performance measures used in current CMS 
programs. While we acknowledge that pay-for-performance is not the only 
way for a model to heighten a focus on maintaining or improving the 
quality of LEJR episode care, we believe that the CJR model, like other 
Innovation Center models, should target both improved quality and 
reduced costs. Based on our experience in other programs and models, we 
believe that pay-for-performance under the CJR model shows great 
promise in moving participant hospitals toward greater efficiency and 
higher quality of LEJR episodes. In view of successful implementation 
of pay-for-performance in other CMS hospital programs using similar 
quality measures that has resulted in significant improvements in the 
quality of care, we believe IPPS hospitals have sufficient experience 
to be ready for pay-for-performance under the CJR model. We expect that 
other features of the model design, including our plans for data 
sharing, will help participant hospitals committed to care redesign 
toward these goals achieve success on both quality and cost performance 
for episodes.
    We note that the quality measures finalized for the model as 
discussed in section III.D.2. of this final rule rely upon data that 
hospitals are already submitting and which are already analyzed by CMS 
for other programs, so we see no reason to adopt a period of pay-for-
reporting for the first performance year of the model or longer. In the 
proposed rule, we considered a similar policy that would not penalize 
hospitals with regard to their eligibility for reconciliation payments 
for failure to meet the proposed quality measure thresholds in 
performance year 1. However, we continue to believe that adopting pay-
for-reporting and not pay-for-performance in performance year 1 or 
longer would be inappropriate given that two of the proposed quality 
measures are administrative claims-based measures and impose no 
additional reporting burden on hospitals, the proposed measures are all 
established measures in existing CMS quality programs, and a central 
goal of the CJR model is improving care for Medicare beneficiaries in 
LEJR episodes. In this regard, the CJR model is different from some 
other CMS value-based initiatives where the data for some measures were 
newly submitted by providers or newly analyzed by CMS early in the 
initiative. Furthermore, we do not believe that participant hospitals 
need a year of pay-for-reporting to develop systems for analyzing 
episode claims under the model, as we expect hospitals to already be 
focused on improving their performance on these measures. The two 
measures finalized for the CJR model are aligned with the goals of the 
CJR model, are familiar to hospitals based on their use in other CMS 
hospital programs, and are aligned with CMS priorities to reduce LEJR 
complications while improving the patient experience. Because the 
measures reflect these goals and accurately measure hospitals' level of 
achievement and improvement on quality outcomes that are important to 
beneficiaries undergoing LEJR procedures, we are finalizing our 
proposal to implement a pay-for-performance approach in the CJR model 
in the first performance year by using quality performance in the 
episode payment methodology.
    Comment: Some commenters supported the proposed strategy to link 
quality to payment through performance thresholds for quality measures 
that would result in reconciliation payment eligibility if the 
thresholds were met. Several commenters further reasoned that there 
should be no need to increase thresholds for reconciliation payment 
eligibility over the performance years of the model as CMS had proposed 
because the possibility of reconciliation payment provides an adequate 
quality improvement incentive. A commenter in favor of the proposed 
threshold approach recommended that CMS make the proposed THA/TKA 
voluntary patient-reported outcome (PRO) data submission mandatory and 
significantly increase incentives around their collection.
    A number of commenters estimated that under CMS' proposal, more 
than half of the participant hospitals would be ineligible for 
reconciliation payments based on their current quality measure 
performance, even if episode savings were achieved during a performance 
year. The commenters stated that CMS should not use performance 
percentiles that would always exclude a predetermined number of 
participant hospitals from reconciliation payments, and hold hospitals 
to multiple quality performance standards for the same measure 
performance under different CMS models and programs. They contended 
that performance percentiles, as measures of relative performance, do 
not reflect best practices and, therefore, recommended that CMS require 
a level of absolute measure performance rather than relative 
performance when incorporating quality performance into the payment 
methodology under the CJR model. The commenters did not describe the 
absolute levels of performance that they would recommend on the quality 
measures for the CJR model. Several commenters claimed that the use of 
thresholds for reconciliation eligibility disadvantages small hospitals 
because only one or two patient instances could change the participant 
hospital's performance percentile and, therefore, affect the hospital's 
eligibility for reconciliation payments. Other commenters pointed out 
that the Shared Savings Program uses quality thresholds, but the 
methodology accounts for improvement and the program is voluntary, 
while hospital participation would be required in the CJR model and 
improvement was not considered in the pay-for-performance methodology 
CMS proposed.
    Other commenters asserted that CMS' proposal linking quality 
measure performance to eligibility for reconciliation payments failed 
to reflect the quality of care delivered in the context of the model 
due to flaws in the proposed approach to determining participant 
hospital performance in relation to the thresholds. The commenters 
contended that the proposed methodology to determine performance on 
quality measures and link performance to reconciliation payment 
eligibility uses arbitrary distinctions in performance among hospitals 
that are not borne out by the data or even by CMS's own method of 
assigning ratings of performance on the Hospital Compare Web site. They 
stated that use of measure result point estimates to determine 
performance percentiles under CMS' proposal for performance thresholds 
for reconciliation payment eligibility may not be appropriate because: 
(1) The THA/TKA Complications measure (NQF #1550) and the THA/TKA 
Readmissions measure (NQF #1551) are a ratio comparing observed to 
expected outcome, where expected is based on the national performance, 
so an individual hospital's performance

[[Page 73371]]

should be assessed within confidence intervals as the measure was 
originally specified, tested, and endorsed by the NQF; and (2) there 
may not be a clinically and statistically significant difference in the 
performance of hospitals immediately above and below the 30th 
percentile. The commenters observed that while the HRRP uses measure 
result point estimates (the same measure results proposed in section 
III.C.5.b.(5)(b) of the proposed rule, which proposed to use the 
absolute values of the CJR model participant hospital measure results) 
in calculating the excess readmission ratio in accordance with the 
statutory provision that defines this ratio, they stated that CMS has 
the flexibility under the statutory authority for the CJR model to use 
confidence intervals in determining outcome measure results for use in 
the payment methodology.
    A number of commenters recommended that CMS adopt a threshold 
methodology that would utilize the confidence intervals used on the 
Hospital Compare Web site that distinguishes performance based on the 
three categories of comparison to the national rate on the THA/TKA 
Complications measure (NQF #1550) and the THA/TKA Readmissions measure 
(NQF #1551) to determine if a participant hospital is eligible for 
reconciliation payment. On Hospital Compare, hospitals are grouped into 
``no different than national rate,'' ``better than national rate,'' or 
``worse than national rate'' for each measure. The commenters 
recommending this methodology recommended against use of the HCAHPS 
Survey measure (NQF #0166).
    Therefore, the commenters maintained that CMS should modify its 
proposal and set the quality performance thresholds for reconciliation 
payment eligibility at ``worse than national rate,'' rather than at the 
30th percentile or above compared to the national rate. Specifically, 
the commenters suggested if performance on both the THA/TKA 
Complications measure (NQF #1550) and the THA/TKA Readmissions measure 
(NQF #1551) is statistically ``worse than national rate,'' then a 
participant hospital should not be eligible for reconciliation payment. 
Those hospitals that are deemed ``no different than national rate'' or 
``better than national rate'' on both measures should automatically be 
deemed eligible for any potential reconciliation payment. Some 
commenters further urged CMS to also allow participant hospitals 
performing ``worse than national rate'' on one or both quality measures 
to receive reconciliation payments if CJR model episode savings were 
achieved as long as the hospital submits a corrective action plan to 
CMS describing their future strategies to improve quality of care, 
including contributing a portion of the reconciliation payment to 
quality performance improvement strategies. These commenters asserted 
that the quality performance thresholds should provide equal financial 
opportunity and incentives to all hospital participants.
    The commenters claimed that setting quality performance thresholds 
at the level of ``worse than national rate'' as displayed on the 
Hospital Compare Web site would reduce confusion among the public with 
an interest in hospital performance under the CJR model, and strike an 
appropriate balance between encouraging hospital to focus on quality 
performance and providing hospitals with a fair opportunity to receive 
reconciliation payments if episode savings are achieved. A commenter 
reported that nationally there are 22 hospitals with performance on the 
THA/TKA Complications measure (NQF #1550) or the THA/TKA Readmissions 
measure (NQF #1551) that is ``worse than national rate,'' and only one 
hospital that is ``worse than national rate'' on both measures.
    Response: We appreciate the support of some commenters for our 
proposal to set performance thresholds for reconciliation payment 
eligibility at the 30th percentile based on the national distribution 
of measure results, as well as the concerns expressed by some 
commenters about using relative performance to assess participant 
hospital episode quality performance in the CJR model. We continue to 
believe that relative measure performance is the most appropriate way 
to incorporate quality performance into the CJR model because we do not 
have sufficient information about hospital performance to set and use 
an absolute performance result on each measure. We believe that 
hospitals nationally are working to improve their performance on the 
quality measures proposed for the CJR model on an ongoing basis and, 
thus, while we expect that CJR participant hospitals will have a 
heightened focus on improvement on these measures as a result of the 
financial incentives resulting from episode payment, we are not yet 
certain in this model test what performance outcomes can be achieved 
under best practices. Therefore, we will not set absolute performance 
results as quality thresholds for reconciliation payment eligibility 
under the CJR model. We continue to believe that relative measures of 
quality performance are most appropriate for the CJR model as hospitals 
continue to make progress nationally on improving patient outcomes.
    Furthermore, we will not make THA/TKA voluntary PRO and limited 
risk variable data submission mandatory and increase the incentives 
around their collection in the CJR pay-for-performance methodology as 
recommended by a commenter. This measure remains under development, and 
we want to encourage robust hospital reporting to speed measure 
development, but the measure is not yet ready to have its results 
incorporated in the CJR model methodology in the manner recommended by 
the commenter. We refer readers to section III.D.3.a. of this final 
rule for further discussion of our future plans to incorporate PRO 
measure results in the CJR pay-for-performance methodology.
    We appreciate the suggestions of many commenters that we utilize 
outcome measure thresholds of ``worse than national rate'' as displayed 
on the Hospital Compare Web site to set the thresholds for 
reconciliation payment eligibility. For purposes of the Hospital 
Compare Web site, we made a specific choice around categorizing 
hospitals to performance categories for public display of hospital 
measure results in order to display a high level of statistical 
certainty about differences in hospital quality performance that would 
be reviewed by beneficiaries and other members of the public. 
Specifically for the Hospital Compare Web site, to assign hospitals to 
performance categories, the hospital's interval measure estimate is 
compared to the national rate. If the 95 percent interval estimate 
includes the national observed rate for that measure, the hospital's 
performance is in the ``no different than national rate'' category. If 
the entire 95 percent interval estimate is below the national observed 
rate for that measure, then the hospital is performing ``better than 
national rate.'' Finally, if the entire 95 percent interval estimate 
for the hospital is above the national observed rate for that measure, 
the hospital's performance is ``worse than national rate.''
    Regarding the commenter who suggested that an individual hospital's 
performance on a measure should be assessed within confidence intervals 
as the measure was originally specified, tested, and endorsed by the 
NQF, we note that the THA/TKA Complications measure (NQF #1550) was not 
endorsed by the National Quality Forum for its use with an interval 
estimate, since NQF endorses measure specifications and not the use of 
measures in various programs

[[Page 73372]]

or models. We acknowledge that CMS uses outcome measure ratios and 
rates in different ways that may lead to some confusion for 
stakeholders. We also want to clarify that during measure development 
of the THA/TKA Complications measure (NQF #1550) and the THA/TKA 
Readmissions measure (NQF #1551), these measures were developed and 
tested to yield risk-standardized ratios, which are multiplied by the 
national rate and reported as risk-standardized rates in Hospital 
Compare, and that the 95 percent interval estimate is specifically used 
to display the measure for public reporting on the Hospital Compare Web 
site. We chose to use rates on the Hospital Compare Web site because we 
believe that presentation of a rate on the Hospital Compare Web site is 
better understood by consumers than a measure result expressed as a 
predicted-to-expected ratio. For purposes of the CJR model, we will 
also use risk-standardized rates for the THA/TKA Complications measure 
(NQF #1550) as discussed in section III.D.2.a. of this final rule. We 
discuss our final decision not to adopt the THA/TKA Readmissions 
measure (NQF #1551) for this model in section III.D.2.b. of this final 
rule.
    We note that ``worse than national rate'' is the quality 
performance threshold for reconciliation payment eligibility 
recommended by many commenters as the statistically certain measure of 
poor hospital quality performance, yet almost every hospital in the 
country already exceeds this level on the THA/TKA Complications measure 
(NQF #1550) and the THA/TKA Readmissions measure (NQF #1551). 
Nationally, we estimate that only 29 hospitals currently perform at 
``worse than national rate'' on one or more of these measures, a number 
that is similar to the estimate provided by a commenter. Thus, based on 
current measure performance only a very small number of hospitals would 
fail to meet the quality performance thresholds for reconciliation 
payment eligibility recommended by many commenters. We do not believe 
that adopting ``worse than national rate'' as the threshold for 
reconciliation payment eligibility, or applying no threshold as 
recommended by some commenters if a hospital ``worse than national 
rate'' submits a corrective action plan to CMS, would further encourage 
quality improvement or maintenance of high performance for participant 
hospitals in the CJR model, beyond the incentives that already exist in 
CMS programs.
    Either incorporating a ``worse than national rate'' threshold or 
applying no threshold would essentially eliminate pay-for-performance 
under the CJR model, which would not be consistent with our final 
decision discussed in the prior response to public comments to 
incorporate a pay-for-performance methodology in the CJR model 
beginning in performance year 1.
    Regarding the recommendations to use interval estimates to identify 
hospitals with performance ``worse than national average'' as the most 
equitable approach to identifying statistically valid poor hospital 
performance on quality measures, we have previously explained our 
position on the use of interval estimates when determining payment 
outcomes for hospital performance on measures. Specifically for the 
HRRP where we use point estimates for quality measure performance, we 
acknowledged outcome measures of risk-standardized condition-specific 
readmission rates to be statistical measures (77 FR 53394). We also 
recognized that statistical measures will include some degree of 
variation and stated that other Medicare programs use similar 
statistical measures as part of their programs, so any consideration of 
the use of interval estimates with respect to the HRRP may have 
implications for other programs (77 FR 53394). Despite this reality, we 
finalized the HRRP methodology for quality measure performance (76 FR 
51673), which results in the use of a point estimate for a hospital's 
excess readmission ratio (77 FR 53394), and we use point estimates in 
other CMS programs that rely upon statistically-based outcome measures, 
such as the HVBP Program. (76 FR 26504). We note that over the past 
several years the HRRP has shown that use of point estimates in the 
program has still led to improvement in hospital readmission 
rates.42 43 We, therefore, continue to believe that quality 
performance can be assessed by measure result point estimates that do 
not rely on the statistical certainty of interval estimates which may 
fail to identify real, clinically meaningful differences in hospital 
measure performance.
---------------------------------------------------------------------------

    \42\ Gerhardt G, Yemane A, Hickman P, Oelschlaeger A, Rollins E, 
Brennan N. Data Shows Reduction in Medicare Hospital Readmission 
Rates During 2012. Medicare & Medicaid Research Review 2013: 3(2): 
E1-E12.
    \43\ Medicare Hospital Quality Chartbook 2014: Performance 
Report on Outcome Measures. Prepared by Yale New Haven Health 
Services Corporation Center for Outcomes Research and Evaluation for 
the Centers for Medicare and Medicaid Services 2014:23. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf.
---------------------------------------------------------------------------

    However, we agree with the commenters that our proposal to set 
performance thresholds for reconciliation payment eligibility at the 
30th percentile does not reflect the statistical certainty of intervals 
around hospital measures performance results and may not adequately 
account for the variation that occurs in risk-standardized rates like 
the THA/TKA Complications measure (NQF #1550) and the THA/TKA 
Readmissions measure (NQF #1551) proposed for use in the CJR model. We 
also agree with the commenters that setting required measure 
performance thresholds for reconciliation eligibility may provide 
insufficient quality and cost episode improvement incentives for some 
participant hospitals in the CJR model. We estimate that based on their 
current quality measure performance one-third of participant hospitals 
would not be eligible for reconciliation payments under our proposed 
thresholds for the three required quality measures, even if those 
hospitals achieved savings beyond the target price. While our estimate 
is lower than the estimate of more than 50 percent of participant 
hospitals that was provided by some commenters, we agree with the 
commenters that the proposed methodology would not provide significant 
quality and cost episode improvement incentives for a substantial 
percentage of participant hospitals in the CJR model.
    We continue to believe there are real, clinically meaningful 
differences that are important to Medicare beneficiaries in hospital 
performance on the THA/TKA Complications measure (NQF #1550) finalized 
for this model, as well as opportunities for improvement, which are not 
recognized by the statistical certainty approach that we use for the 
Hospital Compare Web site but can be appropriately recognized by 
assigning hospitals to measure performance percentiles, such as we 
proposed for the CJR model. We also believe it is appropriate to make 
different choices for estimating measure performance for model or 
program payment policies, depending on the context. For example, in the 
CJR model where we proposed to use quality performance in the payment 
methodology of a model specifically focused on quality outcomes 
directly addressed by the proposed measures, we believe a different 
approach to estimating performance differences than the statistical 
certainty approach used on the Hospital Compare Web site would allow us 
to observe and reward real quality performance incentivized by episode 
payment that otherwise would

[[Page 73373]]

be unrecognized. Therefore, we continue to believe that assigning 
hospital measure results to a performance percentile in comparison with 
the national distribution is an appropriate strategy to categorize and 
recognize hospitals achieving different levels of quality performance 
on the measures. We note that assigning hospitals to performance 
percentiles based on their measure result point estimates, and then 
using deciles of performance in a pay-for-performance model payment 
methodology that does not use hospital performance percentiles as 
thresholds, would help account for some of the statistical variation 
that could occur in measure result point estimates and reduce the 
likelihood that we would consider variation to be a real change in 
measure performance. Therefore, we are finalizing our proposal 
discussed in section III.C.5.b.(5)(b) of this final rule to assign each 
participant hospital's measure point estimate to a performance 
percentile based on the national distribution of measure results. 
However, because the statistical uncertainty in measure results 
increases the challenge of determining the most equitable performance 
threshold, below which the level of performance is no longer in the 
best interest of the beneficiary, as well as our interest in providing 
quality and cost episode improvement incentives for all participant 
hospitals under the CJR model, we are not finalizing our proposal to 
set performance percentile thresholds for reconciliation payment 
eligibility in the CJR model. Because we are not using performance 
percentile thresholds for reconciliation payment eligibility in the CJR 
model's final pay-for-performance methodology, we will neither be 
setting nor changing such thresholds in the context of the model's 
payment methodology over the model's performance years. We will be 
adopting the composite score methodology, as discussed in the following 
response to comments.
    Comment: Many commenters offered a variety of other perspectives on 
CMS' proposal and alternatives considered to link quality and payment 
in the CJR model. Several commenters recommended that CMS tie a portion 
of the reconciliation payment to the proposed quality measure threshold 
performance for each of the 3 measures, specifically: \1/3\ of the 
reconciliation payment would be made if one of the quality measure 
performance thresholds is achieved, \2/3\ of the reconciliation payment 
would be made if two of the quality measure performance thresholds were 
achieved, and the full reconciliation payment would be made if all 
three quality measure performance thresholds were achieved. These 
commenters urged CMS to accompany this policy with no repayment 
responsibility in all years for participant hospitals that achieved all 
three quality measure performance thresholds, even if actual episode 
spending exceeds the target price. The commenters reasoned that this 
revised approach would provide the potential for more financial reward 
for participant hospitals providing high quality episode care, and 
limit the financial risk for participant hospitals furnishing high 
quality care.
    Some commenters who opposed the use of performance percentiles on 
quality measures that were included in CMS' threshold proposal also 
opposed the alternative composite quality score approach for the same 
reasons, mainly because it would rely on performance percentiles 
derived from point estimates of quality measure performance to award 
points toward the composite quality score. However, a number of 
commenters favored the use of a composite quality score to link quality 
and payment, rather than thresholds for reconciliation payment 
eligibility, because the composite quality score would provide an 
opportunity for more participant hospitals to receive reconciliation 
payments if episode savings were achieved and would vary a participant 
hospital's financial reward in direct relationship to its episode 
quality performance.
    Other commenters suggested further refinements to the composite 
score methodology, including different weighting of the measures. A 
commenter urged CMS to reconsider the composite score weights discussed 
in the proposed rule, and establish them as: HCAHPS Survey 25 percent; 
Complications 50 percent, and Readmissions 25 percent. The commenter 
reasoned that the Readmissions measure weight should be reduced due to 
the measure's use in other CMS programs. Finally, the commenter 
recommended that CMS modify the minimum percentile to receive quality 
measure score points to the 10th percentile, and add a band for 
incremental performance between the 10th percentile and the current 
national average performance, where an increasing proportion of any 
reconciliation payment from episode savings would be paid. The 
commenter urged CMS to pay the full reconciliation payment for episode 
savings beyond the target price to any hospital with quality 
performance above the national average.
    Several commenters, who also recommended additional quality 
measures, stated that CMS should place greater weight in the composite 
quality score on ambulation, followed by pain experience and 
management, and finally followed by the Complications, Readmissions, 
and HCAHPS Survey measures in descending order of importance when 
calculating the composite quality score. Another commenter contended 
that CMS should increase the HCAHPS Survey measure weight and make the 
submission of THA/TKA voluntary PRO and limited risk variable data 
mandatory for performance year 2 and subsequent years, to increase the 
effect of patient experience on the financial opportunity of 
participant hospitals under the CJR model. A commenter recommended 
that, rather than participant hospital percentiles of performance 
compared to the national distribution of hospital measure performance, 
CMS use hospital-specific metrics that should be able to ``top out'' 
with high quality performance. The commenter suggested that CMS could 
measure performance annually on each measure for every participant 
hospital, and establish a minimum and maximal optimal measure result 
for the measure that could guide performance scoring. Finally, a 
commenter urged CMS to reconsider awarding the 50th percentile of 
performance for individual measure scores that make up the composite 
quality score without actual measure results, as CMS would not be 
assured that those hospitals were providing good quality care.
    A number of commenters recommended that CMS vary the discount 
percentage incorporated in the target price at reconciliation based on 
the participant hospital's level of quality performance. Other 
commenters stated that high-performing hospitals on quality should have 
opportunities for greater reconciliation payments if that high-quality 
performance is sustained, recommending that CMS include no discount in 
the target price or a smaller discount percentage for these hospitals 
than would be used for hospitals with lower levels of quality 
performance. Finally, several commenters contended that hospitals 
furnishing care of lower quality should incur financial penalties based 
on their quality performance.
    Response: We appreciate the suggestions of the commenters on 
features of the CJR pay-for-performance methodology that would be 
valuable in providing the most robust incentives for quality 
improvement or maintenance of high-quality performance for all CJR 
participant hospitals. As described

[[Page 73374]]

previously in this section, we are finalizing our proposal discussed in 
section III.C.5.b.(5)(b) of this final rule to assign each participant 
hospital's quality measure result point estimate to a performance 
percentile based on the national distribution of measure results, but 
we are not finalizing our proposal to set performance percentile 
thresholds for reconciliation payment eligibility under the CJR model.
    We agree with many of the commenters that the pay-for-performance 
methodology under the CJR model should provide the opportunity for 
financial reward to participant hospitals with an acceptable level of 
episode quality performance, while also including an incentive for 
quality improvement if the hospital's current level of quality is low. 
We also agree with the commenters who stated that the CJR pay-for-
performance methodology should provide the potential for increased 
financial reward for participant hospitals that furnish higher-quality 
care through payments that would either increase the reconciliation 
payment to the hospital or reduce the hospital's repayment 
responsibility depending on the hospital's episode cost performance for 
the model performance year. However, we do not agree with the 
commenters who recommended that those hospitals achieving high-quality 
episode performance should not be expected to improve their episode 
efficiency because we believe that substantial opportunities to reduce 
Medicare expenditures in the context of high-quality episode care exist 
for virtually all participant hospitals. Innovation Center models are 
generally designed with a focus on both reducing costs and improving 
the quality of care for model beneficiaries. Therefore, we will 
continue to incorporate a discount percentage into the target price for 
every participant hospital as discussed in section III.C.4.b. of this 
final rule in the methodology for setting target prices for the CJR 
model.
    We also do not agree with the commenters who recommended that 
hospitals with low-quality performance incur financial penalties under 
the model, because the model is specifically designed to reward episode 
quality performance and cost savings. We discussed an alternative under 
the composite quality score approach in section III.C.5.b.(5)(c)(ii) of 
the proposed rule that would impose a quality penalty on hospitals with 
a low composite quality score that would otherwise lead them to be 
ineligible for reconciliation payments (80 FR 41243 through 41244). 
Under this alternative, we would reduce the effective discount 
percentage for these hospitals, thus imposing a 1 percent penalty for 
their low quality performance, regardless of whether or not episode 
savings are achieved beyond the target price. We continue to believe 
that while this approach would provide stronger incentives for quality 
improvement for participant hospitals with low performance on quality, 
even if they did not expect to be able to reduce actual episode 
spending below the target price, it could provide reconciliation 
payments even to those hospitals that did not achieve acceptable 
quality performance. Therefore, we believe that the risk to 
beneficiaries and CMS of these low-quality performing hospitals 
achieving savings in the context of poor quality care by sharply 
decreasing utilization to levels that reflect stinting on medically 
necessary care are so significant that adopting this alternative would 
not be appropriate. Instead, we will provide the opportunity for 
quality incentive payments that relate to the participant hospital's 
overall quality performance and improvement on the model's quality 
measures as reflected in the hospital's composite quality score that we 
will calculate for each performance year at the time reconciliation is 
carried out for that performance year.
    As previously discussed, we are not finalizing our proposal to set 
performance percentile thresholds for reconciliation payment 
eligibility in the CJR model. Based on public comments that addressed 
our reconciliation payment eligibility threshold proposal, the 
alternatives considered, and the objectives of the pay-for-performance 
methodology under the CJR model, we believe that the composite score 
methodology that we discussed in the proposed rule that would determine 
reconciliation payment eligibility and change the effective discount 
percentage experienced by a participant hospital at reconciliation is 
the most appropriate pay-for-performance approach to achieve the 
objectives previously described. While the majority of commenters 
favored the threshold proposal with modification to adopt much lower 
quality thresholds of ``worse than national average'' performance that 
would result in eligibility of almost all participant hospitals for 
reconciliation payments if savings were achieved beyond the target 
price, a substantial percentage of commenters supported the composite 
score methodology or another approach that would provide greater 
financial reward to participant hospitals for higher quality 
performance. The composite score methodology omits the proposed 30th 
percentile performance minimum standard for all required quality 
measures as a definitive cut-off point for eligibility for 
reconciliation payments and replaces it with a quality scoring system 
that provides hospitals with multiple possible combinations of quality 
performance that can result in a hospital reaching eligibility for the 
reconciliation payment, thereby providing opportunity for 
reconciliation payments to hospitals achieving an acceptable or higher 
level of overall quality performance. This methodology also provides an 
incentive structure that acknowledges that high-quality episodes should 
be rewarded with greater financial opportunity under the CJR model, 
either through increased reconciliation payments or reduced repayment 
responsibility, depending upon the participant hospital's episode cost 
performance during a performance year. We appreciate the support of the 
commenters who share our view on the merits of the composite score 
approach.
    We discussed in the proposed rule, but did not propose, a composite 
quality score methodology because at the time we believed that such an 
approach could diminish the importance of each quality measure given 
the limited number in the model, that the measures represented clinical 
goals that should be achievable by all hospitals participating in the 
model, and that a threshold methodology would provide the most 
achievable and predictable quality targets for the CJR model that 
requires participation (80 FR 41244). However, we agree with the 
commenters that the proposed threshold methodology would not 
sufficiently incentivize and reward quality improvement and acceptable 
or high quality performance under the CJR model for a substantial 
proportion of participant hospitals even if savings beyond the target 
are achieved. In contrast, the composite quality score methodology will 
allow performance on each required quality measure to be meaningfully 
valued in the model's pay-for-performance methodology, incentivizing 
and rewarding cost savings in relation to the quality of episode care 
provided by the participant hospital. Despite the small number of final 
CJR model quality measures, the measures represent both clinical 
outcomes and patient experience, and each carries substantial value in 
the composite quality score. Participant hospitals could achieve an 
acceptable or good composite quality score despite performing well on 
one of the required measures but achieving lower

[[Page 73375]]

performance on the other required measure. Thus, while quality 
performance on each measure would not be required for reconciliation 
payment eligibility, performance on each measure would be valued in the 
composite quality score methodology. Based on our review of the public 
comments, including the technical issues raised about measure result 
statistical variation in point estimates, we believe that a participant 
hospital's overall quality performance under the CJR model should be 
considered in the pay-for-performance approach, rather than performance 
on each quality measure individually determining the financial 
opportunity under the model. The composite score methodology also 
provides a framework for incorporating additional measures of 
meaningful outcomes for LEJR episodes, as discussed in section III.D.3. 
of this final rule, in the CJR pay-for-performance methodology in the 
future. Finally, while we believe that high quality performance on all 
of the measures represents goals of clinical care that should be 
achievable by all CJR model participant hospitals that heighten their 
focus on these measures, we appreciate that many hospitals have room 
for significant improvement in their current measure performance. The 
composite score methodology, which does not set performance thresholds 
for each measure for reconciliation payment eligibility, will provide 
the potential for financial reward for more participant hospitals that 
reach overall acceptable or better quality performance, thus 
incentivizing their continued efforts to improve the quality and 
efficiency of episodes.
    In the proposed rule, we presented weights for the proposed quality 
measures in the composite quality score and note that we need to revise 
those weights for the final rule given that we are not adopting the 
THA/TKA Readmissions measure (NQF #1551) for the CJR model. As some 
commenters encouraged us to assign more weight than we discussed in the 
proposed rule to measures of patient experience and functional status, 
we believe it would be most appropriate to redistribute the 20 percent 
measure weight from the THA/TKA Readmissions measure (NQF #1551) 
equally to the two required measures we adopted for the model, 
specifically assigning an additional 10 percent weight each to the THA/
TKA Complications measure (NQF #1550) and the HCAHPS Survey measure 
(NQF #0166). We note that the overall distribution of measure weight in 
the composite quality score would provide 50 percent weight to health-
related conditions that arise following LEJR surgery (through the THA/
TKA Complications measure (NQF #1550)) and 50 percent weight to patient 
experience (through the HCAHPS Survey measure (NQF #0166) and THA/TKA 
voluntary PRO and limited risk variable data submission). We believe 
this weighting appropriately balances patient experience with 
meaningful health outcomes for beneficiaries, by providing equal weight 
in the composite quality score to both dimensions, consistent with the 
patient-centered priorities for quality measurement that some 
commenters urged us to adopt.
    The final measure weights in the composite quality score for the 
CJR model are displayed in Table 17.

   Table 17--Final Quality Measure Weights in Composite Quality Score
------------------------------------------------------------------------
                                                             Weight in
                                                             composite
                     Quality measure                       quality score
                                                                (%)
------------------------------------------------------------------------
Hospital[dash]level RSCR following elective primary THA               50
 and/or TKA (NQF #1550).................................
HCAHPS Survey (NQF #0166)...............................              40
THA/TKA voluntary PRO and limited risk variable data                  10
 submission.............................................
------------------------------------------------------------------------

    Consistent with the scoring of individual measure percentile 
performance as assigned to a decile, as we discussed in the proposed 
rule, and our final decision to use performance percentiles for both 
required quality measures, as discussed earlier in this section, for 
each model performance year we will assign individual measure 
performance scores to each participant hospital based on the values in 
Table 18. These individual measure performance scores have been set to 
reflect the final measures weights in Table 17 so they can ultimately 
be summed without adjustment in calculating the composite quality 
score. The absolute differences for each performance decile among the 
two measures reflect the intended weight of the measure performance in 
the composite quality score.
    As we further discussed in the proposed rule, we will assign 
participant hospitals without a measure value to the 50th performance 
percentile (80 FR 41242). A participant hospital will not have a value 
for the THA/TKA Complications measure (NQF #1550) if the hospital does 
not meet the minimum case count of 25 cases in the 3 year measurement 
period which is required to ensure reliability of the measure result. 
In section III.D.4. of this final rule, we discuss the 25 case minimum 
and note that this quality measure case minimum is the same as the 
minimum used in the HIQR Program (75 FR 50185 and 76 FR 51609). We 
further note that as described in section III.D.2.a. of this final 
rule, the THA/TKA Complications measure (NQF #1550) only includes 
primary elective THA/TKA procedures which are a subset of the LEJR 
episodes included in the CJR model. As a result, it is possible for a 
CJR participant hospital to have LEJR episodes but no cases that meet 
the criteria to be included in the THA/TKA Complications measure (NQF 
#1550). Regarding the HCAHPS Survey measure (NQF #0166), a participant 
hospital will not have a reported value for the HCAHPS Survey measure 
(NQF #0166) if it did not meet the minimum of 100 completed surveys and 
did not have 4 consecutive quarters of HCAHPS data, which are required 
to ensure the reliably of the measure. In section III.D.4. of this 
final rule, we discuss the 100 case minimum and note that this quality 
measure case minimum is the same as the minimum used in the HVBP 
Program (76 FR 26502).
    Moreover, we note that in rare cases, if CMS identifies an error in 
the data used to calculate the measure resulting in suppression of the 
data for public reporting on Hospital Compare, a hospital will not have 
a value for the THA/TKA Complications measure (NQF #1550) or HCAHPS 
Survey measure (NQF #0166) measure and would be assigned to the 50th 
performance percentile of the measure, as applicable.
    Lastly, new hospitals that are identified as participants in the 
CJR model may not have sufficient data within the measure performance 
periods to calculate a value for the THA/TKA Complications measure (NQF 
#1550) or HCAHPS Survey measure (NQF #0166) and would be assigned to 
the 50th performance percentile of the measure, as applicable.
    For hospitals that are in the situations previously described, we 
will assign participant hospitals without a measure value the 50th 
performance percentile of the measure result distribution. We intend to 
publicly report the measure results used to calculate the composite 
quality score for all participant hospitals. While we understand the 
concerns of the commenter that we have no actual outcome measure 
results for certain hospitals, we continue to believe it would be 
unfair to disadvantage a participant hospital in the pay-for-

[[Page 73376]]

performance methodology of this model based on insufficient number or 
no applicable cases alone and, therefore, we will assign these 
hospitals to the 50th performance percentile, which is the middle of 
the national measure performance distribution, and assign quality 
performance points to the participant hospital accordingly based on the 
performance percentile scale identified in Table 18.
    Moreover, as we also discussed in the proposed rule, we will not 
assign individual measure score performance points to a hospital 
categorized to a performance percentile below the 30th percentile 
because we do not believe lower performance percentiles reflect quality 
performance such that they should be assigned any individual quality 
measure score performance points for LEJR episodes under the CJR model. 
Although a commenter suggested providing individual quality measure 
score points to hospitals beginning at the 10th performance percentile, 
we continue to disagree that performance below the 30th performance 
percentile reflects sufficient quality on these two well-established 
measures in CMS hospital programs to award quality measure points. We 
note, however, that a participant hospital assigned no performance 
points for one required quality measure could still be eligible for 
reconciliation payments if episode savings are achieved beyond the 
target price as long that hospital has achieved a sufficient 
performance percentile on the other required quality measure.
    Additionally, we will assign a measure quality score of two points 
for participant hospitals that successfully submit THA/TKA voluntary 
PRO and limited risk variable data and 0 points for participant 
hospitals that do not successfully submit these data. The requirements 
for successful data submission in each performance year are discussed 
in section III.D.3.a. of this final rule. While we discussed awarding 1 
point for successful submission in the proposed rule, this was an error 
because we also stated that the submission of THA/TKA voluntary PRO and 
limited risk variable data would constitute 10 percent of the composite 
quality score, which is based on a maximum score of 20 points. Two 
points is the correct value that reflects 10 percent of the maximum 
score.

                      Table 18--Final Individual Scoring for Two Required Quality Measures
----------------------------------------------------------------------------------------------------------------
                                                                 THA/TKA Complications    HCAHPS Survey  measure
                                                                  measure (NQF #1550)      (NQF #0166)  quality
                                                                  quality performance       performance  score
                    Performance percentile                         score (points) (1          (Points) (0.8
                                                                    additional point         additional point
                                                                     available for            available for
                                                                      improvement)             improvement)
----------------------------------------------------------------------------------------------------------------
>=90th........................................................                    10.00                     8.00
>=80th and <90th..............................................                     9.25                     7.40
>=70th and <80th..............................................                     8.50                     6.80
>=60th and <70th..............................................                     7.75                     6.20
>=50th and <60th..............................................                     7.00                     5.60
>=40th and <50th..............................................                     6.25                     5.00
>=30th and <40th..............................................                     5.50                     4.40
<30th.........................................................                     0.00                     0.00
----------------------------------------------------------------------------------------------------------------

    We will sum the performance and, if applicable, improvement scores 
(as discussed in the following response to comments) on the two 
required quality measures with the score on the successful submission 
of THA/TKA voluntary PRO and limited risk variable data to calculate a 
composite quality score for each performance year for a participant 
hospital. This composite quality score will then be incorporated into 
the pay-for-performance methodology for the CJR model that assigns a 
participant hospital to a quality category at the time of 
reconciliation for a performance year. We will first require a minimum 
composite quality score for reconciliation payment eligibility if the 
participant hospital's actual episode spending is less than the target 
price and second, make quality incentive payments that change the 
effective discount percentage included in the target price experienced 
by the hospital in the reconciliation process. Thus, hospitals with 
higher composite quality scores may financially benefit from their 
episode quality performance compared to hospitals with lower quality 
performance in a different quality category, regardless of whether 
episode savings are achieved. For example, in performance year 4, 
actual episode spending for a hospital with an excellent composite 
quality score would be reconciled to a target price reflecting a 3.0 
percent discount factor, but then the participant hospital would 
receive a quality incentive payment of 1.5 percent of the hospital's 
pre-discount target price that would either increase the hospital's 
reconciliation payment if savings were achieved or reduce the 
hospital's repayment responsibility if actual episode spending exceeded 
the target price. In contrast, actual episode spending for a hospital 
with an acceptable composite quality score would be reconciled to a 
target price reflecting a 3.0 percent discount factor, but then the 
participant hospital would not receive any quality incentive payment. 
Thus, the excellent quality performance by the participant hospital in 
the excellent quality category would provide a financial benefit to 
that hospital of 1.5 percent of the pre-discount target price, 
regardless of whether the hospital achieved savings for episodes.
    As discussed in the proposed rule regarding the composite quality 
score alternative approach to pay-for-for performance under the CJR 
model, the discount for all participant hospitals included in the 
target prices will be 3.0 percent. We refer readers to section 
III.C.4.b.(9) of this final rule for further discussion of the discount 
factor included in the target prices. Hospitals that provide high-
quality episode care will have the opportunity to receive quality 
incentive payments that will reduce the effective discount percentage 
as displayed in Tables 19, 20, and 21, based on their composite quality 
score that places each hospital into one of four quality categories, 
specifically ``Below Acceptable,'' ``Acceptable,'' ``Good,'' and 
``Excellent.'' Three tables are required to display the effective 
discount percentages for each quality category due to the phase-in of 
hospital repayment responsibility from no responsibility in performance 
year 1, to partial responsibility in performance

[[Page 73377]]

years 2 and 3, and finally full responsibility in performance years 4 
and 5 as discussed in section III.C.4.b.(9) of this final rule. 
Depending on the participant hospital's actual composite quality score 
that places the hospital in a quality category, quality incentive 
payments will be valued at 1.0 percent to 1.5 percent of the hospital's 
benchmark episode price (that is, of the expected episode spending 
prior to application of the discount factor to calculate a target 
price).
    While the final policy to place participant hospitals into one of 
four quality categories to determine reconciliation payment eligibility 
and, if applicable, the value of quality incentive payments is the same 
as that presented in the proposed rule, the applicable scoring ranges 
for each quality category discussed in the proposed rule are different 
from the ranges we are finalizing in Tables 19, 20, and 21 for several 
reasons. First, we are not finalizing the THA/TKA Readmissions measure 
(NQF #1551) as part of the CJR model's pay-for-performance methodology, 
requiring us to redistribute the 20 percent weight in the composite 
quality score that we had presented for that measure. That 
redistribution is discussed earlier in this section. Second, our final 
policy includes quality improvement points in addition to quality 
performance points in the composite quality score, as discussed in the 
following response to comments. We estimate based on current quality 
measure performance that approximately 4 percent and 7 percent of all 
participant hospitals would qualify for improvement points on the 
HCAHPS Survey measure (NQF #0166) and the THA/TKA Complications measure 
(NQF #1550), respectively.
    The most significant reason for a change in the scoring ranges for 
the quality categories in the final rule is due to our strengthening 
the financial incentives for participant hospitals under the CJR model 
through the composite quality score pay-for-performance methodology to 
improve quality performance or maintain high-quality performance for 
episodes. We agree with the commenters who urged us to ensure that most 
participant hospitals that achieve savings beyond the discount included 
in the target price receive reconciliation payments if their episode 
quality is acceptable and that we provide the potential for 
significantly greater financial reward for hospitals that achieve or 
maintain high quality episode performance. Therefore, we have 
reassessed our quality performance expectations for each quality 
category by examining the current quality measure performance of 
participant hospitals in the context of the national measure 
performance distribution. We have adjusted the final scoring ranges to 
balance the quality performance required for each quality category with 
the financial incentives (reconciliation payment eligibility and 
quality incentive payments) to achieve the quality performance required 
for the category. In the context of our final composite quality score 
ranges for each quality category, we estimate that approximately 10 
percent of participant hospitals placed in the ``Below Acceptable'' 
quality category based on their composite quality score would not be 
eligible for reconciliation payments based on their current quality 
measure performance, compared to 14 percent based on the proposed rule 
composite score measures and ranges. Similarly, we estimate that 
approximately 12 percent of participant hospitals would be eligible for 
reconciliation payments through placement in the ``Acceptable'' quality 
category but would not receive quality incentive payments based on 
their current quality performance, compared to 30 percent in this 
quality category based on the proposed rule measures and score ranges. 
We estimate that the large majority of participant hospitals, 
specifically 64 percent, would be placed in the ``Good'' quality 
category based on their current quality performance and would, 
therefore, be eligible for reconciliation payments and for quality 
incentive payments valued at 1.0 percent of the hospital's benchmark 
episode price, compared to 46 percent based on the proposed rule 
measures and score ranges. Finally, we estimate that 14 percent of 
participant hospitals through placement in the ``Excellent'' quality 
category would be eligible for reconciliation payments and for quality 
incentive payments valued at 1.5 percent of the hospital's benchmark 
episode price, compared to an estimate of 10 percent based on the 
proposed rule measures and score ranges. Thus, for each quality 
performance category, we have slightly lowered our quality performance 
expectations from our proposed rule discussion of the composite quality 
score approach, in order to provide participant hospitals with more 
significant financial incentives to improve their quality and cost 
performance under the CJR model, as well as their incentives to 
maintain high-quality performance.
    Hospitals will be required to achieve a minimum composite quality 
of score greater than or equal to 4.0 to be eligible for a 
reconciliation payment if actual episode spending is less than the 
target price. Participant hospitals with below acceptable quality 
performance reflected in a composite quality score less than 4.0 will 
be assigned to the ``Below Acceptable'' quality category and will not 
be eligible for a reconciliation payment if actual episode spending is 
less than the target price. A level of quality performance that is 
below acceptable will not affect participant hospitals' repayment 
responsibility if actual spending exceeds the target price. We believe 
that the requirement that this minimum level of LEJR episode quality be 
achieved for reconciliation payments to be made is important to protect 
beneficiaries from excessive reductions in utilization that may result 
from the financial incentives in an episode payment model to lower 
actual episode spending. Under the pay-for-performance methodology of 
the CJR model, this policy should encourage participant hospitals to 
focus on appropriate reductions or changes in utilization that lead to 
high quality, more efficient care. Based on current hospital quality 
measure performance, approximately ninety percent of participant 
hospitals would have a composite quality score of greater than or equal 
to 4.0 and be eligible for reconciliation payments based on acceptable 
or better quality performance.
    Participant hospitals with an acceptable composite quality score of 
greater than or equal to 4.0 and less than 6.0 will be assigned to the 
``Acceptable'' quality category and be eligible for a reconciliation 
payment if actual episode spending is less than the target price 
because their quality performance is at the acceptable level 
established for the CJR model. They will not be eligible for a quality 
incentive payment at reconciliation because their episode quality 
performance, while acceptable, is not good or excellent. Therefore, 
these hospitals will be eligible to receive a reconciliation payment if 
actual episode spending is less than the target price.
    Participant hospitals with a good composite quality score of 
greater than or equal to 6.0 and less than or equal to 13.2 will be 
assigned to the ``Good'' quality category and be eligible for a quality 
incentive payment at reconciliation if actual episode spending is less 
than the target price because their quality performance exceeds the 
acceptable level required for reconciliation payment eligibility under 
the CJR model. In addition, they will be eligible for a quality 
incentive payment at reconciliation for good quality performance that 
equals 1.0 percent of the participant hospital's benchmark

[[Page 73378]]

price, thereby changing the effective discount percentage included in 
the target price experienced by the hospital at reconciliation. Thus, 
participant hospitals achieving this level of quality for LEJR episodes 
under CJR will either have less repayment responsibility (that is, the 
quality incentive payment will offset a portion of their repayment 
responsibility) or receive a higher payment (that is, the quality 
incentive payment would add to the reconciliation payment) at 
reconciliation than they would have otherwise based on a comparison of 
actual episode spending to the target price that reflects a 3.0 percent 
discount. Therefore, these hospitals will be eligible to receive a 
reconciliation payment if actual episode spending is less than the 
target price and will also receive a quality incentive payment.
    Finally, hospitals with an excellent composite score quality score 
of greater than 13.2 will be assigned to the ``Excellent'' quality 
category and be eligible to receive a reconciliation payment if actual 
episode spending is less than the target price because their quality 
performance exceeds the acceptable level required for reconciliation 
payment eligibility under the CJR model. In addition, they will be 
eligible for a higher quality incentive payment at reconciliation for 
excellent quality performance that equals 1.5 percent of the 
participant hospital's benchmark price, thereby changing the effective 
discount percentage included in the target price experienced by the 
hospital at reconciliation. Thus, participant hospitals achieving this 
level of quality for LEJR episodes under CJR will either have less 
repayment responsibility (that is, the quality incentive payment will 
offset a portion of their repayment responsibility) or receive a higher 
payment (that is, the quality incentive payment would add to the 
reconciliation payment) at reconciliation than they would have 
otherwise based on a comparison of actual episode spending to the 
target price that reflects a 3.0 percent discount. Therefore, these 
hospitals will be eligible to receive a reconciliation payment if 
actual episode spending is less than the target price and would also 
receive a quality incentive payment.

    Table 19--Performance Year 1: Relationship of Composite Quality Score to Reconciliation Payment Eligibility and the Effective Discount Percentage
                                                              Experienced at Reconciliation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Effective discount
                                                                Eligible for      Eligible for quality    percentage for         Effective discount
      Composite quality score          Quality category        reconciliation       incentive payment     reconciliation      percentage for  repayment
                                                                  payment                                  payment  (%)                amount
--------------------------------------------------------------------------------------------------------------------------------------------------------
<4.0..............................  Below Acceptable.....  No...................  No..................                 3.0  Not applicable.
>=4.0 and <6.0....................  Acceptable...........  Yes..................  No..................                 3.0  Not applicable.
>=6.0 and <=13.2..................  Good.................  Yes..................  Yes.................                 2.0  Not applicable.
>13.2.............................  Excellent............  Yes..................  Yes.................                 1.5  Not applicable.
--------------------------------------------------------------------------------------------------------------------------------------------------------


Table 20--Performance Years 2 and 3: Relationship of Composite Quality Score to Reconciliation Payment Eligibility and the Effective Discount Percentage
                                                              Experienced at Reconciliation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  Effective discount
                                                                      Eligible for         Eligible for quality     percentage for    Effective discount
       Composite quality score             Quality category     reconciliation  payment     incentive payment       reconciliation      percentage for
                                                                                                                     payment  (%)      repayment amount
--------------------------------------------------------------------------------------------------------------------------------------------------------
<4.0.................................  Below Acceptable.......  No.....................  No.....................                 3.0                 2.0
>=4.0 and <6.0.......................  Acceptable.............  Yes....................  No.....................                 3.0                 2.0
>=6.0 and <=13.2.....................  Good...................  Yes....................  Yes....................                 2.0                 1.0
>13.2................................  Excellent..............  Yes....................  Yes....................                 1.5                 0.5
--------------------------------------------------------------------------------------------------------------------------------------------------------


Table 21--Performance Years 4 and 5: Relationship of Composite Quality Score to Reconciliation Payment Eligibility and the Effective Discount Percentage
                                                              Experienced at Reconciliation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  Effective discount
                                                                      Eligible for         Eligible for quality     percentage for    Effective discount
       Composite quality score             Quality category     reconciliation  payment     incentive payment       reconciliation      percentage for
                                                                                                                     payment  (%)      repayment amount
--------------------------------------------------------------------------------------------------------------------------------------------------------
<4.0.................................  Below Acceptable.......  No.....................  No.....................                 3.0                 3.0
>=4.0 and <6.0.......................  Acceptable.............  Yes....................  No.....................                 3.0                 3.0
>=6.0 and <=13.2.....................  Good...................  Yes....................  Yes....................                 2.0                 2.0
>13.2................................  Excellent..............  Yes....................  Yes....................                 1.5                 1.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Under this methodology, the final stop-loss and stop-gain limits 
discussed in section III.C.8. of the final rule will not change for 
participant hospitals in different quality categories. Despite the 
limited number of quality measures adopted for the CJR model at this 
point in time compared to other programs, such as the Shared Savings 
Program and HBVP Program that use more measures in a quality scoring 
methodology, after considering the public comments we believe this 
approach to quality incentive payments based on the composite quality 
score will have the effect of increasing the alignment of the financial 
and quality performance incentives under the CJR model to the potential 
benefit of participant hospitals and their collaborators as well as 
CMS, although it substantially increases the

[[Page 73379]]

complexity of the pay-for-performance methodology to link quality and 
payment. The final methodology also provides a framework for 
incorporating quality performance and quality improvement in the pay-
for-performance methodology of the CJR model as additional measures 
become available for consideration for the CJR model. We refer readers 
to section III.D.3. of this final rule for discussion of future 
measures for the model.
    Comment: Many commenters urged CMS to provide incentives for 
hospitals to continuously improve the quality of care under the model. 
The commenters asserted that scoring approaches incorporating 
improvement have been successfully used in other CMS programs, such as 
the Shared Savings Program and HVBP Program, as well as other 
Innovation Center payment models. The commenters recommended that the 
proposed thresholds for reconciliation payment eligibility were 
inadequate as they would provide no incentive for further quality 
improvement for the approximately 50 percent of participant hospitals 
currently performing better than the proposed thresholds on all three 
proposed quality measures. Some of these commenters favored the 
composite quality score methodology and further recommended that in 
addition to incorporating quality performance on the quality measures 
in the CJR model payment methodology through the composite quality 
score, CMS should reward year-over-year quality improvement, like the 
Shared Savings Program.
    A few commenters recommended that CMS reward quality improvement 
under the CJR model as long as there is no increase in episode 
spending, observing that under the statutory authority for the CJR 
model, one of the three expectations for a model is that it would 
increase the quality of care without increasing spending. The 
commenters claimed that setting a target price that always includes a 
discount over expected episode spending should not be necessary for 
participant hospitals that demonstrate improvements in quality 
performance.
    Response: We appreciate the perspectives of the commenters who 
recommended that we directly reward hospitals for quality improvement, 
consistent with pay-for-performance policies under other CMS programs 
such as the HVBP Program and the Shared Savings Program. We note that 
the proposed pay-for-performance quality threshold methodology would 
have provided no additional potential for financial reward for quality 
improvement once participant hospitals met the 30th performance 
percentile threshold for reconciliation payment eligibility in the 
first three performance years and the 40th performance percentile 
threshold in the fourth and fifth performance years on the three 
proposed quality measures. As some commenters pointed out, the proposal 
was unlikely to advance a major goal of the CJR model to continue to 
improve the quality or maintain current high quality of care for 
beneficiaries in LEJR episodes at all participant hospitals. In 
contrast, the composite quality score methodology that incorporates 
quality measure performance and that we finalized in the preceding 
response to public comments may indirectly reward quality improvement. 
Quality measure performance for a performance year within a higher 
performance decile than the prior performance year may result in a 
higher number of quality performance points for that measure and, 
ultimately, a higher composite quality score that may result in 
participant hospital assignment to a quality category that provides 
quality incentive payments or a higher amount of quality incentive 
payments than the prior performance year's lower composite quality 
score. However, without further refinement of the composite quality 
score methodology finalized previously, unlike the pay-for-performance 
methodology in other CMS programs such as the Shared Savings Program, 
the CJR model would not directly reward quality improvement in the 
scoring methodology, thereby providing a lesser incentive for quality 
improvement than directly including points for improvement in the 
composite quality score as recommended by some commenters.
    As we stated earlier in this section, we are not yet certain in 
this model test what performance outcomes can be achieved under best 
practices. Therefore, we believe a refinement to the composite score 
methodology in order to drive quality improvement for participant 
hospitals that have historically lagged in quality performance on the 
CJR model quality measures is appropriate, to supplement the composite 
score's valuing of quality performance in the pay-for-performance 
methodology of the model. We agree with the commenters that we should 
directly reward quality improvement under the CJR model pay-for-
performance methodology to encourage participant hospitals currently at 
all levels of quality performance to improve their performance as they 
strive to achieve high quality performance outcomes under best 
practices. Like the commenters, we recognize that the heightened focus 
on episode cost and quality performance by participant hospitals may 
lead to substantial year-over-year quality measure improvement over the 
model performance years, and we agree that improvement should be valued 
in the pay-for-performance methodology, in addition to the quality 
measure performance percentile actually achieved by the hospital. 
However, we disagree with the commenters who suggested that participant 
hospitals demonstrating quality improvement should not be expected to 
demonstrate episode cost efficiency in order for quality improvement to 
be rewarded. Improved quality performance and cost savings are closely 
linked in the CJR pay-for-performance methodology, as both are major 
goals of the CJR model.
    Therefore, we will refine the composite score methodology discussed 
in the proposed rule that assigns quality performance points based on 
performance percentiles for each measure to add the potential for 
incremental quality improvement points to be awarded for substantial 
improvement in performance on a required quality measure. We believe 
that the actual level of quality performance achieved should be most 
highly valued in the composite quality score to reward those hospitals 
furnishing high-quality care to CJR model beneficiaries, with a smaller 
contribution to the composite quality score made by improvement points 
if measure result improvement is achieved. We acknowledge that just 
because a hospital shows substantial improvement on a measure result, 
this does not necessarily mean the episode care is high-quality, yet 
the improvement spurred by the hospital's participation in the CJR 
model deserves to be valued as the hospital's performance is moving in 
a direction that is good for the health of beneficiaries. Valuing 
improvement is especially important because the CJR model involves such 
a wide range of hospitals that must participate if they are located in 
the selected MSAs, and the hospitals will be starting from many 
different current levels of quality performance. This refinement to the 
composite quality score methodology will help to provide all 
participant hospitals with a strong incentive to improve LEJR episode 
outcomes, including those hospitals with historically lagging quality 
performance.
    Specifically, we will add into the composite quality score 10 
percent of the maximum value for one or both of

[[Page 73380]]

the required measures, as applicable, which would equal 1 point for the 
THA/TKA Complications measure (NQF #1550) or 0.8 point for the HCAHPS 
Survey measure (NQF #0166), for those participant hospitals that 
demonstrate substantial improvement from the prior year's measure 
performance percentile on that measure. This modest increment of 10 
percent will allow us to continue to value most significantly quality 
performance in the composite quality score, while incorporating a 
significant but lesser value on quality improvement. We believe that 
rewarding improvement by allocating 10 percent of the maximum quality 
performance points to improvement on a measure provides a significant 
incentive for participant hospitals to achieve national high 
performance benchmarks on the quality measures, as well as provides an 
incentive for historically lagging hospitals to make significant 
quality improvements.
    Because of the uncertainty of statistical measures, as discussed 
previously in this section, and our annual comparison of a participant 
hospital's measure result to the national distribution to determine the 
hospital's performance percentile, we will only award measure quality 
improvement points where improvement is substantial and reflective of 
true improvement in quality performance on the individual measure. 
Thus, in order to be considered for improvement points on one of the 
measures, a participant hospital must have had a reportable measure 
performance result for that measure in the prior year. We note that in 
considering quality improvement points for award in the first model 
performance year, we will use measure results from the prior year 
quality measure performance period in determining each participant 
hospital's measure performance percentile against which we will compare 
its measure performance percentile for CJR model performance year 1 to 
determine if quality improvement points should be awarded. For the 
HCAHPS Survey measure (NQF #0166), the prior year quality measure 
performance period used will be July 1, 2014 through June 30, 2015. For 
the THA/TKA Complications measure (NQF #1550), the prior year quality 
measure performance period used will be April 1, 2012 through March 31, 
2015. The measure performance percentiles for performance year 1 will 
be determined from measure results from the performance year 1 quality 
measure performance periods as displayed in Table C5 of this final 
rule.
    We are defining substantial as improving 3 deciles or more in 
comparison to the national distribution of measure results. Improvement 
of three deciles represents a quality measure result change of over 
one-third of the range between the 10th percentile and the 90th 
percentile measure results. The 3 decile threshold to define 
substantial improvement is based on historical Hospital Compare 
information demonstrating that improving three deciles in measure 
performance on an annual basis is a challenging but attainable 
threshold for hospitals and reflects true improvement in quality 
performance on the individual measure. We estimate based on current 
quality measure performance over the most recent two years of available 
quality measure result data that 30 and 55 participant hospitals would 
qualify for improvement points on the HCAHPS Survey measure (NQF #0166) 
and the THA/TKA Complications measure (NQF #1550), respectively.
    We note that when a participant hospital is awarded improvement 
points in addition to performance points on a specific required 
measure, the sum of these points for the measure will be slightly 
greater than the measure performance points that would be awarded to a 
hospital in the performance decile that is one level higher than the 
participant hospital's actual performance decile. By recognizing 
quality performance in the CJR model pay-for-performance methodology, 
supplemented by valuing quality improvement, we believe participant 
hospitals at all current levels of quality performance, including those 
historically lagging, will have the greatest incentives to achieve high 
and/or improved quality of care under the CJR model through strong 
financial incentives that are linked to quality.
    Comment: A number of commenters urged CMS to further reduce the CJR 
model discount percentage in the target price for those participant 
hospitals who successfully reported THA/TKA voluntary PRO and limited 
risk variable data. They recommended that CMS apply a discount of 1.5 
percent, rather than the proposed 1.7 percent, to the target price in 
order to support a participant hospital's development of an effective 
and efficient process for reporting. A commenter requested that CMS 
provide a stronger financial incentive for THA/TKA PRO voluntary and 
limited risk variable data submission as well as compensation for the 
additional hospital costs of data collection, reasoning that because 
the proposal for the reduced discount percentage only covers the 
expected additional costs of data collection, no financial incentive is 
present for hospitals to report these data. Several commenters stated 
that CMS should go further and require the submission of THA/TKA 
voluntary PRO and limited risk variable data by participant hospitals 
in order for reconciliation payments to be paid because, while limiting 
structure and process measures to value more highly outcome measures is 
laudable, the most important consideration in quality outcomes for CJR 
model beneficiaries should be beneficiary functional status. The 
commenters expressed disappointment in CMS' proposal that reporting 
would be voluntary and urged CMS to institute pay-for-reporting for 
these data are a requirement for hospitals to be paid any savings 
achieved for their episodes beyond the target price. Many commenters 
encouraged CMS to incorporate patient-reported outcomes measure 
performance in the CJR model as soon as possible, and some commenters 
further recommended that CMS delay implementation of the model until 
the PRO measure is available for use.
    Response: We appreciate the emphasis the commenters placed upon 
measure development and implementation to capture the functional status 
of beneficiaries following LEJR procedures. Patient-reported outcomes 
following elective THA and TKA, which are the focus of the measure 
under development, are critically important for these costly procedures 
that beneficiaries choose to improve their quality of life, despite the 
lengthy recovery period involved. Pay-for-performance in the CJR model, 
an episode payment model that is designed to incentivize efficient, 
high-quality episode care, will benefit greatly from the incorporation 
of participant hospital performance on a measure of functional status 
when it is fully developed. We refer readers to section III.D.3.a.(9) 
of this final rule for further discussion of our plans and timeline to 
incorporate the THA/TKA Patient-Reported Outcome Performance Measure 
(PRO-PM) result in the CJR model when its development is complete after 
the period of THA/TKA voluntary PRO and limited risk variable data 
submission under the CJR model. We do not believe it would be 
appropriate to delay implementation of the CJR model until the measure 
has completed development, because the other final measures adopted for 
the model, as described in section III.D.2.a. through c. of this final 
rule, are meaningful measures of LEJR episode quality and

[[Page 73381]]

the CJR model provides an unprecedented opportunity to complete 
development of the THA/TKA PRO-PM because of the broad scope of the 
model test.
    Because the measure is currently under development, we believe our 
final model payment policies and future plans for use of the measure 
result in the CJR model provide sufficient incentive and increased 
financial opportunity to encourage robust reporting by participant 
hospitals of THA/TKA voluntary PRO and limited risk variable data. For 
the reasons discussed earlier in this section, we are not finalizing 
our proposed pay-for-performance threshold methodology to determine a 
participant hospital's reconciliation payment eligibility if episode 
savings are achieved beyond the target price. Therefore, we are not 
finalizing our proposal to reduce the discount percentage to 1.7 
percent from 2.0 percent for successful submission of THA/TKA voluntary 
PRO and limited risk variable data. Instead, under our final policy we 
are incorporating the successful criterion for submission of THA/TKA 
voluntary PRO and limited risk variable data into our composite quality 
score methodology for the CJR model, awarding points to participant 
hospitals who successfully submit these data that will be added into 
the calculation of the hospital's composite quality score, consistent 
with our discussion of the alternative approach to linking quality and 
payment in the proposed rule as described in detail earlier in this 
section. We refer readers to section III.D.3.a.(9) of this final rule 
for our final definition of successful reporting of THA/TKA voluntary 
PRO and limited risk variable data for each performance year of the CJR 
model. Furthermore, as the PRO-PM remains under development, we will 
not require the reporting of THA/TKA voluntary PRO and limited risk 
variable data for reconciliation payment eligibility. However, the 
successful reporting of the voluntary data may increase a participant 
hospital's financial opportunity under the model, which may be greater 
than the hospital's increased administrative cost to report the data. 
While the final policy to incorporate successful reporting of THA/TKA 
voluntary PRO and limited risk variable data into the composite quality 
score methodology is not directly keyed to addressing the hospital 
resources required for reporting as would have been true for the 
voluntary reporting payment adjustment that we proposed, we note that 
voluntary reporting can only help a hospital qualify for quality 
incentive payments and unsuccessful reporting will not hurt a 
participant hospital's eligibility for reconciliation payments.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing our proposal discussed in 
section III.C.5.b.(5)(b) of this final rule to assign participant 
hospital required outcome measure point estimates to performance 
percentiles based on the national distribution. We summarize the public 
comments we received on the proposed criteria for successfully 
reporting the voluntary THA/TKA data, as discussed in section 
III.C.5.b.(5)(b) of this final rule, and provide our responses in 
section III.D.3.a. of this final rule. However, we are not finalizing 
our proposal discussed in section III.C.5.b.(5)(c)(iii) of this final 
rule of a pay-for-performance methodology that identifies specific 
performance thresholds for the required quality measures that must be 
met for reconciliation payment eligibility. We are also not finalizing 
our proposal discussed in section III.C.5.b.(2) of this final rule to 
reduce the discount factor included in the target price for successful 
submission of THA/TKA voluntary PRO and limited risk variable data. 
Instead, based on our review of the public comments, we are finalizing 
the use of a composite quality score, as discussed in section 
III.C.5.b.(5)(c)(ii) of this final rule, that is based on quality 
performance and improvement on the THA/TKA Complications measure (NQF 
#1550) and the HCAHPS Survey measure (NQF #0116), as well as submission 
of THA/TKA voluntary PRO and limited risk variable data, and places 
participant hospitals in one of four quality categories for each 
performance year, ``Below Acceptable,'' ``Acceptable,'' ``Good,'' and 
``Excellent.'' The final payment policies for the quality categories 
for the CJR model performance years are discussed earlier in this 
section and displayed in Tables 19, 20, and 21. We summarize the public 
comments we received on the proposed applicable time period, as 
discussed in section III.C.5.b.(4) of this final rule, and provide our 
responses in section III.D.3.d. of this final rule. We also summarize 
the public comments we received on the reporting time period for the 
THA/TKA patient reported outcome and limited risk variable data 
discussed in section III.C.5.b.(4) of this final rule and provide our 
responses in section III.D.3.a.(8) of this final rule.
    We have added new definitions to Sec.  510.2, specifically: 
``Composite quality score'' means a score computed for each participant 
hospital to summarize the hospital's level of quality performance and 
improvement on specified quality measures, as described in Sec.  
510.315; ``Quality performance points'' are points that CMS adds to a 
participant hospital's composite quality score for a measure based on 
the performance percentile scale and for successful data submission of 
patient reported outcomes; and ``Quality improvement points'' are 
points that CMS adds to a participant hospital's composite quality 
score for a measure if the hospital's performance percentile on an 
individual quality measure increases from the previous performance year 
by at least three deciles on the performance percentile scale. We have 
revised Sec.  510.305(f)(2) and (g)(2) and (3) to reflect the role of 
the composite quality score in determining reconciliation payment 
eligibility. The final pay-for-performance methodology is set forth in 
Sec.  510.315, which has been retitled, ``Composite quality scores for 
determining reconciliation payment eligibility and quality incentive 
payments,'' and revised to set forth the final pay-for-performance 
methodology of the CJR model as described in this final rule.
6. Process for Reconciliation
    We outlined in the proposed rule our proposals for how we intend to 
reconcile aggregate related Medicare payments for a hospital's 
beneficiaries in CJR episodes during a performance year against the 
applicable target price in order to determine if reconciliation payment 
(or repayment, beginning in performance year 2) is applicable under 
this model. We refer readers to section III.B. of this final rule for 
our definition of related services for LEJR episodes under CJR, to 
section III.C.2.a. of this final rule for our definition of performance 
years, and to section III.C.4. of this final rule for discussion of our 
approach to establish target prices.
a. Net Payment Reconciliation Amount (NPRA)
    The proposed rule detailed our proposal to conduct reconciliation 
by calculating a NPRA for each hospital participant in the model. After 
the completion of a performance year, we proposed to retrospectively 
calculate a participant hospital's actual episode performance based on 
the episode definition. We noted that episode payments for purposes of 
the CJR model would exclude the effects of special payment provisions 
under existing Medicare payment systems (section III.C.3.a. of this 
final rule), be subject to

[[Page 73382]]

proration for services that extend beyond the episode (section 
III.C.3.b. of this final rule), and exclude certain PBPM payments for 
programs and models specified in section III.C.7.d. of this final rule. 
We proposed that some episodes may be excluded entirely from the CJR 
model due to overlap with BPCI episodes, as discussed in section 
III.C.7.b. of this final rule. Finally, we proposed that actual episode 
payments calculated for purposes of CJR would be capped at anchor MS-
DRG and region-specific high episode payment ceilings (section 
III.C.3.c. of this final rule). We proposed to apply the high episode 
payment ceiling policy to episodes in the performance year similarly to 
how we apply it to historical episodes (section III.C.4.c. of this 
final rule). Episode payments for episodes attributed to CJR eligible 
hospitals would be determined and the high episode payment ceiling 
would be calculated as two standard deviations above the mean. Any 
actual episode payment amount above the high payment ceiling would be 
capped at the applicable ceiling.
    We proposed to compare each participant hospital's actual episode 
payment performance to its target prices. We proposed that, as 
discussed in section III.C.4. of this final rule, a participant 
hospital would have multiple target prices for episodes ending in a 
given performance year, based on the MS-DRG anchor (MS-DRG 469 versus 
MS-DRG 470), the performance year when the episode was initiated, when 
the episode was initiated within a given performance year (January 1 
through September 30 of the performance year, October 1 through 
December 31 of the performance year, October 1 through December 31 of 
the prior performance year), and whether the participant hospital 
successfully submitted THA/TKA voluntary PRO and limited risk variable 
data. The applicable target price for each episode would be determined 
using the previously stated criteria, and the difference between each 
CJR episode's actual payment and the relevant target price (calculated 
as target price subtracted by CJR actual episode payment) would be 
aggregated for all episodes for a participant hospital within the 
performance year, representing the raw NPRA. This amount would be 
adjusted per the steps discussed later in this section, creating the 
NPRA.
    We proposed to adjust the raw NPRA to account for post-episode 
payment increases (section III.C.8.e. of this final rule) and stop-loss 
and stop-gain limits (section III.C.8.b. of this final rule). Any NPRA 
amount greater than the proposed stop-gain limit would be capped at the 
stop-gain limit, and any NPRA amount less than the proposed stop-loss 
limit would be capped at the stop-loss limit.
    We did not propose to include any CJR reconciliation payments or 
repayments to Medicare under this model for a given performance year in 
the NPRA for a subsequent performance year. We want to incentivize 
providers to provide high quality and efficient care in all years of 
the model. If reconciliation payments for a performance year are 
counted as Medicare expenditures in a subsequent performance year, a 
hospital would experience higher Medicare expenditures in the 
subsequent performance year as a consequence of providing high quality 
and efficient care in the prior performance year, negating some of the 
incentive to perform well in the prior year. Therefore, we proposed to 
not have the NPRA for a given performance year be impacted by CJR 
repayments or reconciliation payments made in a prior performance year. 
For example, if a CJR hospital receives a $10,000 reconciliation 
payment in the second quarter of 2017 for achieving episode spending 
below the target price for performance year 1, that $10,000 
reconciliation payment amount would not be included in the performance 
year 2 calculations of actual episode spending. However, as discussed 
in section III.C.6.b. of this final rule, during the following 
performance year's reconciliation process, we proposed to account for 
additional claims run-out and overlap from the prior performance year, 
and net that amount with the subsequent performance year's NPRA to 
determine the reconciliation or repayment amount for the current 
reconciliation. The following is a summary of comments received and our 
response.
    Comment: Commenters emphasized the need to accurately account for 
wage index differences when calculating target prices and conducting 
reconciliation activities.
    Response: We refer readers to comments and responses to comments in 
section III.C.4.b.(7) of this final rule for further discussion on the 
finalized target price calculation policy to normalize for wage index 
differences at the claim level and to reintroduce wage index 
differences based on the participant hospital's wage index and labor 
cost share. In order to maintain consistency with the target price 
calculations, and to more accurately normalize for the effects of wage 
index differences, we will apply the same claim-level wage index 
normalization to claim payments included in actual episode expenditures 
for each performance year when calculating a hospital's NPRA.
    We also refer readers to response to comments in section 
III.C.4.b.(7) of this final rule on the importance of reintroducing 
wage index differences when calculating target prices and 
reconciliation and repayment amounts. In order to maintain consistency 
with the target price calculations, we will reintroduce wage index 
differences when calculating NPRA by applying the participant 
hospital's wage index and 0.7 as the labor cost share. By mirroring the 
target price calculation approach for accounting for wage index 
differences, we can better ensure that any reconciliation amounts or 
repayments to Medicare are due to differences in practice patterns, not 
Medicare FFS wage index policy variations.
    Comment: A commenter suggested that CMS perform reconciliation 
calculations differently when a beneficiary in a CJR episode receives 
PAC from a SNF or HHA not recommended by the CJR hospital discharge 
planners. Another commenter noted that the reconciliation calculation 
CMS proposed needed refinement as it pertains to the proposed 
methodology for setting episode prices and paying model participants; 
the commenter's suggestions pertaining to the payment methodology are 
addressed in section III.C.4. of this final rule.
    Response: We thank commenters for their suggestions. However, we do 
not believe it is appropriate to make adjustments to a given hospital's 
NPRA based on the choice of PAC facility for beneficiaries discharged 
from that facility. Such a change would be inconsistent with our goal 
of maintaining beneficiary choice and access to care, discussed in 
section III.F. of this final rule. We also note that the process for 
calculating the NPRA is consistent with our methodology for calculating 
target prices and actual episode spending during the performance period 
(section III.C.4.b. of this final rule), along with the adjustments to 
NPRA that would account for post-episode spending (III.C.8.d. of this 
final rule) and the stop-loss and stop-gain limits discussed in section 
III.C.8.b. of this final rule.
    Final Decision: We refer readers to section III.C.4. of this final 
rule for discussion of modifications to how the target prices and 
performance period episode spending are calculated, including risk 
stratification for fracture patients. In addition, section III.C.5. of 
this final rule addresses our final policy on how quality performance 
will be

[[Page 73383]]

used to determine a CJR hospital's effective discount percentage. 
However, after consideration of the public comments we received, we are 
modifying our proposal to calculate the NPRA utilizing the methodology 
described in this subsection to account for wage index normalization 
and reintroduction when calculating actual episode expenditures in a 
performance year and including the modifications to calculation of 
target prices and actual episode spending as described elsewhere in 
this section. After the completion of a performance year, we will 
retrospectively calculate a participant hospital's actual episode 
spending based on the episode definition. Each participant hospital's 
actual episode payment performance will be compared to its target 
prices, creating the raw NPRA, and then adjusted for the stop-loss and 
stop-gain limits, as well as post-episode spending, creating the NPRA.
b. Payment Reconciliation
    We proposed to reconcile payments retrospectively through the 
following reconciliation process. We proposed to reconcile a 
participant hospital's CJR actual episode payments against the target 
price 2 months after the end of the performance year. More 
specifically, we would capture claims submitted by March 1st following 
the end of the performance year and carry out the NPRA calculation as 
described previously to make a reconciliation payment or hold hospitals 
responsible for repayment, as applicable, in quarter 2 of that calendar 
year.
    Comment: Some commenters explicitly supported CMS's proposal to 
implement a retrospective reconciliation process. However, a few 
commenters suggested CMS implement a prospective reconciliation process 
(see section III.C.2.b. of this final rule for discussion of comments 
on the retrospective payment methodology). Commenters suggested CMS 
make a prospective bundled payment to hospitals for all services 
provided during a CJR episode; hospitals would then distribute payments 
to other providers and suppliers. A commenter suggested that CMS hold a 
specified percentage of total episode payments for downstream (non-
hospital) providers and suppliers furnishing services during CJR 
episodes and hospitals would later distribute the amount of the 
withheld payment to providers and suppliers based on quality and 
efficiency.
    Response: We refer readers to section III.C.4.b. of this final rule 
for discussion of comments received on our proposed methodology to 
establish target prices and retrospectively calculate performance 
period episode spending.
    We considered the suggestion to implement a blended reconciliation 
approach by withholding a specified percentage of FFS payments and 
later distributing the remainder of payments to hospitals for 
disbursement to downstream providers and suppliers. We believe that the 
operational challenges associated with such an approach would introduce 
significant administrative burden for hospitals. We also note that, as 
discussed in section III.C.10. of this final rule, we are finalizing 
policies that will allow participant hospitals to engage in financial 
arrangements and relationships with downstream providers and suppliers. 
We believe these relationships will allow participant hospitals the 
opportunity to share financial risk with downstream providers and 
suppliers and engage such entities in efforts to improve quality and 
efficiency throughout the episode.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, without modification, to 
conduct a retrospective reconciliation process for the CJR model.
    To address issues of overlap with other CMS programs and models 
that are discussed in section III.C.7. of the proposed rule, we also 
proposed that during the following performance year's reconciliation 
process, we would calculate the prior performance year's episode 
spending a second time to account for final claims run-out, as well as 
overlap with other models as discussed in section III.C.7. of this 
final rule. This would occur approximately 14 months after the end of 
the prior performance year. As discussed later in this section, the 
amount from this calculation, if different from zero, would be applied 
to the NPRA for the subsequent performance year in order to determine 
the amount of the payment Medicare would make to the hospital or the 
hospital's repayment amount. We note that the subsequent reconciliation 
calculation would be applied to the previous calculation of NPRA for a 
performance year to ensure the stop loss and stop gain limits discussed 
in section III.C.8. of this final rule are not exceeded for a given 
performance year.
    For the performance year 1 reconciliation process, we would 
calculate a participant's, as previously described, and if positive, 
the hospital would receive the amount as a reconciliation payment from 
Medicare. If negative, the hospital would not be responsible for 
repayment to Medicare, consistent with our proposal to phase in 
financial responsibility beginning in performance year 2. Starting with 
the CJR reconciliation process for performance year 2, in order to 
determine the reconciliation or repayment amount, the amount from the 
subsequent reconciliation calculation would be applied to the NPRA. We 
proposed that if the amount is positive, and if the hospital meets the 
minimum quality score required to be eligible for reconciliation, 
(discussed further in section III.C.5. of this final rule), the 
hospital would receive the amount as a reconciliation payment from 
Medicare. If the amount is negative, Medicare would hold the 
participant hospital responsible for repaying the absolute value of the 
repayment amount following the rules and processes for all other 
Medicare debts. Note that given our proposal to not hold participant 
hospitals financially responsible for repayment for the first 
performance year, during the reconciliation process for performance 
year 2 only, the subsequent calculation amount (for performance year 1) 
would be compared against the performance year 1 NPRA to ensure that 
the sum of the NPRA calculated for performance year 1 and the 
subsequent reconciliation calculation for year 1 is not less than zero. 
For performance years 2 through 5, though, we proposed that Medicare 
would hold the participant hospital responsible for repaying the 
absolute value of the repayment amount following the rules and 
processes for all other Medicare debts. The following table illustrates 
a simplified example of how the subsequent reconciliation calculation 
may affect the following year's reconciliation payment. The second 
column represents the raw NPRA calculated for Performance Year 1, 
meaning that Hospital A's aggregated episode spending was $50,000 below 
the target price multiplied by the number of episodes. The third column 
represents the subsequent reconciliation calculation, indicating that 
when calculating episode spending during Performance Year 1 a second 
time, we determined that Hospital A's aggregated episode spending was 
$40,000 below the target price multiplied by the number of episodes, 
due to claims runout, accounting for model overlap, or other reasons. 
The fourth column represents the difference between the subsequent 
reconciliation calculation and the raw NPRA calculated for Performance 
Year 1. This difference is then combined with the amount in the fifth 
column to create the reconciliation

[[Page 73384]]

payment amount for PY2, which is reflected in the sixth column.

                                                         Table 22--Sample Reconciliation Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Difference
                                                                               Performance Year     between PY1                          Reconciliation
                                                            Performance Year    1  subsequent        subsequent      Performance Year   payment made to
                                                           1 (2016) raw NPRA    reconciliation     reconciliation   2 (2017) raw NPRA     hospital in
                                                                                 calculation      calculation  and                       quarter 2 2018
                                                                                                      raw NPRA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital A...............................................           $50,000            $40,000          ($10,000)            $25,000            $15,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    This reconciliation process would account for overlaps between the 
CJR model and other CMS models and programs as discussed in section 
III.C.7. of this final rule, and would also involve updating 
performance year episode claims data. We also note that in cases where 
a hospital has appealed its quality performance results on the 
complications and HCAHPS quality measures through the IQR program 
appeal process, discussed in section III.D. of this final rule, and 
where such appeal results would result in a different effective 
discount percentage or quality incentive payment under the CJR model, 
the subsequent reconciliation calculation will account for these 
updates as well.
    For example, for performance year 1 for the CJR model in 2016, we 
would capture claims submitted by March 1st, 2017, and reconcile 
payments for participant hospitals approximately 6 months after the end 
of the performance year in quarter 2 of calendar year 2017. We would 
carry out the subsequent calculation in the following year in quarter 2 
of calendar 2018, simultaneously with the reconciliation process for 
the second performance year, 2017. Table 23 provides the reconciliation 
timeframes for the model. Lastly, we proposed that the reconciliation 
payments to or repayments from the participant hospital would be made 
by the MAC that makes payment to the hospital under the IPPS. This 
approach is consistent with BPCI Model 2 operations.
    We proposed this approach in order to balance our goals of 
providing reconciliation payments in a reasonable timeframe, while 
being able to account for overlap and all Medicare claims attributable 
to episodes. We stated that pulling claims 2 months after the end of 
the performance year would provide sufficient claims run-out to conduct 
the reconciliation in a timely manner, given that our performance year 
includes episodes ending, not beginning, by December 31st. We note that 
in accordance with the regulations at Sec.  424.44 and the Medicare 
Claims Processing Manual (Pub. L. 100-04), Chapter 1, Section 70, 
Medicare claims can be submitted no later than 1 calendar year from the 
date of service. We recognized that by pulling claims 2 months after 
the end of the performance year to conduct reconciliation, we would not 
have complete claims run-out. However, we believed that the 2 months of 
claims run-out would be an accurate reflection of episode spending and 
consistent with the claims run-out timeframes used for reconciliation 
in other payment models, such as BPCI Models 2 and 3. The alternative 
would be to wait to reconcile until we have full claims run out 12 
months after the end of the performance year, but we were concerned 
that this approach would significantly delay earned reconciliation 
payments under this model. Because we proposed to conduct a second 
calculation to account for overlap with other CMS models and programs, 
we proposed to incorporate updated claims data with 14 months run out 
at that time. However, we did not expect that the updated data should 
substantially, in and of itself, affect the reconciliation results 
assuming hospitals and other providers and suppliers furnishing 
services to Medicare beneficiaries in CJR episodes follow usual 
patterns of claims submission and do not alter their billing practices 
due to this model.

                             Table 23--Proposed Timeframe for Reconciliation in CJR
----------------------------------------------------------------------------------------------------------------
                                                                                   Second            Second
                              Model        Reconciliation    Reconciliation    calculation to      calculation
  Model  performance       performance    claims submitted     payment or     address overlaps    adjustment to
         year                period              by             repayment        and claims      reconciliation
                                                                                run[dash]out         amount
----------------------------------------------------------------------------------------------------------------
Year 1 *..............  Episodes ending   March 1, 2017...  Q2 2017.........  March 1, 2018...  Q2 2018.
                         April 30, 2016
                         to December 31,
                         2016.
Year 2................  Episodes ending   March 1, 2018...  Q2 2018.........  March 1, 2019...  Q2 2019.
                         January 1, 2017
                         through
                         December 31,
                         2017.
Year 3................  Episodes ending   March 1, 2019...  Q2 2019.........  March 2, 2020...  Q2 2020.
                         January 1, 2018
                         through
                         December 31,
                         2018.
Year 4................  Episodes ending   March 2, 2020...  Q2 2020.........  March 1, 2021...  Q2 2021.
                         January 1, 2019
                         through
                         December 31,
                         2019.
Year 5................  Episodes ending   March 1, 2021...  Q2 2021.........  March 1, 2022...  Q2 2022.
                         January 1, 2020
                         through
                         December 31,
                         2020.
----------------------------------------------------------------------------------------------------------------
* Note that the reconciliation for Year 1 would not include repayment responsibility from CJR hospitals.


[[Page 73385]]

    Comment: Several commenters supported the proposed reconciliation 
process. However, many commenters requested that CMS conduct 
reconciliation activities on a quarterly or semi-annual, instead of 
annual, basis. Some commenters suggested that CMS offer participant 
hospitals the option of electing annual or a more frequent 
reconciliation timeline. Commenters stated numerous reasons for their 
request, including: Providing revenue and cash flow to hospitals 
throughout the year to aid in care coordination and redesign efforts; 
giving hospitals interim data on financial performance; the time lag 
between the end of a performance year and the subsequent reconciliation 
calculation; utilizing data for improving care processes; giving 
hospitals the opportunity to gainshare with other providers and 
suppliers with greater frequency; and consistency with the frequency of 
reconciliation in the BPCI initiative, among other reasons. Some 
commenters supported the proposal to make reconciliation payments or 
require repayment on an annual basis, but requested that CMS also 
conduct interim quarterly reconciliation projections to provide 
hospitals with information on financial performance throughout the 
performance year. Several commenters claimed that the proposed 
reconciliation process would result in reduced revenue for hospitals 
throughout the performance period. However, a commenter stated that 
receiving annual reconciliation results in the second quarter of the 
calendar year following the completion of a performance year would 
provide hospitals with timely feedback and opportunity to adjust 
strategies in subsequent years to improve or maintain financial 
performance. Another commenter noted that annual reconciliation at the 
end of each performance year would give participants an early 
indication of progress under the model.
    Response: We appreciate the perspectives of the commenters on our 
proposal. In response to commenters' concerns that an annual 
reconciliation process would result in reduced revenue for hospitals, 
we are clarifying that model participants, and all providers and 
suppliers, would continue to bill and be paid through normal Medicare 
FFS processes throughout the model for Part A and Part B services 
furnished to beneficiaries during a CJR episode, with a retrospective 
reconciliation process after the conclusion of a performance year. We 
disagree that an annual reconciliation process would result in reduced 
revenue for hospitals. In addition, we note that beginning in the 
second quarter of 2017 when the first reconciliation is performed, CJR 
hospitals will be able to utilize any reconciliation payments they earn 
to invest in care redesign and coordination efforts on an ongoing 
basis. We emphasize that the delay of financial repayment 
responsibility until performance year 2 means no hospital will be 
required to make a repayment to Medicare until the second quarter of 
2018 for actual episode spending exceeding the target price. In 
addition, the delay of the model start date until April 1, 2016 and 
truncated first performance year will reduce the amount of time between 
beginning participation in the CJR model and the first reconciliation.
    We appreciate commenters' concerns and request for more frequent 
feedback on performance throughout the performance period. However, we 
continue to believe that an annual reconciliation process is most 
appropriate for the following reasons. As previously stated in this 
section, providers and suppliers have a calendar year to submit FFS 
claims for payment. Implementing a quarterly reconciliation process, as 
we do for the BPCI models, would mean that many claims may be 
incomplete at the time of the reconciliation. The BPCI reconciliation 
process incorporates 3 subsequent reconciliation calculations, and BPCI 
participants have experienced significant fluctuation in financial 
results between the initial reconciliation and the subsequent 
calculations. We believe our proposed annual reconciliation approach 
will lead to more stable financial results for providers. We also note 
based on our experience with the BPCI models that a quarterly 
reconciliation process results in model participants' near constant 
engagement in the reconciliation and appeals processes. This can 
potentially take time away from efforts focused on care redesign and 
coordination with providers and suppliers engaged in furnishing care 
for beneficiaries under the model. In addition, given our plan to 
assess hospital performance on quality measures (discussed in section 
III.C.5. of this final rule), we note that annual reconciliation 
processes will be necessary in order to calculate an accurate composite 
quality score for hospital participants, since quality measures are 
calculated on an annual basis. We also proposed to perform annual 
reconciliation for consistency with other models and programs such as 
the Shared Savings Program. As discussed in section III.C.7.e.of this 
final rule, we will allow for beneficiaries to be assigned to an ACO 
and have a concurrent CJR episode. We will perform our reconciliation 
calculations and then make the reconciliation and repayment amounts 
available to other models and programs in order to account for 
overlapping beneficiaries. We have aligned our annual reconciliation 
timeline with the ACO models and program in order to make this 
information available before the ACO models and program begin their 
annual financial reconciliation calculations; such a timeline is 
necessary to be able to account for program and model overlap.
    We understand commenters' assertions that annual reconciliation 
does not allow for frequent feedback on financial performance under the 
model. We would like to reiterate that we will be providing both line-
level and summary claims data to model participants on a quarterly 
basis, as discussed in section III.E. of this final rule. Such data are 
intended to provide hospitals with information about their care 
patterns and to identify opportunities for care redesign and savings. 
This data will also provide ongoing feedback to hospitals about their 
performance under the model, by including both raw claims as well as 
summary data with information about their episode spending and care 
patterns. Moreover, unlike in BPCI Models 2 and 3, we will be providing 
model participants with performance year target prices on a prospective 
basis, as discussed in section III.C.4 of this final rule. Prospective 
target pricing will provide hospitals with increased certainty about 
financial targets under the model. Finally, we also considered 
commenters' requests to conduct interim financial reconciliation 
calculations on a quarterly basis and provide the results of such 
calculations to hospitals. Because of the potential for volatility 
between the interim results and the final reconciliation results, and 
our concern that such results would not provide additional meaningful 
information to hospitals not present in the claims data and prospective 
target prices, we are not pursuing an interim reconciliation process at 
this time. However, we will continue to consider commenters' 
suggestions and will consider the feasibility of providing interim 
results in the future if we believe it could aid hospitals in 
succeeding under this model and would provide additional information 
not already present in the previously stated claims data and target 
prices.

[[Page 73386]]

    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, without modification, to 
conduct financial reconciliation on an annual basis. We will engage 
with CJR hospitals throughout the model to ensure the prospective 
target prices and quarterly data provided to hospitals provide 
sufficient ongoing feedback and data to hospitals between 
reconciliations. As previously noted, we will continue to consider 
commenters' suggestions and consider the feasibility of further interim 
financial results in the future if warranted.
    Comment: Several commenters expressed concerns about post-payment 
denials and Recovery Audit Contractor (RAC) or MAC reviews that may 
occur after the CJR model reconciliation processes are complete. A 
commenter asserted that providers could be doubly penalized for such 
claims if review and denial occurs after the subsequent reconciliation 
calculation, in particular if a claim is denied for more than 100 
percent of the payment amount. The commenter noted further concern due 
to the aggregated reconciliation calculation; that is if a given claim 
is later denied for an amount greater than 100 percent of the payment 
amount, the denied amount could affect more than just the claim in 
question. The commenter urged CMS to exempt all claims attributed to 
the CJR model from post-payment review and denial.
    Another commenter requested that CMS further outline the 
reconciliation and repayment processes, including how reconciliation 
would be conducted for Periodic Interim Payment (PIP) hospitals. 
Finally, a commenter requested a more flexible repayment process for 
hospitals meeting certain eligibility criteria, but did not suggest 
specific criteria.
    Response: We appreciate the commenters' views. We believe the 
proposed process to perform a reconciliation calculation 2 months after 
the conclusion of a performance year, with a subsequent reconciliation 
calculation 12 months later, will allow sufficient time for routine 
monitoring, review, and adjustment. We acknowledge that audits and 
reviews may occur after our reconciliation processes are complete, 
agreeing that post-payment reviews may occur up to 3 years after the 
submission of a claim, or longer in some instances. However, we believe 
that concluding reconciliation processes 14 months after the completion 
of a performance year provides a reasonable timeframe for claims run-
out and subsequent actions on a claim and is consistent with other 
payment reconciliation processes, such as the reconciliation of 
hospital cost reports, which can have impacts that are mostly but not 
entirely reconciled across multiple payment systems. With respect to 
commenters' specific suggestions, we note that prohibiting review of 
all claims submitted for a beneficiary during a CJR episode would not 
be consistent with our stated goals of the model to monitor for quality 
and appropriateness of care. While we appreciate the concern that the 
price setting methodology under this model already provides a limit on 
spending during the episode, we point out that provider payments are 
not absolutely capped and hospitals are therefore not completely at 
risk. During the initial model period in which hospitals will not be 
financially responsible for repayment to Medicare for spending 
exceeding the target price, all risk will be borne by Medicare. In 
addition, in later years of the model all CJR hospital gains and losses 
are capped, as discussed in section III.C.8. of this final rule, 
meaning that Medicare will continue to bear risk for unusually costly 
cases. We do not believe that CMS should be denied the full flexibility 
to utilize all current processes for pre- and post-payment review based 
on existing rules and regulations for claims associated with care 
furnished under this model. Such a policy could potentially encourage 
inefficient or inaccurate billing practices, or hinder CMS' ability to 
appropriately monitor provider and supplier practices under the model. 
We also note that such situations would only happen if a claim were 
later denied and as such, encourage providers and suppliers submitting 
claims to ensure accuracy and that policies as laid out in this final 
rule are followed by all providers and suppliers submitting Medicare 
FFS claims for services furnished to beneficiaries under the model.
    In response to these comments we have considered whether it would 
be appropriate to allow subsequent reconciliations if claims are denied 
and reprocessed after the second reconciliation. We do not believe this 
is appropriate for several reasons. First, we note that in the event 
that the hospital's total episode spending exceeded the target price, 
we are finalizing policies that limit hospitals' financial 
responsibility for such spending, as discussed in section III.C.8. of 
this final rule. Second, the entire purpose of MAC and RAC audits is to 
ensure that Medicare payments are correctly administered and made only 
for services delivered in accordance with statute and regulation. If 
the hospital enters into appropriate collaboration agreements with high 
quality, responsible, and compliant PAC providers, the 14-month period 
prior to the second reconciliation provides ample opportunity for the 
hospital and its collaborators to work together to conduct internal 
audits and ensure that PAC claims are properly submitted or corrected. 
We believe it is appropriate for hospitals to continue to share some 
risk with Medicare even after the final reconciliation, and believe 
this provides additional incentives for them to work closely with their 
collaborators to ensure that all services are delivered appropriately. 
Third, we believe it is important to conclude the reconciliation 
process in the timeframe we have previously outlined in this section, 
in order to provide hospitals with financial results and certainty over 
their performance under the model. Additional subsequent 
reconciliations could introduce uncertainty for model participants. 
Finally, we do agree that we have a responsibility to ensure that MACs, 
RACs, and other auditing entities audit services delivered under the 
CJR using the rules and regulations governing the CJR model in addition 
to all other relevant statute, regulation, and guidance. We believe 
that appropriate contractor training and oversight will protect 
hospitals from inappropriate denials while protecting beneficiaries 
from the use of inappropriate services and protecting Medicare from 
making payments on inappropriate claims. We reiterate the information 
provided in the proposed rule that when a hospital is eligible for a 
reconciliation payment, such payment would be made to participant 
hospitals in a form and manner specified by CMS. In cases where 
repayment is required, as stated in the proposed rule, CMS will follow 
the normal Medicare debt processes, such as issuing a demand letter. 
CMS intends to build on existing processes for making reconciliation 
payments to hospitals or requiring repayment which are familiar to 
hospitals. Such processes will rely on electronic and other established 
processes to the extent possible. We also reiterate that as discussed 
in section III.C.8. of this final rule, certain hospitals would be 
afforded additional financial protections. We believe are protections 
are sufficient and an extended repayment process for such hospitals is 
not necessary.
    With regard to PIP hospitals, we appreciate that commenters point 
out the different payment processes that apply to such hospitals. PIP 
hospitals receive biweekly payments based on

[[Page 73387]]

hospitals' estimates of applicable Medicare reimbursement for a given 
cost period. Such hospitals also submit FFS claims to Medicare, which 
are reconciled against the payments made through the PIP processes. 
Given that such hospitals continue to submit FFS claims and the 
reconciliation and repayment amounts from the CJR model would not be 
included in the PIP hospital cost reports at settlement, we do not 
believe it is necessary to institute a separate reconciliation process 
for PIP hospitals.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing our proposal to calculate the 
NPRA as previously outlined. We are also finalizing, without 
modification, our proposal to conduct an annual retrospective 
reconciliation with one subsequent reconciliation calculation in the 
following year.
    The following table illustrates the final timeframe for 
reconciliation.

                               Table 24--Final Timeframe for Reconciliation in CJR
----------------------------------------------------------------------------------------------------------------
                                                                                   Second            Second
                              Model        Reconciliation    Reconciliation    calculation to      calculation
  Model  performance       performance    claims submitted     payment or     address overlaps    adjustment to
         year                period              by             repayment      and claims run-   reconciliation
                                                                                     out             amount
----------------------------------------------------------------------------------------------------------------
Year 1 *..............  Episodes ending   March 1, 2017...  Q2 2017.........  March 1, 2018...  Q2 2018.
                         June 30, 2016
                         to December 31,
                         2016.
Year 2................  Episodes ending   March 1, 2018...  Q2 2018.........  March 1, 2019...  Q2 2019.
                         January 1, 2017
                         through
                         December 31,
                         2017.
Year 3................  Episodes ending   March 1, 2019...  Q2 2019.........  March 2, 2020...  Q2 2020.
                         January 1, 2018
                         through
                         December 31,
                         2018.
Year 4................  Episodes ending   March 2, 2020...  Q2 2020.........  March 1, 2021...  Q2 2021.
                         January 1, 2019
                         through
                         December 31,
                         2019.
Year 5................  Episodes ending   March 1, 2021...  Q2 2021.........  March 1, 2022...  Q2 2022.
                         January 1, 2020
                         through
                         December 31,
                         2020.
----------------------------------------------------------------------------------------------------------------
* Note that the reconciliation for Year 1 would not include repayment responsibility from CJR hospitals.

    This final policy is set forth at Sec.  510.305.
7. Adjustments for Overlaps With Other Innovation Center Models and CMS 
Programs
a. Overview
    In the proposed rule, we acknowledged that there may be 
circumstances where a Medicare beneficiary in a CJR episode may also be 
assigned to an ACO participating in the Shared Savings Program or 
otherwise accounted for in a payment model being tested by the 
Innovation Center. Current or forthcoming programs and models with 
potential overlap with CJR are displayed in Table 24. For purposes of 
this final rule, ``total cost of care'' models refers to models in 
which episodes or performance periods include participant financial 
responsibility for all Part A and Part B spending, as well as some Part 
D spending in select cases. We use the term ``shared savings'' to refer 
to models in which the payment structure includes a calculation of 
total savings and CMS and the model participants each retain a 
particular percentage of that savings. We note that there exists the 
possibility for overlap between CJR episodes and shared savings 
programs and models such as the Pioneer ACO Model, other total cost of 
care models such as the OCM, other Innovation Center payment models 
such as BPCI, and other models or programs that incorporate per-
beneficiary-per-month fees or other payment structures.

                   Table 25--Current Programs and Models With Potential Overlap With CJR Model
----------------------------------------------------------------------------------------------------------------
                                                                                      Per-beneficiary- per-month
         Program/model              Brief description           Shared savings?            (PBPM)  payments?
----------------------------------------------------------------------------------------------------------------
Pioneer ACO Model..............  ACO shared savings       Yes.......................  No.
                                  model.
Medicare Shared Savings Program  ACO shared savings       Yes.......................  No.
 (Shared Savings Program).        program.
Next Generation ACO Model *....  ACO shared savings       Yes.......................  No.
                                  model.
Comprehensive Primary Care       Pays primary care        Yes.......................  Yes.
 initiative (CPCi).               providers for improved
                                  and comprehensive care
                                  management.
Multi[dash]payer Advanced        Multi[dash]payer model   Yes.......................  Yes.
 Primary Care Practice (MAPCP).   for advanced primary
                                  care practices, or
                                  ``medical homes``.
Bundled Payments for Care        Bundled payment program  No........................  No.
 Improvement (BPCI).              for acute or PAC
                                  services or both.
Oncology Care Model (OCM) *....  Multi[dash]payer model   No........................  Yes.
                                  for oncology physician
                                  group practices (PGPs).
Comprehensive ESRD Care          ACO for ESRD Medicare    Yes.......................  No.
 Initiative (CEC) *.              beneficiaries.
Million Hearts *...............  Model targeting          No........................  Yes.
                                  prevention of heart
                                  attack and stroke.

[[Page 73388]]

 
Medicare Care Choices Model      Hospice concurrent care  No........................  Yes.
 (MCCM) *.                        model.
----------------------------------------------------------------------------------------------------------------
* Denotes model in pre-implementation phase.

    In the proposed rule, we outlined the following issues that may 
arise in such overlap situations that must be addressed under CJR. 
First, beneficiaries in CJR episodes could also be part of BPCI Model 2 
or 3 LEJR episodes or BPCI non-LEJR episodes, and the clinical services 
provided as part of each episode may overlap entirely or in part. 
Second, CJR reconciliation payments and repayments that are made under 
Part A and B and attributable to a specific beneficiary's episode may 
be at risk of not being accounted for by other models and programs when 
determining the cost of care under Medicare for that beneficiary. 
Third, some Innovation Center models make PBPM payments to entities for 
care coordination and other activities, either from the Part A or B 
Trust Fund or both, or from the Innovation Center's own appropriation 
(see section 1115A(f) of the Act). These payments may occur during a 
CJR episode. Finally, there could be instances when the expected 
Medicare savings for a CJR beneficiary's episode (represented by the 
discount percentage) is not achieved by Medicare because part of that 
savings is paid back to the hospital or another entity under the Shared 
Savings Program or a total cost of care model in which the beneficiary 
is also included. We sought comment on our proposals to account for 
overlap with the Shared Savings Program and other models, including 
those listed in Table 24 as well as other CMS models or programs.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter requested that CMS not limit providers from 
developing and implementing other episode-based payment models while 
participating in the CJR model.
    Response: We clarify that we have not included any limitations on 
participation in future or current models through this final rule. In 
addition, we have included the policies in this section in order to 
allow for CJR hospitals to participate in other models and initiatives 
concurrently with the CJR model.
b. CJR Beneficiary Overlap With BPCI Episodes
    BPCI is an episode payment model testing LEJR episodes, as well as 
47 other episodes, in acute or PAC or both settings (Models 1, 2, 3 or 
4). As discussed in section III.A. of the proposed rule, we proposed to 
exclude from selection for participation in the CJR payment model those 
geographic areas where 50 percent or more of LEJR episodes are 
initiated at acute care hospitals testing the LEJR episode in BPCI in 
Models 1, 2 or 4 as of July 1, 2015. In that same section, we proposed 
that acute care hospitals in selected geographic areas participating in 
BPCI under Model 1 (acute care only) and those participating as episode 
initiators for the LEJR episode in Model 2 (acute and PAC from 30 to 90 
days post-discharge) or Model 4 (prospective episode payment for the 
LEJR anchor hospitalization and related readmissions for 30 days post-
discharge) be excluded from CJR. We discuss the comments received on 
this proposal and our responses in section III.A.4. of this final rule.
    While we believed these proposals will mitigate the overlap of CJR 
beneficiaries with BPCI episodes, there may still be instances of model 
overlap that we need to account for under CJR. These include 
circumstances when a beneficiary is admitted to a CJR participant 
hospital for an LEJR procedure where the beneficiary would also be in a 
BPCI Model 2 episode under a PGP that would initiate the episode under 
BPCI. In another example, a beneficiary discharged from an anchor 
hospitalization under CJR could enter a BPCI Model 2 LEJR episode at 
another hospital for a phased second joint replacement procedure or 
enter a BPCI Model 3 LEJR episode upon initiation of PAC services at a 
BPCI PAC provider episode initiator for the LEJR episode. Similarly, a 
beneficiary in a BPCI Model 2 or Model 3 LEJR episode could be admitted 
to a CJR participant hospital for a phased second joint replacement. In 
all such scenarios in which there is overlap of CJR beneficiaries with 
any BPCI LEJR episodes, we proposed that the BPCI LEJR episode under 
Models 1, 2, 3, or 4 take precedence and we would cancel (or never 
initiate) the CJR episode. Because the cancelation (or lack of 
initiation) would only occur for overlap with BPCI LEJR episodes, we 
expect that the participant hospital and treating physician would 
generally be aware of the beneficiary's care pathway that would cancel 
or not initiate the CJR episode. Therefore, we would exclude the CJR 
episode from the CJR participant hospital's reconciliation calculations 
where we compare actual episode payments to the target price under the 
CJR model. If we were to allow both CJR and BPCI LEJR episodes to 
overlap, we would have no meaningful way to apply the payment policies 
in two models with overlapping care redesign interventions and 
episodes. Participants in BPCI have an expectation that eligible 
episodes will be part of the BPCI model test, whereas CJR participants 
would be aware that episodes may be canceled when there is overlap with 
BPCI episodes as previously discussed in this final rule. We aim to 
preserve the integrity of ongoing model tests without introducing major 
modifications (that is, CJR episode precedence) that could make 
evaluation of existing models more challenging. We considered that 
there may also be instances of overlap between CJR and BPCI Model 3 
LEJR episodes where our proposal to give precedence to all BPCI 
episodes could lead to undesirable patient steering because the BPCI 
Model 3 episode does not begin until care is initiated at an episode-
initiating PAC provider. It could be possible for a participating CJR 
hospital to purposefully guide a beneficiary to a BPCI Model 3 LEJR 
episode initiating PAC provider to exclude that beneficiary's episode 
from CJR. We considered giving precedence to the CJR episode in overlap 
with Model 3 beneficiaries because the CJR episode begins with 
admission for the anchor hospitalization and thus includes more of the 
episode services. However, we believed the steering opportunities would 
be limited due to the preservation of beneficiary choice of provider in 
this model (as discussed in section III.E. of the proposed rule). As 
outlined in section III.F. of this final rule, CJR hospitals must 
provide patients with a complete list of all

[[Page 73389]]

available PAC options. Moreover, BPCI Model 3 PAC providers are 
actively involved in the decision to admit patients to their 
facilities. As episode initiators in BPCI, such providers are subject 
to monitoring and evaluation under that model and would be vigilant 
about not engaging in steering themselves or spurred by other 
providers. Nevertheless, we will monitor CJR hospitals to ensure 
steering or other efforts to limit beneficiary access or move 
beneficiaries out of the model are not occurring (see section III.F.).
    We sought comment on the proposed approach to address overlap 
between CJR and BPCI episodes. The following is a summary of the 
comments we received and our responses.
    Comment: Many commenters supported the proposal to apply precedence 
rules that attribute episodes to BPCI PGPs and PAC providers in cases 
of overlap with CJR. Commenters noted the significant investment PGPs 
and PAC providers have made in BPCI and a desire for these entities to 
continue engagement in care redesign under BPCI. A commenter noted that 
for many providers, 3-year participation in BPCI will expire near the 
time when CJR begins requiring participant hospitals to accept full 
financial responsibility for episode spending. The commenter believes 
it would not be appropriate to change the episode precedence rules for 
BPCI providers prior to the conclusion of providers' 3-year BPCI 
participation, as attributing Model 2 and Model 3 PGP and PAC LEJR 
episodes to CJR in lieu of BPCI could create confusion. Commenters also 
requested that CMS provide additional clarification of a number of 
potential scenarios beyond those addressed in the proposed rule.
    Some commenters disagreed with our proposed policy to apply 
precedence to BPCI Model 2 and Model 3 PGPs and PAC providers. 
Commenters contended that the proposed policy was unfair, given that 
BPCI participants entered models voluntarily, but hospitals in CJR were 
not given the opportunity to opt out and would be at risk for episodes 
where others did not perceive enough opportunity to voluntarily enter 
into risk agreements under BPCI. Commenters expressed concern that, 
given the precedence rules, CJR hospitals could potentially lose many 
episodes to BPCI and may be financially responsible for a low volume of 
episodes. Some commenters also suggested we apply a minimum threshold 
to remove hospitals from the CJR model based on BPCI PGP participation.
    A commenter disagreed with the proposal for BPCI PAC entities at 
risk for a shorter episode duration than the CJR proposed episode to be 
given precedence. Another commenter cited the potential for patient 
steering issues that could arise due to our proposed policy to give 
BPCI PGPs precedence over CJR hospitals for LEJR episodes. In 
particular, the commenter was concerned that the precedence rules would 
lead to BPCI PGPs capturing lower-risk episodes, leaving CJR hospitals 
at risk for more high-risk episodes. The commenter suggested we give 
precedence to CJR episodes over BPCI PGP and PAC episodes to mitigate 
steering concerns.
    Another commenter was concerned about potential confusion when 
episodes initiated at the same acute care hospital could be in both 
models; for example, when episodes initiated by a BPCI PGP at a 
hospital or discharged to a Model 3 PAC are attributed to BPCI while 
the remaining episodes are a part of CJR. The commenter believed that 
following both sets of rules (for the BPCI and CJR models) within the 
same hospital could be confusing for hospitals and partner providers 
and suppliers, limiting providers' ability to target care redesign 
efforts toward patients for whom a CJR hospital is financially 
responsible. Another commenter requested CMS publish a public list of 
BPCI episode initiators whose episodes would take precedence over CJR 
episodes.
    Response: We agree with commenters' assertion that maintaining 
participation in the voluntary BPCI models and recognizing the 
significant investments in care redesign and care coordination already 
made by BPCI participants is important. BPCI participants have an 
agreement with CMS and in some cases have already been participating in 
the voluntary BPCI initiative for several years.
    In response to commenters' requests for additional examples of 
overlap scenarios, we clarify that LEJR overlap could occur in, but is 
not limited to, the following situations:
     A beneficiary is admitted to a CJR hospital for an LEJR 
procedure and discharged to a PAC provider participating in BPCI Model 
3 for the LEJR episode; the episode is attributed to the BPCI Model 3 
PAC provider.
     A beneficiary is admitted to a CJR hospital for an LEJR 
procedure by a PGP participating in BPCI Model 2; the episode is 
attributed to the BPCI Model 2 PGP.
     A beneficiary is admitted to a CJR hospital for an LEJR 
procedure by a PGP participating in BPCI Model 3; the episode is 
attributed to the BPCI Model 3 PGP.
     A beneficiary is admitted to a CJR hospital for an LEJR 
procedure, followed by a second phased LEJR procedure within 90 days of 
the first procedure. The second LEJR procedure is attributed to a PGP 
participating in BPCI Model 2 or 3 or is followed by admission to a PAC 
provider participating in BPCI Model 3 for the LEJR episode. The first 
LEJR episode would be canceled and the second episode would be 
attributed to the BPCI provider.
    We acknowledge that some CJR hospitals could be financially at risk 
for a small proportion of LEJR episodes initiated at the hospital if 
there are high-volume PGPs or PAC providers in their community 
initiating LEJR episodes under BPCI, yet we continue to believe those 
hospitals have opportunity under the CJR model. Physicians and PAC 
providers may already have worked on care redesign for LEJR 
beneficiaries, and the hospitals have an opportunity to learn from that 
experience. Having a smaller number of beneficiaries in the CJR model 
to begin with also places hospitals at less financial risk, which may 
allow them to more rapidly and nimbly design care pathways, test them, 
and refine them on a smaller number of beneficiaries and with less 
resources than if all of the hospital's LEJR beneficiaries were in the 
CJR model from the start. We also note that, given that many providers' 
3-year participation in BPCI would end in 2017 or 2018, in many cases 
full financial responsibility for all of a participant hospital's LEJR 
procedures under the CJR model would not be in effect until the 
conclusion of the BPCI participation period when the CJR participant 
hospitals could have responsibility for a larger number of episodes. By 
that point in time, CJR participant hospitals should have several years 
of experience with LEJR episodes focusing on quality and efficiency, 
and the larger number of beneficiaries can then be integrated into 
existing pathways.
    While we understand the concerns of some commenters that physician 
and PAC providers participating in BPCI will focus on low-risk 
beneficiaries, leaving higher-risk beneficiaries to be the participant 
hospital's responsibility under the CJR model so that the CJR model 
beneficiaries in a performance year will not resemble those in the 
baseline period used to set target prices, there are a number of model 
design features that make this unlikely. First, as discussed in section 
III.C.4.b.(1) of this final rule, we are stratifying episodes on the 
basis of a beneficiary's hip fracture

[[Page 73390]]

status, a major factor related to higher-cost episodes, so that CJR 
model participant hospitals will be appropriately paid for higher-risk 
beneficiaries with hip fractures. Second, we will be monitoring for 
access to care and delayed care as discussed in section III.F. of this 
final rule as well as under BPCI, and examining the CJR model for 
unintended consequences such as adverse selection of patients and 
inappropriate referral practices in the evaluation as discussed in 
section IV. of this final rule. Section III.C.12. of this final rule 
also details our enforcement mechanisms for the CJR model.
    We appreciate commenters' contention that allowing for both models 
to coexist for LEJR episodes within the same acute care hospital may be 
confusing for providers. However, we believe the importance of 
continuing PGP and PAC participation in BPCI Models 2 and 3 outweighs 
this risk, and believe that local providers, in the best interest of 
Medicare beneficiaries and cost and quality success under the two 
models, will coordinate and collaborate to respond to their 
circumstances. We also note that while the BPCI and CJR models differ 
in various ways, the broad goals of the models are the same: Improving 
quality of care while reducing spending during the episode. We believe 
it is reasonable for hospitals, PGPs, and PAC providers to engage in 
care redesign strategies targeted at LEJR episodes in general, 
regardless of attribution of an LEJR episode to a particular model. 
Such overlap within the same hospital may incentivize additional 
coordination between the entities already engaged in care redesign 
under BPCI and acute care hospitals that will begin such activities as 
participants in CJR.
    In response to the commenter who requested a list of BPCI episode 
initiators, we refer readers to the publicly available list of current 
episode initiators in BPCI on the model Web site at https://innovation.cms.gov/initiatives/Bundled-Payments/Participating-Health-Care-Facilities/.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposal, without modification, to 
apply precedence to BPCI Model 2 and Model 3 PGP and PAC provider LEJR 
episodes. Specifically, if at any time during a beneficiary's CJR LEJR 
episode, that beneficiary would also be in a BPCI Model 2 or Model 3 
LEJR episode, the beneficiary's CJR episode would either not be 
initiated or would be canceled such that it would not be included in 
the participant hospital's CJR reconciliation where actual episode 
spending is compared to the target price.
    Comment: Many commenters requested that CMS apply precedence rules 
in cases of CJR and BPCI non-LEJR overlap. Some commenters requested 
that BPCI non-LEJR episodes would have precedence in the case of 
overlap between a BPCI non-LEJR episode and a CJR LEJR episode, while 
others requested that CJR have precedence. Commenters stated that there 
was no way to fairly attribute savings between the two models in such 
scenarios, if CMS allows for overlap between CJR and BPCI non-LEJR 
episodes as proposed. A commenter stated that it would not be possible 
to comment on which model should have precedence (CJR or BPCI) due to 
ambiguity about which model would be more prevalent or expanded in the 
future; another commenter shared this view, but stated that its opinion 
on which model should have precedence was dependent upon the specific 
financial arrangements and waivers finalized for the CJR model.
    Response: We appreciate the feedback and request for clarification 
on whether BPCI or CJR episode would have precedence when the same 
beneficiary could be in a CJR model episode and a BPCI non-LEJR episode 
for an overlapping period of time. We clarify that we did not propose a 
calculation to attribute savings between the two models when concurrent 
episodes occur. We proposed that each model would continue to perform 
financial reconciliation activities as usual. We also believe such 
overlap situations will be relatively rare, given that many LEJR 
procedures are elective and would only be furnished when a physician 
determines it is clinically appropriate for a beneficiary to undergo a 
major surgery. We believe a beneficiary undergoing an LEJR procedure in 
close proximity to an inpatient hospitalization for another condition 
will be an infrequent occurrence. Applying precedence rules could 
introduce confusion for providers participating in BPCI for non-LEJR 
episodes and in the CJR model. For example, if a CJR hospital could 
retrospectively have an LEJR episode canceled if the beneficiary is 
readmitted to another hospital and initiates a BPCI episode for a non-
LEJR episode such as congestive heart failure, the CJR hospital could 
be generally unaware of the beneficiary's care pathway.
    As we noted in the proposed rule, we believe that where there is 
overlap between BPCI and CJR LEJR episodes, providers would generally 
be aware of such situations. For example, BPCI PGPs and PAC providers 
would be aware that a PGP initiating an LEJR episode at a CJR hospital, 
or an admission to a PAC facility in BPCI Model 3 would cancel the CJR 
episode. CJR hospitals could maintain a list of BPCI participants in 
their area. In contrast, if we allow any BPCI non-LEJR episode to 
cancel all CJR episodes, CJR hospitals may not be aware of the 
beneficiary's eventual care pathway. For example, CJR hospitals may be 
unaware of cases in which the CJR LEJR episode is canceled and the non-
LEJR BPCI episode takes precedence because a wide range of BPCI 
clinical episodes and provider types could cancel the CJR episode 
during the 90 day post-discharge period.
    We expect such cases of overlap to be rare given current BPCI 
participation and the participant CJR model hospitals. We also 
reiterate that when such overlap occurs, each model (BPCI and CJR) 
would continue its normal financial reconciliation processes. When 
overlap occurs, it is possible that savings achieved during one model 
could also be counted as savings under the other model. In such cases 
it could be difficult to determine whether savings achieved during an 
episode were attributable to care redesign activities under BPCI or 
CJR. However, allowing for overlap between BPCI non-LEJR and CJR 
episodes will maximize the testing of episodes under both models and 
encourage providers under BPCI and CJR to engage in care redesign and 
coordination activities for all beneficiaries attributed to either 
model. The following examples illustrate potential situations of 
overlap:
     A beneficiary is admitted to a CJR hospital for an LEJR 
procedure and later readmitted to the same or a different CJR hospital 
for a congestive heart failure episode under BPCI.
     A beneficiary is in a BPCI PGP Model 2 episode for chronic 
obstructive pulmonary disease at a CJR hospital and has an LEJR 
procedure at the same or a different CJR hospital during the post-
anchor hospital discharge period of the BPCI episode.
    In both situations, each model would calculate episode spending and 
perform financial reconciliation as normal.
    Summary of Final Decisions: After consideration of the public 
comments received, we are finalizing our proposal, without 
modification, to apply precedence to BPCI Model 2 and Model 3 PGP and 
PAC LEJR episodes. By precedence, we mean that if for any portion of 
CJR model episode, a beneficiary would also be in a BPCI LEJR episode 
under Model 2 or Model 3, we will cancel (or never initiate) the CJR 
episode. We refer readers to III.B.3.

[[Page 73391]]

for further discussion of the circumstances under which CJR episodes 
will be canceled. We are also finalizing the proposal, without 
modification, to allow for overlap between the period of time in which 
a beneficiary is in a CJR episode and a BPCI non-LEJR episode.
c. Accounting for CJR Reconciliation Payments and Repayments in Other 
Models and Programs
    Under CJR, we proposed to annually, as applicable, make 
reconciliation payments to or receive repayments from participating CJR 
hospitals based on their quality performance and Medicare expenditures, 
as described in section III.C.6. of the proposed rule. While we 
proposed that these reconciliation payments or repayments would be 
handled by MACs, the calculation of these amounts would be done 
separately before being sent through the usual Medicare claims 
processing systems. Nevertheless, it is important that other models and 
programs in which providers are accountable for the total cost of care 
be able to account for the full Medicare payment, including CJR-related 
reconciliation payments and repayments as described in section III.C.6. 
of the proposed rule, for beneficiaries who are also in CJR episodes. 
Accordingly, it is necessary to have beneficiary-specific information 
on CJR-related reconciliation payments and repayments available when 
those models and programs make their financial calculations. Thus, in 
addition to determining reconciliation payments and repayments for the 
participant hospitals in the CJR model, we proposed to also calculate 
beneficiary-specific reconciliation payment or repayment amounts for 
CJR episodes to allow for those other programs and models, as their 
reconciliation calculation timeframes permit, to determine the total 
cost of care for overlapping beneficiaries. We would perform the 
reconciliation calculations for CJR hospitals and make information 
about the CJR reconciliation or repayment amounts available to other 
programs and models, such as the Shared Savings Program and Pioneer ACO 
as well as non-ACO total cost of care models such as CPCi and OCM that 
begin reconciliation calculations after CJR. For example, this strategy 
is currently in place to account for overlaps between beneficiaries 
assigned or aligned to Pioneer and Shared Savings Program ACOs and BPCI 
model beneficiaries. Beneficiary-specific reconciliation payment or 
repayment amounts are loaded into a shared repository for use during 
each program or model's respective reconciliations. However, we note 
that we proposed not to make separate payments to, or collect 
repayments from, participating CJR hospitals for each individual 
episode, but, instead, to make a single aggregate reconciliation 
payment or repayment determination for all episodes for a single 
performance year, as discussed in section III.C.6. of the proposed 
rule. As described in section III.C.6 of the proposed rule, we proposed 
to conduct reconciliation based on claims data available 2 months after 
the end of the performance year and a second calculation based on 
claims data available 14 months after the end of a performance year to 
account for claims run-out and potential overlap with other models. The 
rationale for this proposed reconciliation process was to be able to 
make payments to, and require repayment from, CJR participant hospitals 
in a timely manner and to be able to account for overlaps in other 
models and programs. In addition, the timing of the reconciliation was 
determined giving consideration to when the other total cost of care 
programs and models conduct their reconciliations so that when they 
perform their financial calculations, they will have the information 
necessary to account for beneficiary-specific payments/repayments made 
under the CJR model as it is consistent with their policies. We intend 
to report beneficiary-specific payments and repayment amounts made for 
the CJR model in the CMS Master Database Management (MDM) System that 
generally holds payments/repayment amounts made for CMS models and 
programs. Other total cost of care models and programs can use the 
information on CJR payment/repayment amounts reported in the Master 
Database Management System in their financial calculations such as in 
their baseline or benchmark calculations or reconciliations, to the 
extent that is consistent with their policies.
    We sought comment on our proposed approach to ensuring that the 
full CJR episode payment for a beneficiary is accounted for when 
performing financial calculations for other total cost of care and 
episode-based payment models and programs. The following comments and 
responses refer to the implications of our proposal to ensure other 
models are able to account for the full CJR episode payment, including 
any reconciliation payment or repayment amount. As discussed later in 
this section, many commenters expressed concern about how this policy 
would affect ACO financial calculations. Because total cost of care 
models and programs, including the Shared Savings Program and other ACO 
models, would include the full CJR episode payment (that is, including 
any reconciliation or repayment amounts) in their annual financial 
calculations determining the total spending for a beneficiary, most of 
the savings achieved during a CJR episode would be attributed to the 
CJR model. As discussed in section III.C.7.e. of this final rule, in 
some select cases the savings amount represented by the discount 
percentage could be attributed to a Shared Savings Program or other ACO 
model entity.
    The following is a summary of comments received and our response.
    Comment: Commenters did not offer feedback on the implications of 
the proposed policy on overlap with non-ACO total cost of care models. 
Commenters generally supported the proposal to attribute episode 
savings to the CJR model when the CJR hospital is aligned to an ACO as 
a participant or provider/supplier. However, several commenters 
expressed concern about the proposed policy, requesting that savings 
earned during an episode (that is, any reconciliation payments) be 
fully attributed to the ACO--by not accounting for reconciliation 
payments in determining Medicare spending for an ACO's assigned 
beneficiaries--when the ACO and CJR participant hospital are unrelated. 
These commenters claimed that attributing savings to the ACO in such 
cases is important for the following reasons: Ensuring ACOs are able to 
earn savings during a CJR episode in some situations, supporting 
population-based health models, not penalizing providers already taking 
on risk, and testing a different method of overlap from the BPCI 
initiative. Several commenters stated that attributing savings to the 
CJR episode, regardless of whether the ACO and CJR hospital are 
related, would make ACOs unable to earn savings during any CJR episode 
and could erode the Shared Savings Program over the long-term as 
episode-based payment models grow. A commenter also asserted that the 
proposed policy could result in increased utilization of LEJR 
procedures in lieu of less costly clinical interventions.
    Response: We thank commenters for their feedback and engagement on 
the issue of how to attribute savings among various models and programs 
when overlap occurs. We also appreciate commenters' support for the 
proposal to attribute savings to the CJR episode when the CJR hospital 
is aligned to the ACO as a participant or provider/supplier.

[[Page 73392]]

    In response to commenters who requested that we fully attribute 
savings achieved (represented by reconciliation payments) during CJR 
episodes to the ACO in cases where a beneficiary is assigned to an ACO 
and initiates a CJR episode at a hospital that is not aligned to the 
ACO as a participant or provider/supplier, we decline to diverge from 
the approach we have taken in other episode payment models because we 
wish to maintain consistency and because such a change would be 
unworkable, as we discuss later in this section. There are several ways 
in which CMS potentially could attribute savings achieved during a CJR 
episode to the ACO in lieu of the CJR hospital, but after considering 
them, we have concluded that each option has far-reaching and 
undesirable implications for the policies and operations of both the 
CJR model and ACOs. The first option would involve making the ACO to 
which a beneficiary is assigned the financially responsible entity for 
the CJR episode so that reconciliation payments or repayments would 
ultimately be the responsibility of the ACO. To accomplish this, we 
would need to determine a way to make the reconciliation payment to or 
request the repayment amount from the unrelated CJR hospital on behalf 
of the ACO. This would mean that the CJR hospital would need to have a 
financial arrangement with the unrelated ACO to pay the ACO the 
reconciliation payment or the ACO would need to pay the CJR hospital if 
payment is due to Medicare. Under this approach, it would be necessary 
to conduct a separate reconciliation process for beneficiaries 
attributed to the unrelated ACO and another reconciliation for all 
other beneficiaries with CJR episodes. This would disrupt our approach 
to the financial protections discussed in section III.C.8. of this 
final rule--that is, stop-loss and stop-gain, which are intended to 
apply to all of a CJR hospital's episodes, because we would need to 
apply those thresholds separately to the episodes attributed to the 
unrelated ACO. We believe this, in turn, would be confusing for 
participant hospitals. We note that this is distinct from our policy to 
report beneficiary-specific reconciliation amounts in the MDM, as 
previously discussed in this section, which would occur after 
performing the reconciliation calculations and applying the stop-loss 
and stop-gain thresholds for a given hospital across all of its 
aggregated episodes.
    A second approach would be for all models or programs (CJR and the 
Shared Savings Program or other ACO) to conduct reconciliation 
activities for all beneficiaries as normal. The attribution of savings 
for those CJR beneficiaries assigned to an unrelated ACO could be 
accounted for through the subsequent reconciliation through the 
following process. Reconciliation payments could be recouped from CJR 
participant hospitals and paid to the ACOs in cases where a beneficiary 
was assigned to an ACO and had a CJR episode at an unrelated CJR 
hospital. However, we decline to adopt this approach because it would 
introduce significant uncertainty for CJR participant hospitals and 
could cause large fluctuations in reconciliation and repayment amounts 
between the initial reconciliation and subsequent calculation. 
Additional policies would also need to be adopted in order to ensure 
the financial reconciliation activities for the CJR model and the 
Shared Savings Program or shared savings models are able to account for 
such transactions, including further coordination of reconciliation 
timelines and policies to account for the subsequent reconciliation 
calculations. At present, we have not made any proposals for such types 
of financial arrangements between the initiatives that would allow for 
such transactions.
    A final option would be to cancel (or never initiate) a CJR episode 
for any beneficiary assigned to an unrelated ACO. Beneficiaries 
assigned to such ACOs would need to be excluded from CJR financial 
reconciliation calculations. Implementing such a policy would be 
challenging, given our plan to conduct CJR reconciliation activities 
prior to ACO financial reconciliations, in which ACOs finalize their 
list of assigned beneficiaries. It would not be possible to finalize a 
list of CJR episodes or beneficiaries until after the ACO models or the 
Shared Savings Program, as applicable, had completed their financial 
reconciliations. Additionally, CJR participant hospitals would not know 
until well after episodes were completed whether the hospital was 
actually responsible for a particular beneficiary's episode under the 
CJR model. While we note that in some cases a CJR episode could be 
canceled for other reasons, such as precedence for a BPCI PGP episode 
as discussed in III.C.7.b, in such cases we believe that CJR hospitals 
will generally be aware of the possibility of episode cancelation due 
to BPCI precedence. For example, a CJR hospital may be aware that any 
time a given PGP furnishes an LEJR procedure to a Medicare beneficiary 
in the CJR hospital, that beneficiary will most likely be in a BPCI, 
not CJR, episode. In contrast, the uncertainty of final ACO assignment 
lists prior to the CJR reconciliation activities could lead to 
significant unanticipated changes in episode attribution. In addition, 
the high volume of potential CJR episodes that would be canceled under 
this approach could potentially limit the scope of the CJR model test. 
As discussed in section I.A. of this final rule, CJR is intended to be 
a robust test of episode payment across many types of hospitals.
    Because this approach is generally inconsistent with our proposals 
for the CJR model, we decline to adopt it. In addition, if CMS were to 
pursue a policy for attributing CJR model episode savings to an ACO in 
lieu of to the CJR hospital, the ACO--not the hospital--would become 
the risk-bearing entity for some beneficiaries (those assigned to the 
ACO), which is inconsistent with our stated policy in section III.A.2. 
of this final rule to designate hospitals as financially responsible 
for all CJR episodes. As discussed in detail in section III.A.2. of 
this final rule, we believe hospitals are the most appropriate entities 
to manage the care and financial responsibility for CJR episodes. CJR 
hospitals could be unaware that beneficiaries are assigned to an ACO, 
given that their episodes would be canceled or attributed to the ACO 
only in cases where the CJR hospital is not participating in the ACO.
    Given the significant complexity such a change would introduce, and 
the changes in other CJR model and ACO policies and operations that 
would be required to implement such a change (such as CJR model 
reconciliation processes, application of financial protections for 
hospitals, and financial arrangements), we continue to believe it is 
most appropriate, consistent with the policies of both the CJR model 
and the Shared Savings Program and other ACO models, and operationally 
feasible to attribute savings achieved during a CJR episode (that is, 
reconciliation payments) to the CJR model in all cases. Doing so also 
attributes these savings to the episode that is most proximate to the 
beneficiary's care during an LEJR episode. We refer readers to section 
III.C.7.e. of this final rule for discussion of the CJR discount 
percentage and attribution of the savings represented by the discount 
percentage.
    We do not agree that our proposal to attribute savings achieved 
during CJR episodes via reconciliation payments to the CJR participant 
instead of the ACO incentivizes overutilization of LEJR procedures, 
penalizes providers taking on risk, or harms population-based health 
models. First, as discussed in

[[Page 73393]]

section III.F.2. of this final rule, we believe that the usual tools 
employed by CMS including data analysis, the process of tracking 
patterns of utilization and trends in the delivery of care, and medical 
review, a clinical audit process by which we verify that services paid 
by Medicare were reasonable and necessary in accordance with section 
1862(a)(1)(A) of the Act, will help to ensure that LEJR procedures 
under the CJR model are reasonable and necessary. Second, ACOs will be 
assured of predictable spending (at the amount of the target price, 
which would in all cases reflect a discount off total spending that 
would have occurred absent the CJR model) for care provided during CJR 
episodes, as opposed to the uncertainty of spending for beneficiaries 
not included in CJR episodes. Although ACOs may estimate they can 
achieve more savings for these beneficiaries' episodes than the 
discount factor reflected in the CJR model target price, higher savings 
are not certain. ACOs will continue to have savings opportunities for 
CJR model beneficiaries during the other 9 or so months of the ACO's 
performance year, as well as for unrelated services throughout the CJR 
model episode. This also holds true for the BPCI episodes currently in 
testing, which include 48 surgical and medical episodes, many of them 
far less frequent and with less predictable costs than the LEJR 
episodes in the CJR model. Finally, the population health focus of ACOs 
will continue to be valuable as it is much broader than the CJR model, 
with great potential for improving the overall health of Medicare 
beneficiaries and reducing costs. For example, the CJR model begins 
with admission to the inpatient hospital for the LEJR procedure, yet 
the underlying clinical condition for beneficiaries undergoing elective 
THA or TKA is most likely to be long-standing osteoarthritis. Evidence-
based conservative management of this condition may delay the THA or 
TKA or eliminate the need for it altogether, in which case a CJR model 
episode would never occur. The same concept holds true for all of the 
episode payment models currently in testing that are focused around an 
inpatient hospitalization. An ACO's expertise and skill in population 
health care management may sharply reduce the need for inpatient 
hospitalization, resulting in substantial direct savings to the ACO and 
no initiation of an episode under an episode payment model.
    Coexistence of episode-based payment models and ACOs may lead to 
improved care redesign and coordination strategies, and ultimately, 
improved quality of care for beneficiaries. While episode-based payment 
models such as the CJR model target care during a relatively short time 
span, models incorporating the total cost of care over a longer time 
period such as ACOs focus on population health and strategies to 
improve care coordination across the entire spectrum of care. In order 
to achieve the agency's goals of better care, smarter spending, and 
healthier people, CMS must engage providers in a variety of models and 
rigorously evaluate the results of such models and programs in order to 
identify specific care redesign strategies and payment mechanisms that 
are effective in reaching these goals. An important feature of such 
testing and evaluation is also understanding how various models or 
programs work alongside other initiatives. For this reason, we believe 
it is appropriate for CMS to allow for the coexistence of various 
initiatives such as episode-based payment models and ACOs. Doing so 
will provide robust information on the results of each model, including 
information on how particular payment structures fare across a variety 
of regions and in markets with varying levels of provider participation 
in other models.
    In addition, we note that although there are important structural 
differences between initiatives such as CJR and the Shared Savings 
Program or other ACO models, the underlying goals are the same. Both 
CJR and the ACO initiatives target improved quality of care and reduced 
spending during a defined period of time. Over time, provider 
organizations participating in one or both types of models will 
continue to find ways to work together to better coordinate care for 
beneficiaries, improve clinical efficiencies and reduce unnecessary 
utilization of health care services, and succeed financially under 
various types of payment models and programs.
    Finally, while we appreciate commenters' suggestion that we test a 
different method for overlap with ACOs than that used for the BPCI 
initiative, we do not intend to test a different savings attribution 
method at this time. Both BPCI and the CJR model share the common 
episode-initiating event of an inpatient hospitalization and, in the 
case of each of these models as designed, we have concluded that the 
same savings attribution policy is appropriate. As we develop other 
episode payment models in the future and consider the potential for 
expansion of successful episode payment models, we will consider the 
perspectives offered by the commenters on the CJR model in the design 
of those models as we develop overlap policies or consider changes to 
existing policies.
    For the reasons previously stated, we are finalizing our proposal 
to attribute savings achieved (via reconciliation payments) during CJR 
episodes to CJR participant hospitals. We refer readers to section 
III.C.7.e. of this final rule for discussion of the attribution of 
savings for the CJR discount percentage.
    Comment: A commenter requested that CMS not account for overlap 
between models by including reconciliation payments or savings amounts 
from one model in the financial calculations for another model. The 
commenter asserted that any double counting of savings would be offset 
by compounded efficiencies and clinical integration.
    Response: We agree with the commenter that the coexistence of 
various models and programs is likely to result in compounded 
efficiencies and clinical integration. However, under all models and 
programs we believe it is important that Medicare Trust Fund payments 
made on behalf of beneficiaries be accounted for to the extent feasible 
and that CMS not pay back savings that should be maintained by the 
Medicare program. We are finalizing various policies, as outlined 
elsewhere in this section, to minimize the double payment of savings 
achieved during CJR episodes and under other models and programs. In 
addition, we note that under the Shared Savings Program regulations at 
425.604(a)(6)(ii), CMS considers all Part A and B expenditures, 
including payments made under a demonstration or model. Given that CJR 
reconciliation payments are made from the Trust Funds, and can be 
attributed to a particular assigned beneficiary, the Shared Savings 
Program regulations require that such payments be taken into account 
for the calculation of shared savings or losses.
    Comment: Several commenters requested that CMS provide CJR 
hospitals with a list of beneficiaries prospectively aligned to ACOs. 
Commenters stated that such information would aid participants in both 
CJR and the model or program.
    Response: We appreciate the commenters' suggestion. However, 
providing such a list to CJR participants could potentially lead to 
patient steering. Because we expect hospitals and other providers and 
suppliers to engage in care redesign activities under both an ACO model 
or the Shared Savings Program and the CJR model, it would not be 
appropriate to create incentives for providers and suppliers to

[[Page 73394]]

treat beneficiaries differently based on ACO alignment status.
    Comment: Numerous commenters requested that CMS allow for Shared 
Savings Program ACOs or other current or future ACOs participating in 
risk-bearing ACO models (such as under the Next Generation ACO model) 
to opt out of the CJR model for beneficiaries aligned to those ACOs. 
Several commenters suggested allowing Track 2 or Track 3 Shared Savings 
Program ACOs that had achieved savings in previous performance years to 
opt out of the CJR model for their aligned beneficiaries.
    Response: As previously discussed, we believe it is possible and 
desirable for the multiple CMS programs and models to coexist. We also 
believe the coexistence of episode-based payment models and total cost 
of care models such as ACOs can lead to increased efficiencies for both 
initiatives and additional coordination among providers. As discussed 
in section III.A. of this final rule, we do not believe it would be 
appropriate to allow ACOs to opt their aligned hospitals out of the CJR 
model. Such a policy could significantly diminish the number of 
participants in the CJR model, eroding our ability to evaluate the CJR 
model. As discussed in section I.A. of this final rule, CJR is intended 
to test the effect of episode payment across a variety of hospitals. 
Significantly limiting the scope of the model by allowing ACOs to opt 
their hospitals out of participation in CJR would impact our ability to 
achieve the goals of the model.
    Comment: A commenter requested that if precedence is not given to 
Shared Savings Program ACOs for savings arising from CJR episodes 
initiated at unrelated hospitals, CMS should require CJR hospitals to 
sign agreements with ACOs in the same MSA to coordinate care for such 
beneficiaries. The commenter suggested such mandated agreements include 
specific requirements for the CJR hospital to coordinate a 
beneficiary's care, such as documented use of clinical practice 
guidelines and a care plan.
    Response: Requiring this type of agreement would be inappropriate 
at this time because it is inconsistent with current CMS policies and 
practices. While we offer opportunities for providers participating in 
models such as CJR to enter into financial arrangements with other 
providers and suppliers and encourage model participants to form 
clinical partnerships or financial arrangements with other providers 
and suppliers where appropriate, we do not require specific care 
coordination agreements or arrangements between entities participating 
in different CMS models or programs. For further information on our 
policies regarding agreements and relationships between providers and 
suppliers coordinating care for beneficiaries under the CJR model, we 
refer readers to section III.C.10. of this final rule for discussion of 
financial arrangements under the CJR model.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing our policy to make 
reconciliation and repayment amounts under the CJR model available to 
other models and programs to include in their financial reconciliation 
calculations.
    This policy is set forth at Sec.  510.305.
d. Accounting for PBPM Payments in the Episode Definition
    There are currently five CMS models that pay PBPM payments to 
providers for new or enhanced services as displayed in Table 17. These 
PBPM payments vary as to their funding source (Medicare Trust Funds or 
Innovation Center appropriation), as well as to their payment 
methodology.
    In general, these PBPM payments are for new or enhanced provider or 
supplier services that share the goal of improving quality of care 
overall and reducing Medicare expenditures for services that could be 
avoided through improved care coordination. Some of these PBPM payments 
may be made for services furnished to a beneficiary that is in another 
Innovation Center model at the that same time that the beneficiary is 
in a CJR LEJR episode, but the clinical relationship of services paid 
by the PBPM payments to the CJR episode will vary. For purposes of CJR, 
we consider clinically related those services paid by PBPMs that are 
for the purpose of care coordination and care management of any 
beneficiary diagnosis or hospital readmission not excluded from the CJR 
episode definition, as discussed in section III.B.2. of this final 
rule.
    We would determine whether the services paid by PBPM payments are 
excluded from the CJR episode on a model by model basis based on their 
funding source and clinical relationship to CJR episodes. If we 
determine a model's PBPM payments are for new or enhanced services that 
are clinically related to the CJR episode and the PBPM payment is 
funded through the Medicare Part A or B Trust Fund, we would include 
the services paid by the PBPM payment to the extent they otherwise meet 
the proposed episode definition for the CJR model. That is, we would 
include the clinically related services paid by a PBPM payment if the 
services would not otherwise be excluded based on the principal 
diagnosis code on the claim, as discussed in section III.B.2 of the 
proposed rule. The PBPM payments for clinically related services would 
not be excluded from the historical CJR episodes used to calculate 
target prices when the PBPM payments are present on Part A or Part B 
claims, and they would not be excluded from calculation of episode 
actual expenditures during the performance period. PBPM model payments 
that we determine are clinically unrelated would be excluded, 
regardless of the funding mechanism or diagnosis codes on claims for 
those payments. We note that in the case of PBPM model payments, 
principal diagnosis codes on a Part B claim (which are used to identify 
exclusions from CJR episodes, as discussed in section III.B. of this 
final rule), would not denote the only mechanism for exclusion of a 
service from the CJR episode. All such PBPM model payments we determine 
are clinically unrelated would be excluded as discussed in this 
proposal. Finally, all services paid by PBPM payments funded through 
the Innovation Center's appropriation under section 1115A of the Act 
would be excluded from CJR episodes, without a specific determination 
of their clinical relationship to CJR episodes. We believed including 
such PBPM payments funded under the Innovation Center's appropriation 
and not included on claims would be operationally burdensome and could 
significantly delay any reconciliation payments and repayments for the 
CJR model. In addition, because these services are not paid for from 
the Medicare Part A or B Trust Fund, we are not confident that they 
would be covered by Medicare under existing law. Therefore, we believed 
the services paid by these PBPM payments are most appropriately 
excluded from CJR episodes. Our proposal for the treatment of services 
paid through model PBPM payments in CJR episodes would pertain to all 
existing models with PBPM payments, as well as future models and 
programs that incorporate PBPM payments. We believed that this proposal 
is fully consistent with our goal of including all related Part A and 
Part B services in the CJR episodes, as discussed in section III.B.2. 
of the proposed rule.
    Under this proposal, only one of the active models displayed in 
Table 17 include services paid by PBPM payments that would not be 
excluded from CJR episodes. The MAPCP model makes PBPM payments that 
are funded

[[Page 73395]]

through the Trust Fund for new or enhanced services that coordinate 
care, improve access, and educate patients with chronic illnesses. We 
expect these new or enhanced services to improve quality and reduce 
spending for services that may have otherwise occurred, such as 
hospital readmissions, and consider them to be clinically related to 
CJR episodes because the PBPM payments would support care coordination 
for medical diagnoses that are not excluded from CJR episodes. Thus, we 
proposed that services paid by PBPM payments under the MAPCP model not 
be excluded from CJR episodes to the extent they otherwise meet the 
proposed episode definition. While the OCM model will pay for new or 
enhanced services through PBPM payments funded by the Medicare Part B 
Trust Fund, we did not believe these services are clinically related to 
CJR episodes. The OCM model incorporates episode-based payment 
initiated by chemotherapy treatment, a service generally reported with 
ICD-9-CM and ICD-10-CM codes that are specifically excluded from the 
CJR episode definition in section III.B.2. of this final rule. We 
believed the care coordination and management services paid by OCM PBPM 
payments would be focused on chemotherapy services and their 
complications, so the services would be clinically unrelated to CJR 
episodes. Therefore, we proposed that services paid by PBPM payments 
under the OCM model be excluded from CJR episodes. Similarly, we 
proposed to exclude services paid by PBPM payments under the Medicare 
Care Choices Model (MCCM) from the CJR episode spending calculations. 
The MCCM focuses on providing care coordination and palliative care 
services for beneficiaries with certain conditions certified as 
terminally ill with a life expectancy of 6 months or less that have not 
elected the Medicare hospice benefit. The MCCM seeks to test whether 
providing palliative care services, without beneficiaries having to 
forgo curative care, incentivizes beneficiaries to elect hospice 
sooner. This is aimed at addressing the large percentage of hospice 
beneficiaries who elect the hospice benefit too late to fully benefit 
from the range of services that hospice has to offer at end of life. 
Since the purpose of the MCCM is to test whether providing palliative 
care services to beneficiaries who are otherwise eligible to elect the 
Medicare hospice benefit without requiring the beneficiary to forgo 
curative care results in beneficiaries electing the hospice benefit 
sooner, we are not including such payments in the CJR episode spending 
calculations at this time. In addition, unlike the regular hospice 
benefits, which are furnished to beneficiaries in lieu of curative care 
and which therefore can be coordinated during a LEJR episode, as 
described in section III.B.2.b. of this final rule, the services 
furnished under the MCCM will be in addition to curative services. We 
note that we are including such curative services in the episode, as 
they are consistent with our episode definition described in III.B.2.of 
this final rule, but not the services represented by the PBPM, which 
are provided in addition to curative services. Beneficiaries electing 
the hospice benefit could have lower episode spending because they have 
forgone curative care, however beneficiaries included in the MCCM may 
have higher episode spending because they are receiving both curative 
care and the services represented by the PBPM. We do not want to create 
incentives that deter providers from enrolling beneficiaries in the 
MCCM model. We note that Part A and Part B services would be included 
in episodes in both the historical and performance periods used for 
spending calculations, while the inclusion of PBPM payments would only 
occur for those time periods (historical and performance periods) 
during which the relevant model was active. Given that the MCCM was not 
active during the CJR initial historical period, if we were to include 
MCCM PBPM payments they would only be included in CJR performance 
period spending calculations. Excluding MCCM payments also ensures that 
we do not incentivize providers to avoid enrolling beneficiaries in the 
MCCM to minimize the effect of the PBPM payment amounts on episode 
spending during CJR performance periods.
    We acknowledge there may be new models not included in Table 17 
that could incorporate a PBPM payment for new or enhanced services. We 
would plan to make our determination about whether services paid by a 
new model PBPM payment that is funded under the Medicare Trust Funds 
are clinically related to CJR episodes through the same subregulatory 
approach that we are proposing to use to update the episode definition 
(excluded MS-DRGs and ICD-10-CM diagnosis codes). We would assess each 
model's PBPM payment to determine if it would be primarily used for 
care coordination or care management services for excluded clinical 
conditions under the LEJR episode definition for CJR based on the 
standards we proposed to use to update the episode definition that are 
discussed in section III.B.2 of the proposed rule.
    If we determine that the PBPM payment would primarily be used to 
pay for services to manage an excluded clinical condition, we would 
exclude the PBPM payment from the CJR episode on the basis that it pays 
for unrelated services. If we determine that the PBPM payment could 
primarily be used for services to manage an included clinical 
condition, we would include the PBPM payment in the CJR episode if the 
diagnosis code on the claim for the PBPM payment was not excluded from 
the episode, following our usual process for determining excluded 
claims for Part B services in accordance with the episode definition 
discussed in section III.C.2 of the proposed rule. We would post our 
proposed determination about whether the PBPM payment would be included 
in the episode to the CMS Web site to allow for public input on our 
planned application of these standards, and then adopt changes to the 
overlap list with posting to the CMS Web site of the final updated list 
after our consideration of the public input.
    We sought comment on our proposals to account for Innovation Center 
model PBPM payments under CJR.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter supported the proposal to exclude CPCi, OCM, 
and MCCM PBPM payments and the proposal to seek future public input on 
PBPM payments that are clinically related to CJR.
    Response: We thank the commenter for support of our proposal to 
exclude CPCi, OCM, and MCCM PBPM payments from CJR episode spending 
calculations.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposed policy, without modification, 
to include PBPM payments that are funded with Trust Fund dollars, if 
the services would not otherwise be excluded under the model episode 
definition. Included PBPM payments would be included in CJR model 
financial calculations only for historical and performance periods 
during which the model with a PBPM is active and the PBPM is funded 
with Trust Fund dollars.
    This policy is set forth at Sec.  510.200.
e. Accounting for Overlap With Medicare Initiatives Involving Shared 
Savings and Total Cost of Care Models
    In addition to the Medicare Shared Savings Program under section 
1899 of the Act, there are several ACO and other Innovation Center 
models that make or will make, once implemented, providers

[[Page 73396]]

accountable for total cost of care over 6 to 12 months, including the 
Pioneer ACO Model, Next Generation ACO Model, Comprehensive ESRD Care 
(CEC) Model, CPCi, OCM, and the MAPCP Demonstration. Some of these are 
shared savings models (or programs, in the case of the Shared Savings 
Program), while others do not involve shared savings but still hold 
participating providers accountable for the total cost of care during a 
defined episode of care, such as OCM. Note that as discussed in section 
III.C.7.a. of this final rule, ``total cost of care'' models refer to 
models in which episodes or performance periods include participant 
financial responsibility for all Part A and Part B spending, as well as 
some Part D spending in select cases. Each of these payment models 
holds providers accountable for the total cost of care over the course 
of an extended period of time or episode of care by applying various 
payment methodologies. In the proposed rule, we stated our belief that 
it is important to simultaneously allow beneficiaries to receive care 
under broader population-based and other total cost of care models, as 
well as episode payment models that target a specific episode of care 
with a shorter duration, such as CJR. Allowing beneficiaries to receive 
care under both types of models may maximize the potential benefits to 
the Medicare Trust Funds and participating providers and suppliers, as 
well as beneficiaries. Beneficiaries stand to benefit from care 
redesign that leads to improved quality for LEJR episodes of care even 
while also receiving care under these broader models, while entities 
that participate in other models and programs that assess total cost of 
care stand to benefit, at least in part, from the cost savings that 
accrue under CJR. For example, a beneficiary receiving an LEJR 
procedure may benefit from a hospital's care coordination efforts with 
regard to care during the inpatient hospitalization. The same 
beneficiary may be attributed to a primary care physician affiliated 
with an ACO who is actively engaged in coordinating care for all of the 
beneficiary's clinical conditions throughout the entire performance 
year, beyond the 90-day post-discharge LEJR episode.
    We proposed that a beneficiary could be in a CJR episode, as 
defined in section III.B. of this final rule, by receiving an LEJR 
procedure at a CJR hospital, and also attributed to a provider 
participating in a model or program in Table 17. For example, a 
beneficiary may be attributed to a provider participating in the 
Pioneer ACO model for an entire performance year, as well as have a CJR 
episode during the ACO's performance year. Each model incorporates a 
reconciliation process, where total included spending during the 
performance period or episode are calculated, as well as any potential 
savings achieved by the model or program. Given that we proposed to 
allow for such beneficiary overlap, we stated our belief that it would 
be important to account for savings under CJR and the other models and 
programs with potential overlap in order that CMS can apply the 
respective individual savings-related payment policies of the model or 
program, without attributing the same savings to more than one model or 
program. In the proposed rule, we stated our belief that when overlap 
occurs, it is most appropriate to attribute Medicare savings accrued 
during the CJR time period (hospitalization plus 90 days post-
discharge) to CJR to the extent possible. The CJR episode has a shorter 
duration and is initiated by a major surgical procedure, requiring an 
inpatient hospitalization. In contrast, the total cost of care models 
listed in Table 17 incorporate 6 to 12 month performance periods for 
participants and, in general, have a broader focus on beneficiary 
health. Our intention was to ensure that CJR episodes are attributed 
the full expected savings to Medicare to the extent possible. As such, 
we proposed the following policies to ensure that other programs and 
models are able to account for the reconciliation payments paid to CJR 
hospitals to the extent possible prior to performing their own 
reconciliation calculations and that, in all appropriate circumstances, 
the CJR model or the other program or model would make an adjustment 
for savings achieved under the CJR model and partially paid back 
through shared savings/performance payments under other initiatives to 
ensure that the full CJR model savings to Medicare is realized.
    We proposed that the total cost of care calculations under non-ACO 
total cost of care models would be adjusted to the extent feasible to 
account for beneficiaries that are aligned to participants in the model 
and whose care is included in CJR in order to ensure that the savings 
to Medicare achieved under CJR (the discount percentage) are not paid 
back under these other models through shared savings or other 
performance-based payment. Thus, the non-ACO total cost of care models 
would adjust their calculations to ensure the CJR discount percentage 
is not paid out as savings or other performance-based payment to the 
other model participants. As previously discussed, we believe that the 
efficiencies achieved during the CJR episode should be credited to the 
entity that is closest to that care for the episode of care in terms of 
time, location, and care management responsibility, rather than the 
broader entity participating in a total cost of care model that spans a 
longer duration. We proposed that the non-ACO total cost of care models 
to which this policy would apply would include CPCi, OCM, and MAPCP. We 
sought comment on our proposal to account for overlap with those non-
ACO total cost of care models and any other current or forthcoming 
models.
    We received no comments on our proposed policy to account for the 
potential for the discount percentage to be paid out as savings by a 
non-ACO total cost of care model.
    We proposed a different policy for accounting for overlap with 
Shared Savings Program and other ACO models. We noted that given the 
operational complexities and requirements of the Shared Savings Program 
reconciliation process, it would not be feasible for the Shared Savings 
Program to make an adjustment to account for the discount to Medicare 
under a CJR episode under existing program rules and processes. 
Additionally, for programmatic consistency across the Shared Savings 
Program and other ACO models, given that our ACO models generally are 
tested for the purpose of informing future potential changes to the 
Shared Savings Program, in the proposed rule we stated our belief that 
the ACO model overlap adjustment policy should be aligned with the 
Shared Savings Program policy. Thus, we proposed that under CJR, we 
would make an adjustment to the reconciliation amount if available to 
account for any of the applicable discount for an episode resulting in 
Medicare savings that is paid back through shared savings under the 
Shared Savings Program or any other ACO model, but only when a CJR 
participant hospital also participates in the ACO and the beneficiary 
in the CJR episode is also assigned to that ACO. This adjustment would 
be necessary to ensure that the applicable discount under CJR is not 
reduced because a portion of that discount is accounted for in shared 
savings to the ACO and thus, indirectly, is paid back to the hospital.
    However, we proposed not to make an adjustment under CJR when a 
beneficiary receives an LEJR procedure at a participant hospital and is 
assigned

[[Page 73397]]

to an ACO in which the hospital is not participating. While this 
proposal would leave overlap unaccounted for in such situations, we did 
not believe it would be appropriate to hold responsible for repayment 
the hospital that managed the beneficiary during the episode through a 
CJR adjustment, given that the participant hospital may have engaged in 
care redesign and reduced spending during the CJR episode and may be 
unaware that the beneficiary is also assigned to an ACO. However, we 
recognized that as proposed this policy would allow an unrelated ACO 
full credit for the Medicare savings achieved (via the discount 
percentage) during the episode. The evaluation of the CJR model, as 
discussed in section IV. of this final rule, would examine overlap in 
situations where there is overlap between ACOs and CJR to the extent 
feasible and the potential effect on Medicare savings.
    We note that our proposed policy would entail CJR reclaiming from 
the participant hospital any discount percentage paid out as shared 
savings under the Shared Savings Program or ACO models only when the 
hospital is participating in an ACO as a participant or provider/
supplier and the beneficiary is assigned to that ACO, while other total 
cost of care models such as CPCi would adjust for the discount 
percentage in their calculations to the extent feasible. While it is 
operationally feasible for smaller total cost of care models in 
testing, such as CPCi, to make an adjustment to account for any CJR 
discount percentage paid out as sharing savings or other performance-
based payments, the operational complexities and requirements of the 
large permanent Medicare ACO program, the Shared Savings Program, make 
it infeasible for that program to make an adjustment in such cases, and 
in the proposed rule we stated our belief that other ACO models in 
testing that share operating principles with the Shared Savings Program 
should follow the same policies as the Shared Savings Program 
adjustment for certain overlapping ACO beneficiaries. As the landscape 
of CMS models and programs changes, we may revisit this policy through 
future rulemaking.
    We sought comment on our proposal for adjustments to account for 
overlap of the discount percentage between CJR and ACO models or 
programs.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter suggested that the proposal could create a 
disincentive for health systems to expand participation in ACO 
initiatives due to the more favorable treatment of non-ACO 
participating hospitals. The commenter also requested that CMS not 
recoup the portion of the discount percentage paid out as savings, 
regardless of whether the CJR hospital is participating in an ACO as a 
participant or provider/supplier.
    Response: As discussed in section III.C.7.c. of this final rule, we 
proposed to make CJR reconciliation and repayment amounts available for 
other models and programs to include in their financial calculations. 
As commenters noted, the effect of this proposed policy is that savings 
achieved during the CJR episode would generally be attributed to the 
CJR model. This proposed policy does not distinguish between ACO and 
non-ACO entities. In contrast, this section outlines our proposal to 
make an adjustment to CJR reconciliation amounts in certain situations 
when a portion of the CJR discount percentage was paid out as savings 
to an ACO.
    For purposes of limiting the instances in which a portion of the 
discount percentage is doubly counted as savings, we proposed the 
following. When a beneficiary has a CJR episode and is also assigned to 
an ACO, it is possible that a portion of the CJR discount percentage 
could be paid out as savings through the ACO's financial 
reconciliation. The reconciliation or repayment amounts shared with 
other models for incorporation into their financial calculations are 
based on the episode target price, which does not include the spending 
amount equal to the discount percentage as the discount represents 
potential savings to Medicare. We proposed that when overlap occurs 
between CJR hospitals that are participating in an ACO model or program 
as a participant or provider/supplier, we would make an adjustment to 
the reconciliation payment (if available) to account for the portion of 
the discount that was paid to the ACO as shared savings. For example, 
through the subsequent reconciliation calculation, described in section 
III.C.6. of this final rule we would reduce a CJR hospital's 
reconciliation payment by the dollar amount that would have been saved 
by CMS under the applicable CJR discount percentage, but was determined 
to have been paid to the ACO as shared savings. In cases where the CJR 
hospital is not participating in the Shared Savings Program or an ACO 
model, we would not make such an adjustment. We believe it is 
reasonable to minimize the situations in which the CJR discount 
percentage is double counted as savings. We also believe our policy not 
to make this adjustment in the case of an unrelated ACO is appropriate, 
given that the ACO may be unaware of the beneficiary's care pathway or 
that the beneficiary's LEJR episode is included in the CJR model 
because the CJR hospital and the ACO are not related. We also note that 
while making an adjustment to a CJR hospital's reconciliation payment 
is within the scope of the CJR model, adjusting shared savings amounts 
for ACO entities would necessitate changes to agreements to the Shared 
Savings Program and other ACO model agreements and methodologies. For 
the reasons previously stated, we believe unrelated ACOs should not be 
required to repay the amount of the CJR discount percentage included in 
the ACO's financial reconciliation.
    We do not believe our proposed policy would create a disincentive 
for health systems to participate in an ACO. Hospitals that are not 
participating in the Shared Savings Program or other ACO models are 
treated the same as those participating in an ACO for purposes of 
determining attribution of savings during the CJR episode represented 
by the reconciliation payments, as previously discussed in section 
III.C.7.c. of this final rule. As discussed in that section, after 
performing the financial reconciliation calculations for CJR, we will 
put the reconciliation or repayment amounts, as applicable, in a shared 
repository for other models or programs to use in their own financial 
calculations. The reconciliation or repayment amounts would be taken 
into account as if they were FFS payments made for a covered service 
furnished to a beneficiary, to the extent that such inclusion of 
payments is consistent with the other model or program's policies. In 
applying this policy, we will not make a distinction between hospitals 
or other providers based on participation in an ACO or other 
initiative. The reconciliation or repayment amounts will be available 
for all other models or programs to use in their financial calculations 
as appropriate. In cases where the other initiative includes the CJR 
reconciliation or repayment amounts in their financial calculations, 
the savings achieved during an episode would be attributed to CJR, 
except in cases where the discount percentage is paid out as savings to 
another model or program participant, as discussed later in this 
section. In addition, in cases where some or all of the CJR discount 
percentage is paid out to an ACO hospital through the ACO's financial 
reconciliation, making an adjustment to the reconciliation payment 
where available to account for the discount percentage does not 
penalize the hospital participating in an ACO. Such

[[Page 73398]]

adjustment ensures that the discount percentage is not paid out as 
savings to the same or a related entity.
    Comment: A commenter questioned the methodology CMS proposed for 
accounting for such overlap, requesting that the calculation be pro-
rated for the 90-day episode and only include the portion related to 
CJR model participants.
    Response: Although our calculations to determine reconciliation or 
repayment amounts would be done in aggregate across all CJR episodes 
for a given participants, overlap adjustments and calculations would be 
done at the beneficiary level. Therefore, we do not believe proration 
is necessary.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, without modification, to 
account for overlap with non-ACO total cost of care models and ACO 
models and programs. In cases where a portion of the CJR discount 
percentage is paid out as savings to a non-ACO model participant, the 
other model will make an adjustment to their financial reconciliation 
calculation to the extent feasible. In the case of such overlap with an 
entity participating in the Shared Savings Program or an ACO model, the 
CJR model would require repayment of the portion of the discount 
percentage paid out as savings through the subsequent reconciliation 
process, by making an adjustment to the reconciliation amount if 
available. If a CJR hospital did not earn a reconciliation payment, the 
adjustment would not be made. That is, we will not increase the amount 
of a hospital's repayment amount in order to account for the portion of 
the discount percentage paid out as savings. This adjustment would only 
be undertaken when the CJR hospital is also aligned to an ACO as a 
participant or a provider/supplier and the beneficiary in the CJR 
episode was assigned or aligned to the ACO. We may revisit our approach 
to accounting for overlap with the Shared Savings Program and ACO 
models in future rulemaking.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing our proposal, without 
modification, for non-ACO total cost of care models to adjust their 
financial reconciliation calculations to the extent feasible to ensure 
that a portion of the CJR discount is not paid out as savings under 
that model. We are also finalizing our proposal, without modification, 
to make an adjustment to a CJR hospital's subsequent reconciliation 
calculation, when the CJR hospital also participates in the ACO and the 
beneficiary in the CJR episode is also assigned to that ACO, to account 
for when a portion of the CJR discount percentage is paid out as shared 
savings the ACO.
    This policy is set forth at Sec.  510.305.
8. Limits or Adjustments to Hospital Financial Responsibility
a. Overview
    As discussed in section III.A. of the proposed rule, we proposed 
designating as the financially responsible providers in CJR all acute 
care hospitals paid under the IPPS that are located in the selected 
geographic areas for this test of 90-day post-discharge LEJR episodes, 
with the exception of some hospitals that we proposed to exclude 
because of participation in BPCI (Models 1, 2, or 4) for LEJR episodes. 
We are interested in ensuring a broad test of episode payment for this 
clinical condition among different types of hospitals, including those 
who may not otherwise choose to participate in an episode payment 
model. Many of the participant hospitals would likely be key service 
providers in their communities for a variety of medical and surgical 
conditions extending well beyond orthopedic procedures. We want to gain 
experience with this model before extending it to hospitals in uncommon 
circumstances. In addition, we acknowledge that hospitals designated 
for participation in CJR currently vary with respect to their readiness 
to function under an episode payment model with regard to their 
organizational and systems capacity and structure, as well as their 
beneficiary population served. Some hospitals may more quickly be able 
to demonstrate high quality performance and savings than others, even 
though we proposed that the episode target prices be based 
predominantly on the hospital's own historical episode utilization in 
the early years of CJR.
    We also note that providers may be incentivized to excessively 
reduce or shift utilization outside of the CJR episode, even with the 
quality requirements discussed in section III.C.5. of the proposed 
rule. In order to mitigate any excessive repayment responsibility for 
hospitals or reduction or shifting of care outside the episode, 
especially beginning in performance year 2 of the model when we 
proposed to begin to phase in responsibility for repaying Medicare for 
excess episode spending, we proposed several specific policies that are 
also referenced in section III.C.6.b. of the proposed rule.
b. Limit on Raw NPRA Contribution to Repayment Amounts and 
Reconciliation Payments
(1) Limit on Raw NPRA Contribution to Repayment Amounts
    When hospital repayment responsibility begins in the second 
performance year of CJR, under this final rule, hospitals would be 
required to repay Medicare for episode expenditures that are greater 
than the applicable target price. As discussed in the section III.C.3.c 
of the proposed rule regarding our proposed pricing adjustment for high 
payment episodes, hospitals participating in CJR would not bear 
financial responsibility for actual episode payments greater than a 
ceiling set at two standard deviations above the mean regional episode 
payment. Nevertheless, hospitals would begin to bear repayment 
responsibility beginning in performance year 2 for those episodes where 
actual episode expenditures are greater than the target price up to the 
level of the regional episode ceiling. In aggregate across all 
episodes, the money owed to Medicare by a hospital for actual episode 
spending above the applicable target price could be substantial if a 
hospital's episodes generally had high payments. As an extreme example, 
if a hospital had all of its episodes paid at two standard deviations 
above the mean regional episode payment, the hospital would need to 
repay Medicare a large amount of money, especially if the number of 
episodes was large.
    To limit a hospital's overall repayment responsibility for the raw 
NPRA contribution to the repayment amount under this model, we proposed 
a 10 percent limit on the raw NPRA contribution to the repayment amount 
in performance year 2 and a 20 percent limit on the raw NPRA 
contribution to the repayment amount in performance year 3 and 
subsequent years. Hereinafter we refer to these proposed repayment 
limits as stop-loss limits. In performance year 2 as we phase in 
repayment responsibility, the hospital would owe Medicare under the 
proposed CJR payment model no more than 10 percent of the hospital's 
target price for the anchor MS-DRG multiplied by the number of the 
hospital's CJR episodes anchored by that MS-DRG during the performance 
year, for each anchor MS-DRG in the model. Ten percent provides an even 
transition with respect to maximum repayment amounts from performance 
year 1, where the hospital bears no repayment responsibility, to the 
proposed stop-loss limit in performance years 3 through 5 of 20 
percent. In performance years 3

[[Page 73399]]

through 5 when repayment responsibility is fully phased in, no more 
than 20 percent of the hospital's target price for the MS-DRG 
multiplied by the number of the hospital's CJR episodes with that MS-
DRG in that performance year would be owed by the hospital to Medicare 
under the proposed CJR payment model. The proposed stop-loss percentage 
of 20 percent would be symmetrical in performance years 3 through 5 
with the proposed limit on the raw NPRA contribution to reconciliation 
payments discussed in the following section.
    We had believed that a stop-loss limit of 20 percent is appropriate 
when the hospital bears full repayment responsibility, based on our 
assessment of the changes in practice pattern and reductions in quality 
of care that could lead to significant repayment responsibility under 
the CJR model, as compared to historical LEJR episode utilization. We 
estimate that the IPPS payment for the anchor hospitalization makes up 
approximately 50 percent of the episode target price, and we expect 
that the anchor hospitalization offers little opportunity for 
efficiencies to be achieved by reducing Medicare expenditures. In 
contrast, we expect significant episode efficiencies could be achieved 
in the 90 days following discharge from the anchor hospitalization 
through reductions in related hospital readmissions and increased 
utilization of appropriate lower intensity PAC providers, specifically 
increased utilization of home health services and outpatient therapy 
and reduced utilization of SNFs and IRFs. Hospital readmissions and 
facility-based PAC increase the typical Medicare episode payment by 30 
to 45 percent over episodes that do not include these services. The 
proposed 20 percent stop-loss limit related to the total episode 
payment corresponds to approximately 40 percent of episode payment for 
the post-discharge period only, where the major opportunities for 
efficiency through care redesign occur. Thus, taking into consideration 
the historical patterns used to set target prices, we believed it is 
reasonable to hold participant hospitals responsible for repayment of 
actual episode spending that is up to 20 percent greater than the 
target price. If a participant hospital's repayment amount due to the 
raw NPRA would otherwise have exceeded the stop-loss limit of 20 
percent (comparable to 40 percent of Medicare payment for the post-
discharge period), the hospital's episodes would include much poorer 
episode efficiency as compared to the hospital's historical episodes, 
with large proportions of episodes including related readmissions and 
facility-based PAC, costly services that we do not expect to be 
necessary for most beneficiaries whose care is well-coordinated and 
appropriate throughout a high quality LEJR episode.
    The following hypothetical example illustrates how the proposed 
stop-loss percentage would be applied in a given performance year for 
the episodes of a participant hospital. In performance year 3, a 
participant hospital had ten episodes triggered by MS-DRG 469, with a 
target price for these episodes of $50,000. The hospital's episode 
actual spending for these ten episodes was $650,000. The hospital's raw 
NPRA that would otherwise be $150,000 ((10 x $50,000)-$650,000) would 
be capped at the 20 percent stop-loss limit of $100,000 (0.2 x 10 x 
$50,000) so the hospital would owe CMS $100,000, rather than $150,000. 
In performance year 3, the same participant hospital also has 100 
episodes triggered by MS-DRG 470, with a target price for these 
episodes of $25,000. The hospital's episode actual spending for these 
100 episodes was $2,800,000. The hospital's raw NPRA would be $300,000 
((100 x $25,000)-$2,800,000), an amount that would be due to CMS in 
full as it would not be subject to the 20 percent stop-loss limit of 
$500,000 (0.2 x 100 x $25,000).

[[Page 73400]]

[GRAPHIC] [TIFF OMITTED] TR24NO15.012

    As illustrated in Figure 4 where we display results from our 
national model for the proposed CJR performance year 2 policies when 
the phase-in of repayment responsibility begins and under the 
assumption that utilization remains constant, we estimate that the 10 
percent stop-loss limit would impact the amount of repayment due to the 
raw NPRA for about 11 percent of hospitals. For performance year 3, the 
20 percent stop-loss limit would affect significantly fewer hospitals, 
only about 3 percent. We note that the stop-loss limit for years 3 
through 5 where repayment responsibility is fully implemented is 
consistent with the BPCI Model 2 policy. While Figure 3 assumes no 
change in utilization patterns, under the model test we expect that the 
proposed stop-loss limits could actually affect a smaller percentage of 
hospitals in each performance year because we expect LEJR episode care 
redesign incentivized by the model's financial opportunities to 
generally reduce unnecessary utilization, thereby reducing actual 
episode spending and, correspondingly, any associated repayment amounts 
due to the raw NPRA. We note that we would include any post-episode 
spending amount due to Medicare according to the policy proposed in 
section III.C.8.d. of the proposed rule in assessing the total 
repayment amount due to the raw NPRA against the stop-loss limit for 
the performance year to determine a hospital's total payment due to 
Medicare, if applicable.

We sought comment on our proposal to adopt a 10 percent stop-loss limit 
in performance year 2 and 20 percent stop-loss limit in performance 
year 3 and beyond in CJR as hospital repayment responsibility for 
excess episode spending above the target price is phased in and then 
maintained in the model. The following is a summary of the comments 
received and our responses.
    Comment: Several commenters commented on our proposal for stop-loss 
limits and expressed support of our proposal to establish stop-loss 
limits on financial responsibility to 10 percent in year 2, 20 percent 
in years 3 through 5 that aligned with BPCI and comments in support of 
the premise of phase-in risk under a mandatory model. However, we also 
received several comments in opposition of our approach for stop-loss 
limits. Several commenters requested that we either delay downside risk 
until Performance Year 3 or set the maximum stop-loss limit at 10 
percent, as opposed to 20 percent. Several commenters suggested that we 
phase in downside risk more slowly with various permutations of the 
transition to downside risk such as 3 percent in year 3, 6 percent in 
year 4 and 10 percent in year 5 which aligned more with the Shared 
Savings Program Track 2 or that we phase in risk with no repayment in 
year 1 and 2 and stop loss limit set at intervals leading up to 10 
percent by performance year 5. Commenters found the stop loss limit to 
be high considering that the IPPS payment for an LEJR episode comprised 
50 percent of a payment, so a 10 percent stop-loss limit would actually 
represent 20 percent of DRG payment and a 20 percent stop-loss limit 
would represent 40 percent of DRG payment. Additionally, a commenter 
was concerned that if hospitals only treat

[[Page 73401]]

outlier cases, episode costs could be highly skewed, resulting in 
repayment. Commenters requested for a more gradual transition to 
downside risk and a lower stop-loss limit to allow for hospitals to 
have more time to gain experience under a mandatory model. 
Additionally, commenters were concerned with the downward pressures 
faced by hospitals under Medicare reimbursement such as penalties under 
HRRP, HAC, HITECH and sequestration, and that hospitals need to manage 
moving to ICD-10 and changes under MACRA. The commenter requested that 
given the other competing Medicare payment policies that are affecting 
hospitals, we should provide for a lower stop-loss limit.
    Response: We thank the commenters for the concerns they raised 
regarding the proposed stop-loss limit. As described earlier in this 
final rule, we acknowledge that it may take time for the hospitals to 
make changes in response to this model and to assume downside risk. We 
have made several changes in response to such concerns, including 
delaying the start date of this model to April 1, 2016. Additionally, 
we have provided safeguards for high cost outlier episodes where we are 
finalizing capping episodes that are two standard deviations above the 
mean regional price when determining episode target prices and actual 
episode payments. Similarly, we agree with commenters that we can 
provide a more gradual transition to downside risk as hospitals make 
changes to infrastructure, care coordination, and financial alignment 
in response to this model. Additionally, we believe a gradual 
transition to downside risk may reduce the effect of random variation 
in the early years of the model that could result in highly skewed 
episode costs that would result in hospital repayment. We are 
finalizing our policy for no downside risk in Performance Year 1, a 
stop-loss limit of 5 percent in Performance Year 2, a stop-loss limit 
of 10 percent in Performance Year 3 and full downside risk with a stop-
loss limit of 20 percent in Performance Years 4 and 5. We believe that 
as we move to regional pricing, hospitals will gain more experience 
with the model and reduce unnecessary utilization, allowing them better 
manage additional downside risk capped at 20 percent in Performance 
Year 4 and 5.
    Comment: We received a comment that we should align our stop-loss 
limit policy with BPCI such that we allow hospitals to choose their 
level of risk among different tracks such as 5 percent stop loss/stop 
gain, 10 percent stop loss/stop gain or 20 percent stop loss/stop gain 
limits. The commenter suggested that as hospitals have more control 
over the risk they take on, they can get more benefit in terms of stop-
gain. Commenter suggested that, similar to BPCI, hospitals should be 
able to change their risk level on a quarterly basis.
    Response: While this may be similar to how the BPCI model operates, 
we do not believe it would be appropriate to allow for that option at 
this time. One of the goals of this model is to evaluate the 
generalizability of a bundled payment model for selected hospitals and 
we are interested in evaluating the effects on hospitals for assuming 
financial responsibility of an episode of care that include downside 
risk with limits over time. If we allow hospitals to choose their risk 
level over time, it adds to the operational complexity of this model 
and may limit the generalizability of the findings.
    Comment: We received a comment that we should use dollar thresholds 
to set the stop-loss limits as opposed to percentages. The commenter 
was concerned that depending on the amount of volume at a hospital, the 
proposed 10 percent stop-loss limit in Performance Year 2 or 20 percent 
stop-loss limit in Performance Year 3 through 5 could be difficult to 
absorb.
    Response: We believe that it would be operationally complex to 
establish a stop-loss limit based on a dollar amount given the payment 
policies finalized in this rule. It would be difficult to establish a 
dollar amount stop-loss limit as selected hospitals have varying 
volumes for LEJR episodes that we are not able to predict over the 
course of the model. Additionally, we are finalizing to adjust target 
episode prices twice a year in accordance with updates to the Medicare 
FFS schedules so it would be challenging to additionally adjust stop-
loss limits based on a dollar amount. We believe the percentage based 
stop-loss limits are easier for the public to understand.
    Final Decision: After consideration of the public comments we 
received, we are finalizing to apply stop-loss limits of 5 percent in 
performance year 2, 10 percent in performance year 3 and 20 percent for 
performance years 4 and 5. This is a change from the proposed rule 
where we had proposed to apply stop-loss limits of 10 percent in 
Performance Year 2 and 20 percent in Performance Years 3 through 5. We 
are codifying these changes at Sec.  510.305(e)(1)(v)(C).
(2) Limit on Raw NPRA Contribution to Reconciliation Payments
    We believed a limit on reconciliation payments for CJR would be 
appropriate for several reasons. Due to the proposed nature of the CJR 
model during performance year 1, when hospitals have no repayment 
responsibility for excess episode spending above the target price, CMS 
bears full financial responsibility for Medicare actual episode 
payments for an episode that exceed the target price, and we believed 
our responsibility should have judicious limits. Therefore, we believed 
it would be reasonable to cap a hospital's reconciliation payment due 
to the raw NPRA as a percentage of episode payment on the basis of 
responsible stewardship of CMS resources. In addition, we note that 
beginning in performance year 1, participant hospitals would be 
eligible for reconciliation payments due to the NPRA if actual episode 
expenditures are less than the target price, assuming the proposed 
quality thresholds are met. This proposal for reconciliation payments 
due to the NPRA provides a financial incentive to participant hospitals 
from the beginning of the model to manage and coordinate care 
throughout the episode with a focus on ensuring that beneficiaries 
receive the lowest intensity, medically appropriate care throughout the 
episode that results in high quality outcomes. Therefore, we also 
believed it would be reasonable to cap a hospital's reconciliation 
payment due to the raw NPRA based on concerns about potential excessive 
reductions in utilization under the CJR model that could lead to 
beneficiary harm.
    In determining what would constitute an appropriate reconciliation 
payment limit due to the raw NPRA, we believed it should provide 
significant opportunity for hospitals to receive reconciliation 
payments for greater episode efficiency that includes achievement of 
quality care and actual episode payment reductions below the target 
price, while avoiding creating significant incentives for sharply 
reduced utilization that could be harmful to beneficiaries. Thus, for 
all 5 performance years of the model, we proposed a limit on the raw 
NPRA contribution to the reconciliation payment of no more than 20 
percent of the hospital's target prices for each MS-DRG multiplied by 
the number of the hospital's episodes for that MS-DRG. Hereinafter we 
refer to this proposed reconciliation payment limit as the stop-gain 
limit. This proposed stop-gain limit is parallel to the 20 percent 
stop-loss limit proposed for performance year 3 and beyond. We believed 
that a parallel stop-gain and stop-loss limit is important to provide 
proportionately similar protections to CMS and participant hospitals 
for their financial

[[Page 73402]]

responsibilities under CJR, as well as to protect the health of 
beneficiaries.
    As illustrated in Figure 3 where we displayed results from our 
national model for the proposed CJR performance year 2 policies under 
the assumption that utilization remains constant, we estimate that the 
20 percent stop-gain limit would impact the reconciliation payment 
amount due to the raw NPRA of almost no hospitals. We note that a stop-
gain limit of 20 percent is consistent with BPCI Model 2 policy. While 
Figure 3 assumes no change in utilization patterns, under the model 
test we expect that the proposed stop-gain limit could actually affect 
a few hospitals in each performance year because we expect LEJR episode 
care redesign incentivized by the model's financial opportunities to 
generally reduce unnecessary utilization, thereby reducing actual 
episode spending and, correspondingly, increasing any associated 
reconciliation payment amounts due to the raw NPRA. Nevertheless, we 
believed the proposed stop-gain limit of 20 percent provides 
substantial opportunity for hospitals to achieve savings over the 
target price without excessive reductions in utilization, and those 
savings would be paid back to hospitals fully in most cases without 
being affected by the stop-gain limit. We sought comment on our 
proposal to adopt a 20 percent stop-gain limit for all performance 
years of CJR.
    We note that we plan to monitor beneficiary access and utilization 
of services and the potential contribution of the stop-gain limit to 
any inappropriate reduction in episode services. We refer readers to 
section III.F. of the proposed rule for our proposals on monitoring and 
addressing hospital performance under CJR.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters were generally supportive of the proposed stop-
gain limit policy at 20 percent as it aligns with BPCI. Another 
commenter supported the 20 percent stop-gain limit but noted that it is 
not proportional to the stop-loss limit of 20 percent that was proposed 
to begin in Performance Year 3 because hospitals have to invest and 
achieve a minimum 2 percent savings for the Medicare discount from a 
blend of regional and provider spend which may represent a higher cost 
savings. Some commenters requested that we remove a stop-gain limit as 
there are sufficient safeguards in the rule that a stop gain limit was 
not necessary. Additionally, commenters found a stop-gain limit could 
serve as a disincentive for hospitals and hospital systems to undertake 
those reforms that truly transform care.
    Response: As described earlier, in response to comments that 
hospitals need a more time to assume downside risk, we are similarly 
finalizing a more gradual transition the stop-loss limit of 20 percent 
such that in Performance Year 2, the stop-loss limit is 5 percent, in 
Performance Year 3, the stop loss limit is 10 percent and in 
Performance Year 4 and 5, the stop-loss limit is 20 percent. As 
described in the proposed rule, we proposed parallel stop-loss and 
stop-gain limits in order to provide proportionately similar 
protections to CMS and participant for their financial responsibilities 
under CJR, as well as to protect the health of beneficiaries. Because 
we are changing our stop-loss limits in this final rule to provide for 
a more gradual transition to a stop-loss limit of 20 percent, we are 
believe it would be similarly appropriate to implement a gradual 
transition to the full stop-gain limit of 20 percent. We believe that 
the commenters' arguments for requiring additional time to make changes 
to adapt to the model and to take on financial responsibility similarly 
applies to hospitals' ability to obtain upside risk under this model. 
We want to ensure that any repayments in the early years of the model 
are not due to random variation and accordingly, we have applied a 
transition to downside risk with more gradual stop-loss limits during 
the course of the model. We similarly want to ensure that any savings 
achieved by the hospitals in the early years of the model are also not 
due to random variation and believe it would be appropriate to apply a 
parallel transition with more gradual stop-gain limits during the 
course of the model. Additionally, we want to ensure that changes that 
the hospitals undertake to improve efficiency that include achievement 
in quality care and episode payment reductions below the target episode 
price also do not result in sharp decreases in utilization that could 
be harmful to beneficiaries. Implementing parallel stop-loss and stop-
gain limits provides significant opportunity for hospitals to reduce 
episode spending through care redesign and care coordination, with 
appropriate safeguards to ensure that such redesign and coordination 
activities are clinically appropriate and do not result in reduced 
quality of care. We recognize that while some hospitals may already be 
adept at such coordination activities, given that we are requiring 
participation in the CJR model, such safeguards are necessary to 
protect beneficiaries and the Trust Funds while hospitals less 
experienced with care redesign adapt to the model and begin to engage 
in care redesign activities. While we are implementing various 
mechanisms to monitor for inappropriate changes in utilization as 
discussed later in this rule, we believe it would also be appropriate 
to transition to upside risk in the same manner as we are finalizing to 
transition to downside risk. In addition, we believe parallel stop-loss 
and stop-gain limits are appropriate for the CJR model in order to 
ensure that both CMS and hospitals in the model are similarly at risk 
for episode spending. Accordingly, we are finalizing a 5 percent stop-
gain limit in Performance Year 1 and 2, 10 percent stop-gain limit in 
Performance Year 3 and 20 percent stop-gain limit in Performance Years 
4-5. We believe that it is appropriate that as participant hospitals 
increase their downside risk, they can similarly increase their 
opportunity for additional payments under this model.
    Additionally, we acknowledge the comment that hospitals need to 
achieve a certain percent savings, representing the Medicare discount 
before they are able to receive a reconciliation payment and be subject 
to the stop-gain limits. As discussed in section III.C.4.b.(9) of this 
final rule, we are modifying our policy in this final rule so as to use 
lower discount factors for purposes of determining the hospital's 
responsibility for excess episode spending not only in performance year 
2, but also in performance year 3. Additionally, as discussed in 
section III.C.5. of this final rule, we are modifying the proposed rule 
so as to provide different levels of quality incentive payments that 
would modulate participant hospitals' effective target price discount 
factor based on their quality performance. We expect participant 
hospitals to have significant opportunity to improve the quality and 
efficiency of care furnished during episodes in comparison with 
historical practice, because this model would facilitate the alignment 
of financial incentives among providers and suppliers caring for 
beneficiaries throughout the episode. This discount would serve as 
Medicare's portion of reduced expenditures from the episode, with any 
episode expenditure below the target price potentially available as 
reconciliation payments to the participant hospital where the anchor 
hospitalization occurred.
    Final Decision: After consideration of the public comments we 
received, we are finalizing to establish stop-gain limits that 
correspond to the finalized stop-loss limits such that the stop-gain 
limit is 5 percent in Performance Years 1 and 2, 10 percent in 
Performance Year

[[Page 73403]]

3 and 20 percent in Performance Year 4 and 5. We are codifying the 
establishment of stop-gain limits in this model at Sec.  
510.305(e)(1)(v)(D).
c. Policies for Certain Hospitals To Further Limit Repayment 
Responsibility
    As discussed in section III.C.3. of the proposed rule, we proposed 
that participant hospitals would be subject to repayment responsibility 
for episode actual spending in excess of the applicable target price 
beginning in performance year 2. Hospitals participating in CJR would 
not be responsible for actual episode payments greater than a ceiling 
set at two standard deviations above the mean regional episode payment 
as described earlier in this section. Additionally, we proposed a 10 
percent limit on the raw NPRA contribution to the repayment amount in 
performance year 2 and a 20 percent limit on the raw NPRA contribution 
to the repayment amount in performance year 3 and beyond, as described 
in the previous section of this final rule.
    Though our proposals provide several safeguards to ensure that 
participant hospitals have limited repayment responsibility due to the 
raw NPRA, we are proposing additional protections for certain groups of 
hospitals that may have a lower risk tolerance and less infrastructure 
and support to achieve efficiencies for high payment episodes. 
Specifically, we are proposing additional protections for rural 
hospitals, SCHs, Medicare Dependent Hospitals and Rural Referral 
Centers (RRCs). We note that these categories of hospitals often have 
special payment protections or additional payment benefits under 
Medicare because we recognize the importance of preserving Medicare 
beneficiaries' access to care from these hospitals. In MedPAC's Report 
to the Congress in June 2012, MedPAC examined issues related to rural 
Medicare beneficiaries and found that ``The primary objective of rural 
special payments is to ensure that Medicare does its part to support 
the financial viability of rural providers that are necessary for 
beneficiaries' access to care. Some form of special payments will be 
needed to maintain access in areas with low population density where 
providers inevitably have low patient volumes and lack economies of 
scale.'' \44\
---------------------------------------------------------------------------

    \44\ MedPAC Report to Congress June 2012, Chapter 5, page 121.
---------------------------------------------------------------------------

    We proposed that a rural hospital would have additional protections 
under the stop-loss limit proposal. For the purpose of this model, we 
are proposing to define a rural hospital as an IPPS hospital that is 
either located in a rural area in accordance with Sec.  412.64(b) or in 
a rural census tract within an MSA defined at Sec.  412.103(a)(1) or 
has reclassified to rural in accordance with Sec.  412.103. Such rural 
hospitals would have additional protections under the stop-loss limit 
proposal. Consistent with the findings in MedPAC's June 2012 Report to 
the Congress, we believed rural hospitals may have a lower risk 
tolerance and less infrastructure and support to achieve efficiencies 
for high payment episodes, particularly if they are the only rural 
hospital in an area.
    Our preliminary analysis examining national spending for MS-DRGs 
469 and 470 from October 1, 2013 to September 30, 2014 showed that MS-
DRGs 469 and 470 cases represent a slightly higher proportion of cases 
and spending for rural hospitals than the national average (for 
example, MS-DRG 470 episode spending represents 12 percent of IPPS 
spending for rural hospitals and represents 9 percent of IPPS spending 
nationally).\45\ Additionally, our analysis on the distribution of 
national spending of MS-DRGs 469 and 470 episodes by service type (that 
is inpatient, outpatient, SNF, Home Health, Physician Part B, DME), 
found that on average, inpatient services account for the most spending 
for an MS-DRGs 469 and 470 episode (53 percent of spending for an MS-
DRG 469 episode and 55 percent of spending for MS-DRG 470 episode). SNF 
services account for 27 percent of spending for MS-DRG 469 and 18 
percent of spending for MS-DRG 470. The spending distribution for all 
rural IPPS hospitals also differs from the national average. For rural 
hospitals, inpatient services for CJR episodes account for more 
spending than the national average (56 percent for MS-DRG 469 and 57 
percent for MS-DRG 470 for rural hospitals) and SNF spending is higher 
than the national average (29 percent for MS-DRG 469 and 21 percent for 
MS-DRG 470 for rural hospitals). It is evident that this category of 
hospitals has different spending patterns than the national average. 
Furthermore, hospitals in rural areas often face other unique 
challenges. Rural hospitals may be the only source of healthcare 
services for beneficiaries living in rural areas, and beneficiaries 
have limited alternatives should rural hospitals be subject to 
financial changes under this model. Additionally, because rural 
hospitals may be in areas with fewer providers including fewer 
physicians and PAC facilities, rural hospitals may have more limited 
options in coordinating care and reducing spending while maintain 
quality of care under this model. We believed that urban hospitals may 
not have similar concerns as they are often in areas with many other 
providers and have greater opportunity to develop efficiencies under 
this model. Given that rural hospitals have different episode spending 
patterns, have different challenges in coordinating care and reducing 
cost than urban hospitals and serve as a primary access to care for 
beneficiaries, we believed that we should have a more protective stop-
loss limit policy as described later in this section.
---------------------------------------------------------------------------

    \45\ Medicare FFS Parts A and B claims, CJR episodes as 
proposed, between October 1, 2013 and September 30, 2014.
---------------------------------------------------------------------------

    Additionally, we proposed to provide additional protections for 
SCHs as defined in Sec.  412.92, Medicare Dependent Hospitals as 
defined in Sec.  412. 108 and RRCs as defined in Sec.  412.96. 
Hospitals paid under the IPPS can qualify for SCH status if they meet 
one of the following criteria:
     Located at least 35 miles from other like hospitals.
     Located in a rural area, located between 25 and 35 miles 
from other like hospitals, and no more than 25 percent of residents or 
Medicare beneficiaries who become hospital inpatients in the hospital's 
service area are admitted to other like hospitals located within a 35-
mile radius of the hospital or the hospital has fewer than 50 beds and 
would meet the 25 percent criterion if not for the fact that some 
beneficiaries or residents were forced to seek specialized care outside 
of the service area due to the unavailability of necessary specialty 
services at the hospital.
     Hospital is rural and located between 15 and 25 miles from 
other like hospitals but because of local topography or periods of 
prolonged severe weather conditions, the other like hospitals are 
inaccessible for at least 30 days in each of 2 out of 3 years.
     Hospital is rural and the travel time between the hospital 
and the nearest like hospital is at least 45 minutes.
    If an IPPS hospital qualifies to be a SCH, the hospital can be paid 
the higher of the federal payment rate paid to IPPS hospitals or a 
cost-based hospital-specific rate as described in Sec.  412.78. Under 
OPPS, a rural SCH can receive a 7.1 percent add on payment for most 
services with certain exceptions, in accordance with Sec.  419.43(g). 
These criteria to qualify for SCH status demonstrate that SCHs are 
likely to be the sole hospital in an area. Furthermore, additional 
payments

[[Page 73404]]

provided under Medicare FFS for SCHs, demonstrates Medicare's interest 
in ensuring these hospitals are able to provide services to the 
Medicare beneficiaries who may have limited access to providers in 
their area. As a result, we believed that we should provide SCHs 
additional protections from hospital responsibility for repayment in 
this model. We note that we proposed to exclude these add-on payments 
for SCHs, as described in section III.C.3.a. of the proposed rule.
    MDHs are defined as a hospital that meets the following criteria:
     Located in a rural area.
     Has 100 beds or less.
     Is not a SCH.
     Sixty percent of the hospital's inpatient days or 
discharges were attributable to individuals entitled to Medicare Part A 
benefits during specified time periods as provided in Sec.  412.108.
    MDHs also qualify for special additional payments under the IPPS 
where an MDH can receive the higher of a payment under the federal 
standard rate for IPPS hospitals or the payment under federal standard 
rate for IPPS hospitals plus 75 percent of the difference in payments 
between a cost based hospital-specific rate and the federal standard 
rate as described in Sec.  412.108(c). These criteria demonstrate that 
MDHs are small, rural hospitals that have a high Medicare case mix 
percentage and receive additional payments under the IPPS to ensure 
financial stability and preserve beneficiary access to care to these 
hospitals. Thus, we believed these factors demonstrate that we should 
provide additional safeguards from hospital responsibility for 
repayment in order to preserve access to care. We note that we proposed 
to exclude these payment enhancements for MDHs, as described in section 
III.C.3.a. of the proposed rule.
    RRCs are defined as IPPS hospitals with at least 275 beds that meet 
the following criteria:
     Fifty percent of the hospital's Medicare patients are 
referred from other hospitals or from physicians who are not on the 
staff of the hospital.
     At least 60 percent of the hospital's Medicare patients 
live more than 25 miles from the hospital.
     At least 60 percent of all services the hospital furnishes 
to Medicare patients are furnished to patients who live more than 25 
miles from the hospital.


If a hospital does not meet the criteria described previously, a 
hospital can also qualify for RRC status if a hospital meets the 
following criteria:
     For specified period of time, the hospital has a case-mix 
that equals the lower of the median case mix index (CMI) value for all 
urban hospitals nationally; or the median CMI value for urban hospitals 
located in its region, excluding those hospitals receiving indirect 
medical education payments.
     Its number of discharges is at least--
    ++ 5,000 (or 3,000 for an osteopathic hospital); or
    ++ The median number of discharges for urban hospitals in the 
census region in which it is located, set by the CMS through IPPS 
rulemaking.
     Additionally, a hospital must meet one of the following 
criteria:
    ++ More than 50 percent of its active medical staff are specialists 
who meet the conditions specified atSec.  412.96(c)(3).
    ++ At least 60 percent of all discharges are for inpatients who 
reside more than 25 miles from the hospital.
    ++ At least 40 percent of all inpatients treated are referred from 
other hospitals or from physicians who are not on the hospital's staff.


As an RRC, a hospital can qualify for several additional payments under 
the IPPS. For example, an RRC is not subject to the 12 percent cap on 
Medicare Disproportionate Share Hospital payments that a rural hospital 
would otherwise be subject to, in accordance with Sec.  412.106(d). 
Although RRCs are larger and have a higher Medicare patient mix, they 
often serve as the sole provider to treat higher acuity cases, as 
demonstrated by the RRC qualification criteria. As a result of these 
unique characteristics of these hospitals, RRCs can receive additional 
payments under Medicare FFS. Thus, it is also important to provide 
additional protections for RRCs such that participation in this model 
does not result in significant financial loss that may reduce access 
for Medicare beneficiaries.
    For these reasons, we proposed a stop-loss limit of 3 percent of 
episode payments for these categories of hospitals in performance year 
2 and a stop-loss limit of 5 percent of episode payments for 
performance years 3 through 5. More specifically, in performance year 
2, a rural hospital, SCH, RRC or MDH that is a participant hospital 
would owe Medicare due to the raw NPRA no more than 3 percent of the 
hospital's target price for the anchor MS-DRG multiplied by the number 
of the hospital's CJR episodes with that anchor MS-DRG in the 
performance year. Additionally, in performance years 3 through 5, a 
rural hospital, SCH, RRC or MDH that is a participant hospital would 
owe Medicare due to the raw NPRA no more than 5 percent of the 
hospital's target price for the anchor MS-DRG multiplied by the number 
of the hospital's CJR episodes with that anchor MS-DRG in the 
performance year. We believed a different stop-loss limit policy is 
warranted given the different spending patterns and the unique hospital 
characteristics for these groups of hospitals as described earlier. We 
believed this proposal strikes an appropriate balance between 
protecting hospitals that often serve as the only access of care for 
Medicare beneficiaries and having these hospitals meaningfully 
participate in the model. We note that this proposal does not impact 
the proposed stop-gain policy for these categories of hospitals. Rural 
hospitals, SCHs, MDHs and RRCs would still have the opportunity to 
participate in full gains at 20 percent similar to other hospitals.
    Hospitals can apply for SCH, MDH and RRC status through their MACs 
and Regional Office at any time. MACs maintain the list of SCHs, MDHs, 
and RRCs in the CMS Provider Specific File, which they update on a 
quarterly basis. The special hospital designations recorded in the 
Provider Specific File are used in Medicare claims pricing to ensure 
that these hospitals are paid according to their special hospital 
designation. Additionally, CMS can identify which hospitals are 
considered rural for the purpose of this policy, using the Provider 
Specific File to identify physical geographic location of a hospital 
and the MACs to identify whether an urban hospital has reclassified to 
rural under Sec.  412.103 or located in a rural census tract of an MSA 
defined under Sec.  412.103(a)(1). Thus, we proposed to identify rural 
hospitals, MDHs, SCHs and RRCs at the time of reconciliation using the 
Provider Specific File updated in December of the end of the 
performance year and information from the MACs, and those hospitals 
would be subject to the 3 percent stop-loss limit policy for that 
performance year 2, and 5 percent stop-loss limit policy in performance 
years 3 through 5. For example, to identify the hospitals that would 
receive a 3 percent stop-loss limit for performance year 2, we would 
use the Provider Specific File updated in December 2017. We note that 
the special Medicare payment designation of MDH status has been 
extended through FY 2017 by legislation under the MACRA. As a result, 
the proposed additional protections for hospital responsibility for 
repayment for MDHs would only apply to the extent that MDH status 
exists under Medicare.

[[Page 73405]]

In other words, should MDH expire on or after September 30, 2017, we 
would not identify hospitals as MDHs to receive the 5-percent stop-loss 
limit policy for performance year 3. Though MDH status is set to expire 
after the third quarter of 2017, we would still identify MDHs to 
receive the 3-percent stop loss limit policy for all of performance 
year 2.
    We note that we also considered excluding rural hospitals, SCHs, 
MDHs and RRCs from the CJR model altogether due to our concerns of 
placing significant responsibility for actual episode payment above the 
target price on these hospitals. Additionally, we were also concerned 
that from an evaluation perspective, we would not have sufficient 
sample size of CJR episodes from these categories of hospitals to have 
significant results of how these groups of hospitals perform under this 
model. We weighed our reasons for excluding these hospitals with the 
potential qualitative information we would gain from payment innovation 
tests on rural hospitals in this model. We concluded that because the 
CJR model strives to test episode payment for a broad variety of 
hospitals, it would be preferable to include these hospitals in the CJR 
model and provide additional protections from a large repayment 
responsibility. We welcome public comment on our proposed stop-loss 
limit for rural hospitals, SCHs, MDHs and RRCs and on our alternative 
consideration to exclude these hospitals entirely from the CJR model.
    Comment: Several commenters commented on our proposal to provide a 
more protective stop-loss for rural hospitals, SCHs, MDHs and RRCs. and 
support of the more protective stop-loss for rural hospitals, SCHs, 
MDHs and RRCs in order to preserve access to care. Some commenters 
suggested even more protective stop-loss for these categories of 
hospitals such as delaying downside risk until Performance Year 3, not 
providing for downside risk to these hospitals or reducing downside to 
1 percent in Performance Year 3, 3 percent in Performance Year Four, 
and 5 percent in Performance Year Five. We also received comments that 
we should exclude all-together rural hospitals, SCHs, MDH and RRCs, 
because as we had acknowledged in the proposed rule, these hospitals 
may not be able to take on financial risk under this model.
    Response: We are interested in including these categories of 
hospitals in our model to see the impact of a bundled payment model in 
providers that may not otherwise participate in a voluntary program and 
to better understand the generalizability of this model. However, we 
recognize the concerns that these categories of hospitals may be less 
equipped to take on risk and may be the only access of care in their 
areas. Thus, we proposed to provide for a more limited stop-loss for 
these categories of hospitals at 3 percent for Performance Year 2 and 5 
percent for Performance Years 3 through 5. We had proposed that rural 
hospitals, MDHs, SCHs and RRCs would still have the opportunity to 
participate in full gains at 20 percent similar to other hospitals in 
the model. While we would provide for more limited downside risk for 
these categories of hospitals for the reasons previously stated, we 
believe rural hospitals, MDHs, SCHs and RRCs should have the 
opportunity to receive the gains to the same extent as the other 
hospitals in the model. We note that we are finalizing to provide for a 
more gradual stop-loss limit for all other hospitals in the model where 
the stop-loss limit is 5 percent in Performance Year 2, 10 percent in 
Performance Year 3 and 20 percent in Performance Years 4-5. 
Additionally, we are finalizing that the stop-gain limit would be 
proportional to the stop-loss limit such that in Performance Year 1-2, 
the stop-gain limit would be 5 percent; in Performance Year 3, the 
stop-gain limit would be 10 percent; and in Performance Years 4-5, the 
stop gain limit would be 20 percent We believe the our rationale 
described earlier in this section to provide for a more gradual 
transition to stop-gain limits over the course of the model should 
similarly apply to rural hospitals, SCHs, MDHs and RRCs, particularly 
in light of our concerns that these categories of hospitals have lower 
risk tolerance and less infrastructure and support to achieve 
efficiencies for high payment episodes. We want to ensure that any 
performance gains by these categories of hospitals are not based on 
random variation but rather due to implementing changes to achieve 
efficiencies for high payment episodes. Thus, we are finalizing a more 
gradual stop-gain limit where the stop-gain limit is 5 percent in 
Performance Year 2, 10 percent in Performance Year 3 and 20 percent in 
Performance Years 4-5 for all hospitals in the model, including rural 
hospitals, SCHs, MDHs and RRCs.
    Comment: Some commenters recommended that we apply the protective 
stop-loss limits to other categories of providers with similar low-risk 
tolerance as rural hospitals, SCHs, MDHs and RRCs. A commenter 
suggested that we apply the protective stop-loss limit to hospitals in 
bankruptcy, or undergoing major restructuring under State oversight 
like safety net hospitals under the Medicaid DSRIP waiver in New York. 
Another commenter suggested that we provide a protective stop-loss 
limit for urban referral centers. Another commenter requested that we 
provide risk corridors for providers that partner with participant 
hospitals such as IRFs and SNFs.
    Response: As described in the proposed rule and finalized in this 
final rule, we are providing additional protections on repayment 
through more limited stop-loss to certain categories of hospitals that 
are financially responsible for the 90-day episode spending in this 
model. Because the provider at risk in this model is the hospital, we 
believe it is appropriate to provide for limits on financial gain and 
repayment. We do not believe it would be appropriate to provide risk 
corridors for other types of providers that may be involved in the 
continuum of care in a 90 day episode for LEJR such as PAC providers 
since we will not be making a reconciliation payment or recoupment to 
those providers. Additionally, we have provided more protective stop-
loss limits for certain categories of hospitals that have been 
recognized by Medicare through additional Medicare FFS payment 
incentives as often being the only access of care for Medicare 
beneficiaries and thus it is in our interest to both be able to keep 
them in the model but recognizing their lower risk tolerance. We do not 
believe it would be appropriate to provide a limited stop-loss to 
safety net hospitals under the Medicaid DSRIP waiver in New York. The 
CJR model addresses a defined population (FFS Medicare beneficiaries 
undergoing LEJR procedures) for which there are potentially avoidable 
expenditures (arising from less than optimal care coordination). We 
believe the DSRIP waiver in New York, which is a waiver provided under 
the Medicaid program, does not directly impact Medicare FFS payments or 
a hospital's ability to be in the CJR model at this time. If healthcare 
transformation initiatives led by States raise concerns about a 
participant hospital's ability to be in the model, we would address the 
issue in future rulemaking as necessary. Additionally, we do not 
believe it would be appropriate to carve out additional protections for 
other types of hospitals at this time because we want to evaluate, in 
part, the model's generalizability, which becomes challenging if we add 
more exceptions. We will continue to monitor the effects

[[Page 73406]]

of this model on different categories of hospitals.
    Comment: We received a comment regarding our proposal to provide 
MDHs with the more limited stop-loss until the MDH payment status 
expires under statute in 2017. The commenter requested that we continue 
to provide the more limited-stop loss for hospitals currently 
classified as MDHs in the final rule, if MDH status expires. The 
commenter stated that while the higher payments afforded to MDHs are 
set to expire in 2017, the concerns on their ability to bear risk and 
infrastructure capacity issues will remain.
    Response: We had proposed that hospitals that maintain SCH, MDH or 
RRC status during the performance year would be subject to the 
protective stop-loss limit. We understand the concern that with the 
expiration of MDH status under legislation in September 30, 2017, 
hospitals will lose their MDH designation and additional Medicare FFS 
payments provided under the MDH designation. Additionally, under the 
expiration of MDH status, hospitals would no longer qualify for the 
protective stop-loss limit tied to that status under this model. Should 
the MDH payment status expire, some MDHs may apply with their MACs to 
determine if they qualify as an RRC or SCH and would be able to 
maintain the protective stop-loss limit in this model. However, we 
believe it would be inconsistent to apply the additional benefit of 
protective stop-loss limits to former MDHs when by law, those hospitals 
are not permitted to retain the other Medicare payment benefits 
provided to MDHs. Additionally we proposed and are finalizing to 
identify MDHs at the time of reconciliation in the Provider Specific 
File updated in December of the end of the performance year and 
information from the MACs and the MDHs identified in that file would be 
subject to the protective stop-limits. Should the MDH payment status 
expire, the Provider Specific File would no longer be updated by MACs 
to identify hospitals that would have met the expired MDH criteria as 
it would no longer be a Medicare payment policy. As a result, it would 
be operationally challenging to appropriately identify the hospitals 
that would have met the criteria to receive MDH status and to apply 
protective stop-loss to those hospitals. In general, we recognize that 
hospitals may change their status on an annual basis during the course 
of this model based on whether or not a hospital can continue to meet 
the criteria for the special payment designation, and should a hospital 
no longer meet the rural, SCH, MDH or RRC designation, it would no 
longer receive the protective stop-loss limit.
    Comment: Some comments requested that urban hospitals that 
reclassify to rural hospitals should be considered rural and be subject 
to the more protective stop-loss limits. The commenters stated that we 
generally consider hospitals that undergo urban-to-rural 
reclassification pursuant to Sec.  412.103 as rural for all Medicare 
payment purposes and we should consistently treat them as rural under 
this model and provide this category of hospitals with the more 
protective stop-loss limit.
    Response: We agree with the commenters that urban hospitals that 
reclassify to rural under Sec.  412.103 should be considered a rural 
hospital for the purposes of this model and receive the more limited 
stop-loss. We note that we proposed to define rural hospitals as an 
IPPS hospital that is either located in a rural area in accordance with 
Sec.  412.64(b) or in a rural census tract within an MSA defined at 
Sec.  412.103(a)(1) or has reclassified to rural in accordance with 
Sec.  412.103 and to provide a more limited stop-loss for such rural 
hospitals. However, we note that rural hospitals were inadvertently 
excluded from the proposed regulation language at Sec.  
510.305(e)(1)(v)(E) defining which categories of hospitals would be 
subject to a lower stop-loss limit. Thus, we are finalizing our 
proposal to provide a more protective stop-loss limit to rural 
hospitals as previously defined, as well as MDHs, SCHs and RRC, and 
will revise the regulatory language at Sec.  510.305(e)(1)(v)(E) to 
reflect our final policy.
    Comment: Some commenters were concerned that hospitals with low 
volume of LEJR episodes have a lower risk tolerance, similar to rural 
hospitals, SCHs, MDHs and RRCs, may be subject to greater volatility in 
episode payments and would not have adequate volume to spread the risk 
of high cost episodes. A commenter's analysis showed that volume is an 
important determinant of per-episode spending where the average loss 
was higher for hospitals with fewer episodes. Commenters raised 
concerns that hospitals with fewer episodes per year may have fewer 
resources in terms of capital to invest in data infrastructure or care 
redesign. Commenters suggested that we exclude low volume hospitals 
from the model, remove downside risk for low volume hospitals or 
provide a lower stop-loss limit for these hospitals. Commenters 
provided varying definitions for what qualifies as a low volume 
hospital ranging from 35 LEJR episodes per year to 100 LEJR episodes 
per year.
    Response: We believe that we can address these concerns for low 
volume hospitals by the other design changes that we are finalizing in 
this final rule to mitigate risk as participant hospitals implement the 
necessary changes to improve efficiencies for LEJR episodes and quality 
of care. These changes made in this final rule would alleviate concerns 
for low volume hospitals such that special policies for low volume 
hospitals are not necessary. First, we believe that the policy 
finalized in this rule in response to public comments to allow for a 
more gradual transition to the stop-loss limit of 20 percent beginning 
in Performance Year 4 will alleviate the concerns of hospitals bearing 
financial risk in a mandatory model. Participant hospitals, including 
low volume hospitals, will have additional time to make changes in 
response to the model and gradually take on more upside and downside 
risk. Second, we believe that our policy, finalized in this rule, to 
risk stratify MS-DRG 469 and MS-DRG 470 for hip fractures will reduce 
the variability in the episode costs. We acknowledge that hip fractures 
can increase the 90 day episode spend so by risk stratifying for hip 
fracture, we are creating an episode target price for MS-DRG 469 and 
MS-DRG 470 with and without hip fractures. For a hospital with a lower 
volume of cases, the risk stratification for hip fractures will 
mitigate variability in episode costs if a hospital that has fewer 
episodes treats higher proportion of hip fracture cases. We disagree 
with commenters that we should exclude low volume hospitals from the 
model because we are interested in evaluating the experience of small 
providers and the inclusion of these hospitals in the model is part of 
our overall desire to see the impact of a bundled payment model in 
providers who would not otherwise participate in a voluntary program. 
We would be concerned that setting a threshold for low volume could 
result in hospital gaming in order to be below that threshold and be 
excluded from the model.
    We are finalizing our proposal to provide for a lower stop-loss 
limit for rural hospitals, RRCs, MDHs and SCHs and codifying this 
policy at Sec.  510.305(e)(1)(v)(E). Additionally, we are finalizing to 
provide a stop-gain limit that correspond to the finalized stop-loss 
limits for other hospitals in the model such that the stop-gain limit 
is 5 percent in Performance Years 1 and 2, 10 percent in Performance 
Year 3 and 20 percent in Performance Years 4 and 5 that would apply to 
all hospitals in

[[Page 73407]]

the model including rural hospitals, MDHs, SCHs and RRCs. We are 
codifying the establishment of stop-gain limits in this model at Sec.  
510.305(e)(1)(v)(D).
d. Hospital Responsibility for Increased Post-Episode Payments
    We noted that while the proposed CJR episode would extend 90-days 
post-discharge from the anchor hospitalization, some hospitals may have 
an incentive to withhold or delay medically necessary care until after 
an episode ends to reduce their actual episode payments. We did not 
believe this would be likely, especially given the relatively long 
episode duration. However, in order to identify and address such 
inappropriate shifting of care, we proposed to calculate for each 
performance year the total Medicare Parts A and B expenditures in the 
30-day period following completion of each episode for all services 
covered under Medicare Parts A and B, regardless of whether the 
services are included in the proposed episode definition (section 
III.B. of the proposed rule), as is consistent with BPCI Model 2. 
Because we base the proposed episode definition on exclusions, 
identified by MS-DRGs for readmissions and ICD-9-CM diagnosis codes for 
Part B services as discussed in section III.B. of the proposed rule, 
and Medicare beneficiaries may typically receive a wide variety of 
related (and unrelated) services during the CJR episode that extends 90 
days following discharge from the anchor hospitalization, there is some 
potential for hospitals to inappropriately withhold or delay a variety 
of types of services until the episode concludes, without attending 
carefully to the episode definition, especially for Part B services 
where diagnosis coding on claims may be less reliable. This 
inappropriate shifting could include both those services that are 
related to the episode (for which the hospital would bear financial 
responsibility as they would be included in the actual episode spending 
calculation) and those that are unrelated (which would not be included 
in the actual episode spending calculation), because a hospital engaged 
in shifting of medically necessary services outside the episode for 
potential financial reward may be unlikely to clearly distinguish 
whether the services were related to the episode or not in the 
hospital's decisions.
    This calculation would include prorated payments for services that 
extend beyond the episode as discussed in section III.C.3.b. of the 
proposed rule. Specifically, we would identify whether the average 30-
day post-episode spending for a participant hospital in any given 
performance year is greater than three standard deviations above the 
regional average 30-day post-episode spending, based on the 30-day 
post-episode spending for episodes attributed to all CJR regional 
hospitals in the same region as the participant hospital. We proposed 
that beginning in performance year 2, if the hospital's average post-
episode spending exceeds this threshold, the participant hospital would 
repay Medicare for the amount that exceeds such threshold, subject to 
the stop-loss limits proposed elsewhere in the proposed rule. We sought 
comment on this proposal to make participant hospitals responsible for 
making repayments to Medicare based on high spending in the 30 days 
after the end of the episode and for our proposed methodology to 
calculate the threshold for high post-episode spend.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters opposed the proposal entirely, finding 
that it represented excessive monitoring of LEJR episodes. Other 
commenters supported monitoring 30 day post-episode spending, but 
requested certain modifications to the proposal. Other commenters 
supported our rationale to monitor a hospital's 30 day post-episode 
spending to identify potential inappropriate shifting of care, but they 
opposed our proposal to require participant hospitals to repay Medicare 
for the amount of post-episode spend that exceeds the threshold. 
Commenters also requested that the categories of services excluded from 
the episode definition should also be excluded when determining the 30 
day post-episode spending because they found it to be inappropriate to 
hold a hospital responsible for unrelated services, particularly those 
related to high-cost conditions like the onset of therapy for cancer or 
the sudden inclusion of clotting factors for hemophilia. Lastly, we 
received comments in support of our proposal, agreeing that this 
approach could help identify participant hospitals that withhold or 
delay medically necessary care until after an episode ends in order to 
reduce their actual episode spending. A commenter suggested that rather 
than requiring a participant hospital to repay Medicare up to the stop-
loss limit if they are found to have excessive 30 day post-episode 
spending, we implement an additional financial penalty for participant 
hospitals that are found to inappropriately delay care. The commenter 
suggested that the penalty should not be capped at the proposed stop-
loss limit arguing that a hospital that has already substantially 
exceeded target prices and had to repay CMS under the stop-loss limit 
will have little incentive to refrain from stinting on care unless a 
separate penalty exists.
    Response: We continue to believe that monitoring for 30 day post-
episode spending is an appropriate tool to identify inappropriate 
shifts in care based on our experience with BPCI. We disagree with 
commenters that we should exclude the same set of services that are 
excluded from the episode definition in the 30 day post-episode spend 
because of concern that this model could lead to shifting of both 
related and unrelated (those not included in the episode definition) 
services due to some providers encouraging delays of services for 
beneficiaries that are not immediately necessary, without 
discriminating between those services that are in and out of the 
episode definition. Additionally, our experience with BPCI that 
similarly includes all costs when monitoring for 30 day post-episode 
spending has helped to inform our policy for the CJR model. Based on 
our experience with BPCI, we have not found that by including all costs 
to measure 30 day post-episode spending, that we are inappropriately 
penalizing hospitals. While we understand commenters' concerns that 
hospitals could be held responsible for high costs conditions that are 
not included in the episode definition, our policy aims to strike a 
balance to hold participating hospitals accountable for inappropriate 
shifts or delays in care and to provide hospitals with safeguards on 
financial risk for 30 day post-episode spend. To that end, we are 
setting a high threshold where only hospitals that have a 30 day post-
episode spending average that is three standard deviations above the 
regional average would be subject to repay that difference to Medicare, 
and in the case where the hospital's average 30 day post-episode 
spending exceeds regional average 30 day post-episode spending, the 
participant hospital would repay Medicare for the amount that exceeds 
such threshold, subject to the stop loss limits. Additionally, we 
disagree with the commenter that the penalty for high post-episode 
spending should not be capped at the proposed stop-loss limit because 
we still want to provide safeguards for high cost spending for 
participant hospitals. We note that, as described earlier, we are 
finalizing to reduce the stop-loss limits for Performance Year 2 and 3 
to provide participating hospitals a more gradual transition to assume 
downside risk

[[Page 73408]]

under this model so that repayment under the 30 day post-episode 
spending policy will be even more limited. We note that participant 
hospitals that are eligible for reconciliation payments in a 
performance year that also have an average 30 day post-episode spend 
that is higher than three standard deviations from the regional average 
30 day post-episode spend would have their reconciliation payments 
reduced by the amount by which spending exceeds three standard 
deviations.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal as proposed and codifying this 
policy at Sec.  510.305(e)(1)(v)(A). We note that the term ``CJR 
eligible hospitals'' is being renamed to ``CJR regional hospitals'' as 
discussed in response to comments in section III.C.4.b.(4) of this 
final rule. CJR regional hospitals are all IPPS hospitals located in a 
region, including IPPS hospitals that are participants in BPCI Model 1 
or in the risk bearing period of Models 2 or 4 for LEJR episodes. 
Accordingly, 30-day post-episode spending for episodes attributed to 
all IPPS hospitals including BPCI hospitals in the same region as the 
participant hospital would be included to determine the value that is 
three standard deviations greater than the regional average 30 day 
post-episode spend and to determine if a participant hospital has 
excessive average 30 day post-episode spending.
9. Appeal Procedures
    Under the CJR model, we proposed that we would determine target 
prices for episodes of care using the methodology described in section 
III.C. of the proposed rule. We proposed to institute a reconciliation 
payment process as described in section III.C.6. of the proposed rule, 
and we proposed to retrospectively calculate a participant hospital's 
actual episode performance relative to its target price after the 
completion of each performance year. The difference between the actual 
episode spending of each CJR episode and the target price of that 
episode (calculated as target price subtracted by CJR actual episode 
payment) would be aggregated for all episodes initiated at a 
participant hospital during each performance year. This calculation for 
a participant hospital would be adjusted for post-episode payment 
increases and stop gain and stop loss limits, as described in section 
III.C.6.a. of the proposed rule. We proposed to use quality measure 
percentiles to determine hospital eligibility to receive the 
reconciliation payment and use the successful reporting of the 
voluntary PRO THA/TKA data to adjust the reconciliation payment, as 
described in section III.C.5. of the proposed rule. The NPRA would be 
reflected in a report sent to the participant hospital called the CJR 
Reconciliation Report.
    We also proposed to institute appeals processes for the CJR model 
that would allow participant hospitals to appeal matters related to 
reconciliation and payment (that are previously discussed in this 
section), as well as non-payment related issues, such as enforcement 
matters detailed in section III.C.12. of this final rule.
a. Payment Processes
    The proposed processes with regard to reconciliation, payment, use 
of quality measures to determine payment, and stop-loss and stop-gain 
policies are set forth in detail in sections III.C.5. through 8. of 
this final rule. In this section, we proposed an appeals process that 
will apply to the matters addressed in sections III.C.5 through 8. of 
this final rule, as well as matters not related to payment or 
reconciliation. These appeals processes will apply to the following 
payment and reconciliation processes:
     Starting with the CJR Reconciliation Report for 
performance year 1, if the CJR Reconciliation Report indicates the 
reconciliation amount is positive, CMS would issue a payment, in a form 
and manner specified by CMS, for that amount to the awardee within 30 
calendar days from the issue date of the CJR Reconciliation Report, 
unless the participant hospital selects to pursue the calculation error 
and reconsideration review processes, in which case payment will be 
delayed as detailed later in this section.
     For performance year 1, if the CJR reconciliation report 
indicates a repayment amount, the participant hospital would not be 
required to make payment for that amount to CMS, as we have finalized 
our proposal not to hold hospitals financially responsible for negative 
NPRAs for the first performance year. In addition, if it is determined 
that a CJR hospital has a positive NPRA for performance year 1, and the 
subsequent calculation for performance year 1 the following year, as 
described in section III.C.6. of the proposed rule, determines that in 
aggregate the performance year 1 NPRA and the subsequent calculation 
amount for performance year 1 is a negative value (adding together the 
NPRA amount from the reconciliation for performance year 1 as well as 
the amount determined in the subsequent calculation, which would be 
detailed on the CJR reconciliation report for performance year 2), the 
hospital would only be financially responsible for a repayment amount 
that would net the performance year 1 NPRA and subsequent calculation 
for performance year 1 to zero. This would be true for performance year 
1 only, given our proposal to begin phasing in financial responsibility 
in year 2 of the model as discussed in section III.C.2.c. of the 
proposed rule. For performance years 2 through 5 of the model, for 
example, if there was a positive NPRA for performance year 1 for a 
given hospital of $3,000, and the subsequent calculation performed in 
Q2 2018 to account for claims run-out and overlaps determined a 
repayment amount of $3,500 for claims incurred and overlap during 
performance year 1, $3,000 would be applied to the CJR reconciliation 
report for performance year 2. If the positive NPRA for performance 
year 2 were $5,000, the repayment amount of $3,000 would be netted 
against the $5,000, and the reconciliation payment for performance year 
2 would be $2,000. Given that downside risk has been waived for 
performance year 1, the remaining $500 would not be added to the CJR 
reconciliation report for performance year 2. However, beginning with 
the reconciliation process for performance year 3, any repayment 
amounts generated through the subsequent calculation process detailed 
in section III.C.6.b. of this final rule would be netted against any 
repayment or reconciliation amount on the respective CJR reconciliation 
reports for performance years 2, 3, 4, and 5. Starting with the 
reconciliation for performance year 2, if the CJR Reconciliation Report 
indicates the NPRA is negative, the participant hospital would make 
payment for the absolute value of that amount to CMS within 30-calendar 
days from the issue date of the CJR Reconciliation Report, in a form 
and manner specified by CMS. For example, if there was a positive NPRA 
for performance year 3 for a given hospital of $1,000, and the 
subsequent calculation performed in Q2 2019 to account for claims run-
out and overlaps determined a repayment amount of $2,500 for claims 
incurred and overlap during performance year 3, the full $2,500 would 
be applied to the CJR reconciliation report for performance year 4, 
subject to the stop loss/stop gain limits detailed in section III.C.8. 
of this final rule. Thus, if the positive NPRA for performance year 4 
were $2,000, the repayment amount of $2,500 would be netted against the 
$2,000, and a repayment amount for performance year

[[Page 73409]]

4 would be $500. Where the participant hospital does not issue payment 
within 30-calendar days, we will issue a demand letter requiring 
payment be made immediately.
     The reconciliation or repayment amount may include 
adjustments, arising from matters from the previous performance year, 
as necessary to account for subsequent calculations performed for 
performance years that were specified in earlier CJR Reconciliation 
Reports, as discussed in section III.C.6. of the proposed rule. For 
example, we would potentially make determinations of additional monies 
owed by Medicare to participant hospitals or vice versa in subsequent 
periods based on the availability of updated Medicare administrative 
data. These subsequent calculations would be contained in the 
succeeding reconciliation report. For example, the subsequent 
calculations applicable to performance year 1 would be contained in the 
reconciliation report for performance year 2.
     If the participant hospital fails to pay CMS the amount 
owed by the date indicated in the demand letter, CMS will recoup owed 
monies from participant hospital's present and future Medicare payments 
to collect all monies due to CMS. While we proposed that a participant 
hospital may enter into financial arrangements with CJR collaborators 
that allow for some risk-sharing, as discussed in section III.C. of the 
proposed rule, the participant hospital would be solely liable for the 
repayment of the negative repayment amount to CMS. Where the 
participant hospital fails to repay CMS in full for all monies owed, 
CMS would invoke all legal means to collect the debt, including 
referral of the remaining debt to the United States Department of the 
Treasury, pursuant to 31 U.S.C. 3711(g).
b. Calculation Error
    We proposed the following calculation error process for participant 
hospitals to contest matters related to payment or reconciliation, of 
which the following is a non-exhaustive list: The calculation of the 
participant hospital's reconciliation amount or repayment amount as 
reflected on a CJR reconciliation report; the calculation of NPRA; the 
calculation of the percentiles of quality measure performance to 
determine eligibility to receive a reconciliation payment; and the 
successful reporting of the voluntary PRO THA/TKA data to adjust the 
reconciliation payment. Participant hospitals would review their CJR 
reconciliation report and be required to provide written notice of any 
error, in a notice of calculation error that must be submitted in a 
form and manner specified by CMS. Unless the participant provides such 
notice, the reconciliation report would be deemed final within 30 
calendar days after it is issued, and CMS would proceed with payment or 
repayment. If CMS receives a timely notice of an error in the 
calculation, CMS would respond in writing within 30 calendar days to 
either confirm or refute the calculation error, although CMS would 
reserve the right to an extension upon written notice to the 
participant hospital. We proposed that if a participant hospital does 
not submit timely notice of calculation error in accordance with the 
timelines and processes specified by CMS, the participant hospital 
would be precluded from later contesting any of the following matters 
contained in the CJR reconciliation report for that performance year: 
Any matter involving the calculation of the participant hospital's 
reconciliation amount or repayment amount as reflected on a CJR 
reconciliation report; any matter involving the calculation of NPRA; 
the calculation of the percentiles of quality measure performance to 
determine eligibility to receive a reconciliation payment; and the 
successful reporting of the voluntary PRO THA/TKA data to adjust the 
reconciliation payment.
c. Dispute Resolution
(1) Limitations on Review
    In accordance with section 1115A(d) of the Act, there is no 
administrative or judicial review under sections 1869 or 1878 of the 
Act or otherwise for the following:
     The selection of models for testing or expansion under 
section 1115A of the Act.
     The selection of organizations, sites or participants to 
test those models selected.
     The elements, parameters, scope, and duration of such 
models for testing or dissemination.
     Determinations regarding budget neutrality under 
subsection 1115A(b)(3) of the Act.
     The termination or modification of the design and 
implementation of a model under subsection 1115A(b)(3)(B) of the Act.
     Decisions about expansion of the duration and scope of a 
model under subsection 1115A(c) of the Act, including the determination 
that a model is not expected to meet criteria described in paragraph 
(1) or (2) of such subsection.
(2) Matters Subject To Dispute Resolution
    We proposed that a participant hospital may appeal an initial 
determination that is not precluded from administrative or judicial 
review by requesting reconsideration review by a CMS official. The 
request for review must be submitted for receipt by CMS within 10 days 
of the notice of the initial determination, in a form and manner 
specified by CMS.
(3) Dispute Resolution Process
    We proposed the following dispute resolution process. First, we 
proposed that only a participant hospital may utilize the dispute 
resolution process. Second, in order to access the dispute resolution 
process a participant hospital must have timely submitted a notice of 
calculation error, as previously discussed, for any matters related to 
payment. We proposed these matters would include any amount or 
calculation indicated on a CJR reconciliation report, including 
calculations not specifically reflected on a CJR reconciliation report 
but which generated figures or amounts reflected on a CJR 
reconciliation report. The following is a non-exhaustive list of the 
matters we proposed would need to be first adjudicated by the 
calculation error process as previously detailed: Calculations of 
reconciliation or repayment amounts; calculations of NPRA; and any 
calculations or percentile distribution involving quality measures that 
we proposed could affect reconciliation or repayment amounts. If a 
participant hospital wants to engage in the dispute resolution process 
with regard to one of these matters, we proposed it would first need to 
submit a notice of calculation error. Where the participant hospital 
does not timely submit a notice of calculation error, we proposed the 
dispute resolution process would not be available to the participant 
hospital with regard to those matters for the reconciliation report for 
that performance year.
    If the participant hospital did timely submit a notice of 
calculation error and the participant hospital is dissatisfied with 
CMS's response to the participant hospital's notice of calculation 
error, the hospital would be permitted to request reconsideration 
review by a CMS reconsideration official. The reconsideration review 
request would be submitted in a form and manner and to an individual or 
office specified by CMS. The reconsideration review request would 
provide a detailed explanation of the basis for the dispute and include 
supporting documentation

[[Page 73410]]

for the participant hospital's assertion that CMS or its 
representatives did not accurately calculate the NPRA or post-episode 
spending amount in accordance with CJR rules. The following is a non-
exhaustive list of representative payment matters:
     Calculations of NPRA, post-episode spending amount, target 
prices or any items listed on a reconciliation report.
     The application of quality measures to a reconciliation 
payment, including the calculation of the percentiles thresholds of 
quality measure performance to determine eligibility to receive 
reconciliation payments, or the successful reporting of the voluntary 
PRO THA/TKA data to adjust the reconciliation payment.
     Any contestation based on the grounds that CMS or its 
representative made an error in calculating or recording such amounts.
    Where the matter is unrelated to payment, such as termination from 
the model, the participant hospital need not submit a notice of 
calculation error. We proposed to require the participant hospital to 
timely submit a request for reconsideration review, in a form and 
manner to be determined by CMS. Where such request is timely received, 
we proposed CMS would process the request as discussed later in this 
section.
    We proposed that the reconsideration review would be an on-the-
record review (a review of briefs and evidence only). The CMS 
reconsideration official would make reasonable efforts to notify the 
hospital in writing within 15 calendar days of receiving the 
participant hospital's reconsideration review request of the date and 
time of the review, the issues in dispute, the review procedures, and 
the procedures (including format and deadlines) for submission of 
evidence (the ``Scheduling Notice''). The CMS reconsideration official 
would make reasonable efforts to schedule the review to occur no later 
than 30 calendar days after the date of the Scheduling Notice. The 
provisions at Sec.  425.804(b), (c), and (e) will apply to reviews 
conducted pursuant to the reconsideration review process for CJR. The 
CMS reconsideration official would make reasonable efforts to issue a 
written determination within 30 days of the review. The determination 
would be final and binding.
    We solicited comment on our proposals related to appeals rights 
under this model. The two-step appeal process for payment matters--(1) 
Notice of calculation error, and (2) reconsideration review--is used 
broadly in other CMS models. We sought comment on whether we should 
develop an alternative appeal process. We are also interested in 
whether there should be appeal rights for reductions or eliminations of 
NPRA as a result of enforcement actions, as discussed in section 
III.C.12. of the proposed rule, and if so, whether the process for such 
appeals should differ from the processes proposed here.
    The following is a summary of the comments received and our 
responses.
    Comment: The comments we received on the calculation error process 
varied widely. Multiple commenters were supportive of the process, 
including commenters that have experience in BPCI, in which an 
identical calculation error process is used. A majority of the comments 
recommended that CMS extend the timeframe for appeals under the 
calculation error process. Commenters indicated that they appreciated 
CMS providing details of an appeal procedure, but many suggested that 
the 30-day timeframe for submission of a notice of calculation error is 
too short. Some commenters offered proposals for longer periods; 
specifically, we received separate comments indicating that 45 days, 60 
days, or 180 days would be acceptable timeframes. With regard to the 
proposal to allow for 180 days, multiple commenters noted that this 
timeframe is similar to the timeframe afforded hospitals to appeal 
adjustments in the Medicare Cost Report. Multiple commenters also noted 
that a longer timeframe for notices of calculation error may benefit 
participant hospitals in providing additional time to identify and 
understand calculation errors.
    Response: We appreciate these comments and are sympathetic to the 
requests from commenters for more time to review reconciliation reports 
and submit notices of calculation error. We agree with commenters that 
providing additional time may benefit some participant hospitals in 
identifying and understanding calculation errors. We are committed to 
paying participant hospitals accurately and correctly and believe that 
the calculation error process serves an important function in achieving 
that goal.
    CMS uses the following processes for appeals that we are finalizing 
in section III.C.9. of this final rule. The procedures for processing 
and issuing reconciliation payments and repayments require that we 
submit the payment files for participant hospitals to the payment 
systems in batches. CMS uses these processes for several reasons. It is 
administratively more efficient to continue to use MACs to issue 
payments to all providers and suppliers that furnish services to 
beneficiaries during a CJR episode, so as not to disrupt the timing of 
FFS payments that providers and suppliers normally receive. For 
reconciliation payments and repayments, CMS has developed a process for 
processing these payments, which is used for other CMS models. This 
current process is the result of a substantial number of infrastructure 
changes to payment and recoupment procedures that were made over a 
period of several years. As a result, we believe it is appropriate to 
utilize those processes for the CJR model, given that the challenges 
associated with establishing these processes, as well as the fact that 
they were created for other CMS models.
    The effect of these processes is that the batches are sent at 
specified intervals. The first batch is sent after the calculation 
error timeframe closes. The second batch is sent after CMS has 
responded to the notices of calculation error of participant hospitals 
and those hospitals choose to not proceed with the dispute resolution 
process detailed in section III.C.9.b.(3) of this final rule. The final 
batch is sent after CMS has adjudicated all of the reconsideration 
reviews for those participant hospitals that selected to utilize the 
dispute resolution process.
    Given these processes, any extension in the timeframe allowed for 
submission of notices of calculation error delays payment not only to 
participant hospitals that choose to utilize the calculation error and 
dispute resolution processes, but even those participant hospitals that 
choose not to engage in these processes. As such, we believe the need 
for extending the deadline for submission of notices of calculation 
error should be balanced with CMS' goal to issue reconciliation 
payments and repayments promptly, as an extension for these submissions 
would delay the processing of reconciliation payments for all 
participant hospitals for a significant period of time. However, we 
acknowledge the commenters' concerns and the need for participant 
hospitals to have adequate time to analyze and prepare notices of 
calculation error.
    Therefore, we believe that a longer timeframe for submission of the 
calculation error form is appropriate for the CJR model, given that CMS 
is reconciling on an annual basis, as opposed to quarterly for the BPCI 
initiative. Given that participant hospitals in CJR are likely have a 
larger subset of data to review on their annual reconciliation reports 
than their BPCI counterparts who receive quarterly reconciliation 
reports, we believe it is

[[Page 73411]]

prudent for CMS to allow additional time for participant hospitals to 
review their reconciliation reports for calculation errors. We agree 
with the commenters who suggested that 45 days would allow sufficient 
time for participant hospitals to review reconciliation reports, and if 
they choose, submit notices of calculation error. We believe that 45 
days is the appropriate timeframe to allow for this process, as it 
responds to the requests for more time than our proposal of 30 days, 
but does not seriously delay payment of reconciliation payments, in the 
way in which a submission timeframe of 180 days would do. We considered 
the recommendations for 60 days, but we rejected these recommendations 
because we note that the calculation error form represents the first 
step in a two-step appeals process. Where a participant hospital 
submits a calculation form and is dissatisfied with CMS' response, the 
dispute resolution option is available to the participant hospital via 
a reconsideration review request. Upon receipt of a reconsideration 
review request, the date of such a review would be scheduled by CMS 
approximately 130 days from the issue date of the reconciliation 
report. Thus, we believe that the option for reconsideration review, at 
a much later date, provides participant hospitals with adequate 
additional time to analyze the date on reconciliation reports, that a 
60-day submission deadline for the calculation error form is 
unnecessary. Finally, we believe that extending this period to 45 days 
appropriately balances the goal of CMS to process reconciliation 
payments on a timely basis with the needs of participant hospitals to 
have adequate time to review their reconciliation reports and submit 
notices of calculation error.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal with one modification to allow 
participant hospitals 45 days to submit a calculation error form. We 
are finalizing our proposal to process and issue reconciliation 
payments and collect repayments as described in section III.C.6. of 
this final rule, and to allow for an optional appeals process, as 
previously described in this section, in which participant hospitals 
may submit a calculation error form, as well as have an opportunity to 
engage in dispute resolution.
    With regard to the calculation error process, we are finalizing our 
proposal with one modification. Participant hospitals may submit a 
calculation error form to contest matters related to payment or 
reconciliation, of which the following is a non-exhaustive list: The 
calculation of the participant hospital's reconciliation amount or 
repayment amount as reflected on a CJR reconciliation report; the 
calculation of NPRA; the calculation of the percentiles of quality 
measure performance to determine eligibility to receive a 
reconciliation payment; and the successful reporting of the voluntary 
PRO THA/TKA data to adjust the reconciliation payment. Upon receipt of 
its CJR reconciliation report, the participant hospital may choose to 
submit a calculation error form. The form must be submitted in a form 
and manner specified by CMS. Unless the participant provides such 
notice, the reconciliation report will be deemed final within 45 
calendar days after it is issued, and CMS will proceed with payment or 
repayment. If CMS receives a timely notice of an error in the 
calculation, CMS will respond in writing within 30 calendar days to 
either confirm or refute the calculation error, although CMS reserves 
the right to an extension upon written notice to the participant 
hospital. If a participant hospital does not submit timely notice of 
calculation error in accordance with the timelines and processes 
specified by CMS, the participant hospital is precluded from later 
contesting any of the following matters contained in the CJR 
reconciliation report for that performance year: any matter involving 
the calculation of the participant hospital's reconciliation amount or 
repayment amount as reflected on a CJR reconciliation report; any 
matter involving the calculation of NPRA; the calculation of the 
percentiles of quality measure performance to determine eligibility to 
receive a reconciliation payment; and the successful reporting of the 
voluntary PRO THA/TKA data to adjust the reconciliation payment.
    With regard to the dispute resolution process, we are finalizing 
our proposal without modification. In accordance with section 1115A(d) 
of the Act, there is no administrative or judicial review under 
sections 1869 or 1878 of the Act or otherwise for the following:
     The selection of models for testing or expansion under 
section 1115A of the Act.
     The selection of organizations, sites or participants to 
test those models selected.
     The elements, parameters, scope, and duration of such 
models for testing or dissemination.
     Determinations regarding budget neutrality under 
subsection 1115A(b)(3) of the Act.
     The termination or modification of the design and 
implementation of a model under subsection 1115A(b)(3)(B of the Act.
     Decisions about expansion of the duration and scope of a 
model under subsection 1115A(c), including the determination that a 
model is not expected to meet criteria described in paragraph (1) or 
(2) of such subsection.
    We are also finalizing our proposal without modification regarding 
the matters subject to dispute resolution, and the process CMS will use 
to adjudicate dispute resolution matters. Thus, a participant hospital 
may appeal an initial determination that is not precluded from 
administrative or judicial review by requesting reconsideration review 
by a CMS official. The request for review must be submitted for receipt 
by CMS within 10 days of the notice of the initial determination, in a 
form and manner specified by CMS. Only a participant hospital may 
utilize the dispute resolution process.
    In order to access the dispute resolution process, a participant 
hospital must timely submit a calculation error form, as previously 
discussed, for any matters related to payment. These matters include 
any amount or calculation indicated on a CJR reconciliation report, 
including calculations not specifically reflected on a CJR 
reconciliation report but which generated figures or amounts reflected 
on a CJR reconciliation report. The following is a non-exhaustive list 
of the matters that we are requiring must be first adjudicated by the 
calculation error process as previously detailed: Calculations of 
reconciliation or repayment amounts; calculations of NPRA; and any 
calculations or percentile distribution involving quality measures that 
we proposed could affect reconciliation or repayment amounts. If a 
participant hospital wants to engage in the dispute resolution process 
with regard to one of these matters, the participant hospital must 
first submit a calculation error form. Where the participant hospital 
does not timely submit a calculation error form, the dispute resolution 
process is not available to the participant hospital with regard to 
those matters for the reconciliation report for that performance year.
    If the participant hospital does timely submit a calculation error 
form and the participant hospital is dissatisfied with CMS's response 
to the participant hospital's calculation error form, the hospital is 
permitted to request reconsideration review by a CMS reconsideration 
official. The reconsideration review request must be submitted in a 
form and manner and to

[[Page 73412]]

an individual or office specified by CMS. The reconsideration review 
request must provide a detailed explanation of the basis for the 
dispute and include supporting documentation for the participant 
hospital's assertion that CMS or its representatives did not accurately 
calculate the NPRA or post-episode spending amount in accordance with 
CJR rules. The following is a non-exhaustive list of representative 
payment matters:
     Calculations of NPRA, post-episode spending amount, target 
prices or any items listed on a reconciliation report.
     The application of quality measures to a reconciliation 
payment, including the calculation of the percentiles thresholds of 
quality measure performance to determine eligibility to receive 
reconciliation payments, or the successful reporting of the voluntary 
PRO THA/TKA data to adjust the reconciliation payment.
     Any contestation based on the grounds that CMS or its 
representative made an error in calculating or recording such amounts.
    Lastly, we are finalizing our proposal without modification that 
the reconsideration review is an on-the-record review (a review of 
briefs and evidence only). The CMS reconsideration official will make 
reasonable efforts to notify the hospital in writing within 15 calendar 
days of receiving the participant hospital's reconsideration review 
request of the date and time of the review, the issues in dispute, the 
review procedures, and the procedures (including format and deadlines) 
for submission of evidence (the ``Scheduling Notice''). The CMS 
reconsideration official will make reasonable efforts to schedule the 
review to occur no later than 30 calendar days after the date of the 
Scheduling Notice. The provisions at Sec.  425.804(b), (c), and (e) 
will apply to reviews conducted pursuant to the reconsideration review 
process for CJR. The CMS reconsideration official will make reasonable 
efforts to issue a written determination within 30 days of the review. 
The determination will be final and binding.
    This modification is set forth in Sec.  510.310(a)(1). The 
remainder of the proposal is finalized as proposed and set forth in 
Sec.  510.310.
10. Financial Arrangements and Beneficiary Incentives
a. Financial Arrangements
    As previously noted, in the proposed rule we stated our belief that 
given the financial incentives of episode payment in CJR, participant 
hospitals in the model might want to engage in financial arrangements 
to share reconciliation payments or hospital internal cost savings or 
both, as well as responsibility for repaying Medicare, with providers 
and suppliers making contributions to the hospital's episode 
performance on spending and quality. Such arrangements would allow the 
participant hospitals to share all or some of the reconciliation 
payments they may be eligible to receive from CMS, or the participant 
hospital's internal cost savings that result from care for 
beneficiaries during a CJR episode. Likewise, such arrangements could 
allow the participant hospitals to share the responsibility for the 
funds needed to repay Medicare with providers and suppliers engaged in 
caring for CJR beneficiaries, if those providers and suppliers have a 
role in the hospital's episode spending or quality performance. We use 
the term ``CJR collaborator'' to refer to such providers and suppliers, 
who we proposed may include the following:
     SNFs.
     HHAs.
     LTCHs.
     IRFs.
     PGPs.
     Physicians, nonphysician practitioners, and providers or 
suppliers of therapy services.
    We stated our belief that CJR collaborators should have a role in 
the participant hospital's episode spending or quality performance. 
Accordingly, we proposed that the CJR collaborator would directly 
furnish related items or services to a CJR beneficiary during the 
episode and/or specifically participate in CJR model LEJR episode care 
redesign activities, such as attending CJR meetings and learning 
activities; drafting LEJR episode care pathways; reviewing CJR 
beneficiaries' clinical courses; developing episode analytics; or 
preparing reports of episode performance under the direction of the 
participant hospital or a CJR collaborator that directly furnishes 
related items and services to CJR beneficiaries. We also stated that in 
addition to playing a role in the participant hospital's episode 
spending or quality performance, physician, nonphysician, and PGP CJR 
collaborators must directly furnish services to CJR beneficiaries in 
order to receive a gainsharing payment as result of their financial 
arrangement with the participant hospital. We sought comment on our 
proposed definition of CJR collaborators, as well as our proposed 
definition of a provider's or supplier's role in the participant 
hospital's episode spending or quality performance.
    We proposed that certain financial arrangements between a 
participant hospital and a CJR collaborator be termed a ``CJR sharing 
arrangement,'' and that the terms of each CJR sharing arrangement be 
set forth in a written agreement between the participant hospital and 
the CJR collaborator. We proposed to use the term ``Participation 
Agreement'' to refer to such agreements. We proposed that a ``CJR 
sharing arrangement'' would be a financial arrangement contained in a 
Participation Agreement to share only the following: (1) CJR 
reconciliation payments (as that term is defined in section III.C. of 
the proposed rule); (2) the participant hospital's internal cost 
savings (as that term is defined later in this section); and (3) the 
participant hospital's responsibility for repayment to Medicare, as 
discussed later in this section. Where a payment from a participant 
hospital to a CJR collaborator is made pursuant to a CJR sharing 
arrangement, we proposed to define that payment as a ``gainsharing 
payment.'' A gainsharing payment may only be only composed of the 
following: (1) Reconciliation payments; (2) internal cost savings; or 
(3) both. Where a payment from a CJR collaborator to a participant 
hospital is made pursuant to a CJR sharing arrangement, we proposed to 
define that payment as an ``alignment payment.'' We proposed that CJR 
sharing arrangements that provide for alignment payments would not 
relieve the participant hospital of its ultimate responsibility for 
repayment to CMS. Many of the programmatic requirements discussed later 
in this final rule for gainsharing payments and alignment payments are 
similar to those in Model 2 of the BPCI initiative.
    CJR sharing arrangements must be solely related to the 
contributions of the CJR collaborators to care redesign that achieve 
quality and efficiency improvements under this model for CJR 
beneficiaries. All gainsharing payments or alignment payments between 
participant hospitals and CJR collaborators resulting from these 
arrangements must be auditable by HHS, as discussed later in this 
section, to ensure their financial and programmatic integrity. We 
emphasized that any CJR collaborator that receives a gainsharing 
payment or makes an alignment payment must have furnished services 
included in the episode to CJR beneficiaries. Furthermore, the payment 
arrangements for gainsharing payments or alignment payments contained 
in a CJR sharing arrangement must be actually and proportionally 
related to

[[Page 73413]]

the care of beneficiaries in a CJR episode, and the CJR collaborator 
must be contributing to the care redesign strategies of the participant 
hospital.
    We considered whether CJR collaborators should be termed 
``participants'' in this model, or whether the term ``participant'' 
should refer only to the participant hospitals located in MSAs selected 
for participation. If CJR collaborators are participants in the model, 
we proposed that their activities with regard to CJR beneficiaries 
would be regulated directly by CMS. However, if CJR collaborators are 
not participants, but rather are participating entities and individuals 
in the CJR model through signed agreements with participant hospitals, 
their activities with regard to CJR beneficiaries would be governed by 
the Participation Agreement between a CJR collaborator and a 
participant hospital. Given the large number of potential CJR 
collaborators, the expected varied nature of their respective 
arrangements with participant hospitals, and the potential 
administrative burden in reporting information to CMS, we believed the 
activities of CJR collaborators with regard to CJR beneficiaries would 
be best managed by participant hospitals. As we discussed earlier in 
this final rule, one justification for proposing that acute care 
hospitals be the provider type financially responsible under the CJR 
model is the position of the hospital with respect to other providers 
and suppliers, in terms of coordinating care for CJR beneficiaries. 
Given that position, we proposed that where participant hospitals enter 
into Participation Agreements that contain CJR sharing arrangements, 
the participant hospital must also be responsible for ensuring that 
those providers and suppliers comply with the terms and requirements of 
the proposed rule. We sought comments on this proposal; specifically, 
whether CJR collaborators should be termed participants in this model 
and subject to the applicable requirements, or whether the 
responsibility for compliance with the model's requirements is better 
managed by participant hospitals. We were particularly interested in 
comments that address the advantages and disadvantages of making CJR 
collaborators participants in the model, and whether there are certain 
provider or supplier types that CMS should consider including as 
``participants'' in the model.
    The following discussion outlines our proposed requirements and 
responsibilities of participant hospitals that engage in such CJR 
sharing arrangements. In the proposed rule, we stated our belief that 
these proposed requirements and responsibilities are essential to 
ensuring that all CJR sharing arrangements are for the sole purpose of 
aligning the financial incentives of collaborating providers and 
suppliers with those of the participant hospital toward the CJR model 
goals of improved LEJR episode care quality and efficiency. We believed 
that the rationale for and details of these arrangements must be 
documented and auditable by HHS, with a direct connection to the 
arrangements and the participant hospital's episode performance. 
Finally, we believed that the proposed limitations to the arrangements, 
as described later in this section, are necessary to ensure the 
integrity of the CJR model by minimizing incentives for problematic 
behaviors, such as patient steering. We sought comments on all proposed 
requirements regarding CJR sharing arrangements.
    With respect to whether certain entities or individuals should be 
prevented from participating in the CJR model, either as participant 
hospitals or CJR collaborators, we considered whether CMS should 
conduct screening for program integrity purposes. Many CMS models 
conduct screening during the application process and periodically 
thereafter. These screenings examine provider and supplier program 
integrity history, including any history of Medicare program exclusions 
or other sanctions and affiliations with individuals or entities that 
have a history of program integrity issues. Where a screening reveals 
that a provider or supplier has a history of program integrity issues 
or affiliations with individuals or entities that have a history of 
program integrity issues, we may remove that provider or supplier from 
the model. We utilize these screening processes for many CMS models, 
including the BPCI initiative.
    For several reasons, in the proposed rule we stated our belief that 
this type of screening for participant hospitals would be inapplicable 
to the CJR model. Most importantly, this model seeks to evaluate the 
performance in the model of hospitals located in a particular MSA. We 
believed it is important that all hospitals that meet the criteria for 
participation in the model be included. Further, in section III.F. of 
the proposed rule we proposed that CMS would evaluate the quality of 
care and institute beneficiary protections via a monitoring plan that 
in ways that would go beyond some of the efforts of previous or 
existing CMS models. We solicited comments on this proposal, including 
whether screening of participant hospitals or CJR collaborators might 
be appropriate or useful in aiding HHS' program integrity efforts and 
identifying untrustworthy parties or parties with program integrity 
history problems.
(1) CJR Sharing Arrangement Requirements
    We proposed that each CJR sharing arrangement must include and set 
forth in writing at a minimum--
     A specific methodology and accounting formula for 
calculating and verifying internal cost savings, if the participant 
hospital elects to share internal cost savings through gainsharing 
payments with CJR collaborators. We proposed to define internal cost 
savings as the measurable, actual, and verifiable cost savings realized 
by the participant hospital resulting from care redesign undertaken by 
the participant hospital in connection with providing items and 
services to beneficiaries within specific CJR episodes of care. 
Internal cost savings would not include savings realized by any 
individual or entity that is not the participant hospital. Each CJR 
sharing arrangement must include specific methodologies for accruing 
and calculating internal cost savings of the participant hospital, 
where the hospital intends to share internal cost savings through a CJR 
sharing arrangement. The specific methodologies for accruing and 
calculating internal cost savings must be transparent, measurable, and 
verifiable in accordance with Generally Accepted Accounting Principles 
(GAAP) and Government Auditing Standards (The Yellow Book). The 
methodology must set out the specific care redesign elements to be 
undertaken by the participant hospital or the CJR collaborator or both;
     A description of the methodology and accounting formula 
for calculating the percentage or dollar amount of a reconciliation 
payment received from CMS that will be paid as a gainsharing payment 
from the participant hospital to the CJR collaborator;
     A description of the methodology, frequency or dates of 
distribution, and accounting formula for distributing and verifying any 
and all gainsharing payments;
     A description of the arrangement between the participant 
hospital and the CJR collaborator regarding alignment payments, where 
the hospital and CJR collaborator agree through a CJR sharing 
arrangement to share risk for repayment amounts due to CMS, as 
reflected on a CJR reconciliation report. The description of this 
arrangement must include safeguards to ensure that such alignment 
payments are made solely for

[[Page 73414]]

purposes related to sharing responsibility for funds needed to repay 
Medicare in the CJR model. This description should also include a 
methodology, frequency of payment, and accounting formula for payment 
and receipt of any and all alignment payments;
     A provision requiring the participant hospital to recoup 
gainsharing payments paid to CJR collaborators if gainsharing payments 
were based on the submission of false or fraudulent data;
     Plans regarding care redesign, changes in care 
coordination or delivery that are applied to the participant hospital 
or CJR collaborators or both, and any description of how success will 
be measured;
     Management and staffing information, including type of 
personnel or contactors that will be primarily responsible for carrying 
out changes to care under the model;
     The participant hospital must maintain records identifying 
all CJR collaborators, and the participant hospital's process for 
determining and verifying the eligibility of CJR collaborators to 
participate in Medicare; and
     All CJR sharing arrangements must require compliance, from 
both the participant hospital and the CJR collaborator, with the 
policies regarding beneficiary notification set forth in section III.F. 
of the final rule.
    With respect to these requirements for Participation Agreements and 
CJR sharing arrangements, we considered whether we should require 
participant hospitals and CJR collaborators to periodically report this 
information to CMS for purposes of enforcement of these proposed 
regulations. However, we are mindful of the administrative burden in 
reporting this information as well as the challenges associated with 
creating a universal collection tool that would account for all the 
various iterations of financial arrangements into which participant 
hospitals and CJR collaborators may enter. We sought comment on this 
proposal as well as whether CMS should require participant hospitals 
and CJR collaborators to periodically report data such as: Gainsharing 
payments and/or alignment payments distributed and received; name and 
identifier (NPI, CCN, TIN) of all CJR collaborators; and any other 
relevant information related to Participation Agreements and CJR 
sharing arrangements that would assist HHS with enforcement of these 
regulations.
    We solicited comments about all of the requirements set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the model are met.
(2) Participation Agreement Requirements
    We proposed that the Participation Agreement must obligate the 
parties to comply, and must obligate the CJR collaborator to require 
any of its employees, contractors or designees to comply, without 
limitation, with the following requirements:
     Each individual's or entity's participation in the CJR 
sharing arrangement is voluntary and without penalty for 
nonparticipation.
     Any gainsharing payments made pursuant to a CJR sharing 
arrangement must be made only from the participant hospital to the CJR 
collaborator with whom the participant hospital has signed a 
Participation Agreement containing a CJR sharing arrangement. 
Additionally, we proposed to require the following for all CJR sharing 
arrangements between a participant hospital and a CJR collaborator that 
is a PGP:
    + Where a gainsharing payment is made to a CJR collaborator that is 
a PGP, all monies contained in such a gainsharing payment must be 
shared only with physician or nonphysician practitioners that furnished 
a service to a CJR beneficiary during an episode of care in the 
calendar year from which the Net Payment Reconciliation Amount (NPRA), 
as that term is defined in section III.C.6. of this final rule, or 
internal cost savings was generated, either or both of which are the 
only permitted sources of funds for a gainsharing payment. We further 
proposed that each CJR sharing arrangement between a participant 
hospital and a CJR collaborator that is a PGP must stipulate that the 
PGP may not retain any portion of a gainsharing payment or distribute, 
by any method, any portion of a gainsharing payment to physician or 
nonphysician practitioners who did not furnish a service to a CJR 
beneficiary during an episode of care in the calendar year from which 
the NPRA or internal cost savings was generated.
     Any alignment payments made pursuant to a CJR sharing 
arrangement may be made only to the participant hospital from the 
entity or individual with whom the participant hospital has signed a 
Participation Agreement containing a CJR sharing arrangement.
     Each CJR sharing arrangement must require that the CJR 
collaborator be in compliance with all Medicare provider enrollment 
requirements at Sec.  424.500 et seq., including having a valid and 
active TIN or NPI.
     Any internal cost savings or reconciliation payments that 
the participant hospital seeks to share through CJR sharing 
arrangements must meet the requirements set forth in the final CJR rule 
(as finalized) and be administered by the participant hospital in 
accordance with GAAP. In no event may the participant hospital 
distribute any amounts pursuant to a CJR sharing arrangement that are 
not comprised of either internal cost savings or a reconciliation 
payment, as those terms are defined in this final rule. All amounts 
determined to be internal cost savings by the participant hospital must 
reflect actual, internal cost savings achieved by the participant 
hospital through implementation of care redesign elements identified 
and documented by the participant hospital. In no case may internal 
cost savings reflect ``paper'' savings from accounting conventions or 
past investment in fixed costs.
     Any alignment payments that the participant hospital 
receives through a CJR sharing arrangement must meet the requirements 
set forth in the final CJR rule (as finalized) and be administered by 
the participant hospital in accordance with GAAP.
     CJR sharing arrangements must not include any amounts that 
are not alignment payments or gainsharing payments.
     Further, we proposed that each Participation Agreement--
    ++ Between the participant hospital and a CJR collaborator must 
obligate the CJR collaborator to provide the participant hospital and 
HHS access to the CJR collaborator's records, information, and data for 
purposes of monitoring and reporting and any other lawful purpose. 
Records, information, and data regarding the CJR sharing arrangement 
must have sufficient detail to verify compliance with all material 
terms of the CJR sharing arrangement and the terms of the CJR model;
    ++ Must require the participant hospital and the CJR collaborator 
to include in their compliance programs specific oversight of their 
Participation Agreements and compliance with the requirements of the 
CJR model;
    ++ If the participant hospital or CJR collaborator does not have a 
compliance program, each party must create one and incorporate the 
provisions described in this part in that program;
    ++ Must require compliance, from both the participant hospital and 
the CJR collaborator, with the policies regarding beneficiary 
notification set

[[Page 73415]]

forth in section III.F.2. of this final rule; and
    ++ Must require the board or other governing body of the 
participant hospital to have responsibility for overseeing the 
participant hospital's participation in the model, its arrangements 
with CJR collaborators, its payment of gainsharing payments and receipt 
of alignment payments, and its use of beneficiary incentives in the CJR 
model.
     Participation Agreements must require all CJR 
collaborators to comply with any evaluation, monitoring, compliance, 
and enforcement activities performed by HHS or its designees for the 
purposes of operating the CJR model.
     Each Participation Agreement must require the CJR 
collaborator to permit site visits from CMS, or one of its designees, 
for purposes of evaluating the model.
    We solicited comments about all of the requirements set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the model are met.
(3) Gainsharing Payment and Alignment Payment Conditions and 
Restrictions
    We proposed the following conditions and restrictions concerning 
gainsharing payments and alignment payments made pursuant to a CJR 
sharing arrangement:
     No entity or individual, whether or not a party to a 
Participation Agreement, may condition the opportunity to give or 
receive gainsharing payments in CJR on the volume or value of past or 
anticipated referrals or other business generated to, from, or among a 
participant hospital, any CJR collaborators, and any individual or 
entity affiliated with a participant hospital or CJR collaborator.
     Participant hospitals would not be required to share 
reconciliation payments, internal cost savings, or responsibility for 
repayment to CMS with other providers and suppliers. However, where a 
participant hospital elects to engage in those activities, we proposed 
that such activities be limited to the provisions prescribed in the 
proposed rule.
     We proposed that gainsharing payments must be distributed 
on an annual basis, and are required to meet the following criteria:
    ++ Must be clearly identified and comply with all provisions in the 
proposed rule, as well as all applicable laws, statutes, and rules;
    ++ Must not be a loan, advance payments, or payments for referrals 
or other business; and
    ++ Must be made by electronic funds transfer (EFT).
     We proposed that alignment payments from a CJR 
collaborator to a participant hospital may be made at any interval, and 
are required to meet the following criteria:
    ++ Must be clearly identified and comply with all provisions in the 
proposed rule, as well as all applicable laws, statutes, and rules;
    ++ Must not be issued, distributed, or paid prior to the 
calculation by CMS of a reconciliation report reflecting a negative 
NPRA;
    ++ Must not be a loan, advance payments, or payments for referrals 
or other business; and
    ++ Must be made by EFT.
     We proposed that each CJR sharing arrangement stipulate 
that any CJR collaborator that is subject to any action involving 
noncompliance with the provisions of the proposed rule, engaged in 
fraud or abuse, providing substandard care, or have other integrity 
problems not be eligible to receive any gainsharing payments related to 
NPRA generated during the time that coincides with the action involving 
any of the issues previously listed until the action has been resolved 
in a forum or manner that constitutes a final determination, either by 
the state or federal court of last resort, as applicable, or by CMS, 
HHS, or its designees.
     No entity or individual, whether or not a party to a 
Participation Agreement, may condition the opportunity to make or 
receive alignment payments in CJR on the volume or value of past or 
anticipated referrals or other business generated to, from, or among a 
participant hospital, any CJR collaborators, and any individual or 
entity affiliated with a participant hospital or CJR collaborator.
     In a calendar year, the aggregate amount of the total 
gainsharing payments distributed by the participant hospital that are 
derived from a CJR reconciliation payment may not exceed the amount of 
the reconciliation payment that the participant hospital received from 
CMS.
     In a calendar year, the aggregate amount of the total 
alignment payments received by the participant hospital may not exceed 
50 percent of the participant hospital's repayment amount due to CMS. 
If no repayment amount is due, then no alignment payments may be 
received by the participant hospital.
     We proposed that the participant hospital must retain at 
least 50 percent of its responsibility for repayment to CMS, pursuant 
to the repayment amount reflected in each annual reconciliation report, 
under the CJR model. Given that the participant hospital will be 
responsible for developing and coordinating care redesign strategies in 
response to its participation in the CJR model, we believed it is 
important that the participant hospital retain a significant portion of 
its responsibility for repayment to CMS. For example, upon receipt of a 
reconciliation report indicating that the participant hospital owes 
$100 to CMS, the participant hospital would be permitted to receive no 
greater than $50 in alignment payments, in the aggregate, from its CJR 
collaborators.
     Further, we proposed that a CJR sharing arrangement must 
limit the amount a single CJR collaborator may make in alignment 
payments to a single participant hospital. We proposed that a single 
CJR collaborator not make an alignment payment to a participant 
hospital that represents an amount greater than 25 percent of the 
repayment amount reflected on the participant hospital's annual 
reconciliation report. For example, upon receipt of a reconciliation 
report indicating that the participant hospital owes $100 to CMS, the 
participant hospital would be permitted to receive no more than $25 in 
an alignment payment from a single entity or individual who is a CJR 
collaborator of the participant hospital.
     Gainsharing payments and alignment payments must not 
induce the participant hospital, CJR collaborators, or the employees, 
contractors, or designees of the participant hospital or CJR 
collaborators to reduce or limit medically necessary services to any 
Medicare beneficiary.
     Individual physician and nonphysician practitioners, 
whether or not a party to a CJR sharing arrangement, must retain their 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
     Entities furnishing services to beneficiaries during a CJR 
episode, whether or not a party to a CJR sharing arrangement, must 
retain their ability to make decisions in the best interests of the 
patient, including the selection of devices, supplies, and treatments.
     Gainsharing methodologies for determining gainsharing 
payments and alignment payments must not directly account for volume or 
value of referrals, or business otherwise generated, between or among a 
participant hospital, any CJR collaborators, and any individual or 
entity affiliated with a participant hospital or CJR collaborator.

[[Page 73416]]

     Gainsharing payments must be derived solely from 
reconciliation payments or internal cost savings or both.
     The total amount of gainsharing payments for a calendar 
year paid to an individual physician or nonphysician practitioner who 
is a CJR collaborator must not exceed a cap. The cap is 50 percent of 
the total Medicare approved amounts under the Medicare Physician Fee 
Schedule (MPFS) for services furnished to the participant hospital's 
CJR beneficiaries during a CJR episode by that physician or 
nonphysician practitioner. This cap of 50 percent on gainsharing 
payments to individual physician or nonphysician practitioner is 
consistent with the same policy for the BPCI initiative. The purpose of 
this cap is to limit the amount of gainsharing payments an individual 
practitioner may receive due to his/her provision of services included 
in the CJR model.
     The total amount of gainsharing payments for a calendar 
year paid to a PGP that is a CJR collaborator must not exceed a cap. 
The cap is 50 percent of the sum of the total Medicare approved amounts 
under the MPFS for services furnished by physician or nonphysician 
practitioner members of the PGP to the participant hospital's CJR 
beneficiaries during a CJR episode by those physicians or nonphysician 
practitioners.
    We solicited comments about all of the requirements set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the model are met.
(4) Documentation and Maintenance of Records
    We proposed to require participant hospitals and CJR collaborators 
to comply with audit and document retention requirements similar to 
those required by the Medicare Shared Savings Program, BPCI Model 2, 
and other Innovation Center models. Specifically, with respect to all 
Participation Agreements and CJR sharing arrangements, the participant 
hospital and CJR collaborator must:
     Comply with the retention requirements regarding 
Participation Agreements and CJR sharing arrangements set forth in 
subsection III.C.10.(a) of this final rule.
     Maintain and give CMS, the Office of Inspector General of 
the Department of Health and Human Services (OIG), and the Comptroller 
General or their designee(s) access to all books, contracts, records, 
documents, and other evidence (including data related to utilization 
and payments, quality performance measures, billings, and CJR sharing 
arrangements related to CJR) sufficient to enable the audit, 
evaluation, inspection, or investigation of the participant hospital's 
compliance, as well as the compliance of any CJR collaborator that has 
a CJR sharing arrangement with the participant hospital, with CJR rules 
and requirements, the Participation Agreement, the quality of services 
furnished, the obligation to repay any reconciliation payments owed to 
CMS, the determination, distribution, receipt, or recoupment of 
gainsharing payments or alignment payments.
     Maintain such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the 
participant hospital's participation in the CJR model or from the date 
of completion of any audit, evaluation, inspection, or investigation, 
whichever is later, unless--
    ++ CMS determines there is a special need to retain a particular 
record or group of records for a longer period and notifies the 
participant hospital or CJR collaborator at least 30 calendar days 
before the normal disposition date; or
    ++ There has been a dispute or allegation of fraud or similar fault 
against the participant hospital or any CJR collaborator in which case 
the records must be maintained for an additional 6 years from the date 
of any resulting final resolution of the dispute or allegation of fraud 
or similar fault.
     Notwithstanding any CJR sharing arrangements, the 
participant hospital must have ultimate responsibility for adhering to 
and otherwise fully complying with all provisions of the CJR model.
     OIG Authority is not limited or restricted by the 
provisions of the CJR model, including the authority to audit, 
evaluate, investigate, or inspect the participant hospital, CJR 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.
     None of the provisions of the CJR model limits or 
restricts any other government authority permitted by law to audit, 
evaluate, investigate, or inspect the participant hospital, CJR 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.
    We solicited comments about all of the requirements set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the model are met.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters requested clarification regarding the 
application of the fraud and abuse laws to arrangements contemplated by 
the CJR model.
    Response: We understand the commenters' interest in the 
availability of fraud and abuse waivers for the CJR model. However, as 
indicated in the proposed rule, such waivers would be issued separately 
by OIG (as to sections 1128A and 1128B of the Act) and CMS (as to 
section 1877 of the Act). Any fraud and abuse waivers issued in 
connection with the CJR model will be available at https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Fraud-and-Abuse-Waivers.html and on OIG's Web site. No waivers of any fraud and abuse 
authorities are being issued in this final rule.
    Comment: Some commenters recommended that CMS rename the proposed 
``Participation Agreements'' as ``collaborator agreements.'' The 
justification for this recommendation was that CJR collaborators, 
unlike the participant hospital, will not have responsibility for 
managing the compliance of other CJR collaborators with terms of the 
CJR sharing arrangement, and that it would be, therefore, appropriate 
to differentiate ``participant hospitals'' from entities or individuals 
signing a ``Participation Agreement.''
    Response: We agree that changing the term from Participation 
Agreement to collaborator agreement is appropriate and may help to 
eliminate confusion about the type and purpose of such agreements. To 
avoid confusion, throughout the remainder of this final rule we are 
substituting the term collaborator agreement in all instances where the 
term Participation Agreement was used in the proposed rule. All 
instances in this final rule in which the term Participation Agreement 
appears have the same meaning as collaborator agreement.
    For the same reason, we are also revising the term ``CJR sharing 
arrangement,'' to ``sharing arrangement.'' Given that a sharing 
arrangement is contained in a collaborator agreement that has been 
created solely for the purpose of establishing a financial arrangement 
between a participant hospital and a CJR collaborator, we believe the 
inclusion of the acronym CJR in the term for sharing arrangement is 
unnecessary. Therefore, to avoid confusion, throughout the

[[Page 73417]]

remainder of this final rule we are substituting the term sharing 
arrangement in all instances where the term CJR sharing arrangement was 
used in the proposed rule. All instances in this final rule in which 
the term CJR sharing arrangement appears have the same meaning as 
sharing arrangement.
    Comment: Many commenters expressed support for CMS' proposal to 
allow participant hospitals to enter into financial arrangements with 
other providers and suppliers to share the participant hospital's 
reconciliation payments or hospital internal cost savings or both, as 
well as a portion of the participant hospital's responsibility for 
repayment to Medicare. Some commenters claimed that past and current 
experience with gainsharing or risk-sharing have yielded positive 
results for many hospitals, particularly with regard to aligning the 
financial incentives of various providers and suppliers that furnish 
services during an episode of care. For example, A commenter noted that 
a prior program involving gainsharing yielded significant cost 
reductions to the hospital participants, while maintaining, and in many 
cases improving, the quality of care. The commenter noted that it had 
observed through participation in that gainsharing program that it 
takes time, discipline, and vigilance to change provider behavior, and 
that gainsharing was one method of attempting to effectuate such 
change.
    Several commenters supported CMS' proposal to define ``CJR 
collaborators'' to include only certain providers and suppliers, 
including that CJR collaborators that are physicians, nonphysicians, or 
PGPs must furnish services to CJR model beneficiaries. Some of these 
commenters suggested that these particular provider and supplier types, 
given the nature of the services they furnish to beneficiaries, have 
increased commitments to clinical responsibility, to sustainable 
change, and to a long-term investment in the communities in which they 
operate, as opposed to entities that do not furnish these types of 
services to beneficiaries.
    By contrast, some commenters expressed disappointment that the list 
of CJR collaborators did not include individuals such as Infectious 
Disease Specialists, or entities such as accountable care organizations 
(ACOs), medical device companies, and other third parties, such as the 
types of convening organizations participating in other CMMI models. 
Some of the commenters suggested that CMS should expand the list of 
potential CJR collaborators to include non-provider or non-supplier 
entities, particularly given that these entities in many cases have a 
track record of providing Medicare providers and suppliers 
participating in other models with support services such as care 
redesign, data analytics, and general program support. A commenter 
noted that were device manufacturers allowed to be CJR collaborators, 
those manufacturers might collaborate with health care providers to 
make a meaningful contribution to the success of the CJR model and the 
individual initiatives of participant hospitals. Multiple commenters 
added that entities like ACOs and conveners might provide such services 
at a reduced cost through economies of scale--as these organizations 
could spread the expense of developing this infrastructure over many 
clients. These commenters also noted that some entities that are not 
providers or suppliers might be willing to assume a high percentage of 
downside risk, in order to reduce that risk to participant hospitals.
    Additionally, a commenter shared its perspective that CMS failed to 
indicate whether the proposed list of CJR collaborators is exhaustive, 
and requested clarification as to whether that was the case. Finally, 
another commenter requested clarification on the status of episodes in 
which services are furnished by physicians who opt out of Medicare.
    Response: We have noted the positive feedback from commenters 
indicating their support for CMS' proposed list of CJR collaborators. 
We also value the input from other commenters requesting that CMS 
expand the list of CJR collaborators to include additional entities, 
some of which may be neither Medicare providers nor suppliers, and the 
justifications to consider allowing these entities to participate in 
gainsharing. We want to point out that infectious disease specialists 
are physicians and, therefore, could potentially be CJR collaborators 
based on our proposed list. We also are clarifying that with the 
exception of PGPs that are CJR collaborators (as discussed later in 
this section), all other CJR collaborators (SNF, HHAs, LTCHs, IRFs, 
physicians, nonphysician practitioners, and providers or suppliers of 
outpatient therapy services) must actually furnish a billable service 
to CJR beneficiaries during CJR episodes in the calendar year in which 
the savings or loss was created in order to be eligible to receive a 
gainsharing payment or make an alignment payment.
    Although we are open to reconsidering the eligibility of additional 
entities to be CJR collaborators in the future based on the early 
implementation experience with the CJR model, at this time we will not 
adopt a final policy that includes additional entities or individuals 
beyond those listed as CJR collaborators in the proposed rule. As we 
stated in section III.A. of the proposed rule, we selected acute care 
hospitals as the financially responsible entity because we are 
interested in evaluating the impact of bundled payment and care 
redesign across a broad spectrum of hospitals with varying levels of 
infrastructure and experience in entering into risk-based reimbursement 
arrangements. We also stated our belief that it is most appropriate to 
identify a single type of provider to bear financial responsibility for 
making repayment to CMS under the CJR model; given that hospitals 
perform a central role in coordinating episode-related care and 
ensuring smooth transitions for beneficiaries undergoing LEJR 
procedures, this role factored in our decision to select IPPS hospitals 
as the financially responsible entity for this model. Given this 
structure, we believe that limiting the testing of gainsharing 
relationships to solely those between hospitals and providers and 
suppliers enrolled in Medicare is most appropriate because we expect 
enrolled providers and suppliers to be most directly and specifically 
engaged with the participant hospitals in care redesign and episode 
care for beneficiaries who have LEJR surgery at the hospital.
    We also note that many of the potential reasons that were suggested 
by commenters for us to consider allowing individuals and entities 
other than providers and suppliers to be CJR collaborators eligible for 
gainsharing payments, such as data analytics and general program 
support, can be achieved outside of the context of gainsharing through 
other relationships between the participant hospital and those 
entities. With the exception of PGPs (as discussed in detail later in 
this section), we continue to believe that any CJR collaborator that 
receives a gainsharing payment must have furnished a billable service 
included in the episode to CJR beneficiaries, that the payment 
arrangements for gainsharing payments must be actually and 
proportionally related to the care of beneficiaries in a CJR episode, 
and that the CJR collaborator must be contributing to the care redesign 
strategies of the participant hospital. We further note that we operate 
many models concurrently, and not all providers and suppliers are 
eligible for participation in all models. Models have

[[Page 73418]]

different design features and, therefore, the permitted financial 
arrangements under the models vary. Testing different financial 
arrangements in various models provides additional information about 
important factors in success of models in improving care quality and 
reducing costs.
    Given our experience to date with the intersection between Medicare 
ACO programs, Medicare ACO models, and bundled payment models, we 
believe it important to note that financial arrangements between non-
Medicare providers and suppliers, such as ACOs or other third parties, 
are allowed under existing laws, rules, and regulations, outside of the 
context of the CJR model. While we agree that the potential for 
leveraging the economies of scale of services offered by many entities 
that are not Medicare providers or suppliers may be significant, we do 
not believe their involvement necessitates CMS allowing for gainsharing 
relationships between hospitals and these entities at this time. In 
many circumstances, financial arrangements between hospitals and these 
entities may be possible outside the context of gainsharing under a 
sharing arrangement in the CJR model. For example, a hospital may pay 
an ACO for care coordination services the ACO provides during or after 
a beneficiary's stay in the hospital, in the event that a hospital and 
the ACO are collaborating and agree to that arrangement. In the event 
an ACO provides care coordination services to the hospital, the 
hospital is not precluded from compensating the ACO for the services. 
In other words, if an ACO hires a case manager to work in the hospital 
to focus on beneficiaries in CJR episodes, the hospital may contract 
with the ACO for those case manager services. However, this payment 
would be outside of the context of the CJR model and would not fall 
under the categories of a gainsharing payment or alignment payment, as 
those terms are defined in this final rule. Further, nothing in this 
section alters the applicable laws, rules, and regulations that apply 
to such arrangements. Thus, we are maintaining the conditions set forth 
in the proposed rule, and finalizing the list of CJR collaborators as 
proposed. This finalized list of CJR collaborators is an exhaustive 
list--only entities and individuals that meet the criteria listed in 
this final rule may be eligible as CJR collaborators.
    Finally, with regard to the comment regarding physicians that have 
opted out of Medicare, we note that as discussed in section III.C.3. of 
this final rule, there are implications related to reconciliation 
payment when services are furnished by physicians and nonphysician 
practitioners that have opted out of Medicare. With regard to sharing 
arrangements, we are clarifying in this final rule that in order to be 
a CJR collaborator, an individual must not have opted out of Medicare, 
meaning that the individual physician or nonphysician practitioner must 
be either enrolled in Medicare as a ``Participating physician/
supplier'' or as a ``Non-participating physician/supplier.'' In this 
model, the payments to physicians and nonphysician practitioners that 
have opted out of Medicare are not included in a participant hospital's 
target price and the actual episode spending calculations. Thus, the 
purpose of this policy is to prevent an individual from receiving a 
gainsharing payment in the CJR model if he/she has opted out of 
Medicare.
    Comment: Some commenters expressed concern that a participant 
hospital may steer beneficiaries to certain providers and suppliers, 
particularly PAC providers, with which the participant has a sharing 
arrangement. Another commenter opined that sharing arrangements have 
the potential to result in decisions that are not in the best interest 
of patient care but rather are in the best interest of increased profit 
for CJR collaborators. The commenter suggested that this incentive-
based arrangement may lead to lower quality of care and restricted 
access to medically necessary services. Several commenters requested 
that CMS allow hospitals to steer patients to particular providers and 
suppliers.
    Response: We emphasize that beneficiaries included in a CJR episode 
retain their full rights to choose their providers and suppliers. 
Participant hospitals, providers, and suppliers are reminded that 
patient steering is not permissible and such entities and individuals 
must continue to comply with current laws. Participant hospitals and 
CJR collaborators that engage in sharing arrangements may not adversely 
impede those rights of the beneficiary. Furthermore, we reiterate that 
sharing arrangements or gainsharing payments must not induce the 
participant hospital, CJR collaborators, or the employees, contractors, 
or designees of the participant hospital or CJR collaborators to reduce 
or limit medically necessary services to any Medicare beneficiary, and 
that individual physician and nonphysician practitioners, whether or 
not a party to a sharing arrangement, must retain their ability to make 
decisions in the best interests of the patient, including the selection 
of devices, supplies, and treatments. For further discussion on this 
topic, we refer readers to see the provisions addressing beneficiary 
notification in section III.F. of this final rule.
    Comment: A commenter suggested that hospitals located in rural 
communities may be less likely to have resources to enter into sharing 
arrangements with CJR collaborators. The commenter stated that in 
regions where there is not a core group of PAC providers where patients 
will seek care, rural hospitals may incur additional costs to try to 
form arrangements with CJR collaborators to support efforts to reduce 
costs and improve the quality of care.
    Response: We appreciate the perspective of the commenter that 
highlights some of the challenges for providers and suppliers located 
in rural areas. This model seeks to test episode payment for LEJR 
procedures initiated at acute care hospitals located in selected 
Metropolitan Statistical Areas (MSAs). By selecting MSAs as the 
geographic unit, the majority of participant hospitals located in the 
selected regions will not be located in rural areas. However, some 
participant hospitals are located in rural areas, and we agree that 
these hospitals may face unique challenges in establishing sharing 
arrangements with CJR collaborators if there are few eligible providers 
or suppliers, or such providers or suppliers are located across 
significant distances.
    Several studies have shown that Medicare beneficiaries located in 
rural areas historically have had identifiable patterns pertaining to 
hospital choice, with results across multiple studies and decades 
indicating that rural Medicare beneficiaries tend to choose larger 
hospitals and those offering a broader scope of services.\46\ 
Particularly, patients with complex acute medical conditions have been 
found to be more likely to bypass their closest rural hospitals for 
larger, urban hospitals. These patterns have been chronicled across 
several decades, and we expect that rural hospitals are familiar with 
many of these studies, as well as related studies demonstrating that 
patients are more likely to seek care from broader regional networks--
comprised of individual rural hospitals--than alternatives with fewer 
hospitals.\47\

[[Page 73419]]

Perhaps based in part on this research, a number of rural health 
alliances and rural health networks have been created to address these 
patient preferences, and we expect these alliances and networks may be 
useful to rural hospitals in exploring the potential for establishing 
sharing arrangements with CJR collaborators.
---------------------------------------------------------------------------

    \46\ Buczko, W. ``Bypassing of Local Hospitals by Rural Medicare 
Beneficiaries.'' Journal of Rural Health. 1994; 10(4): 237-46.
    \47\ Tai, Porell, and Adams. ``Hospital Choice of Rural Medicare 
Beneficiaries: Patient, Hospital Attributes, and the Patient-
Physician Relationship.'' Health Services Research. 2004; 39(6 Pt 
1): 1903-1922.
---------------------------------------------------------------------------

    We anticipate that CJR beneficiaries located in rural areas are 
likely to follow this historical trend, and that some patients will 
seek care from nonrural hospitals. By contrast, other CJR beneficiaries 
will initiate CJR episodes at rural hospitals. But this trend is 
unlikely to be unique to CJR beneficiaries, and we expect that rural 
hospitals already have established relationships, either on their own 
or through rural health networks, with providers and suppliers that can 
furnish services to the hospital's patients upon discharge. Thus, we 
believe it is possible that rural hospitals may identify a small core 
group of PAC providers where their model beneficiaries commonly seek 
care following surgery. We will be providing claims data to assist 
hospitals in identifying potential CJR collaborators, as discussed in 
section III.E. of this final rule. Finally, one of the purposes of 
requiring participation in this model of all hospitals in the selected 
MSAs is to gain information about the challenges and successes achieved 
by different types of hospitals in the CJR model, and to share 
strategies related to success.
    Comment: Multiple commenters requested that CMS clarify the 
relationships between participant hospitals and CJR collaborators. A 
commenter requested that CMS explain whether these are financial or 
clinical relationships. Another commenter expressed concern that CJR 
collaborators that are non-compliant with the requirements of this 
final rule and/or the terms of a collaborator agreement with a 
participant hospital might make a participant hospital liable or 
financially responsible for the conduct of other organizations. The 
commenter reasoned that it would be unreasonable for a participant 
hospital to be held responsible for the behavior of CJR collaborators 
with whom they may enter into a contract for the provision of services 
under this model.
    Response: With respect to the question of whether arrangements 
between a CJR collaborator and a participant hospital constitute 
clinical or financial relationships, we note that a CJR collaborator is 
a specific type of provider or supplier, as previously described, which 
has signed a written collaborator agreement with a participant 
hospital. The collaborator agreement must describe a sharing 
arrangement between the parties. A sharing arrangement, by definition, 
documents a financial arrangement between the CJR collaborator and the 
participant hospital that is for the purpose of making gainsharing 
payments or alignment payments or both. While a collaborator agreement 
may also address clinical matters, such as care redesign strategies, a 
provider or supplier is not a CJR collaborator unless the collaborator 
agreement signed by the provider or supplier contains a sharing 
arrangement.
    As to the second question of provider responsibility, we proposed 
that participant hospitals in the CJR model that enter into sharing 
arrangements ``be responsible for ensuring that those providers and 
suppliers comply with the terms and requirements of this proposed 
rule.'' We are not suggesting that CJR collaborators be able to escape 
responsibility for noncompliance with the Medicare Conditions of 
Participation, or a state or federal law, rule, or regulation merely by 
entering into a sharing arrangement. Rather, this provision is meant to 
not only make participant hospitals aware of their responsibility to 
oversee their CJR collaborators for compliance with the CJR model, but 
also to inform the participant hospitals of the potential remedial 
actions that may be taken against them if their CJR collaborators do 
not comply with all requirements of the CJR model. Specifically, where 
CMS, HHS, or its designees discovers an instance of noncompliance by a 
CJR collaborator with the requirements of the CJR model, CMS, HHS, or 
its designees may take remedial action against the participant 
hospital, which may include requiring the participant hospital to 
terminate a collaborator agreement with a CJR collaborator and prohibit 
further engagement in the CJR model by that CJR collaborator. 
Furthermore, this provision requires participant hospitals to include 
in their collaborator agreements provisions requiring compliance from 
CJR collaborators with the requirements of the CJR model. This 
provision is discussed further in section III.C.12. of this final rule, 
in which we detail the enforcement mechanisms that CMS, HHS, or its 
designees may apply to a participant hospital.
    Comment: Several commenters recommended that CMS screen participant 
hospitals and CJR collaborators to address program integrity concerns.
    Response: We appreciate the recommendations of the commenters that 
we screen participant hospitals and CJR collaborators. However, for 
several reasons, we continue to believe that this type of screening for 
participant hospitals would be inapplicable to the CJR model. Most 
importantly, this model seeks to evaluate the performance in the model 
of hospitals located in a particular MSA. Given this important 
objective, we believe it is crucial for evaluation purposes that all 
hospitals that meet the criteria for participation in the model be 
included. Further, as discussed in sections III.F and IV, we have 
finalized our proposal to include evaluation and monitoring provisions 
that go beyond some of the efforts of previous or existing CMS models.
    With regard to screening CJR collaborators, we believe the 
additional administrative burden on participant hospitals and CMS to 
periodically prepare, collect, and specifically screen lists of CJR 
collaborators would not substantially enhance the program integrity 
protections otherwise built into the model design. We note that CMS 
will be monitoring for inappropriate behavior of participant hospitals 
through monitoring efforts specifically for this model. We further note 
that CMS retains all of its existing mechanisms to directly monitor 
providers and suppliers, even if they are CJR collaborators. We have 
included a number of enforcement mechanisms in this final rule that 
will be available to CMS should a participant hospital or CJR 
collaborator be out of compliance with the model's requirements.
    Comment: Some commenters recommended that CMS provide additional 
opportunities for entities and individuals other than participant 
hospitals to assume downside risk under the model. Several commenters 
indicated that the risk sharing arrangements CMS proposed, via 
alignment payments from CJR collaborators to participant hospitals, are 
too limited. In particular, commenters called for PGPs to be able to 
take on increased risk beyond the 25 percent of a participant 
hospital's repayment amount that CMS proposed. These commenters 
suggested that if PGPs were permitted to negotiate sharing arrangements 
containing provisions for higher gainsharing payments, they would be 
able to assume greater financial risk as well. Commenters further 
suggested that transferring risk to PGPs in this manner would be 
unlikely to result in problematic behaviors such as patient steering, 
but rather, that such allowances would result in greater provider 
alignment and better patient care.

[[Page 73420]]

    Response: We believe the limits proposed on alignment payments 
perform two important functions. First, as described in section III.A. 
of this final rule, we seek to test in this model the effects of 
placing financial responsibility on acute care hospitals for episodes 
of care initiating with an inpatient stay involving LEJR procedures. 
While we agree with the commenters that some ability to share downside 
risk could be useful for participant hospitals and CJR collaborators in 
creating greater provider alignment and improving patient care, we 
believe that allowing a participant hospital to shift a majority of its 
repayment risk under the CJR model to a different entity would 
fundamentally change the model CMS seeks to test. Further, our 
experience with other episode payment models, particularly Models 2 and 
3 of BPCI, has demonstrated that relatively few PGPs have committed to 
assuming downside risk in those models. Nearly all of the PGPs 
participating in Models 2 and 3 of BPCI are participating under another 
entity that assumes all (or a substantial majority) of the downside 
risk. Thus, this experience suggests to us that increasing the limits 
on alignment payments is unlikely to result in many PGPs assuming a 
greater percentage of risk than what we proposed.
    Furthermore, limiting alignment payments as we proposed operates as 
a safeguard in much the same manner as we discuss later in this section 
regarding the cap on gainsharing payments. Thus, we do not agree that 
increasing the limits on alignment payments is appropriate at this time 
or necessary to test the model.
    Finally, we reiterate that beneficiaries included in a CJR episode 
retain their full rights to choose their providers and suppliers. 
Participant hospitals and CJR collaborators that engage in sharing 
arrangements may not adversely impede those rights of the beneficiary. 
Alignment payments, or the potential for such payments, must not induce 
the participant hospital, CJR collaborators, or the employees, 
contractors, or designees of the participant hospital or CJR 
collaborators to reduce or limit medically necessary services to any 
Medicare beneficiary. Individual physician and nonphysician 
practitioners, whether or not a party to a sharing arrangement, must 
retain their ability to make decisions in the best interests of the 
patient, including the selection of devices, supplies, and treatments.
    Comment: Many commenters opposed the proposed cap on the total 
amount of gainsharing payments for a calendar year that could be paid 
to a PGP, or an individual physician or nonphysician practitioner who 
is a CJR collaborator, arguing that the 50 percent figure is arbitrary 
and should be removed. Other commenters asserted that a PGP that is a 
CJR collaborator should have the freedom to determine the most 
appropriate way to distribute gainsharing payments, given the multiple 
disciplines involved in patient care. Additionally, some commenters 
requested that internal cost savings be treated separately from 
reconciliation payments under the cap on gainsharing payments. These 
commenters attempted to differentiate these two revenue streams by 
explaining that while internal cost savings may be achieved by the 
participant hospital relatively early in the model, reconciliation 
payments are based upon changes in payment made to providers for 
services related to episodes in the CJR model. The commenters noted 
that the financial effects of these latter changes, in the form of 
positive reconciliation payments, may not be realized for some time. 
These commenters added that gainsharing payments comprised of internal 
cost savings are derived from hospital cost improvements and do not 
result from or impact Medicare payments. Thus, in the commenters' 
opinion, the cap on gainsharing payments should apply only to the 
portion of a gainsharing payment derived from a reconciliation payment. 
A commenter further added that the many requirements that CMS proposed, 
including that all payments must be auditable by HHS, provide assurance 
that the distribution will be documented and supported, thus avoiding 
the possibility of program abuse.
    Other commenters acknowledged the necessity for a cap on 
gainsharing payments, but urged CMS to apply the same cap to the CJR 
model as is applied to Model 2 of the BPCI initiative, which does not 
place a cap on gainsharing payments to PGPs. Commenters stated that 
having different policies between the models could create the potential 
for an uneven playing field across CJR participant hospitals and BPCI 
Model 2 episode initiator hospitals. These commenters asserted that the 
cap on gainsharing payments to PGPs in CJR may work to the detriment of 
participant hospitals, as compared to hospitals in the same geographic 
markets that are participating in BPCI. Given the proposed cap on 
gainsharing payments to PGPs, the commenters stated that participant 
hospitals in CJR may be placed at a competitive disadvantage within the 
market, with the potential for PGPs to view hospitals in BPCI Model 2 
as more lucrative financial partners.
    In addition, some commenters objected to the proposed requirement 
that only CJR collaborators that actually furnish a service to a CJR 
beneficiary during an episode of care would be eligible to receive a 
gainsharing payment. This policy would prohibit, for example, a PGP 
from distributing any portion of a received gainsharing payment to 
physicians or nonphysician practitioners who did not furnish a service 
to the CJR beneficiary during an episode of care. Commenters suggested 
that such a requirement might be difficult to institute with PGPs and 
may necessitate group practices amending their particular bylaws and 
internal contracts. Another commenter acknowledging that CMS' rationale 
for this proposal was to preserve program integrity and ensure that 
individuals who did not furnish services to a CJR beneficiary during an 
episode are not permitted to receive a payment, nevertheless also 
disagreed with the proposal, stating that billing records do not always 
capture all of the surgeons who deliver care to each beneficiary, as 
other PGP members would likely deliver some postoperative services that 
are not separately recorded and thereby not identifiable from claims 
data. According to the commenter, only at the PGP level would it be 
feasible for the group members to most appropriately allocate 
gainsharing payments.
    Response: We acknowledge the many perspectives of the commenters on 
the proposed cap on gainsharing payments to physicians, nonphysician 
practitioners, and PGPs in the CJR model. The purpose of the cap is to 
serve as a safeguard against the potential risks of stinting, steering, 
and denial of medically necessary care due to financial arrangements 
specifically allowed under the CJR model by providing an upper limit on 
the potential additional funds a physician, nonphysician practitioner, 
or PGP can receive for their engagement with participant hospitals in 
caring for CJR model beneficiaries beyond the FFS payments that those 
suppliers are also paid and that are included in the actual episode 
spending calculation for the episodes.
    While we appreciate the distinction being made by the commenters 
regarding the potential timing differences between internal cost 
savings and reconciliation payments, as well as that internal cost 
savings that could be paid to a CJR collaborator would not actually be 
due to a change in Medicare payment, as would be the

[[Page 73421]]

case for reconciliation payments, we do not agree that it would be 
appropriate to exclude gainsharing payments based on internal cost 
savings from the cap on this basis. There is the potential for 
stinting, steering, or denial of medically necessary care to be 
implicated by the sharing of either internal cost savings or 
reconciliation payments. For example, if a physician were to discharge 
a beneficiary from the hospital earlier than medically necessary, and 
not transfer that beneficiary to PAC services that were medically 
necessary, such behavior could have impacts on both a hospital's 
internal cost savings and reconciliation payments. We do not agree that 
only reconciliation payments should be subject to the cap on 
gainsharing payments, but rather that the cap on gainsharing payments 
should apply to all potential dollars that could be transferred to a 
CJR collaborator subject to the cap. We believe that allowing a 
physician or nonphysician practitioner to be paid up to 50 percent more 
for engagement with the episode care of CJR beneficiaries than they are 
paid for furnishing direct services to those beneficiaries under the 
MPFS provides participant hospitals with substantial flexibility in 
developing meaningful financial arrangements that align the financial 
interests of physicians and nonphysician practitioners with the quality 
and cost goals of the hospital under the CJR model. Moreover, we note 
that we have applied the 50 percent cap on gainsharing payments to 
physicians and nonphysician practitioners in the BPCI initiative, and 
participants have not voiced significant complaints that this moderate 
financial limitation has hampered their ability to engage physicians 
and nonphysician practitioners in care redesign to improve episode 
quality and reduce costs. Given this feedback, and that the provisions 
governing financial arrangements for the BPCI initiative and the CJR 
model are similar, we believe that the 50 percent cap on gainsharing 
payments is an appropriate condition for this model.
    We understand the perspective from some commenters that the cap on 
gainsharing payments to PGPs may have impacts on revenue sharing within 
PGPs, particularly for multi-specialty practices. If the CJR model 
included clinical episodes for many different conditions, such as in 
the case of a number of BPCI participants who are testing multiple 
different clinical episodes, we could understand how it might be 
justified to remove the cap on gainsharing payments to PGPs. However, 
with CJR, there is only a single episode--LEJR procedures. As such, we 
believe it is likely that most services to CJR beneficiaries during an 
episode will be furnished by an identifiable subset of physician and 
nonphysician practitioners within a PGP. From our experience with other 
bundled payment models, such as the BPCI initiative, we have found that 
even in large, multi-specialty PGPs, the majority of services to LEJR 
patients are furnished by a subset of practitioners.
    We proposed that a cap on gainsharing payments made to a PGP that 
is a CJR collaborator be limited by the aggregate billable services 
furnished during a calendar year to the participant hospital's CJR 
beneficiaries during CJR episodes by physicians and nonphysician 
practitioners that are members of the PGP. This cap on gainsharing 
payments to PGPs is based on Medicare payments for the services 
delivered to CJR beneficiaries by PGP members. We also proposed that 
the only PGP members that could receive all or a portion of the 
gainsharing payment made to the PGP are those PGP members that 
furnished a billable service to a CJR beneficiary during a CJR episode. 
Therefore, we believe that the cap on gainsharing payments as it has 
been proposed for the CJR model is appropriate, because it ensures that 
only physicians and nonphysician practitioners within a PGP that may 
receive all or a portion of a gainsharing payment are those physicians 
and nonphysician practitioners who actually furnished services to CJR 
beneficiaries during CJR episodes, and that the amounts those PGP 
members receive does not exceed the capped amounts that would be 
applied to those physician and nonphysician practitioners if they were 
directly engaging with a participant hospital as CJR collaborators.
    For example, for a physician or nonphysician practitioner who 
furnishes billable services in a calendar year to CJR beneficiaries 
during CJR episodes that amount $1,000 in total Medicare approved 
amounts under the MPFS, the cap for that physician or nonphysician 
practitioner would be $500. By comparison, if the physician or 
nonphysician practitioner furnishes billable services in a calendar 
year to CJR beneficiaries during CJR episodes that amount $0 in total 
Medicare approved amounts under the MPFS, the cap for that physician or 
nonphysician practitioner would be $0. In both scenarios, if the 
physician or nonphysician practitioner is a PGP member in a PGP that is 
a CJR collaborator that has a sharing arrangement with a participant 
hospital, then the maximum gainsharing payment that could be made to 
the PGP would be the aggregate capped amounts, as previously described, 
of all physician and nonphysician practitioners that furnished a 
billable service in a calendar year to a CJR beneficiary during a CJR 
episode. Similarly, if the physician or nonphysician practitioner has a 
sharing arrangement directly with a participant hospital (regardless of 
whether the physician or nonphysician practitioner is a PGP member), 
the maximum gainsharing payment that could be made to the physician or 
nonphysician practitioner would be the capped amount, as previously 
described, for services furnished to the participant hospital's CJR 
beneficiaries during a CJR episode by that physician or nonphysician 
practitioner. We believe that the flexibilities inherent in these 
policies on limits to gainsharing recognize the various levels of 
engagement from physicians and nonphysician practitioners in a 
participant hospital's care redesign, and allows for arrangements to be 
structured accordingly.
    Our proposed policies for limits on gainsharing also recognized 
that the work of care redesign will also likely be carried out by those 
same physicians caring for model beneficiaries. We further note that 
MSAs with high proportions of acute care hospitals initiating LEJR 
episodes in BPCI have not been included in the random selection process 
for the CJR model, as described in section III.A. of this final rule. 
This should limit those communities where participant hospitals in CJR 
and BPCI hospitals initiating LEJR episodes are co-located such that 
PGPs could consider moving their current practice locations based on 
financial considerations under a model in testing.
    Furthermore, we do not see how allowing all or a portion of a 
gainsharing payment to be distributed to individual physicians, 
nonphysician practitioners, or members of PGPs who did not furnish any 
services to model beneficiaries during a CJR episode is likely to 
increase the quality of care that was furnished to those beneficiaries 
or reduce the cost to Medicare. We can, however, see the potential for 
abuse by allowing such payments to flow freely to any member of a PGP, 
as PGPs in some markets could potentially funnel portions of a 
gainsharing payment to practitioners not involved in LEJR care as a 
means of impacting the referral patterns of those practitioners to 
particular hospitals or the PGP. As stated previously, the cap on 
gainsharing payments functions to deter

[[Page 73422]]

steering, stinting, and denial of medically necessary care. For these 
reasons, we believe that the limits on gainsharing payments to certain 
types of CJR collaborators via the proposed cap are necessary and 
tailored appropriately to the risks we seek to minimize.
    In summation, the cap on gainsharing payments ensures that only 
physician and nonphysician practitioners that actually furnish a 
service to a beneficiary during a CJR episode are eligible for 
gainsharing payments, and that gainsharing payments made to PGPs are 
limited to the aggregate capped amounts of each physician or 
nonphysician practitioner member that furnished a service to a CJR 
beneficiary. We reiterate that while the cap is only applicable to 
gainsharing payments made to CJR collaborators who are physicians, 
nonphysician practitioners, providers or suppliers of outpatient 
therapy services, and PGPs, CJR collaborators that are SNFs, HHAs, 
LTCHs, IRFs, physicians, nonphysician practitioners, and providers or 
suppliers of outpatient therapy services that are CJR collaborators 
must have furnished a billable service during a CJR episode to a CJR 
beneficiary during the calendar year in which the internal cost savings 
was generated or to which the NPRA applied (the latter of which are 
directly reflected in a reconciliation payment), in order to be 
eligible to receive a gainsharing payment. As discussed later in this 
section, CJR collaborators that are PGPs need to have participated in 
care redesign activities that involved the provision of care to CJR 
beneficiaries during the calendar year in which the internal cost 
savings was generated or to which the NPRA applied (the latter of which 
is directly reflected in a reconciliation payment), in order to be 
eligible to receive a gainsharing payment. We believe this connection 
to beneficiaries is likely to be important in aligning the financial 
incentives of the practitioner with those of the participant hospital, 
as well as the other providers and suppliers involved in the delivery 
of care to beneficiaries.
    Comment: A commenter suggested that outside of large orthopedic 
groups, few CJR collaborators are likely to have a sufficient volume of 
cases for gainsharing to be a financially meaningful incentive. The 
commenter further explained that in the current environment, there is 
no compelling reason for a CJR collaborator to enter into a sharing 
arrangement containing provisions for alignment payments.
    Many commenters offered related comments regarding CMS' proposed 
gainsharing policies as applied to PGPs. Commenters vigorously 
requested that CMS remove the provision prohibiting a PGP that is a CJR 
collaborator from retaining any portion of a gainsharing payment. CMS' 
proposal would have required the PGP to distribute 100 percent of the 
gainsharing payment to the PGP's member physicians and nonphysician 
practitioners that actually furnished a service to a CJR beneficiary 
during a CJR episode. In opposing this proposed requirement, commenters 
stressed that PGPs should have the freedom to determine the most 
appropriate way to distribute gainsharing payments, given the multiple 
disciplines involved in patient care, and the potential for clinical 
and financial involvement of the PGP in the care of CJR beneficiaries. 
Multiple commenters suggested that if CMS were to finalize this 
proposal without modification that PGPs would likely be discouraged 
from participating as CJR collaborators in the model.
    Response: We appreciate these perspectives, and have carefully 
considered the potential consequences of our proposals. With regard to 
the commenter that recommended that gainsharing will be meaningful for 
only a small subset of large PGPs, our experience in gainsharing in 
other models suggests otherwise. For example, we have received 
extensive feedback from participants in the BPCI initiative that 
gainsharing can be a highly effective tool in assisting hospitals in 
aligning financial incentives not only with physician group practices, 
but also with individual physicians. Second, as we detail in section 
III.C. of this final rule, PAC spending within a 90-day LEJR episode 
constitutes a significant portion of the overall episode spending. As a 
result, we believe that participant hospitals may choose to engage in 
sharing arrangements with a wide variety of CJR collaborators, 
including physicians, PGPs, and PAC providers to attempt to reduce 
unnecessary episode spending during the post-anchor hospital discharge 
period. Our experience with BPCI suggests these efforts may be best 
served from involvement by multiple individuals and entities, not just 
large orthopedic practices.
    We considered whether PGPs that are CJR collaborators should be 
permitted to retain all or a portion of a gainsharing payment. We are 
concerned by the comments suggesting that some PGPs may be unwilling to 
engage in care redesign efforts as a CJR collaborator with a 
participant hospital if the PGP is not permitted to retain a 
gainsharing payment. We also understand that PGPs might serve a variety 
of functions that contribute to care redesign and innovations in care 
furnished to CJR beneficiaries. For example, while a PGP, as an entity, 
would not furnish a billable service to a CJR beneficiary (that 
function is performed by the member physician and nonphysician 
practitioners of the PGP), a PGP that is engaged in care redesign with 
a participant hospital could serve as an organizing entity for the 
physician and nonphysician practitioner members of the PGP that are 
furnishing services to CJR beneficiaries. Further, the PGP might 
provide care coordination services for CJR beneficiaries or invest in 
new technologies that improve care for CJR beneficiaries. In this way, 
a PGP is distinct from the other provider and supplier types eligible 
to be CJR collaborators in that, although the PGP is a Medicare 
enrolled entity, it does not furnish billable services to 
beneficiaries.
    Given these considerations, we are persuaded that a PGP that is a 
CJR collaborator should be permitted to retain all or a portion of a 
gainsharing payment. Thus, we are finalizing our proposal with a 
modification to allow PGPs that are CJR collaborators to retain all or 
a portion of a gainsharing payment that the PGP receives from a 
participant hospital. We believe that this modification will provide 
greater financial flexibility to PGPs that are CJR collaborators, and 
will allow for those PGPs to consider sharing arrangements that contain 
provisions regarding alignment payments. We note that for purposes of 
this final rule, a PGP is an entity that furnishes clinical patient 
care services, including evaluation and management services, or 
professional surgical services. We do not believe that an entity is a 
PGP if it merely furnishes supplies or tests to patients.
    In order to be eligible to receive a gainsharing payment, the PGP 
that is a CJR collaborator must meet all of the following:
     The PGP must have at least one member of the PGP that is a 
physician or nonphysician practitioner, as those terms are defined at 
Sec.  510.2, that actually furnished a service to a CJR beneficiary 
during a CJR episode during the calendar year in which the participant 
hospital's internal cost savings was generated, or to which the NPRA 
applied (the latter of which is directly reflected in a reconciliation 
payment), as these funds are the only two sources that may comprise a 
gainsharing payment;
     The PGP must contribute to a participant hospital's care 
redesign in CJR and be clinically involved in the care of CJR 
beneficiaries. The following is a non-exhaustive list of ways in

[[Page 73423]]

which a PGP might be clinically involved in the care of CJR 
beneficiaries:
    ++ Provide care coordination services to CJR beneficiaries during 
and/or after inpatient hospital admission;
    ++ Engage with a participant hospital in developing care redesign 
strategies, and actually perform a role in implementing such 
strategies, that are designed to improve the quality of care for LEJR 
episodes and reduce LEJR episode spending;
    ++ In coordination with other providers and suppliers (such as the 
PGP's members, participant hospitals, and PAC providers), implement 
strategies designed to address and manage the comorbidities of CJR 
beneficiaries.
    Finally, should the PGP wish to distribute all or a portion of a 
gainsharing payment to its member physicians and nonphysician 
practitioners, we discuss later in this section, in detail, the 
requirements for such distributions.
    Comment: Multiple commenters raised issues related to participant 
hospitals' consideration of quality of care in initially selecting CJR 
collaborators and later determining gainsharing payments for CJR 
collaborators. While some commenters recommended that CMS require 
hospitals to engage in sharing arrangements with all providers and 
suppliers caring for CJR model beneficiaries, other commenters 
encouraged CMS to maintain participant hospital flexibility in 
selecting CJR collaborators based on parameters such as contributions 
to the efficiency and quality of episode care.
    With respect to the determination of gainsharing payments, a 
commenter stated that gainsharing payments should be founded in quality 
performance, with each CJR collaborator needing to meet minimum 
thresholds prior to any gains being distributed. Other commenters 
suggested that the ability of all CJR collaborators to receive a 
gainsharing payment should be based on the quality performance of the 
CJR collaborators both as individuals and as a group--essentially 
recommending that CMS institute a ``quality gate'' that would need to 
be met by all CJR collaborators in order for any single CJR 
collaborator to receive a gainsharing payment. The suggested 
methodologies varied as to how quality would be measured--some 
commenters suggested that selection should be done by CMS while others 
recommended that participant hospitals should choose quality criteria 
important to them. Commenters did not suggest particular quality 
criteria that CMS should consider, and most commenters did not describe 
how CMS or participant hospitals would select quality criteria.
    Response: We agree with commenters that quality should be a 
consideration in the participant hospital's selection of CJR 
collaborators, as well as the determination of gainsharing payments for 
CJR collaborators. However, we do not believe that we need be as 
prescriptive on quality criteria used for determining gainsharing 
payments as some commenters suggested. Participant hospitals are best 
positioned to determine the quality of care considerations for CJR 
collaborator selection and the quality criteria for gainsharing 
payments that are most important to them and that are the most 
meaningful indicators of the quality of care furnished to CJR model 
beneficiaries. By way of comparison, BPCI participants are required to 
report the quality targets they will use in determining gainsharing 
payments, and providers and suppliers who do not meet the BPCI 
participant's quality targets are prohibited from receiving gainsharing 
payments. For the CJR model, we are adopting a more flexible approach 
to quality considerations in the selection of CJR collaborators and the 
requirement that quality criteria be described in sharing arrangements 
under the CJR model, once again balancing our interest in encouraging 
financial arrangements that consider high quality of care and not the 
volume and value of referrals, with allowing participant hospitals 
maximal flexibility to determine the issues related to quality of most 
importance to their efforts to improve episode quality and efficiency.
    With regard to the selection of CJR collaborators, while we do not 
agree with the commenters suggesting that we require participant 
hospitals to engage as CJR collaborators with all providers and 
suppliers caring for CJR model beneficiaries, we believe the providers 
and suppliers that the participant hospital selects as CJR 
collaborators should be held to certain standards related to the 
quality of care for CJR model beneficiaries. Thus, we believe it is 
appropriate to require the participant hospital to create a written set 
of policies for selecting providers and suppliers for sharing risks and 
gains as CJR collaborators. Those policies must be related to, and 
inclusive of, the quality of care to be delivered to beneficiaries 
during a CJR episode. We believe these criteria could permit selection 
of CJR collaborators based on their previous demonstration of the 
ability to furnish high-quality services to beneficiaries receiving 
LEJR or based on their expected high quality care due to requirements 
specified in the hospital's collaborator agreement. For example, some 
participant hospitals may choose to satisfy this requirement by 
adopting quality criteria that look at a provider/supplier's past 
performance on certain quality metrics, such as complication rates, 
whereas other hospitals may choose to adopt quality criteria that rely 
primarily on satisfaction of forward-looking requirements that the 
participant hospital expects to lead to improved quality of episode 
care, such as attending weekly care coordination meetings, contacting 
CJR beneficiaries frequently, or following specified clinical care 
pathways. As previously stated, we believe it is important that 
participant hospitals have the ability to select the CJR collaborators 
that are willing to engage in the participant hospital's care redesign 
strategies, as well as provide high-quality care, so that the CJR 
collaborators are likely to contribute to improvements in episode 
quality and efficiency. Thus, with regard to the role of quality in the 
selection of CJR collaborators, we will require the participant 
hospital to develop a written set of criteria that it will use to 
determine the selection of all CJR collaborators.
    We also believe the quality of care furnished by CJR collaborators 
to beneficiaries during an episode should be a factor in determining a 
gainsharing payment, not just the savings created by the CJR 
collaborator. We believe that requiring participant hospitals to 
include quality criteria when determining gainsharing payments will 
incentivize CJR collaborators to provide high quality, medically 
necessary care that contributes to the quality of episode care. Because 
the CJR model incorporates pay-for-performance in the payment 
methodology, rewarding high quality performance and quality improvement 
with increased financial opportunity for participant hospitals as 
discussed in section III.C.5. of this final rule, we believe this same 
principle should carry through to gainsharing payments, to which 
episode quality and cost performance should be linked. We further 
believe that requiring the participant hospital to include quality 
criteria as a factor in the determination of gainsharing payments 
should prevent low quality providers and suppliers that have not 
contributed to the quality of episodes that leads to participant 
hospital financial opportunity from receiving gainsharing payments in 
this model.
    With regard to the role of quality in the determination of 
gainsharing

[[Page 73424]]

payments, we will require the participant hospital to develop a written 
methodology included in the collaborator agreement that specifies how 
the hospital will determine gainsharing payments. To be eligible to 
receive a gainsharing payment, a CJR collaborator must meet quality 
criteria, established by the participant hospital and directly related 
to CJR episodes of care, for the calendar year for which the 
gainsharing payment is determined. For purposes of this requirement, we 
note that participant hospitals may utilize a variety of quality 
criteria depending on their priorities for care redesign and quality 
improvement, as long as those criteria are directly related to CJR 
episodes of care. For example, some participant hospitals may choose to 
incorporate health outcome measures specific to each CJR collaborator 
in the gainsharing methodology, such as the hospital readmission rate 
of CJR beneficiaries for each physician or the complication rate of CJR 
beneficiaries at each SNF, in their quality criteria for gainsharing 
payments. Other hospitals may choose to incorporate specific process 
measures that are aligned with the hospital's objectives for care 
redesign to improve CJR episode quality, such as the rate of attendance 
by CJR collaborators at weekly care coordination meetings to discuss 
the care of CJR beneficiaries or performance on patient experience 
surveys of CJR model beneficiaries. Again, we underscore that the set 
of quality criteria used to determine gainsharing payments must be 
directly related to the care of CJR beneficiaries, but we believe that 
each hospital should be permitted to determine the quality criteria 
most important to them and which relate to the areas of care redesign 
on which they seek improvement.
    In summary, we will require the participant hospital to develop and 
maintain a written set of policies for selecting its CJR collaborators. 
Further, this set of policies must contain criteria for selection of 
CJR collaborators that include criteria related to, and inclusive of, 
the quality of care to be delivered to beneficiaries by the CJR 
collaborator during a CJR episode. The selection criteria cannot be 
based directly or indirectly on the volume or value of referrals or 
revenue generated by providers or suppliers. All CJR collaborators must 
have met, or agree to meet, the quality criteria for selection. In the 
case of selection criteria regarding an individual's or entity's 
willingness to engage in activities that are expected to improve the 
quality of care (such as following specified clinical pathways), such 
activities must be specified in the collaborator agreement as an 
obligation of the CJR collaborator. We are also adding a requirement 
that the participant hospital include in its collaborator agreements 
with CJR collaborators the methodology the participant hospital will 
use to determine gainsharing payments, and this methodology must be 
based, at least in part, on criteria related to, and inclusive of, the 
quality of care to be delivered to beneficiaries during a CJR episode, 
and not directly on the volume or value of referrals or business 
generated by providers and suppliers. Finally, we will require 
participant hospitals, in considering the quality criteria to 
incorporate as part of their gainsharing methodologies, to use quality 
criteria that are directly related to CJR episodes of care, so that the 
criteria used by the participant hospital are relevant to care for 
beneficiaries in the model. To be eligible to receive a gainsharing 
payment, a CJR collaborator must meet quality criteria for the calendar 
year for which the gainsharing payment is determined by the participant 
hospital. Any CJR collaborator that does not meet the quality criteria 
described with specificity in the collaborator agreement is not 
eligible for a gainsharing payment for the calendar year for which the 
gainsharing payment is being calculated.
    Lastly, with regard to the application of a participant hospital's 
quality criteria prior to the distribution of gainsharing payments, we 
are clarifying our proposal by changing the word ``calculation'' to 
``determination.'' As previously discussed, we are requiring that 
participant hospitals use a methodology to determine gainsharing 
payments, and that this methodology be explained in detail in all 
sharing arrangements with CJR collaborators. We expect that this 
methodology may include calculations, but we are clarifying that while 
quality criteria must be used when determining the gainsharing payment 
for each CJR collaborator, the quality criteria are not specifically 
required to be a part of the calculated amount of the gainsharing 
payment.
    Comment: Many commenters recommended specific changes to the 
gainsharing policies proposed by CMS. First, some commenters 
recommended that CMS require participant hospitals to offer the same 
gainsharing arrangement to all CJR collaborators of the same provider 
or supplier type. For example, MedPAC recommended that CMS allow 
participant hospitals the flexibility to draft their own risk-sharing 
arrangements, but require that hospitals have the same gainsharing 
arrangement with all physicians; the per-episode payment for each 
physician that is a CJR collaborator in the gainsharing pool would be 
the same. MedPAC also suggested that physicians in a gainsharing pool 
should be judged across all CJR beneficiaries treated by all physicians 
in the pool, which would prevent hospitals from making gainsharing 
payments on a patient-specific basis. MedPAC stated that these 
requirements would limit the incentive for physicians to select low-
cost patients. With respect to CJR collaborators that are PAC 
providers, MedPAC and other commenters recommended that participant 
hospitals should not be required to offer risk sharing to all PAC 
providers, the arrangements offered should be identical across all 
selected PAC providers, and the gainsharing payments should be 
calculated for all PAC providers offered risk sharing by the hospital 
using a methodology that is not patient-specific or provider/supplier-
specific. The commenters recommended that gainsharing methodologies 
that reward providers or suppliers based on the performance of a group 
of similar providers or suppliers would limit the incentives for 
certain CJR collaborators to select low-cost patients over higher cost 
patients. In addition, the commenters recommended that such 
methodologies would encourage all CJR collaborators to lower episode 
spending, improve quality, and reduce Medicare spending for all CJR 
model beneficiaries.
    Second, a number of commenters urged CMS to make sharing 
arrangements mandatory; in effect suggesting that participant hospitals 
be required to enter into gainsharing relationships. For example, a 
commenter recommended that CMS require participant hospitals to enter 
into sharing arrangements with ACOs in the participant hospital's MSA. 
Another commenter recommended that CMS require participant hospitals to 
enter into sharing arrangements with all orthopedic physicians 
credentialed at the hospital, in order to reduce the potential for 
hospitals to arbitrarily decide whether or not to enter into such 
arrangements with a physician. Multiple commenters cautioned that 
participant hospitals may choose to select only the most ``efficient'' 
or ``cost effective'' orthopedic surgeons to enter into sharing 
arrangements, and thus recommended that CMS require participant 
hospitals to enter into sharing arrangements with all

[[Page 73425]]

physicians. Another commenter likewise urged CMS to require, or 
strongly encourage, participant hospitals to collaborate with 
independent professionals who can demonstrate effectiveness and 
efficiency in the rehabilitation treatment of THA and TKA patients in 
the model. However, many other commenters recommended that CMS retain 
the provision in the proposed rule to allow participant hospitals the 
freedom to determine whether they want to enter into gainsharing or 
risk-sharing arrangements. MedPAC stated that a participant hospital 
should not be required to offer sharing arrangements to all providers 
and suppliers in its market, and that participant hospitals should be 
allowed to exclude providers and suppliers that are not contributing to 
efficiencies or that are delivering a poor quality of care. Many 
commenters recommended that CMS allow participant hospitals to 
discontinue a sharing arrangement with any individual or entity not 
contributing to savings. Several commenters urged CMS to finalize its 
proposed policy to prohibit participant hospitals from coercing or 
requiring physician participation in the CJR model.
    Many commenters stated that the proposed sharing arrangement 
requirements, such as the gainsharing and alignment payment caps, were 
too limiting. Several commenters noted that certain types of 
physicians--particularly orthopedic surgeons--serve a critical role in 
care redesign and creating internal cost savings for a participant 
hospital and episode savings to Medicare. Thus, these commenters 
stated, applying the same policies regarding sharing gains and losses 
to orthopedic surgeons as to other providers and suppliers--such as 
physical therapists or PAC providers--would be inapplicable. These 
commenters recommended that CMS allow physicians greater freedom to 
negotiate sharing arrangements--such as the ability to assume greater 
financial risk above the 25 percent for alignment payments proposed by 
CMS in the proposed rule, and removal of the 50 percent cap on 
gainsharing payments for CJR collaborators that are physicians, 
nonphysician practitioners, and PGPs.
    Several commenters suggested that the proposed caps on gainsharing 
payments and alignment payments were arbitrary, particularly given the 
proposed policy that gainsharing payments must be ``actually and 
proportionally related to the care'' of beneficiaries in CJR episodes 
and that the CJR collaborator must be contributing to the care redesign 
strategies of the participant hospital. Other commenters likewise 
suggested that the capped limits were arbitrary because they may not 
reflect the efforts that a physician undertook to meet required quality 
metrics and reduce episode spending. Rather than setting what they 
argue is an arbitrary limit, these commenters recommended that CMS 
should allow providers to determine the distribution amounts.
    Some commenters noted that gainsharing structures in the private 
sector allow for more flexibility and are less prescriptive. Other 
commenters recommended that the participant hospital should be afforded 
broad discretion to establish its policies for the distribution of 
gainsharing payments. For example, a commenter suggested that CMS 
should remove the requirement that gainsharing payments be made 
annually, and allow participant hospitals to make this payments at any 
interval, or at a minimum, twice per year. These commenters also noted 
that hospitals are likely to be experienced business entities and 
should be able to make independent financial decisions without a 
regulatory structure for gainsharing like the one proposed. Further, 
these commenters suggested that in the absence of gainsharing, the 
participant hospital would retain the full reconciliation payment, and 
thus the hospitals are unlikely to make distributions of gainsharing 
payments unnecessarily.
    Response: We appreciate the robust response from commenters on 
these issues. We proposed to allow financial arrangements in this model 
to incentivize higher quality care and reductions in episode spending 
through improved financial alignment between providers and suppliers 
furnishing services to beneficiaries during a CJR episode, while 
protecting against undue risk from beneficiary steering, care stinting, 
and inappropriate reductions in access to care that could otherwise 
result from the financial incentives in an episode payment model.
    We appreciate the reasons for the recommendations by some 
commenters that we require participant hospitals to essentially offer 
the same gainsharing arrangement to all providers and suppliers of the 
same type. While we understand the potential benefits of a policy 
standardizing sharing arrangements to protect against selection of low-
cost patients and the resulting patient steering, we believe that 
participant hospitals may have legitimate reasons to enter into a 
sharing arrangement with a particular provider or supplier that differs 
from the hospital's arrangements with other similar providers or 
suppliers. For example, it is possible there may be instances in which 
a particular SNF offers certain therapies or has resources that a 
participant hospital believes will benefit its patients in the model. 
In these instances, it may be prudent for a hospital to enter into a 
different sharing arrangement with that SNF, as opposed to other SNFs. 
Furthermore, participant hospitals may have legitimate reasons to 
construct different sharing arrangements with CJR collaborators that 
agree to take on a portion of the participant hospital's financial risk 
compared to sharing arrangements with CJR collaborators that do not 
assume downside risk. We believe that the CJR model's policies that 
require participant hospitals to be financially liable for episodes of 
care will incentivize participant hospitals to decrease episode 
spending and increase the quality of care by engaging participant 
hospitals to seek CJR collaborators that are also supportive of these 
goals.
    We believe that the MedPAC recommendation to require identical per-
episode payments for each physician that is a CJR collaborator would 
likely limit physician commitment to the goals of the model and the 
model would be less likely to result in reduced episode spending and 
improved quality of care. Our experience in other models that 
incorporate gainsharing has indicated that a hospital may have 
legitimate reasons to construct different sharing arrangements with 
different physicians, depending on factors such as the involvement of 
the physician in the hospital's care redesign efforts, adoption of 
leadership roles requiring direction and instruction of other 
physicians, and the number and magnitude of disruptions in the 
physician's existing practice patterns.
    We have included safeguards in this final rule to address patient 
steering, including the requirement that beneficiaries retain their 
full rights to choose their providers and suppliers, the requirement 
that hospitals not limit beneficiary choice of providers or suppliers, 
the cap on gainsharing payments, the requirement that the opportunity 
to receive gainsharing payments (or the opportunity to make or receive 
alignment payments) may not be conditioned on the volume or value of 
past or anticipated referrals or other business generated to, from, or 
among the participant hospital and any CJR collaborator, the 
requirement that gainsharing payments be distributed only to CJR 
collaborators that meet the quality criteria established by the 
participant hospital, and the

[[Page 73426]]

requirement that gainsharing methodologies must not directly account 
for the volume or value of referrals or business otherwise generated 
between or among the participant hospital and CJR collaborators. For 
these reasons, we believe that participant hospitals should be allowed 
to enter into different sharing arrangements with various CJR 
collaborators.
    While we appreciate the reasons why some commenters recommended 
that we require participant hospitals to enter into financial 
relationships with certain entities and individuals, we do not agree 
that such a requirement is necessary. We agree with the commenters who 
supported the voluntary nature of sharing arrangements, and we continue 
to believe that it is essential that sharing arrangements be voluntary 
and without penalty for nonparticipation. Although we are not requiring 
participant hospitals to offer sharing arrangements to all providers or 
suppliers, we are finalizing our proposal prohibiting hospitals from 
coercing or requiring individuals or entities to enter into a sharing 
arrangement, and participant hospitals may not penalize or discriminate 
against physicians and nonphysician practitioners on the grounds that 
they are not CJR collaborators. However, in response to these comments, 
we are also modifying our proposal, discussed in detail later in this 
section, regarding the selection criteria a participant hospital must 
use in choosing CJR collaborators. We believe that our final 
requirement for selection criteria for CJR collaborators responds to 
the concerns from some commenters regarding how a participant hospital 
selects it CJR collaborators.
    In response to the view of some commenters that the provisions for 
gainsharing and risk-sharing in the CJR model are overly restrictive, 
we note that we constructed a framework for financial arrangements in 
the CJR model that we believe leaves participant hospitals and CJR 
collaborators relatively unconstrained to develop sharing arrangements 
in a manner they see fit, provided that all the requirements contained 
in this final rule are met. We have not proposed that participant 
hospitals would need to use a particular methodology for determining 
gainsharing payments or alignment payments, other than placing upper 
thresholds on those payments and a requirement for quality criteria for 
gainsharing payments, which we discuss in greater detail previously in 
this section.
    With regard to the provision on the annual distribution of 
gainsharing payments, given that CMS is not requiring participant 
hospitals to submit gainsharing methodologies for review or to report 
gainsharing payments to CMS, we believe that the provision allowing for 
gainsharing payments on an annual basis is appropriately placed, for 
purposes of tracking by the participant hospital, as well as 
facilitating any program integrity matters by CMS, HHS, and its 
designees. We also believe that annual distributions of gainsharing 
payments are appropriate because reconciliation within the model will 
occur on an annual basis. Also, because providers and suppliers will 
continue to be paid according to the existing FFS processes throughout 
the duration of the model, CJR collaborators will continue to have 
sources of revenue other than gainsharing payments, which we believe 
makes distributions of gainsharing payments more often than once per 
year unnecessary. Finally, while gainsharing arrangements in the 
private sector may be less restrictive, as suggested by some 
commenters, other commenters nonetheless noted that a number of Federal 
laws are implicated by gainsharing, and thus a more prescriptive set of 
gainsharing policies is an appropriate reflection of the presence and 
importance of that legal framework. We agree with those commenters, and 
emphasize that while we have attempted to avoid making the provisions 
on sharing arrangements and collaborator agreements unnecessarily 
complex, we believe that the regulatory requirements for these 
documents are justified, for reasons such as limiting opportunities for 
patient steering, preserving beneficiary choice, and protecting Federal 
healthcare dollars.
    We continue to believe that the permissible sharing arrangements 
under the CJR model should allow participant hospitals substantial and 
appropriate flexibility to develop these arrangements with the care 
redesign needs of their beneficiaries in mind to achieve the model 
objective of quality improvement and reduced episode cost, while 
providing sufficient protections against the possible risks of 
beneficiary steering, stinting, and inappropriate reductions in access 
to care under an episode payment model. Therefore, final policies apply 
certain limited protections to minimize these risks and reduce the 
opportunities for providers and suppliers to engage in inappropriate 
behavior, while allowing participant hospitals sufficient flexibility 
to achieve success in the model, striking an appropriate balance 
between these two important objectives. These protections fall into the 
following several categories:
     Requirements that the basis for selection of CJR 
collaborators be on criteria related to, and inclusive of, the quality 
of care to be delivered to beneficiaries during a CJR episode, and that 
the selection criteria cannot be based directly or indirectly on the 
volume or value of referrals or revenue generated by providers or 
suppliers. Further, all CJR collaborators must have met, or agree to 
meet, the quality criteria for selection.
     Requirements that the basis for, and determination of, 
gainsharing payments include provisions describing with specificity in 
the collaborator agreement, including the quality criteria that the 
participant hospital will use in its determination of gainsharing 
payments, and that such payments be based on criteria other than the 
volume or value of past or future referrals, or business otherwise 
generated.
     Contemporaneous documentation requirements to ensure that 
collaborator agreements between participant hospitals and CJR 
collaborators are memorialized in writing and comply with all the 
provisions of this final rule.
     Limits on the absolute amount of dollars in alignment 
payments to ensure that such payments are made solely for the purposes 
permitted under this final rule.
     Restrictions on the types of providers and suppliers that 
may receive gainsharing payments and provisions requiring that those 
providers and suppliers have actually furnished a service to a 
beneficiary and/or been involved in care redesign, as required by this 
final rule.
     Limits on the absolute amount of dollars an individual 
practitioner or PGP may receive as gainsharing payments.
     Compliance from participant hospitals and CJR 
collaborators with the requirements of this final rule.
    Finally, for the many reasons previously provided, we disagree with 
commenters who suggested that we proposed an arbitrary structure for 
financial arrangements in the CJR model. We acknowledge that any 
protections will inherently provide some limits on the flexibility of 
participant hospitals to develop certain financial arrangements, but we 
believe that the CJR model requirements appropriately balance the need 
for flexibility and program integrity.
    Comment: Some commenters expressed confusion about the manner in 
which gainsharing payments can be distributed from participant 
hospitals to CJR collaborators. For example, these

[[Page 73427]]

commenters inquired about whether a physician who is engaged in CJR 
model care redesign with a participant hospital and is also a member of 
a PGP would contract directly with the participant hospital through a 
collaborator agreement or whether the PGP would contract with the 
participant hospital, including on behalf of the physician member who 
is working with the hospital.
    Response: We appreciate these requests for clarification. We 
understand from the comments that some physicians engaged in care 
redesign with a participant hospital may wish to contract directly with 
a hospital through a collaborator agreement, and other physicians may 
prefer to have their PGP contract directly with a participant hospital 
on behalf of the members of the PGP that furnish services to CJR 
beneficiaries. We note that as previously discussed, we are finalizing 
our proposal with a modification to allow PGPs that are CJR 
collaborators to retain all or a portion of a gainsharing payment, 
provided that the PGP meets certain conditions. A PGP that does not 
retain any or all of a gainsharing payment can distribute all or the 
remaining portion of the gainsharing payment to individual 
practitioners who are members of the PGP under certain conditions. As 
such, we are adding new Sec.  510.505 to set forth the requirements for 
the arrangement between a PGP that is a CJR collaborator and the 
individual practitioners who are members of the PGP. The section only 
applies when the PGP chooses to distribute all or a portion of a 
gainsharing payment to individual physicians or nonphysician 
practitioners who are members of the PGP.
    We specify in Sec.  510.505(a) that a PGP that has entered into a 
collaborator agreement with a participant hospital may distribute all 
or a portion of any gainsharing payment it receives from the hospital 
only in accordance with a ``distribution arrangement,'' which we define 
as a financial arrangement between a PGP that is a CJR collaborator and 
a ``practice collaboration agent'' pursuant to which the PGP 
distributes some or all of a gainsharing payment. We define a 
``practice collaboration agent'' as a PGP member who has entered into a 
distribution arrangement with the same PGP of which he or she is a 
member and who has not entered into a collaborator agreement with a 
participant hospital. We are defining the terms ``PGP member'' and 
``member of a PGP'' to mean a physician, nonphysician practitioner, or 
therapist who is an owner or employee of the PGP and who has reassigned 
to the PGP his or her right to receive Medicare payment. We note that 
the fact that an entity employs or contracts with physicians, 
nonphysician practitioners or therapists does not make the entity a 
PGP. We are adding commonplace definitions of ``physician'' and 
``nonphysician practitioner'' and we are defining ``therapist'' to 
include physical, occupational, and speech therapists.
    We emphasize that a PGP that is a CJR collaborator (hereafter in 
this section, ``a PGP,'' unless noted otherwise) is not obligated under 
this final rule to distribute (make a ``distribution payment'') of a 
gainsharing payment to its PGP members. Upon receipt of a gainsharing 
payment, the PGP may retain some or all of the gainsharing payment. If 
the PGP chooses to make distribution payments, it must do so only in 
accordance with a distribution arrangement. This final rule requires at 
new Sec.  510.505 that all distribution arrangements must comply with 
all applicable laws and regulations, including the applicable fraud and 
abuse laws, and the following criteria:
     All distribution arrangements must be in a writing signed 
by the PGP and practice collaboration agent.
     Participation in a distribution arrangement must be 
voluntary and without penalty for nonparticipation.
     The distribution arrangement must require the practice 
collaboration agent to comply with the requirements set forth in this 
final rule.
     The opportunity to receive a distribution payment must not 
be conditioned directly on the volume or value of past or anticipated 
referrals or other business generated to, from, or among a participant 
hospital, the PGP, other CJR collaborator, any practice collaboration 
agents, and any individual or entity affiliated with a participant 
hospital, CJR collaborator, or practice collaboration agent.
     Methodologies for determining distribution payments must 
not directly account for volume or value of referrals, or business 
otherwise generated, between or among the participant hospital, CJR 
collaborators, practice collaboration agents, and any individual or 
entity affiliated with a participant hospital, CJR collaborator, or 
practice collaboration agent.
     A practice collaboration agent is eligible to receive a 
distribution payment only if the PGP billed for an item or service 
furnished by the practice collaboration agent to a CJR beneficiary 
during a CJR episode that occurred during the calendar year in which 
the participating hospital accrued the internal cost savings or earned 
the reconciliation payment that comprise the gainsharing payment made 
to the PGP.
     Where a PGP receives a gainsharing payment from a 
participant hospital pursuant to a sharing arrangement, all monies 
contained in such a gainsharing payment must be shared only with the 
physician or nonphysician practitioners that are PGP members that 
furnished a service to a CJR beneficiary during an episode of care in 
the calendar year from which the NPRA, as that term is defined in 
section III.C.6. of the final rule, or internal cost savings was 
generated, either or both of which are the only permitted sources of 
funds for a gainsharing payment.
     The total amount of distribution payments for a calendar 
year paid to a practice collaboration agent must not exceed 50 percent 
of the total Medicare approved amounts under the Medicare Physician Fee 
Schedule (MPFS) for services billed by the PGP and furnished by the 
practice collaboration agent to the participant hospital's CJR 
beneficiaries during a CJR episode.
     With respect to the distribution of any gainsharing 
payment received by a PGP, the total amount of all distribution 
payments must not exceed the amount of the gainsharing payment.
     All distribution payments must be made through EFTs.
     The practice collaboration agents must retain their 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
     The distribution arrangement must not--
    ++ Induce a practice collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    ++ Reward the provision of items and services that are medically 
unnecessary.
     The PGP must maintain documentation regarding practitioner 
distribution arrangements in accordance with Sec.  510.500(e), 
including the relevant written agreements, documentation of the amount 
of any distribution payment, the identity of each practice 
collaboration agent who received a distribution payment, and a 
description of the methodology and accounting formula for calculating 
the amount of any distribution payment.
     The PGP may not enter into a distribution arrangement with 
any member of the PGP that has a collaborator agreement in effect with 
a participant hospital.
    These provisions require distribution payments to be made by a PGP 
only to individuals who furnished an item or service to a CJR 
beneficiary during a CJR

[[Page 73428]]

episode. As a result, a PGP's existing practice compensation 
methodology is likely to be inapplicable to the determination and 
payment of distribution payments. For example, where a PGP retains a 
gainsharing payment and elects not to make distribution payments to 
eligible practice collaboration agents, the aforementioned criteria 
would prohibit the PGP from placing the gainsharing payment in its 
general funds and distributing those monies to any member of the PGP 
who did not furnish an item or service to a CJR beneficiary during a 
CJR episode that occurred during the calendar year in which the 
participating hospital accrued the internal cost savings or earned the 
reconciliation payment that comprise the gainsharing payment made to 
the PGP. We emphasize that such individuals are not permitted under 
this final rule to receive a distribution payment.
    Comment: Some commenters requested that CMS offer additional 
protections to small businesses, such as some physical therapy or 
physician group practices, who may desire to engage as CJR 
collaborators with participant hospitals, but may have limited 
resources to do so. Recommendations from these commenters were for CMS 
to ensure that gainsharing payments are paid in a timely manner, that 
gainsharing payments are distributed fairly and equitably to CJR 
collaborators according to the provisions in this final rule as well as 
those agreed upon in a collaborator agreement, and that participant 
hospitals and CJR collaborators not be permitted to engage in unfair 
business practices.
    Response: It is our intent to construct a model that offers 
opportunities for providers and suppliers of all sizes to be CJR 
collaborators, provided they meet the criteria in this final rule. In 
response to the timely payment comment, we direct those commenters to 
the requirement that gainsharing payments must be distributed on an 
annual basis. Accordingly, a gainsharing payment can only be 
distributed to eligible CJR collaborators once per year. As previously 
noted, CMS is not requiring participant hospitals to enter into 
collaborator agreements with all providers and suppliers caring for CJR 
beneficiaries, but where a hospital does enter one or more collaborator 
agreements, the participant hospital must not distribute any 
gainsharing payments more than once per year. We believe that this 
requirement ensures that gainsharing payments are timed to sufficiently 
maintain a CJR collaborator's commitment to lowering costs and 
improving quality of care.
    To the extent the commenters were advocating that CMS prohibit late 
payment of amounts owed to CJR collaborators, we believe that the 
consequences for breach of contract offer sufficient protection. 
Regarding the commenters' desire to ensure that gainsharing payments 
are distributed fairly and equitably to CJR collaborators, we believe 
that the provisions of this final rule adequately address their 
comment. For example, this final rule prohibits participant hospitals 
and all CJR collaborators from reducing or limiting medically necessary 
services, prohibits conditioning the opportunity to receive gainsharing 
payments on the volume or value of referrals, requires gainsharing 
payment eligibility to include quality criteria and gainsharing payment 
determinations to be based on criteria related to the quality of care 
to be delivered to CJR beneficiaries during episodes, prohibits 
gainsharing methodologies that directly account for the volume or value 
of referrals, and caps the amount a physician or nonphysician 
practitioner can receive in gainsharing payments as a CJR collaborator. 
Finally, we agree with the commenters that it is important to deter 
unfair business practices, but the regulation of such practices is 
outside the scope of our authority. Accordingly, we decline to add a 
prohibition against unfair business practices. However, we believe that 
many of the program integrity provisions regarding sharing arrangements 
will also serve to deter unfair business practices.
    Comment: A few commenters suggested that CMS should encourage 
participant hospitals and CJR collaborators to establish multi-year 
collaborator agreements, with the goal of fostering a long-term 
relationship resulting in optimal program alignment.
    Response: Nothing in this final rule prohibits participant 
hospitals and CJR collaborators from entering into collaborator 
agreements for a duration of more than one year.
    Comment: Several commenters opposed the adoption of reporting 
requirements for gainsharing and alignment payments, a topic upon which 
CMS sought comment but did not make a specific proposal. Alternatively, 
these commenters recommended CMS should not finalize the adoption of 
reporting requirements without considering the administrative burden 
such reporting would place on hospitals. However, other commenters 
recommended that CMS take a more active role in managing the agreements 
and payments between participant hospitals and CJR collaborators. For 
example, some commenters recommended that all collaborator agreements 
should be submitted to CMS and that CMS should perform random audits of 
these agreements to ensure they comply with current regulations. 
Another commenter urged CMS to track all gainsharing payments from 
participant hospitals to each CJR collaborator. Furthermore, multiple 
commenters recommended that CMS include a requirement that participant 
hospitals submit to CMS, or publish themselves, a list of all CJR 
collaborators. These commenters believe that disclosure of all sharing 
arrangements would foster transparency regarding the business and 
referral networks of providers and suppliers that may arise through 
sharing arrangements.
    Response: We appreciate the feedback with respect to the potential 
burden of periodically reporting data to CMS on matters related to 
gainsharing payments. We proposed to require participant hospitals to 
retain documentation regarding sharing arrangements and solicited 
comments on whether we should require participant hospitals and CJR 
collaborators to periodically report certain data, including 
gainsharing payments, alignment payments, identification of all CJR 
collaborators, and other relevant information related to collaborator 
agreements and sharing arrangements. We also sought comment on whether 
we should require reporting of any other information that would assist 
HHS with enforcement of the regulations governing this model and 
whether additional or different safeguards are needed to protect the 
program and to ensure that its goals are satisfied.
    We agree with the commenters that transparency is important to 
ensure program integrity and to assist with evaluation of the model. We 
have tried, where possible, to ensure transparency regarding sharing 
arrangements and distribution arrangements without imposing undue 
administrative burden on the individuals and entities that enter into 
such arrangements.
    Because documenting financial arrangements is consistent with 
general business practices, we believe that our documentation 
requirement imposes minimal additional administrative burden on 
participant hospitals and CJR collaborators. To promote transparency, 
we are modifying our regulation text to require contemporaneous 
documentation of collaborator agreements. This will discourage gaming 
by ensuring that these agreements are entered into before care is 
furnished to CJR beneficiaries.

[[Page 73429]]

Further, we are modifying our regulation text to require that the 
documentation for collaborator agreements must include a description of 
the sharing arrangement; its date; the purpose; the provisions and 
scope of the arrangement; and the financial terms of the arrangement. 
We believe that these requirements will ensure that these agreements 
are entered into before the care furnished to CJR beneficiaries and 
will be auditable by the government. We have imposed similar 
requirements for distribution arrangements.
    We do not agree that it is necessary for participant hospitals to 
submit periodically to CMS documentation regarding sharing 
arrangements, lists of CJR collaborators, or documentation regarding 
all gainsharing payments and alignment payments. We are sensitive to 
the potential burden of such a reporting requirement. We believe that 
the goals of transparency and program integrity can be achieved by 
requiring participant hospitals and CJR collaborators to retain 
contemporaneous documentation of collaborator agreements, gainsharing 
payments, and alignment payments for at least 10 years following 
completion of the arrangement and to allow CMS, HHS, or its designee's 
access to such records. In addition, we are modifying the regulation 
text to require each participant hospital to maintain accurate, 
current, and historical lists of CJR collaborators and to publish on 
its Web site, on a Web page accessible to the general public, an 
accurate and current list of all CJR collaborators. The hospital must 
update its published list of CJR collaborators no less frequently than 
quarterly. The dollar amounts of any gainsharing payments or alignment 
payments need not be listed on the participant hospital's Web site.
    We note that the participant hospital's records associated with 
tracking gainsharing payments must reflect whether the participant 
hospital recouped any gainsharing payments received by a CJR 
collaborator that contain funds derived from a CMS overpayment on a 
reconciliation report or because such gainsharing payments were the 
result of the submission of false or fraudulent data. Similarly, this 
final rule also requires PGPs to maintain documentation regarding 
distribution arrangements in accordance with Sec.  510.500(e), 
including the relevant written agreements, documentation of the amount 
of any distribution payment, the identity of each practice 
collaboration agent who received a distribution payment, and a 
description of the methodology and accounting formula for determining 
the amount of any distribution payment. We have revised the regulation 
text to reflect these requirements.
    We do not believe that the obligation to maintain accurate current 
or historical lists of CJR collaborators and documentation regarding 
all gainsharing payments and alignment payments, imposes any 
significant additional burden on participant hospitals. Participant 
hospitals will likely maintain such lists for their own operational 
purposes whether or not they are required by our regulations to do so. 
We believe that maintaining an accurate list of all CJR collaborators 
and documentation regarding all gainsharing payments, alignment 
payments, and distribution payments is a necessary and appropriate 
provision for purposes of transparency, keeping beneficiaries informed, 
and ensuring that such information is auditable by CMS, HHS, or its 
designees. We also believe that such information will help inform both 
CMS and the public about collaborator agreements.
    We leave open the possibility for future rulemaking on the issue of 
documentation and reporting for this model. CMS may consider additional 
documentation requirements, including submission of lists of CJR 
collaborators and practice collaboration agents to CMS at regular, 
ongoing intervals.
    Summary of Final Decisions: After consideration of the public 
comments we received, we are finalizing the proposal with thirteen 
modifications. These modifications are:
     The term ``Participation Agreement'' has been changed to 
``collaborator agreement''.
     The term ``CJR sharing arrangement'' has been changed to 
``sharing arrangement''.
     In order for a physician or nonphysician practitioner to 
be a CJR collaborator, the physician or nonphysician practitioner must 
not have opted out of Medicare.
     PGPs that are CJR collaborators may retain all or a 
portion of a gainsharing payment, provided that the PGP meets all the 
criteria in this final rule for such retention.
     Sharing arrangements, included in collaborator agreements, 
must be entered into before care is furnished to CJR beneficiaries 
under the terms of the arrangement.
     A requirement that the participant hospital develop and 
maintain a written set of policies for selecting its CJR collaborators. 
This set of policies must contain criteria for selection of CJR 
collaborators that include criteria related to, and inclusive of, the 
quality of care to be delivered to beneficiaries during a CJR episode. 
The selection criteria cannot be based directly or indirectly on the 
volume or value of referrals or business otherwise generated by, 
between or among the participant hospital and CJR collaborators, and 
any individual or entity affiliated with a participant hospital or CJR 
collaborator. All CJR collaborators must have met, or agree to meet, 
the quality criteria for selection.
     A requirement that the participant hospital include in its 
collaborator agreements with CJR collaborators the methodology the 
participant hospital will use to determine gainsharing payments, and 
this methodology must be based, at least in part, on criteria related 
to, and inclusive of, the quality of care to be delivered to 
beneficiaries during a CJR episode, and not directly on the volume or 
value of referrals or business otherwise generated by, between or among 
the participant hospital and CJR collaborators, and any individual or 
entity affiliated with a participant hospital or CJR collaborator
     A requirement that the participant hospital, in 
considering the quality criteria to incorporate as part of its 
gainsharing methodologies, use quality criteria that are directly 
related to CJR episodes of care, so that the criteria used by the 
participant hospital are relevant to care for beneficiaries in the 
model. Any CJR collaborator that does not meet the quality criteria 
described with specificity in the sharing arrangement is not eligible 
for a gainsharing payment for the calendar year for which the 
gainsharing payment is being determined.
     Requirements that the participant hospital keep 
contemporaneous documentation of collaborator agreements.
     A requirement that the participant hospital maintain 
accurate current and historical lists of CJR collaborators.
     A requirement that the participant hospital publish on its 
Web site, on a Web page accessible to the general public, accurate 
current and historical lists of CJR collaborators.
     A participant hospital must not make a gainsharing payment 
to a CJR collaborator that is subject to any action for noncompliance 
with this part or the fraud and abuse laws, or for the provision of 
substandard care in CJR episodes or other integrity problems.
     A regulatory framework has been created to allow PGPs that 
are CJR collaborators to share all or portions of gainsharing payments 
with individual practitioners that are members of the PGP. These 
requirements are set forth in new Sec.  510.505.
    With the exception of new Sec.  510.505, the final policies are set 
forth in

[[Page 73430]]

Sec.  510.500, which we have reorganized to eliminate redundancy and 
internal inconsistencies and to more clearly set forth the requirements 
for CJR sharing arrangements.
    ``General.'' We are finalizing at Sec.  510.500(a) the following 
general requirements for all sharing arrangements that a participant 
hospital may elect to enter into:
     A participant hospital must not make a gainsharing payment 
or receive an alignment payment except in accordance with a sharing 
arrangement. Any gainsharing payments or alignment payments made 
pursuant to a sharing arrangement must be made only from the 
participant hospital to the CJR collaborator with whom the participant 
hospital has signed a collaborator agreement containing a sharing 
arrangement.
     CMS may review any sharing arrangement for compliance with 
the requirements of this part and to ensure that it does not pose a 
risk to beneficiary access, beneficiary freedom of choice, or quality 
of care.
     Notwithstanding any sharing arrangements between the 
participant hospital and CJR collaborators, the participant hospital 
must have ultimate responsibility for fully complying with all 
provisions of the CJR model.
     If a participant hospital enters into a sharing 
arrangement, it must update its compliance program to include oversight 
of sharing arrangements and compliance with the requirements of the CJR 
model.
     The board or other governing body of the participant 
hospital must have responsibility for overseeing the participant 
hospital's participation in the model, its arrangements with CJR 
Collaborators, its payment of gainsharing payments and receipt of 
alignment payments, and its use of beneficiary incentives in the CJR 
model.
     Participant hospitals must develop and maintain a written 
set of policies for selecting its CJR collaborators. This set of 
policies must contain criteria for selection of CJR collaborators that 
include criteria related to, and inclusive of, the quality of care to 
be delivered by the CJR collaborator to beneficiaries during a CJR 
episode. The selection criteria cannot be based directly or indirectly 
on the volume or value of referrals or business otherwise generated by, 
between or among the participant hospital and CJR collaborators, and 
any individual or entity affiliated with a participant hospital or CJR 
collaborator. All CJR collaborators must have met, or agree to meet, 
the quality criteria for selection.
    ``Sharing Arrangements.'' We have consolidated at Sec.  510.500(b) 
the criteria that each sharing arrangement must satisfy. Specifically, 
each sharing arrangement must comply with the following criteria:
     The sharing arrangement must be set forth in a 
collaborator agreement that complies with the requirements of Sec.  
510.500(c).
     The sharing arrangement must comply with all relevant laws 
and regulations, including the applicable fraud and abuse laws and all 
applicable payment and coverage requirements.
     An individual or entity's participation in a sharing 
arrangement must be voluntary and without penalty for nonparticipation.
     The parties must enter into a sharing arrangement before 
care is furnished to CJR beneficiaries under the terms of the sharing 
arrangement.
     To be eligible to receive a gainsharing payment, a CJR 
collaborator must meet quality criteria for the calendar year for which 
the gainsharing payment is determined by the participant hospital. The 
quality criteria must be established by the participant hospital and 
directly related to CJR episodes of care.
     To be eligible to receive a gainsharing payment or make an 
alignment payment, a CJR collaborator other than a PGP must directly 
furnish a billable service to a CJR beneficiary during a CJR episode 
that occurred in the calendar year in which the savings or loss was 
created.
     To be eligible to receive a gainsharing payment, a PGP 
that is a CJR collaborator must meet the following criteria:
    ++ The PGP must have billed for an item or service that was 
rendered by one or more members of the PGP to a CJR beneficiary during 
a CJR episode that occurred during the calendar year in which the 
participant hospital's internal cost savings was generated, or to which 
the NPRA applied;
    ++ The PGP must contribute to a participant hospital's care 
redesign in the CJR model and be clinically involved in the care of CJR 
beneficiaries. We set forth in the regulation a non-exhaustive list of 
ways in which a PGP might be clinically involved in the care of CJR 
beneficiaries.
     No entity or individual, whether a party to a collaborator 
agreement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments on the 
volume or value of referrals or business otherwise generated by, 
between or among the participant hospital, CJR collaborators, and any 
individual or entity affiliated with a participant hospital or CJR 
collaborator.
     Gainsharing payments, if any, must be--
    ++ Derived solely from reconciliation payments, or internal cost 
savings, or both;
    ++ Actually and proportionally related to the care of beneficiaries 
in a CJR episode;
    ++ Distributed on an annual basis (not more than once per calendar 
year); and
    ++ Not be a loan, advance payments, or payments for referrals or 
other business.
     Alignment payments from a CJR collaborator to a 
participant hospital may be made at any interval that is agreed upon by 
both parties, and must--
    ++ Not be issued, distributed, or paid prior to the calculation and 
issuance by CMS of a reconciliation report reflecting a repayment 
amount; and
    ++ Not be a loan, advance payments, or payments for referrals or 
other business.
     A participant hospital must not make a gainsharing payment 
to a CJR collaborator that is subject to any action for noncompliance 
with this part or the fraud and abuse laws, or for the provision of 
substandard care in CJR episodes or other integrity problems.
     In a calendar year, the aggregate amount of all 
gainsharing payments distributed by a participant hospital that are 
derived from a CJR reconciliation payment may not exceed the amount of 
the reconciliation payment the participant hospital receives from CMS.
     In a calendar year, the aggregate amount of all alignment 
payments received by the participant hospital must not exceed 50 
percent of the participant hospital's repayment amount. No alignment 
payments may be collected by a participant hospital if it does not owe 
a repayment amount.
     The aggregate amounts of all alignment payments from any 
one CJR collaborator to a participant hospital must not be greater than 
25 percent of the participant hospital's repayment amount.
     A sharing arrangement must not induce the participant 
hospital, CJR collaborator, or any employees or contractors of the 
participant hospital or CJR collaborator to reduce or limit medically 
necessary services to any Medicare beneficiary.
     A sharing arrangement must not restrict the ability of a 
CJR collaborator to make decisions in the best interests of its 
patients, including the selection of devices, supplies, and treatments.
     The methodology for determining gainsharing payments must 
be based, at

[[Page 73431]]

least in part, on criteria related to, and inclusive of, the quality of 
care to be delivered to CJR beneficiaries during an episode and must 
not directly account for the volume or value of referrals or business 
otherwise generated by, between or among the participant hospital, CJR 
collaborators, and any individual or entity affiliated with a 
participant hospital or CJR collaborator.
     The methodology for determining alignment payments must 
not directly account for the volume or value of referrals or business 
otherwise generated by, between or among the participant hospital, CJR 
collaborators, and any individual or entity affiliated with a 
participant hospital or CJR collaborator.
     The total amount of a gainsharing payment for a calendar 
year paid to an individual physician or nonphysician practitioner who 
is a CJR collaborator must not exceed 50 percent of the total Medicare 
approved amounts under the Physician Fee Schedule (PFS) for services 
furnished to the participant hospital's CJR beneficiaries during a CJR 
episode by that physician or nonphysician practitioner.
     The total amount of gainsharing payments for a calendar 
year paid to a PGP that is a CJR collaborator must not exceed 50 
percent of the total Medicare approved amounts under the Physician Fee 
Schedule (PFS) for services that are billed by the PGP and furnished 
during a calendar year by members of the PGP to the participant 
hospital's CJR beneficiaries during CJR episodes.
     The participant hospital's determination of internal cost 
savings must satisfy the following criteria:
    ++ Internal cost savings are calculated in accordance with 
generally accepted accounting principles and Government Auditing 
Standards (The Yellow Book).
    ++ All amounts determined to be internal cost savings must reflect 
actual, internal cost savings achieved by the participant hospital 
through implementation of care redesign elements identified and 
documented by the participant hospital. Internal cost savings does not 
include savings realized by any individual or entity that is not the 
participant hospital.
    ++ Internal cost savings may not reflect ``paper'' savings from 
accounting conventions or past investment in fixed costs.
     All gainsharing payments and any alignment payments must 
meet the requirements set forth in this section and be administered by 
the participant hospital in accordance with generally accepted 
accounting principles. In no event may the participant hospital receive 
any amounts from a CJR collaborator under a sharing arrangement that 
are not alignment payments.
     All gainsharing payments and alignment payments must be 
made through electronic funds transfers.
    ``Participation Agreements.'' We proposed a number of provisions 
that we believed should be set forth in the sharing arrangement or 
participation agreement (now termed ``collaborator agreement''). We 
have finalized and consolidated these provisions under Sec.  
510.500(c). Specifically, we are finalizing our proposal to require 
that each collaborator agreement must include and set forth in writing 
the following:
     The collaborator agreement must contain a description of 
the arrangement between the participant hospital and the CJR 
collaborator regarding gainsharing payments and alignment payments. 
This description must specify the following:
    ++ The parties to the sharing arrangement.
    ++ The date of the sharing arrangement.
    ++ The purpose and scope of the sharing arrangement; ++ The 
financial or economic terms of the sharing arrangement, including the 
frequency of payment, and the methodology and accounting formula for 
determining the amount of any gainsharing payment or alignment payment.
    ++ Safeguards to ensure that alignment payments are made solely for 
purposes related to sharing responsibility for funds needed to repay 
Medicare in the CJR model.
    ++ Plans regarding care redesign.
    ++ Changes in care coordination or delivery that is applied to the 
participant hospital or CJR collaborators or both.
    ++ A description of how success will be measured.
    ++ Management and staffing information, including type of personnel 
or contractors that will be primarily responsible for carrying out 
changes to care under the model.
     The collaborator agreement must contain a requirement that 
the CJR collaborator and its employees and contractors must comply with 
the applicable provisions of this part (including requirements 
regarding beneficiary notifications, access to records, record 
retention, and participation in any evaluation, monitoring, compliance, 
and enforcement activities performed by CMS or its designees) and all 
other applicable laws and regulations.
     The collaborator agreement must require the CJR 
collaborator to be in compliance with all Medicare provider enrollment 
requirements at Sec.  424.500 of this chapter, including having a valid 
and active TIN or NPI, during the term of the agreement.
     The collaborator agreement must require the CJR 
collaborator to have a compliance program that includes oversight of 
the collaborator agreement and compliance with the requirements of the 
CJR model.
     The collaborator agreement must set forth a specific 
methodology for accruing, calculating, and verifying the internal cost 
savings generated by the participant hospital based on the care 
redesign elements specifically associated with the particular CJR 
collaborator.
    ++ The methodology must set out the specific care redesign elements 
to be undertaken by the participant hospital or the CJR collaborator or 
both.
    ++ The methodology must be based, at least in part, on criteria 
related to, and inclusive of, the quality of care to be delivered to 
CJR beneficiaries during an episode and must not directly account for 
the volume or business otherwise generated by, between, or among the 
participant hospital, CJR collaborators, and any individual or entity 
affiliated with a participant hospital or CJR collaborator.
    ++ The specific methodologies for accruing and calculating internal 
cost savings must be transparent, measurable, and verifiable in 
accordance with generally accepted accounting principles and Government 
Auditing Standards (The Yellow Book).
     The collaborator agreement must set forth the quality 
criteria established by the participant hospital that will be used in 
determining the gainsharing payment.
     The collaborator agreement must require the participant 
hospital to recoup gainsharing payments paid to CJR collaborators if 
gainsharing payments contain funds derived from a CMS overpayment on a 
reconciliation report, or were based on the submission of false or 
fraudulent data.
     Any alignment payments made pursuant to a sharing 
arrangement may be made only to the participant hospital from the 
entity or individual with whom the participant hospital has signed a 
collaborator agreement containing a sharing arrangement.
     The collaborator agreement must require the CJR 
collaborator to comply with the beneficiary notice requirements 
specified in Sec.  510.405, as applicable.
     Any internal cost savings or reconciliation payments that 
the participant hospital seeks to share through sharing arrangements 
must

[[Page 73432]]

meet the requirements set forth in this final rule and be administered 
by the participant hospital in accordance with GAAP. In no event may 
the participant hospital distribute any amounts pursuant to a sharing 
arrangement that are not comprised of either internal cost savings or a 
reconciliation payment, as those terms are defined in this final rule. 
All amounts determined to be internal cost savings by the participant 
hospital must reflect actual, internal cost savings achieved by the 
participant hospital through implementation of care redesign elements 
identified and documented by the participant hospital. In no case may 
internal cost savings reflect ``paper'' savings from accounting 
conventions or past investment in fixed costs.
     Any alignment payments that the participant hospital 
receives through a sharing arrangement must meet the requirements set 
forth in this final rule and be administered by the participant 
hospital in accordance with GAAP.
     Sharing arrangements must not include any amounts that are 
not alignment payments or gainsharing payments.
     Each collaborator agreement --
    ++ Between the participant hospital and a CJR collaborator must 
obligate the CJR collaborator to provide the participant hospital and 
HHS access to the CJR collaborator's records, information, and data for 
purposes of monitoring and reporting and any other lawful purpose. 
Records, information, and data regarding the sharing arrangement must 
have sufficient detail to verify compliance with all material terms of 
the sharing arrangement and the terms of the CJR model;
    ++ Must require the participant hospital and the CJR collaborator 
to include in their compliance programs specific oversight of their 
collaborator agreements and compliance with the requirements of the CJR 
model;
    ++ If the participant hospital or CJR collaborator does not have a 
compliance program, each party must create one and incorporate the 
provisions described in this part in that program; and
    ++ Must require the board or other governing body of the 
participant hospital to have responsibility for overseeing the 
participant hospital's participation in the model, its arrangements 
with CJR Collaborators, its payment of Gainsharing Payments and receipt 
of Alignment Payments, and its use of beneficiary incentives in the CJR 
model.
     Collaborator agreements must require all CJR collaborators 
to comply with any evaluation, monitoring, compliance, and enforcement 
activities performed by HHS (including CMS and OIG) and its designees 
for the purposes of operating the CJR model.
     Each collaborator agreement must require the CJR 
collaborator to permit site visits from CMS, and its designees, for 
purposes of evaluating the model.
    ``Documentation and Maintenance of Records.'' We are finalizing at 
Sec.  510.500(d) our proposal with regard to certain documentation 
requirements, and we are finalizing at new Sec.  510.500(e) our 
proposal regarding access to documents and record retention. Under 
Sec.  510.500(d), we require the following documentation:
     Documentation of any collaborator agreement containing a 
sharing arrangement must be contemporaneous with the establishment of 
the arrangement.
     A participant hospital must maintain accurate current and 
historical lists of all CJR collaborators, including their names and 
addresses. The participant hospital must update the lists on at least a 
quarterly basis and publicly report the current and historical lists of 
CJR collaborators on a public-facing Web page on the participant 
hospital's Web site.
     The participant hospital and CJR collaborator must 
maintain contemporaneous documentation of the payment or receipt of any 
gainsharing payment or alignment payment. The documentation must 
identify at least the following: The nature of the payment (gainsharing 
payment or alignment payment); the identity of the parties making and 
receiving the payment; the date of the payment; the amount of the 
payment; and the date and amount of any recoupment of all or a portion 
of a CJR collaborator's gainsharing payment.
    ++ The participant hospital must keep records of the following:
    ++ Its process for determining and verifying the eligibility of CJR 
collaborators to participate in Medicare.
    ++ Information confirming the organizational readiness of the 
participant hospital to measure and track internal cost savings.
    ++ The participant hospital's plan to track internal cost savings.
    ++ Information on the accounting systems used to track internal 
cost savings.
    ++ A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings.
    ++ The participant hospital's plan to track gainsharing payments 
and alignment payments.
    ++ Whether the participant hospital recouped any gainsharing 
payments received by a CJR collaborator that contain funds derived from 
a CMS overpayment on a reconciliation report, or were based on the 
submission of false or fraudulent data.
    ``Access to Records and Record Retention.'' Section 510.500(e) 
finalizes our proposal regarding government access to books and records 
and document retention requirements. Specifically, Sec.  510.500(e) 
requires that each participant hospital and CJR Collaborator, at a 
minimum, adhere to the following requirements:
     Provide to CMS, the OIG, and the Comptroller General or 
their designees scheduled and unscheduled access to all books, 
contracts, records, documents, and other evidence (including data 
related to utilization and payments, quality criteria, billings, lists 
of CJR collaborators, sharing arrangements, and distribution 
arrangements, and other documentation) sufficient to enable the audit, 
evaluation, inspection, or investigation of the individual's or 
entity's compliance with CJR requirements, the quality of services 
furnished, the obligation to repay any reconciliation payments owed to 
CMS, or the calculation, distribution, receipt, or recoupment of 
gainsharing payments, alignment payments, or distribution payments.
     Maintain such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the 
participant hospital's participation in the CJR model or from the date 
of completion of any audit, evaluation, inspection, or investigation, 
whichever is later, unless--
    ++ CMS determines there is a special need to retain a particular 
record or group of records for a longer period and notifies the 
participant hospital or CJR collaborator at least 30 calendar days 
before the normal disposition date; or
    ++ There has been a dispute or allegation of fraud or similar fault 
against the participant hospital or any CJR collaborator in which case 
the records must be maintained for an additional 6 years from the date 
of any resulting final resolution of the dispute or allegation of fraud 
or similar fault.
    We are finalizing without modification our proposal that OIG 
Authority is not limited or restricted by the provisions of the CJR 
model, including the authority to audit, evaluate, investigate, or 
inspect the participant hospital, CJR Collaborators, or any other 
person or entity or their records, data, or information, without 
limitation. In addition, we are finalizing without change our proposal 
that none of the provisions of the CJR model limits or restricts any 
other government authority permitted by law to audit,

[[Page 73433]]

evaluate, investigate, or inspect the participant hospital, CJR 
Collaborators, or any other person or entity or their records, data, or 
information, without limitation. These provisions are finalized atSec.  
510.510.
    ``Distribution Arrangements.'' As previously noted, we are 
finalizing our proposal with a modification to allow PGPs that are CJR 
collaborators to enter into distribution arrangements for the purposes 
of distributing all or a portion gainsharing payment with certain PGP 
members (practice collaboration agents). We note that we are not 
requiring the PGP to distribute all or a portion of a gainsharing 
payment to its member physicians and nonphysician practitioners. But 
where a PGP chooses to make such distributions, this final rule 
requires at new Sec.  510.505 that all distribution arrangements must 
comply with all applicable laws and regulations and the following 
criteria:
     All distribution arrangements must be in writing and 
signed by the PGP and practice collaboration agent.
     Participation in a distribution arrangement must be 
voluntary and without penalty for nonparticipation.
     The distribution arrangement must require the practice 
collaboration agent to comply with the requirements set forth in this 
part.
     The opportunity to receive a distribution payment must not 
be conditioned directly or indirectly on the volume or value referrals 
or business otherwise generated by, between or among a participant 
hospital, the PGP, other CJR collaborators, any practice collaboration 
agents, and any individual or entity affiliated with a participant 
hospital, CJR collaborator, or practice collaboration agent.
     Methodologies for determining distribution payments must 
not directly account for the volume or value of referrals, or business 
otherwise generated, by, between or among the participant hospital, CJR 
collaborators, other CJR collaborators, practice collaboration agents, 
and any individual or entity affiliated with a participant hospital, 
CJR collaborator, or practice collaboration agent.
     A practice collaboration agent is eligible to receive a 
distribution payment only if the PGP billed for an item or service 
furnished by the practice collaboration agent to a CJR beneficiary 
during a CJR episode that occurred during the calendar year in which 
the participating hospital accrued the internal cost savings or earned 
the reconciliation payment that comprise the gainsharing payment made 
to the PGP.
     Where a PGP receives a gainsharing payment from a 
participant hospital pursuant to a sharing arrangement, all monies 
contained in such a gainsharing payment must be shared only with the 
physician or nonphysician practitioners that are PGP members that 
furnished a service to a CJR beneficiary during an episode of care in 
the calendar year from which the NPRA, as that term is defined in 
section III.C.6. of the final rule, or internal cost savings was 
generated, either or both of which are the only permitted sources of 
funds for a gainsharing payment.
     The total amount of distribution payments for a calendar 
year paid to an individual physician or nonphysician practitioner who 
is a practice collaboration agent must not exceed a cap. The total 
amount of distribution payments for a calendar year paid to a practice 
collaboration agent must not exceed 50 percent of the total Medicare 
approved amounts under the Medicare Physician Fee Schedule (MPFS) for 
services billed by the PGP and furnished by the practice collaboration 
agent to the participant hospital's CJR beneficiaries during a CJR 
episode.
     With respect to the distribution of any gainsharing 
payment received by a PGP, the total amount of all distribution 
payments must not exceed the amount of the gainsharing payment.
     All distribution payments must be made through electronic 
funds transfers.
     The practice collaboration agents must retain their 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
     The distribution arrangement must not--
    ++ Induce a practice collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    ++ Reward the provision of items and services that are medically 
unnecessary.
     The PGP must maintain contemporaneous documentation 
regarding distribution arrangements in accordance with Sec.  
510.500(e), including the relevant written agreements, the date and 
amount of any distribution payment, the identity of each practice 
collaboration agent who received a distribution payment, and a 
description of the methodology and accounting formula for determining 
the amount of any distribution payment.
     The PGP may not enter into a distribution arrangement with 
any member of the PGP that has a collaborator agreement in effect with 
a participant hospital.
b. Beneficiary Incentives Under the CJR Model
    In the proposed rule, we stated our belief that the CJR model would 
incent participant hospitals to furnish services directly and otherwise 
coordinate services throughout the episode that lead to higher quality 
care for the beneficiary and lower episode spending. We proposed that 
one mechanism that may be useful to the participant hospital in 
achieving these goals would be the provision of certain items and 
services to the beneficiary during the episode of care. We also 
considered whether this policy on beneficiary incentives should extend 
to providers and suppliers, other than the participant hospital, that 
furnish services during the CJR episode of care. In the proposed rule, 
we stated our belief that hospitals are better suited than other 
providers and suppliers to provide beneficiary incentives. Thus, we 
proposed that participant hospitals could choose to provide certain in-
kind patient engagement incentives to the beneficiary, subject to a 
number of conditions, including the following:
     The incentive must be provided by the participant hospital 
to the beneficiary during CJR episode of care.
     There must be a reasonable connection between the item or 
service and the beneficiary's medical care.
     The item or service must be a preventive care item or 
service or an item or service that advances a clinical goal for a CJR 
beneficiary, including the following: Increasing the beneficiary's 
engagement in the management of his or her own health care; adherence 
to a treatment or drug regimen; adherence to a follow-up care plan; 
reduction of readmissions and complications resulting from LEJR 
procedures; and management of chronic diseases and conditions that may 
be affected by the LEJR procedure.
     Items of technology must comply with certain safeguards, 
as discussed later in this section.
     The participant hospital must maintain contemporaneous 
documentation of the incentives provided to beneficiaries for a period 
of 10 years.
     The cost of the incentives must not be shifted to another 
federal health care program.
    For example, under this proposal, participant hospitals could 
provide incentives such as post-surgical monitoring equipment to track 
patient weight and vital signs for post-surgical patients discharged 
directly to home, but they could not provide theater tickets, which 
would bear no reasonable connection to the patient's medical care.

[[Page 73434]]

Similarly, we proposed that participant hospitals might provide post-
surgical monitoring equipment, but not broadly used technology that is 
more valuable to the beneficiary than equipment that is reasonably 
necessary for the patient's post-surgical care. In such circumstances, 
a reasonable inference arises that the technology would not be 
reasonably connected to the medical care of the patient. Among other 
things, this safeguard precludes incentives that might serve to induce 
beneficiaries inappropriately to receive other medical care that is not 
included in the episode.
    In addition to the conditions previously noted, we proposed that 
participant hospitals would be required to maintain contemporaneous 
documentation of such items and services furnished whose value exceeds 
$10, including the date and identity of the beneficiary to whom the 
item or service was provided. We further proposed that the required 
documentation be maintained for a period of 10 years.
    We also proposed that items and services involving technology 
provided to beneficiaries may not exceed $1,000 in retail value at the 
time of donation for any one beneficiary in any one CJR episode. Items 
of technology exceeding $50 in retail value at the time of donation 
must remain the property of the participant hospital and must be 
retrieved from the beneficiary at the end of the episode, with the 
documentation of the date of retrieval. In addition, we proposed that 
the amount and nature of the technology must be the minimum necessary 
to achieve the goals previously noted earlier in this section. Finally, 
we proposed that beneficiary incentives may not be tied to the receipt 
of services outside the episode of care and that the cost of the 
incentives cannot be shifted to a federal health care program. Our 
proposals regarding beneficiary incentives are consistent with the 
policies on beneficiary incentives in other CMS models, such as the 
BPCI initiative.
    We sought comment on our proposal for beneficiary incentives under 
CJR. In addition to general comments on the proposal, we described our 
interest in comments on whether the $1000 retail value limit on 
technology items and services is necessary, reasonable, and 
appropriate. We also solicited comment on whether retrieving technology 
valued at more than $50 would be too burdensome and whether elimination 
of that requirement would prevent abuse. We also solicited comment on 
the documentation requirement for items and services furnished that 
exceed $10, or whether a different amount would be more appropriate and 
less burdensome. We welcomed comments on additional program integrity 
safeguards for these arrangements.
    We proposed to set forth the CJR beneficiary incentives policies in 
Sec.  510.505. However, in this final rule, the beneficiary incentives 
section has been renumbered to Sec.  510.515. Thus, the following 
discussion incorporates the final beneficiary incentive policies under 
the new section number.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters expressed appreciation for CMS' proposal 
to permit beneficiary incentives to be provided by participant 
hospitals. The commenters agreed that CMS should establish certain 
conditions under which beneficiary incentives would be permitted, in 
order to ensure that beneficiary incentives are used solely to advance 
the goals of the CJR model for the beneficiary's care. These commenters 
further agreed that the beneficiary incentives should only be used when 
a beneficiary was in a CJR episode.
    Several commenters expressed concern about the use of beneficiary 
incentives in a payment model such as the CJR model that commonly 
includes a substantial period of PAC services which may be furnished by 
different provider types during the episode, as opposed to the more 
traditional use of beneficiary incentives in a wellness environment 
where such incentives are related to prevention and primary care. The 
commenters urged CMS to maintain the requirement of a reasonable 
connection between the service and a beneficiary's medical care and 
that the service advance a meaningful clinical goal for the beneficiary 
under the CJR model. The commenters suggested that CMS take two further 
actions to strengthen the protections against hospitals' misuse of 
beneficiary incentives to influence the beneficiary's choice of 
providers and types of care. First, they recommended that CMS include 
strong and specific language prohibiting the formal or informal use of 
incentives as a way to steer beneficiaries toward a certain provider or 
type of services. Second, they urged CMS to additionally require that 
hospitals offer beneficiary incentives in the same way to all patients 
and that the hospital make their beneficiary incentive policy publicly 
available.
    Response: We appreciate the support of the commenters for our 
proposal to allow beneficiary incentives under certain conditions in 
the CJR model, including requirements related to advancing a clinical 
goal and use of the incentive during the episode. We wish to clarify 
that beneficiary incentives should be reasonably connected to medical 
care that is provided during an episode, which is consistent with our 
proposal that beneficiary incentives not be tied to the receipt of 
services outside the episode of care. We note that the clinical goals 
of the model that may be advanced through beneficiary incentives 
include beneficiary adherence to drug regimens, beneficiary adherence 
to a care plan, reduction of readmissions and complications resulting 
from LEJR procedures, and management of chronic diseases and conditions 
that may be affected by the LEJR procedure. We further note that this 
final rule defines an episode to include services for chronic diseases 
and conditions that may be affected by the LEJR procedure or post-
surgical care (see section III.B.2.b. of this final rule). To the 
extent that services for these chronic conditions are included in CJR 
model episodes, we believe it is appropriate to permit beneficiary 
incentives to manage these chronic diseases and conditions during the 
episode. For example, we would consider a beneficiary incentive to 
advance the clinical goals of the CJR model and to be connected to 
medical care provided to the beneficiary during the episode if the 
incentive is related to a chronic condition, such as diabetes or 
congestive heart failure, that may be affected by the LEJR procedure or 
post-surgical care and is included in the LEJR episode.
    We appreciate the concerns of some commenters about the potential 
misuse of beneficiary incentives to steer beneficiaries toward a 
certain type of provider or type of services. We believe that requiring 
beneficiary incentives to be provided only by a participant hospital 
partially reduces the likelihood that such an incentive would be used 
to steer a beneficiary toward a specific PAC provider or type of PAC 
services. We are accepting the commenters' suggestion to add a 
requirement that beneficiary incentives must not be tied to the receipt 
of items or services from a particular provider or supplier. We believe 
this requirement, which will appear at new Sec.  510.515(a)(5), will 
further reduce the potential for use of beneficiary incentives to steer 
a beneficiary toward a specific provider or supplier.
    While we agree with the commenters who recommended that we 
explicitly prohibit the use of beneficiary incentives to steer a 
beneficiary toward a certain type of provider or types of services, we 
do not believe that hospitals should be required to offer the 
incentives in the same way to all

[[Page 73435]]

beneficiaries in the model or to make their policies regarding 
beneficiary incentives publicly available. Hospitals may want to offer 
beneficiary incentives to those CJR model beneficiaries with the 
greatest need, even if CJR model beneficiaries have similar clinical 
goals. In addition, we do not believe it would be appropriate to 
require hospitals to make their policies regarding beneficiary 
incentives publicly available because, as later discussed in this 
section, we do not believe that the availability of beneficiary 
incentives should be advertised or marketed to beneficiaries.
    We believe that certain aspects of our proposal on beneficiary 
incentives will help to protect the program and beneficiaries from 
misuse of such incentives, including the requirements that only a 
hospital may provide patient incentives, that the incentives must be 
furnished during an episode of care, and that the item or service is 
either a preventive care item or service or advances a clinical goal 
for a CJR beneficiary. Accordingly, we are finalizing the conditions 
that we proposed in Sec.  510.515(a)(1) and (2), but with some 
modification. First, we wish to clarify that the items and services may 
be provided by the hospital through an agent who is under the 
hospital's direction and control. We note that if a reasonable 
beneficiary would perceive the item or service as being from the agent 
rather than the hospital, we would not consider the incentive to have 
been provided by the hospital. Second, as previously noted, we are 
clarifying in Sec.  510.515(a)(2) that the items and services must be 
reasonably connected to medical care provided to a beneficiary during 
an episode. We are separately incorporating the requirement that the 
item or service be a preventive care item or service or advance a 
clinical goal for a beneficiary in a CJR episode in new Sec.  
510.515(a)(3). In addition, we are also adding a new Sec.  
510.515(a)(4) to set forth the proposed requirement that the item or 
service must not be tied to the receipt of services outside of the 
episode of care. To clarify, our proposed requirement that the item or 
service must not be tied to the receipt of services outside of the 
episode of care should have also referred to the receipt of items 
outside of the episode of care. Thus, the new Sec.  510.515(a)(4) 
requires that the item or service must not be tied to the receipt of 
items or services outside of the episode of care.
    Comment: Some commenters recognized that beneficiary incentives 
have potential value to model beneficiaries, especially the use of new 
technology that will help beneficiaries better monitor their health. 
However, they pointed out that the incentives could be a financial 
burden on hospitals when model beneficiaries can choose any provider 
for their care. They added that beneficiary incentives would lead to a 
cost to the hospital, with no guarantee of quality improvement. The 
commenters expressed concerns that small benefits due to beneficiary 
incentives would be outweighed by their costs to hospitals and the 
additional cost to CMS of monitoring their use.
    Response: We recognize that the provision of beneficiary incentives 
may create some additional costs and administrative burden for 
participant hospitals. However, we believe that it is important to 
provide participant hospitals with the option to furnish beneficiary 
incentives in a manner that will not result in patient steering or 
other abuse. The participant hospitals are not required to offer 
beneficiary incentives. Thus, hospitals are free to determine whether 
it will be useful or feasible to provide beneficiary incentives in 
accordance with the terms of this final rule.
    Comment: Several commenters recommended that CMS not permit 
marketing of beneficiary incentives, similar to the existing 
requirements for beneficiary incentives in Medicare Advantage plans. 
The commenters stated that this additional condition would provide 
further protection against the potential for beneficiary incentives 
being used to steer beneficiaries to certain providers.
    Response: We agree that beneficiary incentives should not be 
marketed to beneficiaries, because this could unduly influence their 
selection of a provider or type of service. As discussed previously, we 
are incorporating the requirement that beneficiary incentives must not 
be tied to the receipt of items or services from a particular provider 
or supplier. We believe it would be difficult to meet this requirement 
if the availability of the items or services was advertised or promoted 
except in the case where a CJR beneficiary is only made aware of the 
availability of the items or services at the time the beneficiary could 
reasonably benefit from them. For example, when a participant hospital 
initiates post-discharge planning for a CJR beneficiary with a chronic 
health condition, the participant hospital could discuss providing the 
beneficiary with an electronic tablet for home use to track certain 
measurements and health information and to transmit this information 
periodically to the beneficiary's physician to aid in post-operative 
recovery and management of the chronic health condition. We are 
including this condition in new Sec.  510.515(a)(6).
    Comment: Many commenters opposed the proposed requirements that 
hospitals maintain contemporaneous documentation of beneficiary 
incentive items and services whose value exceeds $10. The commenters 
recommended that CMS increase the threshold to $50, $100, or a higher 
value in order to minimize unnecessary administrative burden. Some 
commenters also suggested that CMS exempt beneficiary incentives from 
the 10-year documentation requirement to further reduce burden.
    Response: We appreciate the perspectives of the commenters on our 
proposed requirements for contemporaneous documentation of all 
beneficiary incentive items and services furnished whose value exceeds 
$10, including the date and the identity of the beneficiary to whom the 
item or service was provided. We note that, like the $1,000 limit for 
beneficiary incentives involving technology items and services, our 
proposed documentation threshold of $10 was intended to represent the 
retail value of the item or service. We proposed a $10 retail value 
threshold for documentation because we recognized that a beneficiary 
could receive many incentives that are each of low dollar value but in 
the aggregate constitute an excessively high value to the beneficiary. 
We believe is important to maintain the documentation threshold at a 
modest level for all beneficiary incentives in order to monitor 
compliance with the requirements for providing these items and 
services. We believed that the $10 threshold represented an appropriate 
balance between the benefits of beneficiary incentives and burden of 
the documentation requirement.
    The commenters did not provide specific examples of items and 
services that would be commonly furnished as beneficiary incentives 
such that the cumulative documentation burden on the hospital for CJR 
model beneficiaries would outweigh the potential benefit to the 
beneficiary of the item or services. However, after considering the 
comments, we believe a higher retail value threshold of $25 would 
strike the appropriate balance between beneficiary and program 
protections and participant hospital administrative burden. This higher 
threshold will eliminate the documentation burden for some beneficiary 
incentives. Therefore, at Sec.  510.515(c)(1), we are finalizing our 
proposed requirement that participant

[[Page 73436]]

hospitals must maintain a contemporaneous list of items and services 
furnished as beneficiary incentives, including the date the incentive 
was provided and the identity of the beneficiary to whom it was 
provided. We specify in that section that this obligation applies only 
to incentives that exceed $25 in retail value. Under new Sec.  
510.515(c)(2), we set forth the requirement that the participant 
hospital must retain the required documentation in accordance with new 
Sec.  510.515(e), which we have added to establish our proposed 
documentation and maintenance of records provision for beneficiary 
incentives.
    We recognize that the 10-year retention requirement imposes some 
administrative burden, but we note that such a 10-year requirement is 
commonly used in Medicare. We do not believe it would be appropriate to 
reduce that document retention period for beneficiary incentives 
furnished under this model.
    Comment: Several commenters provided their perspectives on the 
proposed $50 retail value threshold for items of technology that must 
remain the property of the participant hospital and be retrieved at the 
end of the episode. Some commenters recommended that CMS increase this 
threshold to $100 or $500. Many commenters expressed particular concern 
about the proposed requirement to retrieve technology from a 
beneficiary following the end of the episode because they believed it 
could be impossible to locate some beneficiaries and/or retrieve the 
technology from them in some cases. These commenters requested that CMS 
waive this requirement for hospital demonstration of a good faith 
effort to retrieve the technology. A number of commenters requested 
that CMS eliminate the requirement to maintain documentation of the 
date of retrieval. The commenters generally expressed concerns about 
the legal, compliance, documentation, and administrative resources 
associated with the proposed requirements for items of technology 
provided as beneficiary incentives. While no commenters objected to the 
proposed retail value limit of $1,000 on items and services of 
technology, a commenter questioned the meaning of this limit. The 
commenter inquired whether a hospital could be paid by CMS for the 
incentive and questioned the use of the term ``donate'' in the proposed 
rule in the discussion of the ``retail value at the time of donation'' 
of items involving technology.
    Response: The commenters did not provide specific information about 
the types of technology that they believe should remain the property of 
the beneficiary at the end of episode. However, we believe that a 
higher threshold than the one we proposed for items of technology that 
must remain the property of the participant hospital may result in 
useful beneficiary incentives that, in light of other regulatory 
safeguards, would not pose an undue risk of patient steering or other 
abuse. One important safeguard is the inability of a hospital to 
advertise or promote the availability of the technology. In addition, 
we are finalizing our proposed safeguard requiring that items and 
services involving technology must be the minimum necessary to advance 
a clinical goal for a CJR beneficiary (as defined in Sec.  510.515(b)). 
We note that we are finalizing the term ``advance a clinical goal'' in 
this provision, rather than our proposed language (``achieve a clinical 
goal''), for consistency with Sec.  510.515(b), which identifies the 
clinical goals that may be ``advanced'' through beneficiary incentives. 
Accordingly, in light of these safeguards, we believe it is appropriate 
to raise the technology retrieval threshold to a retail value of $100 
which, for example, would allow some types of electronic tablets that 
could be furnished to a beneficiary for health monitoring during a CJR 
model episode to remain the property of the beneficiary following the 
end of the episode.
    We understand the administrative burden on hospitals that tracking 
and retrieval requires, but believe that a higher retrieval threshold 
is not warranted. For example, given that the majority of CJR episodes 
will be elective THA or TKA procedures, we believe it would be 
inappropriate for participant hospitals to furnish items of technology 
with a retail value of over $100 for beneficiaries' permanent use 
because the high value of these items could unduly influence the 
beneficiary to receive services from the hospital, particularly 
services outside of the CJR episode of care. We do not believe the 
administrative burden of retrieving items involving technology with a 
retail value in excess of $100 outweighs the program integrity benefits 
of retrieval. Therefore, we are finalizing Sec.  510.515(d)(3) to 
reflect the $100 retail value threshold for retrieval of items of 
technology.
    We decline to exempt items of technology and their retrieval date 
from the documentation requirements. We believe that documentation is 
important to ensure that the provision of items of technology is in 
compliance with program requirements and is not used by a participant 
hospital to steer beneficiaries toward one provider or type of service 
or to engage in other abusive conduct. We stress that hospitals must 
carefully and completely document all of their attempts to retrieve 
from a beneficiary at the end of an episode items of technology whose 
retail value exceeds $100, regardless of whether the hospital is 
ultimately successful in retrieving the technology. Documented, 
diligent, good faith attempts to retrieve items of technology will be 
deemed to meet the retrieval requirement. These policies are set forth 
in Sec.  510.515(d)(3)(ii).
    Hospitals will not be reimbursed by CMS for the cost of items and 
services furnished to CJR model beneficiaries as beneficiary 
incentives. Participant hospitals may choose to provide in-kind patient 
engagement incentives to beneficiaries in CJR model episodes in 
accordance with the CJR regulations. Items and services of technology 
furnished as beneficiary incentives may not exceed $1,000 in retail 
value at the time they are furnished to any one beneficiary in a single 
CJR model episode.
    Finally, we acknowledge that, in light of our proposal to require 
retrieval of certain items of technology, our use of the word 
``donate'' was imprecise. We intended to refer to the retail value of 
technology at this time it was ``furnished'' to a model beneficiary.
    Comment: Several commenters recommended that CMS allow other types 
of beneficiary incentives, including waivers of Part B coinsurance 
amounts and opportunities for participant hospitals to share 
reconciliation payments with model beneficiaries when actual episode 
spending is less than the target price.
    Response: We appreciate these suggestions for additional 
beneficiary incentives. However, we are limiting our policies to the 
incentives as proposed and subsequently modified and finalized in this 
final rule. We do not believe that waivers of the Part B coinsurance 
amounts are necessary for the model test to advance clinical goals for 
model beneficiaries in view of the typical services furnished to 
beneficiaries in LEJR episodes and the aggregate modest associated 
coinsurance amounts. We also do not believe that sharing savings would 
be appropriate as such a policy could unduly influence a beneficiary's 
choice of types of care.
    Comment: Several commenters recommended that CMS or the OIG should 
establish a dedicated email address or other communication portal

[[Page 73437]]

for questions about beneficiary incentives, so that participant 
hospitals could receive informal compliance advice in order to ensure 
that their use of beneficiary incentives in the CJR model meets the 
required conditions. Other commenters requested specific guidance on 
certain items with respect to the beneficiary incentives conditions, 
including post-surgical intermittent pneumatic compression devices, the 
determination of retail prices, supportive services that are in short 
supply or inadequate such as hot meal delivery, home preparation for a 
beneficiary who left home urgently, or enhanced homemaker or personal 
care aide services.
    Response: We appreciate the interest of the commenters in 
understanding the conditions under which beneficiary incentives can be 
furnished under the CJR model. We believe that this final rule provides 
sufficient guidance on the requirements for beneficiary incentives 
under the model. Only beneficiary incentives that meet all of these 
requirements are permitted under this model. We will not provide 
informal compliance advice or provide additional advisory information 
about specific items or services or other definitions and terms in this 
final rule. Participant hospitals should review the regulations for the 
conditions and requirements to make sure their plans for beneficiary 
incentives comply with all of the requirements and conditions set forth 
in this final rule and any other applicable law. Any guidance from OIG 
regarding its authorities would be provided outside the scope of this 
rulemaking.
    Comment: Several commenters recommended that CMS prohibit hospitals 
from shifting the cost of the incentives to government programs 
generally, including state health care programs, not only federal 
health care programs. Other commenters suggested that CMS further 
extend the cost-shifting prohibition to commercial programs.
    Response: We intend to prohibit cost shifting to a ``Federal health 
care program,'' as defined at 42 U.S.C. 1320a-7b(f) (section 1128-7b(f) 
of the Act), which encompasses the following broad array of government 
health care programs:
     Any plan or program that provides health benefits, whether 
directly, through insurance, or otherwise, which is funded directly, in 
whole or in part, by the United States Government (other than the 
health insurance program under chapter 89 of title 5, United States 
Code [5 U.S.C. 8901 et seq.]); or
     Any state health care program, as defined in section 
1128(h) [42 U.S.C. 1320a-7(h)], which includes the following:
     A state plan approved under title XIX [42 U.S.C. 1396 et 
seq.].
     Any program receiving funds under title V [42 U.S.C. 701 
et seq.] or from an allotment to a state under such title.
     Any program receiving funds under subtitle 1 of title XX 
[42 U.S.C. 1397 et seq.] or from an allotment to a State under such 
subtitle.
     A state child health plan approved under title XXI [42 
U.S.C. 1397aa et seq.].
    We do not believe it would be appropriate to expand this cost-
shifting prohibition to other government programs generally or to 
commercial programs. We question whether we have the authority to 
expand the cost-shifting prohibition to commercial payers. Moreover, we 
believe it would be very difficult to enforce such a provision in a 
meaningful manner.
    We are finalizing this proposed condition in Sec.  510.515(a)(7).
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal for beneficiary incentives 
under the CJR model, with certain modifications. We are clarifying at 
Sec.  510.515(a)(1) that the items and services may be provided by the 
hospital through an agent who is under the hospital's direction and 
control. We note that if a reasonable beneficiary would perceive the 
item or service as being from the agent rather than the hospital, we 
would not consider the incentive to have been provided by the hospital. 
As previously noted, we are clarifying in Sec.  510.515(a)(2) that the 
items and services must be reasonably connected to medical care 
provided to a beneficiary ``during an episode.'' We are separately 
incorporating at Sec.  510.515(a)(3) the proposed requirement that the 
item or service be a preventive care item or service or advance a 
clinical goal for a beneficiary in a CJR episode. In addition, we are 
also adding a new paragraph(a)(4) at Sec.  510.515 to set forth the 
proposed requirement that the item or service must not be tied to the 
receipt of items or services outside of the episode of care. At the 
suggestion of the commenters, we are adding new provisions to require 
that--(1) The item or service may not be tied to receipt of items or 
services from a particular provider or supplier; and (2) the 
availability of the items or services must not be advertised or 
promoted, except that a beneficiary may be made aware of the 
availability of the items or services at the time the beneficiary could 
reasonably benefit from them. These conditions appear at Sec.  
510.515(a)(5) and (6). We are finalizing the proposed requirement in 
Sec.  510.515(a)(7) that the cost of the items or services must not be 
shifted to another federal health care program.
    We are also finalizing Sec.  510.515(b) regarding the goals of the 
CJR model. We note that Sec.  510.515(b)(2) is being finalized with 
modification to avoid redundancy. The provision will refer to 
beneficiary adherence to ``a care plan,'' rather than ``a follow-up 
care plan or care,'' since a care plan would include follow up and 
other care. In addition, we are finalizing the proposed documentation 
requirement for beneficiary incentives with certain changes; it will 
apply only to those items and services furnished as beneficiary 
incentives whose retail value exceeds $25, and it requires 
contemporaneous documentation to be retained for 10 years. As no 
commenters objected to the proposed limit of $1,000 in retail value for 
items and services involving technology provided to any one beneficiary 
in any one CJR episode, we are finalizing this requirement under Sec.  
510.515(d)(1). We are also finalizing in revised Sec.  510.515(d)(2) 
the proposed condition that the items or services involving technology 
provided to a beneficiary must be the minimum necessary to advance a 
clinical goal for a CJR beneficiary. Moreover, we are modifying the 
requirement that items of technology furnished as beneficiary 
incentives remain the property of the participant hospital and be 
retrieved from the beneficiary at the end of the model to apply only to 
those items of technology that exceed $100 in retail value, and 
finalizing these requirements under Sec.  510.515(d)(3) and paragraph 
(d)(3)(i). Under Sec.  510.515(d)(3)(ii), documented, diligent, good 
faith attempts to retrieve items of technology will be deemed to meet 
the retrieval requirement. Finally, we are adding new Sec.  510.515(e) 
to establish the proposed documentation and record retention provision 
for beneficiary incentives furnished under the CJR model.
    The final beneficiary incentive policies are set forth in Sec.  
510.515.
11. Waivers of Medicare Program Rules
a. Overview
    In the proposed rule, we stated our belief that it may be necessary 
and appropriate to provide additional flexibilities to hospitals 
participating in CJR, as well as other providers that furnish services 
to beneficiaries in CJR episodes. The purpose of such flexibilities 
would be to increase LEJR episode quality and decrease episode

[[Page 73438]]

spending or provider and supplier internal costs, or both, and to 
provide better, more coordinated care for beneficiaries and improved 
financial efficiencies for Medicare, providers, and beneficiaries. 
These possible additional flexibilities could include use of our waiver 
authority under section 1115A of the Act, which provides authority for 
the Secretary to waive such requirements of title XVIII of the Act as 
may be necessary solely for purposes of carrying out section 1115A of 
the Act with respect to testing models described in section 1115A(b) of 
the Act. This provision affords broad authority for the Secretary to 
waive statutory Medicare program requirements as necessary to carry out 
the provisions of section 1115A of the Act.
    As we have stated elsewhere in sections I.A. and III.A.3 of this 
final rule, our previous and current efforts in testing episode payment 
models have led us to believe that models where entities bear financial 
responsibility for total Medicare spending for episodes of care hold 
the potential to incentivize the most substantial improvements in 
episode quality and efficiency. As discussed in section III.C. of this 
final rule, we proposed that hospitals participating in this model be 
eligible for reconciliation payments based on improved performance 
starting in performance year 1, and we would phase-in repayment 
responsibility for excess episode spending starting in performance year 
2. In the proposed rule, we stated our belief that where participant 
hospitals bear repayment responsibility for excess episode spending 
that surpasses the target price while high quality care is valued, they 
will have an increased incentive to coordinate care furnished by the 
hospital and other providers and suppliers throughout the episode to 
improve the quality and efficiency of care. With these incentives 
present, there may be a reduced likelihood of over-utilization of 
services that could otherwise result from waivers of Medicare program 
rules. Given these circumstances, waivers of certain program rules for 
providers and suppliers furnishing services to CJR beneficiaries may be 
appropriate to offer more flexibility than under existing Medicare 
rules for such providers and suppliers, so that they may provide 
appropriate, efficient care for beneficiaries. An example of such a 
program rule that could be waived to potentially allow more efficient 
LEJR episode care would be the 3-day inpatient hospital stay 
requirement prior to a covered SNF stay for beneficiaries who could 
appropriately be discharged to a SNF after less than a 3-day inpatient 
hospital stay.
    In addition, in the proposed rule we stated our belief that waivers 
of certain Medicare program rules are necessary to make reconciliation 
payments to or recoup payments from participant hospitals as a result 
of the NPRA for each performance year as discussed in section 
III.C.6.a. of this final rule, as well as to exclude beneficiary cost-
sharing from these reconciliation payments or repayments.
    We welcomed comments on possible waivers under section 1115A of the 
Act of certain Medicare program rules that surpass those specifically 
discussed in the proposed rule that might be necessary to test this 
model. In the proposed rule, we stated that we would consider the 
comments that are received during the public comment period and our 
early model implementation experience and may make future proposals 
regarding program rule waivers during the course of the model test. We 
noted that we were especially interested in comments explaining how 
such waivers could provide providers and suppliers with additional ways 
to increase quality of care and reduce unnecessary episode spending, 
but that could be appropriately used in the context of CJR where 
participant hospitals bear full responsibility for total episode 
spending by performance year 3. We were also interested in receiving 
comments regarding the timing and manner in which such waivers, were 
they to be offered, would be implemented. For example, would it be 
necessary and appropriate to offer program waivers early in the model 
to allow providers and suppliers adequate time to adjust their care 
coordination strategies to implement changes permitted by the waivers, 
despite there being no full repayment responsibility for excess episode 
spending until performance year 3? What program integrity and 
beneficiary protection risks could be introduced by waivers of the 
program rules described later in this section of this final rule and 
how could we mitigate those risks? What other issues should be 
considered when making use of waiver authority with respect to program 
rules? What operational issues do CMS and providers and suppliers 
furnishing services to beneficiaries in the model need to consider and 
what processes would need to be in place to implement these alternative 
program policies? What implications would there be for provider and 
supplier infrastructure, including IT and other systems and processes? 
What provider education would be needed? We noted that any waivers 
included in a final rule would be offered to participant hospitals, but 
depending on the specifics of each waiver, might be applied to services 
furnished by providers and suppliers other than the hospital. Where 
that is the case, we sought input on how we may best educate and 
disseminate information using methods effective in reaching providers 
and suppliers. Additionally, we sought comment on how we would 
appropriately and accurately track the use of waivers by providers and 
suppliers other than participant hospitals.
    Specific program rules for which we proposed waivers under the CJR 
model to support provider and supplier efforts to increase quality and 
decrease episode spending and for which we invited comments are 
included in the sections that follow. We proposed that these waivers of 
program rules would apply to the care of beneficiaries who are in CJR 
episodes at the time a service is furnished to a beneficiary under a 
waiver, even if the episode is later canceled as described in section 
III.B.3.b of this final rule. If a service is found to have been billed 
and paid by Medicare under circumstances only allowed by a program rule 
waiver for a beneficiary not in the CJR model at the time a service 
under a waiver was furnished, CMS would recoup payment for that service 
from the provider or supplier who was paid, and require that provider 
or supplier to repay the beneficiary for any coinsurance previously 
collected.
    The following is a summary of the comments received and our 
response.
    Comment: Many commenters commended CMS for proposing that the 
waivers of Medicare program rules would apply to the care of 
beneficiaries who are in CJR episodes at the time a service is 
furnished to a beneficiary under a waiver, even if the episode is later 
canceled. The commenters believe that CMS addressed an important 
ambiguity that exists in the use of similar waivers under BPCI, given 
that both BPCI and the proposed CJR model are retrospective payment 
models where payment is made to Medicare providers and suppliers 
throughout the episode. Several commenters requested clarification of 
the proposal regarding its applicability to beneficiaries whose change 
in coverage at some point in the episode following provision of a 
service under a waiver leads to the beneficiary's care ultimately being 
excluded from the model. They provided examples such as a beneficiary 
who enrolled in a Medicare Advantage plan or whose Medicare eligibility 
changed to the ESRD benefit at some point during an

[[Page 73439]]

episode after a service permitted by a CJR model program rule waiver 
was furnished. These commenters argued that CMS should treat situations 
of changes in coverage that exclude beneficiaries' care from the CJR 
model the same as CMS proposed to treat episode cancellations. That is, 
the commenters recommended that the waivers should apply to the care of 
beneficiaries who are in CJR episodes at the time a service is 
furnished to a beneficiary under the waiver, even if the beneficiary's 
care is later excluded from the model due to a change in the 
beneficiary's coverage during the episode.
    Response: We agree with the commenters that it would be appropriate 
to treat the applicability of program rule waivers to beneficiaries 
whose care is later excluded from the model due to changes in 
beneficiary coverage in the same way as we proposed to treat episode 
cancellations, because based on beneficiary coverage at the time 
services are furnished under the waiver, the beneficiary's care was 
included in the model. The ultimate exclusion of the beneficiary's care 
from the model would not be decided until a later point in the episode 
when a change in the beneficiary's coverage would result in 
cancellation of the episode. As discussed in the proposed rule in 
regard to episode cancellation, we believe it would be appropriate to 
cancel the episode when a beneficiary's status changes during the 
episode such that they no longer meet the criteria for inclusion. 
Therefore, if a beneficiary's coverage or circumstances change during 
the episode such that they no longer meet the criteria for inclusion, 
as would occur in the examples provided by the commenters, the episode 
would be canceled. Thus, under our proposal, waivers of Medicare 
program rules would apply to the care of beneficiaries who are in CJR 
episodes at the time a service is furnished to a beneficiary under a 
waiver even if the episode is later canceled, which includes 
circumstances where the beneficiary's care is ultimately excluded from 
the CJR model due to a change in the beneficiary's coverage during the 
episode. We believe it is important to structure the CJR Medicare 
program rule waivers in this way so that later episode cancellations 
that could not be known or anticipated by providers or beneficiaries at 
the time services are furnished under a waiver, would not result in 
unexpected provider or beneficiary financial liability.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, without modification, that 
waivers of Medicare program rules would apply to the care of 
beneficiaries who are in CJR model episodes at the time the service is 
furnished to the beneficiary under the waiver, even if the episode is 
later canceled. This policy would include circumstances where a 
beneficiary's care is ultimately excluded from the CJR model due to a 
change in the beneficiary's coverage during the episode. As discussed 
in the proposed rule, if a service is found to have been billed and 
paid by Medicare under circumstances only allowed by a program rule 
waiver for a beneficiary not in the CJR model at the time a service 
under a waiver was furnished, CMS will recoup payment for that service 
from the provider or supplier who was paid. However, for this situation 
we are not finalizing our proposal to require that providers or 
suppliers repay the beneficiary for any coinsurance previously 
collected. We may consider other approaches to handling these types of 
issues in the future.
    In the proposed rule, we also generally sought comment on any 
additional Medicare program rules that it may be necessary to waive 
using our authority under section 1115A of the Act in order to 
effectively test the CJR model that we could consider in the context of 
our early model implementation experience to inform any future 
proposals we may make.
    The following is a summary of the comments received and our 
response.
    Comment: Many commenters requested that CMS consider additional 
program rule waivers for the CJR model that surpass those specifically 
proposed for the model. The commenters provided information about how 
those waivers could be used to enhance the efficiency and quality of 
care for CJR model beneficiaries, allowing the widest variety of 
interested and well-prepared providers and suppliers to partner with 
hospitals in care redesign for LEJR episodes. Some suggested waivers 
were specific to payment, such as providing ``per diem'' payment for 
IRFs, changing payment under the IPPS PAC transfer policy, and 
eliminating the Part B therapy caps. Several commenters recommended 
that CMS waive the Part B copayments for CJR model beneficiaries. 
Requests for waivers specific to the rules governing certain types of 
providers and suppliers included waivers of the IRF 60-percent rule and 
3-hour therapy rule that specifies the particular models of therapy 
permitted, waiver of the physician supervision rules for certified 
registered nurse anesthetists, and waiver of the requirement for 
physicians to certify home health services to allow NPPs to perform 
this task. Waivers of CMS review policies for CJR collaborators were 
requested by some commenters, including waivers of manual medical 
review policies and prepayment and postpayment reviews. Many commenters 
requested waivers of the hospital discharge planning requirements in 
order to allow hospitals to share lists of only those PAC providers 
collaborating on the model with the participant hospital, as well as 
waivers to allow home health providers to furnish pre-surgical 
counseling and visits and to assist with discharge planning and care 
transitions for beneficiaries. Finally, several commenters suggested 
that CMS provide very general waivers that would waive all policies 
that may impact a PAC provider's ability to admit a CJR beneficiary or 
be paid for services furnished to them or, even more broadly, waivers 
of all the relevant regulations that impede the ability of hospitals to 
effectively coordinate and manage a patient's care.
    Response: We appreciate the information provided by the commenters 
and, as discussed in the proposed rule, we will consider the comments 
we received during the public comment period and our early model 
implementation experience and may make future proposals regarding 
program rule waivers during the course of the model test.
    We refer readers to section III.F.2. of this final rule for a 
discussion of the discharge planning requirements under the CJR model.
    Final Decision: We address the Medicare programmatic waivers we 
proposed in the proposed rule in the following sections. We decline at 
this time to waive any additional Medicare programmatic requirements. 
We will review the information provided by the commenters and our early 
model experience and may consider waiving additional requirements 
during the course of the model test.
b. Post-Discharge Home Visits
    In the proposed rule, we stated our expectation that the broadly 
defined LEJR episodes with duration of 90 days following hospital 
discharge as we proposed in section III.B. of this final rule would 
result in participant hospitals redesigning care by increasing care 
coordination and management of beneficiaries following surgery. This 
would require participant hospitals to pay close attention to any 
underlying medical conditions that could be affected by the anchor 
hospitalization

[[Page 73440]]

and improving coordination of care across care settings and providers. 
Beneficiaries may have substantial mobility limitations during LEJR 
episodes following discharge to their home or place of residence that 
may interfere with their ability to travel easily to physicians' 
offices or other health care settings. Adopting new strategies to 
increase beneficiary adherence to and engagement with recommended 
treatment and follow-up care following discharge from the hospital or 
PAC setting would also be important to high quality episode care. 
Scientific evidence exists \48\ to support the use of home nursing 
visits among Medicare beneficiaries in improving care coordination 
following hospital discharge. In addition, in the proposed rule, we 
stated our belief that the financial incentives in this episode payment 
model would encourage hospitals to closely examine the most appropriate 
PAC settings for beneficiaries so that the clinically appropriate 
setting of the lowest acuity is recommended following discharge from 
the anchor hospitalization. We discussed our expectation that all these 
considerations would lead to greater interest on the part of hospitals 
and other providers and suppliers caring for CJR beneficiaries in 
furnishing services to beneficiaries in their home or place of 
residence. Such services could include visits by licensed clinicians 
other than physicians and nonphysician practitioners.
---------------------------------------------------------------------------

    \48\ Naylor MD, Brooten D, Campbell R, Jacobsen BS, Mezey MD, 
Pauly MV, Schwartz JS. Comprehensive discharge planning and home 
follow up of hospitalized elders: A randomized clinical trial. JAMA. 
1999: 281(7): 613 620. doi:10/1001/jama.281.7.6136.
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    In order for Medicare to pay for home health services, a 
beneficiary must be determined to be ``home-bound''. Specifically, 
sections 1835(a) and 1814(a) of the Act require that a physician 
certify (and recertify) that in the case of home health services under 
the Medicare home health benefit, such services are or were required 
because the individual is or was ``confined to the home'' and needs or 
needed skilled nursing care on an intermittent basis, or physical or 
speech therapy or has or had a continuing need for occupational 
therapy. A beneficiary is considered to be confined to the home if the 
beneficiary has a condition, due to an illness or injury, that 
restricts his or her ability to leave home except with the assistance 
of another individual or the aid of a supportive device (that is, 
crutches, a cane, a wheelchair or a walker) or if the beneficiary has a 
condition such that leaving his or her home is medically 
contraindicated. While a beneficiary does not have to be bedridden to 
be considered confined to the home, the condition of the beneficiary 
must be such that there exists a normal inability to leave home and 
leaving home requires a considerable and taxing effort by the 
beneficiary. Absent this condition, it would be expected that the 
beneficiary could typically get the same services in an outpatient or 
other setting. Thus, the homebound requirement provides a way to help 
differentiate between patients that require medical care at home versus 
patients who could more appropriately receive care in a less costly 
outpatient setting. Additional information regarding the homebound 
requirement is available in the Medicare Benefit Manual (Pub 100-02); 
Chapter 7, ``Home Health Services'' Section 30.1.1, ``Patient Confined 
to the Home''.
    We considered whether a waiver of the homebound requirement would 
be appropriate under the CJR model, particularly beginning in 
performance year 2, where hospitals begin to bear repayment 
responsibility for excess episode spending. Waiving the homebound 
requirement would allow additional beneficiaries to receive home health 
care services in their home or place of residence. As previously 
discussed, physician certification that a beneficiary meets the 
homebound requirement is a prerequisite for Medicare coverage of home 
health services, and waiving the homebound requirement could result in 
lower episode spending in some instances. For example, if a beneficiary 
is allowed to have home health care visits, even if the beneficiary is 
not considered homebound, the beneficiary may avoid a hospital 
readmission. All other requirements for the Medicare home health 
benefit would remain unchanged. Thus, under such a waiver, only 
beneficiaries who otherwise meet all program requirements to receive 
home health services would be eligible for coverage of home health 
services without being homebound.
    However, we did not propose to waive the homebound requirement 
under CJR for several reasons. Based on the typical clinical course of 
beneficiaries after LEJR procedures, we stated our belief that many 
beneficiaries would meet the homebound requirement for home health 
services immediately following discharge from the anchor 
hospitalization or following discharge to their home or place of 
residence from a SNF that furnished PAC services immediately following 
the hospital discharge, so they could receive medically necessary home 
health services under existing program rules. Home health episodes are 
60 days in duration, and payment adjustments are made for beneficiaries 
who require only a few visits during the home health episode or who are 
discharged during the home health episode. For those CJR beneficiaries 
who could benefit from home visits by a licensed clinician for purposes 
of assessment and monitoring of their clinical condition, care 
coordination, and improving adherence with treatment but who are not 
homebound, we did not believe that paying for these visits as home 
health services under Medicare is necessary or appropriate, especially 
given that Medicare payments for home health services are set based on 
the clinical care furnished to beneficiaries who are truly homebound. 
Finally, in other CMS episode payment models, such as BPCI, we have not 
waived the homebound requirement for home health services.
    The following is a summary of the comments received and our 
response.
    Comment: Several commenters requested that CMS waive the homebound 
requirement for the entire 90-day period of time included in the LEJR 
episode following discharge from the anchor hospitalization. They 
recommended that such a waiver would allow home health services to be 
furnished whenever medically necessary throughout the entire length of 
the CJR model episode, leading to improvements in continuity and care 
coordination and serving as a natural extension of home health care 
furnished by a HHA that many beneficiaries would likely receive when 
homebound at an earlier time in the episode.
    Response: While we appreciate the commenters' requests that we 
waive the homebound requirement for home health services, we disagree 
that waiving the homebound requirement is necessary for the test of the 
CJR model. As discussed in the proposed rule, we proposed to waive the 
``incident to'' direct physician supervision requirement for post-
discharge home visits in order to allow clinical staff to furnish post-
discharge home visits to CJR model beneficiaries who do not meet the 
requirements for home health services. We believe that this would allow 
the home visits for non-homebound CJR model beneficiaries that we 
believe are necessary for testing the model. As we discussed in the 
proposed rule, we believe many CJR beneficiaries should qualify for 
home health services under the existing program rules, especially 
immediately after discharge from the hospital or discharge from an 
institutional setting such as a SNF to their residence.

[[Page 73441]]

Furthermore, as a retrospective payment model, all providers and 
suppliers are paid for services furnished to model beneficiaries at 
their usual rates, and program payments for home health services are 
set based on the needs of Medicare beneficiaries who are truly 
homebound. The resources required to care for homebound beneficiaries 
in the home are likely greater than those required for CJR 
beneficiaries who are not homebound. Therefore, waiving the homebound 
requirement would lead to inappropriate payment for post-discharge home 
visits to CJR model beneficiaries and could result in increased CJR 
episode actual spending, which is counter to the goals of the CJR 
model.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, without modification, to 
maintain the existing Medicare requirements for home health services, 
including the requirement that the beneficiary be homebound, when home 
health services are furnished to CJR model beneficiaries.
    In the proposed rule, we noted that in BPCI, we have provided a 
waiver of the ``incident to'' direct physician supervision requirement 
in order to allow a physician or NPP participating in care redesign 
under a participating BPCI provider to bill for services furnished to a 
beneficiary who does not qualify for Medicare coverage of home health 
services as set forth under Sec.  409.42 where the services are 
furnished in the beneficiary's home during the episode after the 
beneficiary's discharge from an acute care hospital. The ``incident 
to'' direct physician supervision requirement is set forth at Sec.  
410.26(b)(5), in which services and supplies furnished ``incident to'' 
the service of a physician or other practitioner must be provided under 
the direct supervision (as defined at Sec.  410.32(b)(3)(ii)) of a 
physician or other practitioner.
    In BPCI, the waiver is available only for services that are 
furnished by licensed clinical staff under the general supervision (as 
defined at Sec.  410.32(b)(3)(i)) of a physician (or other 
practitioner), as long as the individual is an employee, leased 
employee, or independent contractor of the physician (or other 
practitioner), or of the same entity that employs or contracts with the 
physician (or other practitioner), and while the services may be 
furnished by licensed clinical staff they must be billed by the 
physician (or other practitioner) in accordance with CMS instructions 
using a HCPCS G-code created by CMS specifically for the BPCI 
initiative. As discussed in section III.B. of this final rule, 
participants in the BPCI initiative are permitted to select the 
duration of an episode as 30 days, 60 days or 90 days. In the case of 
the ``incident to'' direct physician supervision waiver under BPCI, the 
waiver allows physicians and NPPs to furnish the services not more than 
once in a 30-day episode, not more than twice in a 60-day episode, and 
not more than three times in a 90-day episode. All other Medicare 
coverage and payment criteria must be met.
    For the CJR model, we proposed to waive the ``incident to'' direct 
physician supervision requirement set forth at Sec.  410.26(b)(5), to 
allow a CJR beneficiary who does not qualify for home health services 
to receive post-discharge visits in his or her home or place of 
residence any time during the episode. The waiver would not apply for 
beneficiaries who would qualify for home health services under the 
Medicare program, as set forth under Sec.  409.42. Therefore these 
visits could not be billed for such beneficiaries. We proposed to allow 
licensed clinicians, such as nurses, either employed by a hospital or 
not, to furnish the service under the general supervision of a 
physician, who may be either an employee or a contractor of the 
hospital. We proposed to allow services furnished under such a waiver 
to be billed under the MPFS by the physician or NPP or by the hospital 
to which the supervising physician has reassigned his or her benefits. 
In the latter scenario, we noted that the post-discharge home visit 
services would not be ``hospital services,'' even when furnished by 
clinical staff of the hospital. While we used the term ``licensed 
clinicians'' in the proposed rule to describe the personnel furnishing 
a post-discharge home visit to CJR model beneficiaries, for purposes of 
consistency with correct coding guidelines, hereinafter we will instead 
use the term ``clinical staff'' as it is defined in the CPT coding 
guidelines. Specifically, in the ``CPT Coding Guidelines, Introduction, 
Instructions for Use of the CPT Codebook'' it says, a ``clinical staff 
member is a person who works under the supervision of a physician or 
other qualified health care professional, and who is allowed by law, 
regulation and facility policy to perform or assist in the performance 
of a specific professional service, but does not individually report 
that professional service.''
    We proposed that up to 9 post-discharge home visits could be billed 
and paid during each 90-day post-anchor hospitalization CJR episode. 
Given the average PAC length of stay of approximately 45 days for these 
episodes and the incentives under CJR to improve efficiency, which may 
shorten PAC stays, 9 visits would represent a home visit on average of 
once per week for two-thirds of the 90-day episode duration, the period 
of time when the typical beneficiary may have concluded PAC in an 
efficient episode. In the proposed rule, we stated our belief that a 
home visit of once a week to a non-homebound beneficiary who has 
concluded PAC and who could also receive services in the physician's 
office or hospital outpatient department as needed, along with 
telehealth visits in the home from a physician or NPP as proposed, 
should be sufficient to allow comprehensive assessment and management 
of the beneficiary throughout the LEJR episode. We proposed that the 
service be billed with HCPCS code GXXXX (CJR model, home visit for 
patient assessment performed by a qualified health care professional 
for an individual not considered homebound, including, but not 
necessarily limited to patient assessment of clinical status, safety/
fall prevention, functional status/ambulation, medication 
reconciliation/management, compliance with orders/plan of care, 
performance of activities of daily living, and making beneficiary 
connections to community and other services; (for use only in the 
Medicare approved CJR model); may not be billed for a 30 day period 
covered by a transitional care management code) and paid at 
approximately $50 under the MPFS. We proposed that the standard MPFS 
ratesetting methodologies would establish relative value units (RVUs) 
based on the resources required to furnish the typical service. We 
stated that final RVUs under the CY 2016 MPFS for the proposed new 
HCPCS code for CJR home visits would be included in the CJR final rule. 
In addition, we proposed to update the values each year to correspond 
to final values established under the MPFS.
    The waiver would not apply with respect to a CJR beneficiary who 
has qualified, or would qualify, for home health services when the 
visit was furnished. We discussed our expectation that the visits by 
clinical staff could include patient assessment, monitoring, assessment 
of functional status and fall risk, review of medications, assessment 
of adherence with treatment recommendations, patient education, 
communication and coordination with other treating clinicians, care 
management to improve beneficiary connections to community and other 
services, etc. These post-discharge home visits would remove barriers 
to follow-up care outside of the

[[Page 73442]]

home with providers and suppliers and allow the beneficiary to be 
treated in his or her home environment or place of residence, where 
potential safety concerns, such as tripping hazards, could quickly be 
identified and remediated. Given these occasions for further patient 
assessment and intervention, we stated out belief that where such post-
discharge home visits are furnished, there are opportunities to 
increase patient-centered care coordination and decrease episode 
spending, potentially resulting in higher quality care for 
beneficiaries and increased episode efficiency which may benefit the 
beneficiaries, the Medicare Trust Fund, and participant hospitals.
    We also proposed to waive current Medicare billing rules in order 
to allow the separate reporting of these post-discharge home visits 
during surgical global periods. The MPFS payment for the surgical 
procedure includes 90 days of post-operative care furnished by the 
surgeon. Post-operative follow-up care is not separately billable by 
the surgeon. We note that in the proposed rule we had incorrectly 
stated that Medicare limits the separate billing of post-operative care 
when there is a transfer of care to another practitioner. The current 
construction of the global packages included in MPFS payments reflects 
a more narrow view of surgical follow-up care that does not encompass 
broader, more comprehensive models of post-operative care, such as an 
episode model like CJR. As we have noted in the past, it is also 
difficult to determine the appropriate valuation of the various 
components of the current global packages (2015 Physician Fee Schedule 
79 FR 67584). We did not believe that the CJR post-discharge home 
visits, which can include nursing assessments for chronic conditions 
for which care may be affected by the surgery, would replace or 
substantially duplicate the kind of post-operative visits involved in 
furnishing post-operative follow-up care for the global surgery 
procedure under the MPFS. Instead, we anticipated that the work of 
these post-discharge visits would be similar to the work furnished by 
the physician coordinating the patient's overall episode care. 
Therefore, we proposed to waive the global surgery billing rules to 
allow the surgeon or other practitioners to furnish and bill for the 
post-discharge home visits during surgical global periods.
    In the proposed rule, we noted that we planned to monitor 
utilization patterns of post-discharge home visits under CJR to monitor 
for overutilization and significant reductions in medical home health 
services. We sought comments on the proposed waiver of the ``incident 
to'' direct physician supervision requirement to pay for a maximum 
number of post-discharge home visits to beneficiaries who do not 
qualify for home health services by clinical staff under the general 
supervision of a physician.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters commended CMS for the proposal to waive 
the ``incident to'' direct physician supervision requirement to allow a 
CJR beneficiary who does not qualify for home health services to 
receive post-discharge visits in his or her home or place of residence 
any time during the episode. The commenters believe these home visits 
will provide participant hospitals with a useful tool for care 
coordination and management that will ultimately improve the quality 
and reduce the cost of an LEJR episode extending 90 days following 
hospital discharge. The commenters asserted that the flexibility 
afforded by these post-discharge home visits and the latitude for 
testing different configurations of visits will be very valuable to the 
development of new care pathways for LEJR patients, to CJR model 
beneficiaries' health, and to overall participant hospital episode 
quality and payment performance. In addition, several commenters 
specifically commended CMS for proposing to waive current Medicare 
billing rules in order to allow the separate reporting of these post-
discharge home visits during surgical global periods. These commenters 
explained that this proposal would allow the clinical staff of 
orthopedic surgeons engaged in care management throughout the CJR 
beneficiary's episode to furnish post-discharge home visits to address 
beneficiary health concerns, where the resources required for the 
surgeon to coordinate the beneficiary's overall episode of care during 
the global surgical period are not accounted for in the typical case 
used under the MPFS to price the global period for the surgical 
procedure.
    Response: We agree that allowing post-discharge home visits to be 
furnished to non-homebound CJR model beneficiaries may contribute to 
improved care coordination and management and stronger patient 
engagement, ultimately resulting in better health outcomes and reduced 
episode spending. We also believe it is appropriate for these visits to 
be paid separately in addition to payment for the surgical procedure, 
if they are furnished during the global surgical period ``incident to'' 
the services of the physician who performed the surgical procedure.
    Comment: Several commenters recommended that CMS permit home visits 
under the ``incident to'' direct physician supervision waiver, 
regardless of whether or not the beneficiary qualified for home health 
services. These commenters believe that participant hospitals should 
have the full flexibility to determine the most efficient and 
appropriate way to furnish home nursing visits to beneficiaries who 
would qualify for home health services, including those who are 
homebound.
    Response: While we appreciate the commenters' suggestions that we 
provide maximal flexibility to participant hospitals to deliver the 
configuration of services the hospital believes to be most appropriate 
to manage a beneficiary's care, we continue to believe that home visits 
furnished under the ``incident to'' direct physician supervision waiver 
should be limited to CJR model beneficiaries who otherwise would not 
qualify for home health services. We note that while home health 
episodes are 60 days in duration, payment adjustments are made for 
beneficiaries who require only a few visits during the episode or who 
are discharged during the home health episode. Therefore, CJR model 
beneficiaries who qualify for home health services could receive home 
health services that would be appropriately paid even if they qualified 
for such services for less than 60 days. Those beneficiaries who 
qualify for home health services for any duration of time during the 
CJR model episode would not need to receive post-discharge home visits 
under the ``incident to'' direct physician supervisions waiver. 
Furthermore, we expect that homebound CJR model beneficiaries may 
typically need other types of services provided under the home health 
benefit than just post-discharge home visits by clinical staff, 
including skilled nursing services, therapy services, medical supplies, 
and medical social services. We would not expect that post-discharge 
home visits provided under the ``incident to'' direct physician 
supervision waiver would adequately substitute for home health services 
under the more comprehensive Medicare home health benefit. For those 
beneficiaries receiving home health care, paying additionally for post-
discharge home visits under the ``incident to'' direct physician 
supervision waiver would be duplicative of services that should be 
furnished under the home health episode and could lead to ineffective 
care coordination and management due

[[Page 73443]]

to the involvement of multiple clinical staff working for different 
organizations or physician practices.
    Comment: Many commenters expressed support for CMS's proposal to 
pay for up to 9 post-discharge home visits under the proposed 
``incident to'' direct physician supervision waiver for CJR model 
beneficiaries during episodes of care. These commenters asserted that 9 
post-discharge home visits should be sufficient to address the care 
coordination and management needs of beneficiaries throughout the 
episode during the time when those beneficiaries are not homebound. 
Other commenters recommended that CMS should not limit the number to 9 
visits because such a limit inappropriately prescribes patterns of 
care. In the context of bundled payment that provides a target price 
for the episode, these commenters believe that providers should be able 
to furnish any number of home visits they believe is appropriate based 
on the beneficiary's clinical condition and that there is no risk of 
overutilization due to the pre-established target price. Other 
commenters arguing in favor of the proposal for up to 9 post-discharge 
home visits further recommended that CMS revisit the maximum number of 
visits over the course of the model and increase the maximum number 
permitted based on the early experience of model participants if a 
higher number of post-discharge visits seems warranted.
    Response: While we understand that some commenters would prefer no 
limit or a higher limit on the number of post-discharge home visits, as 
discussed previously these visits are restricted to CJR model 
beneficiaries who do not quality for home health services. The 
commenters did not offer specific clinical rationale for setting a 
higher maximum number of post-discharge home visits. Moreover, we 
continue to believe it is appropriate to limit the number of post-
discharge home visits that can be paid under the CJR model to mitigate 
the risk of overutilization, especially in the early years of the model 
where participant hospitals have no, or limited, repayment 
responsibility for excess actual episode spending above the target 
price. Thus, we continue to believe that it is most appropriate to 
allow up to 9 post-discharge home visits during a CJR model episode, 
which should be sufficient for the episode period when CJR model 
beneficiaries would not qualify for home health services. As we 
discussed in the proposed rule, 9 visits would represent a home visit 
on average of once per week for two-thirds of the 90-day episode 
duration, the period of time when the typical beneficiary may have 
concluded PAC in an efficient episode. We are not prescribing the 
periodicity, pattern, or number of these visits for model 
beneficiaries. We will monitor utilization of these visits and may 
revisit the maximum number of visits over the course of the model based 
on the implementation experience of participant hospitals.
    Comment: Several commenters requested that CMS permit HHAs to bill 
and be paid for the post-discharge home visits under the proposed 
``incident to'' direct physician supervision waiver. They asserted that 
such a policy would allow HHA expertise and experience to contribute to 
LEJR episode efficiency and quality because HHAs routinely furnish 
effective home nursing visits to homebound beneficiaries. A commenter 
pointed out that beneficiaries receiving home health care have 
especially low hospital readmission rates compared to beneficiaries 
receiving PAC from other types of providers. A number of commenters 
asserted that allowing HHAs to furnish home visits outside of home 
health episodes of care would contribute to continuity of care for CJR 
model beneficiaries, as nurses from the HHA with established 
relationships with the beneficiary and his or her family could continue 
to furnish home visits when the beneficiary was no longer homebound 
and, therefore, not eligible for home health services.
    Some commenters suggested that HHAs furnishing post-discharge home 
visits could be paid under the MPFS at the same rate as physicians, 
while other commenters suggested that HHAs should be paid at the HHPPS 
discipline-specific LUPA rates for the post-discharge home visits. 
Commenters pointed out that HHAs regularly carry out assessment home 
visits paid by commercial insurers, and asserted that allowing HHAs to 
furnish home visits to CJR model beneficiaries who are not in a home 
health episode would provide opportunities for physician groups to 
partner with HHAs on needed interventions.
    Some commenters recommended that other organizations be allowed to 
furnish and be paid for home visits to CJR model beneficiaries, 
including community-based organizations and hospitals. A few commenters 
asserted that hospitals should be able to send nurses to a CJR 
beneficiary's home and bill directly for the services, rather than a 
hospital-based physician billing for those services. Finally, a 
commenter suggested that nurse practitioners be allowed to bill for the 
home visits.
    Response: We appreciate the commenters' suggestions that we permit 
HHAs and other organizations and providers to furnish post-discharge 
home visits to CJR model beneficiaries. We note that nurse 
practitioners may currently furnish and bill for home care visits that 
are paid by Medicare under the usual MPFS rules. Under our proposal, 
post-discharge home visits would be furnished ``incident to'' a 
physician's professional services while under the general supervision 
of a physician. In some cases, this may be the orthopedic surgeon who 
performed the surgical procedure during the anchor hospitalization, and 
in other cases it may be a physician identified by the participant 
hospital to assume care coordination and management responsibility 
following the beneficiary's discharge from the initial hospital stay. 
The regulations at Sec.  410.26 outline specific limitations on 
``incident to'' services. We require that services and supplies 
furnished ``incident to'' a physician's professional service must be--
     Furnished in a noninstitutional setting to a non-
institutional patient.
     An integral, though incidental, part of the services of a 
physician (or other practitioner) in the course of diagnosis or 
treatment of an injury or illness.
     Commonly furnished without charge or included in the bill 
of a physician (or other practitioner).
     Of a type that are commonly furnished in the office or 
clinic of a physician (or other practitioner)
     Furnished under direct supervision of the physician or 
practitioner.
     Furnished by the physician, practitioner with an 
``incident to'' benefit, or auxiliary personnel.
     A physician (or other practitioner) may be an employee or 
independent contractor.
    Although we proposed to waive the direct physician supervision 
requirement in Sec.  410.26(b)(5) as previously discussed, clinical 
staff providing post-discharge home visits as ``incident to'' services 
would still need to be considered ``auxiliary personnel'' (employed, 
contracted, or leased employee of the physician or same employing 
organization as physician) as required by Sec.  410.26(a)(1) and Sec.  
410.26(b)(6). Therefore, it would not be permissible for HHAs, 
community-based organizations, hospitals, or others to provide post-
discharge home visits under the proposed ``incident to'' direct 
physician supervision waiver as these entities would not meet the 
definition of ``auxiliary personnel'' as outlined in regulation. At 
this time, we are declining to waive any additional

[[Page 73444]]

requirements of the ``incident to'' rules that would be necessary for 
these other entities to furnish CJR post-discharge home visits because 
we continue to believe that the post-discharge home visits should 
always be ``incident to'' a physician's professional services, 
including that they are an integral, although incidental, part of the 
physician's professional services in the course of the diagnosis or 
treatment of an illness of injury, and that they are furnished by 
auxiliary personnel (if not by the physician or practitioner with an 
``incident to'' benefit), who by definition are linked to the physician 
(or employing organization of the physician) by employment, contract, 
or lease. We believe the ``incident to'' relationship of post-discharge 
home visits to a physician's professional services is critical due to 
the importance of robust care coordination and close care management to 
episode cost and quality performance, given the lengthy, broadly 
defined CJR episodes. We note that in the case where a post-discharge 
home visit is furnished by clinical staff employed by the hospital, the 
hospital could bill under the MPFS if the supervising physician who is 
an employee or a contractor of the hospital has reassigned his or her 
benefits to the hospital.
    As a result, we are not providing additional waivers for post-
discharge home visits to beneficiaries in the CJR model who otherwise 
do not qualify for Medicare home health services, other than under our 
proposal to allow for 9 post-discharge home visits under the ``incident 
to'' direct physician supervision waiver. We further note that under 
BPCI, post-discharge home visits consistent with the goals of episode 
payment for LEJR procedures are furnished under a similar ``incident 
to'' direct physician supervision waiver, and BPCI participants have 
not expressed concerns that the waiver limits their ability to 
efficiently provide the necessary visits. This leads us to believe that 
the limited waiver of only the direct physician supervision requirement 
for ``incident to'' post-discharge home visits that we are providing 
under the CJR model will be sufficient.
    Comment: Several commenters recommended that CMS require physician 
claims for post-discharge home visits to identify and document the 
specialties of clinical staff providing the visit. They recommended 
that billing for services provides no information about the process of 
care coordination, which would be important to understand success under 
the model test. The commenters expressed concern that the waiver of the 
``incident to'' direct physician supervision requirement could allow a 
non-qualified clinician to provide follow up care to CJR beneficiaries, 
supervised only by a hospital contractor. Several commenters requested 
that CMS further specify the clinical staff who can furnish post-
discharge home visits to CJR model beneficiaries. Finally, another 
commenter inquired whether a nurse, physical therapist, or occupational 
therapist could furnish the visit under the order of a physician.
    Response: We appreciate the interest of the commenters in 
understanding the roles of various clinical staff in care coordination 
under the CJR model. However, we do not plan to collect specific 
information about the clinical staff who furnish post-discharge home 
visits under this waiver of the ``incident to'' direct physician 
supervision requirement because this would be administratively 
burdensome to the physicians involved who are not themselves 
participants in the CJR model and, we believe, unnecessary to ensure 
the delivery of safe, medically necessary services. We proposed to 
waive only the direct physician supervision requirement for ``incident 
to'' services in order to permit general physician supervision for 
these home visits. All other Medicare rules for coverage and payment of 
services ``incident to'' a physician's service continue to apply, 
including that the personnel meet the definition of ``auxiliary 
personnel'' (requiring a relationship with the billing professional); 
that the services and supplies must be an integral, though incidental, 
part of the service of a physician (or other practitioner) in the 
course of diagnosis or treatment of an injury or illness; and that the 
services and supplies must be of a type that are commonly furnished in 
the office or clinic of a physician (or other practitioner) and must be 
in compliance with state law. Thus, we do not believe it is necessary 
to apply a different standard or other requirements to post-discharge 
home visits permitted under the CJR model. We also will not further 
define the clinical staff that can furnish the post-discharge home 
visit but would refer readers to the description of clinical staff in 
the CPT coding guidelines that we provided earlier in this section. We 
further note that the HCPCS G-code descriptor for the post-discharge 
home visits includes various activities that must be in the clinical 
staff's scope of practice, as would be true for any service furnished 
``incident to'' a physician's service. Finally, the evaluation approach 
to the model as described in section IV. of this final rule will yield 
information about care redesign approaches and their association with 
quality and cost performance under the CJR model.
    Comment: Several commenters expressed support for the proposed 
level of payment for the post-discharge home visits, agreeing that this 
should provide adequate payment for the service. A few commenters 
recommended that $50 would not cover the cost of a home visit by any 
licensed provider and recommended that CMS substantially increase the 
payment amount for the visits to reflect the fair market value of the 
services.
    Response: In response to commenters recommending a higher payment 
for the post-discharge home visits, we note that we have experience 
with home visits being furnished to model beneficiaries under BPCI, and 
BPCI participants have not expressed concern about the MPFS payment for 
post-discharge home visits under that model that are priced in the same 
way as our proposal for payment of such visits under the CJR model. We 
proposed to use the standard MPFS ratesetting methodologies to 
establish the MPFS RVUs based on the resources required to furnish the 
typical CJR model post-discharge home visit service. We did not receive 
any specific information from commenters about the resources required 
to furnish these CJR model post-discharge home visits that would lead 
us to adjust our proposed rule estimate of the resources required to 
furnish the typical CJR model post-discharge home visit service, which 
is similar to the BPCI post-discharge home visit service. Therefore, we 
are not changing our methodology for determining the payment for the 
CJR model post-discharge home visit under the MPFS. We have crosswalked 
the RVUs for the CJR model post-discharge home visit directly from 
those used for the similar service under BPCI, because we estimate that 
the typical resources to furnish these services under the two models 
are the same. We provide specific information on the final HCPCS post-
discharge home visit G-code and CY 2016 pricing in the following Table 
26.
    Comment: Several commenters recommended that CMS waive the 
``incident to'' direct physician supervision requirement for services 
other than just post-discharge home visits. The commenters recommended 
that CMS pay for those services using existing CPT codes and their RVUs 
under the MPFS in order to ensure appropriate payment for the resources

[[Page 73445]]

required. Infusion therapy was identified as a service for which the 
waiver should be provided, in order to allow CJR model beneficiaries 
who experience post-surgical infections to receive infusion therapy at 
home, a practice that commenters believe would improve the efficiency 
of the episode and increase beneficiary satisfaction with care.
    Response: We appreciate the requests that CMS waive the ``incident 
to'' direct physician supervision requirement for services other than 
post-discharge home visits. However, we do not agree with the 
commenters that such a waiver is necessary for the CJR model because we 
believe existing Medicare program policies and other proposed waivers 
of program rules for this model, such as the proposed telehealth 
waiver, will provide sufficient flexibility to meet the episode care 
management and care coordination needs for CJR model beneficiaries in a 
variety of facility, office, and home settings after discharge from the 
anchor hospitalization.
    In the specific clinical scenario cited by the commenters, we note 
that there are already several circumstances in which CMS may cover and 
pay for home infusions under existing Medicare program rules should a 
beneficiary develop a post-surgical infection that is not preventable 
following LEJR surgery and that requires treatment with intravenous 
antibiotics. For example, many post-surgical beneficiaries will be 
homebound for a period of time, and skilled nursing visits for infusion 
would be covered under the home health benefit if the beneficiary is 
homebound and has no willing and able caregiver that could administer 
such a service. In addition, aDME for an infusion pump would be covered 
under the DME benefit if the drug being infused is included on the 
national coverage determination (NCD) for infusion pumps (https://www.cms.gov/medicare-coverage-database/details/ncd-details.aspx?NCDId=223&ncdver=2&DocID=280.14&SearchType=Advanced&bc=IAAAABAAAAAA&). If an infusion pump is covered under DME, Prosthetics, 
Orthotics, and Supplies (DMEPOS), the DME supplier is required to set 
up the equipment and provide the training necessary to teach the 
patient how to infuse themselves at home. Infusion therapy may also be 
furnished in SNFs, physicians' offices, and hospital outpatient 
departments. Thus, because coverage is readily available to 
beneficiaries, we do not believe it is necessary to waive the 
``incident to'' direct physician supervision requirement for other 
services, including infusion therapy, in order to allow them to be 
furnished in the beneficiary's home under the general supervision of a 
physician.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal, without modification, to 
waive the ``incident to'' direct physician supervision requirement set 
forth at Sec.  410.26(b)(5), to allow a CJR beneficiary who does not 
qualify for home health services to receive up to 9 post-discharge 
visits in his or her home or place of residence any time during the 
episode following discharge from an anchor hospitalization. We will 
allow clinical staff, such as nurses, considered ``auxiliary 
personnel'' as defined in Sec.  410.26(a)(1), to furnish the service 
under the general, rather than direct, supervision of a physician. In 
some situations the clinical staff providing these services may be 
employees of the participant hospital and, as long as these clinical 
staff are supervised by a physician and the appropriate relationship 
exists between the physician and the clinical staff, payment under the 
MPFS can be made. Services furnished under the waiver will be billed 
under the MPFS by the physician or NPP or by the entity, including a 
hospital, to which the supervising physician or NPP has reassigned his 
or her benefits. We are also waiving current Medicare billing rules in 
order to allow the separate reporting by the physician who performed 
the LEJR procedure of these post-discharge home visits during surgical 
global periods when he or she is providing the general supervision of 
the post-discharge home visit.
    The post-discharge home visit will be billed with the HCPCS code 
displayed in Table 26. This code will be payable for CJR model 
beneficiaries beginning April 1, 2016, the start date of the first CJR 
model performance year as discussed in section III.C.2.a. of this final 
rule. Rather than finalizing the specific RVUs for this new HCPCS code 
in this final rule, we are finalizing them through reference to the 
RVUs for another HCPCS G-code paid under the MPFS, which will be 
released in proximity to this rule. Specifically, the RVUs for this new 
code will be based upon the same inputs used to determine the CY 2016 
payment rate for HCPCS code G9187 (BPCI initiative home visit for 
patient assessment performed by a qualified health care professional 
for individuals not considered homebound including, but not limited to, 
assessment of safety, falls, clinical status, fluid status, medication 
reconciliation/management, patient compliance with orders/plan of care, 
performance of activities of daily living, appropriateness of care 
setting; (for use only in the Medicare-approved BPCI initiative); may 
not be billed for a 30-day period covered by a transitional care 
management code), the specific HCPCS G-code currently used to report 
post-discharge home visits under BPCI. We are crosswalking the RVUs for 
new HCPCS code G9490 to the RVUs for the existing post-discharge home 
visit HCPCS G-code for the BPCI model because, given our view of the 
similarities between these two services in the two different models and 
the similar HCPCS G-code descriptors, we expect the resources required 
to be the same so the two codes are assigned the same inputs under the 
standard MPFS ratesetting methodologies. In summary, we are finalizing 
the policy in this CJR final rule that the new HCPCS code G9490 for CJR 
model post-discharge home visits will have the same RVUs as HCPCS code 
G9187 for BPCI model post-discharge home visits, and we will finalize 
the RVUs for HCPCS code G9187 in the CY 2016 MPFS final rule.
    The final CY 2016 RVUs, geographic practice cost indices and 
conversion factor that determine the MPFS payment for HCPCS code G9187 
will be included in the CY 2016 MPFS final rule. We will annually 
update the RVUs for HCPCS code G9490 for post-discharge home visits for 
CJR model beneficiaries by crosswalking the RVUs for HCPCS code G9490 
to HCPCS code G9187as part of the annual MPFS update, and information 
on the update will be included in the MPFS final rule each year.

[[Page 73446]]



                 Table 26--HCPCS Code for Post-Discharge Home Visits for CJR Model Beneficiaries
----------------------------------------------------------------------------------------------------------------
                                                                                    RVUs equal to those of this
        HCPCS code No.              Long descriptor          Short descriptor      HCPCS code for same calendar
                                                                                        year under the MPFS
----------------------------------------------------------------------------------------------------------------
G9490........................  CJR model, home visit     Joint replac mod home    G9187.
                                for patient assessment    visit.
                                performed by clinical
                                staff for an individual
                                not considered
                                homebound, including,
                                but not necessarily
                                limited to patient
                                assessment of clinical
                                status, safety/fall
                                prevention, functional
                                status/ambulation,
                                medication
                                reconciliation/
                                management, compliance
                                with orders/plan of
                                care, performance of
                                activities of daily
                                living, and ensuring
                                beneficiary connections
                                to community and other
                                services. (for use only
                                in the
                                Medicare[dash]approved
                                CJR model); may not be
                                billed for a 30 day
                                period covered by a
                                transitional care
                                management code.
----------------------------------------------------------------------------------------------------------------

    Beneficiaries will be able to receive post-discharge home visits 
furnished under the ``incident to'' direct physician supervision waiver 
only during the CJR LEJR episode. All other Medicare rules for coverage 
and payment of services ``incident'' to a physician's service continue 
to apply.
    The final post-discharge home visit policies are set forth at Sec.  
510.600, which has been revised to use the term clinical staff instead 
of licensed clinician, as well as to eliminate references to licensed 
clinician and supervising physician employment relationships that are 
unnecessary because all other ``incident to'' coverage and payment 
policies continue to apply. The waiver of certain post-operative 
billing restrictions under the MPFS global surgery rules is set forth 
at Sec.  510.615.
    We note that we plan to monitor utilization patterns of post-
discharge home visits under CJR to monitor for overutilization or 
significant reductions in home health services. c. Billing and Payment 
for Telehealth Services
    As discussed in the previous section, in the proposed rule, we 
described our expectation that the CJR model design features would lead 
to greater interest on the part of hospitals and other providers and 
suppliers caring for CJR beneficiaries in furnishing services to 
beneficiaries in their home or place of residence, including 
physicians' professional services. While physicians and NPPs may 
furnish and be paid by Medicare for home visits under the MPFS, few 
visits are actually furnished to Medicare beneficiaries because of the 
significant physician and NPP resources required for such visits and 
the general structure of most physician and non-physician practitioner 
office-based practices. For example, in 2014 only 2.6 million physician 
or NPP home E/M visits were furnished to Medicare beneficiaries in 
contrast to almost 250 million office or other outpatient evaluation 
and management visits furnished by physicians or NPPs. CJR would create 
new incentives for comprehensive episode care management for 
beneficiaries, including early identification and intervention 
regarding changes in health status following discharge from the anchor 
hospitalization. We discussed our understanding that participant 
hospitals may want to engage health care professionals in furnishing 
timely visits to homebound or non-homebound CJR beneficiaries in their 
homes or places of residence to address concerning symptoms or 
observations raised by beneficiaries themselves, by clinicians 
furnishing home health services, or by clinical staff furnishing post-
discharge home visits, but physicians and NPPs committed to LEJR care 
redesign may not be able to revise their practice patterns to meet this 
home visit need for CJR beneficiaries.
    Under section 1834(m) of the Act, Medicare pays for telehealth 
services furnished by a physician or practitioner under certain 
conditions even though the physician or practitioner is not in the same 
location as the beneficiary. The telehealth services must be furnished 
to a beneficiary located in one of the eight types of originating sites 
specified in section 1834(m)(4)(C)(ii) of the Act, and the site must 
satisfy at least one of the requirements of section 1834(m)(4)(C)(i)(I) 
through (III) of the Act. These sites include the following:
     Offices of physicians or practitioners.
     Hospitals.
     CAHs.
     RHCs
     Federally Qualified Health Centers.
     Hospital-based or CAH-based Renal Dialysis Centers 
(including satellites).
     SNFs.
     CMHCs.
    Generally, for Medicare payment to be made for telehealth services 
under the MPFS, several conditions must be met, as set forth under 
Sec.  410.78(b). Specifically, the service must be on the Medicare list 
of telehealth services and meet all of the following other requirements 
for payment:
     The service must be furnished via an interactive 
telecommunications system.
     The service must be furnished to an eligible telehealth 
individual.
     The individual receiving the services must be in an 
eligible originating site.
    When all of these conditions are met, Medicare pays a facility fee 
to the originating site and provides separate payment to the distant 
site practitioner for the service. Section 1834(m)(4)(F)(i) of the Act 
defines Medicare telehealth services to include professional 
consultations, office visits, office psychiatry services, and any 
additional service specified by the Secretary, when furnished via a 
telecommunications system. For the list of approved Medicare telehealth 
services, see the CMS Web site at https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/Telehealth-Codes.html. Under 
section 1834(m)(4)(F)(ii) of the Act, we have an annual process to 
consider additions to and deletions from the list of telehealth 
services. We do not include any services as telehealth services when 
Medicare does not otherwise make a separate payment for them.
    Some literature suggests that technologies that enable health care 
providers to deliver care to patients in locations remote from 
providers are being increasingly used to complement face-to-face 
patient-provider encounters in both urban and rural areas.\49\ In these

[[Page 73447]]

cases, the use of remote access technologies may improve the 
accessibility and timeliness of needed care, increase communication 
between providers and patients, enhance care coordination, and improve 
the efficiency of care. We noted that certain professional services 
that are commonly furnished remotely using telecommunications 
technology are paid under the same conditions as in-person physicians' 
services, and thus do not require a waiver to be considered as 
telehealth services. Such services that do not require the patient to 
be present in person with the practitioner when they are furnished are 
covered and paid in the same way as services delivered without the use 
of telecommunications technology when the practitioner is in person at 
the medical facility furnishing care to the patient.
---------------------------------------------------------------------------

    \49\ Telehealth in an Evolving Health Care Environment: Workshop 
Summary (2012). Available at: https://www.ic4n.org/wpcontent/uploads/2014/06/IoM%20Telehealth%202012%20Workshop%20Summary.pdf. Accessed 
on June 7, 2015.
---------------------------------------------------------------------------

    In other CMS episode payment models, such as BPCI Models 2 and 3, 
we determined it was necessary to waive the geographic site 
requirements of section 1834(m)(4)(C)(i)(I) through (III) of the Act. 
This waiver allows telehealth services to be furnished to eligible 
telehealth individuals when they are located at one of the eight 
originating sites at the time the service is furnished via a 
telecommunications system but without regard to the site meeting one of 
the geographic site requirements. For CJR, we proposed a waiver of this 
same provision as well as waiver of the requirement that the eligible 
telehealth individual be in an originating site when the otherwise 
eligible individual is receiving telehealth services in his or her home 
or place of residence. This waiver would allow providers and suppliers 
furnishing services to CJR beneficiaries to utilize telemedicine for 
beneficiaries that are not classified as rural and to allow the 
greatest degree of efficiency and communication between providers and 
suppliers and beneficiaries by allowing beneficiaries to receive 
telehealth services at their home or place of residence. In the 
proposed rule, we stated our belief that these waivers are essential to 
maximize the opportunity to improve the quality of care and efficiency 
for LEJR episodes under CJR.
    Specifically, like the telehealth waiver for BPCI, we proposed to 
waive the geographic site requirements of section 1834(m)(4)(C)(i)(I) 
through (III) of the Act that limit telehealth payment to services 
furnished within specific types of geographic areas or in an entity 
participating in a federal telemedicine demonstration project approved 
as of December 31, 2000. Waiver of this requirement would allow 
beneficiaries located in any region to receive services related to the 
episode furnished via telehealth, as long as all other Medicare 
requirements for telehealth services are met. Any service on the list 
of Medicare approved telehealth services and reported on a claim with 
an ICD-10-CM principal diagnosis code that was not excluded from the 
CJR episode definition (see section III.B.2. of this final rule) could 
be furnished to a CJR beneficiary, regardless of the beneficiary's 
geographic location. Under CJR, this waiver would support care 
coordination and increasing timely access to high quality care for all 
CJR beneficiaries, regardless of geography. Additionally, we proposed 
to waive, only for the purpose of testing the CJR model, the 
originating site requirements of section 1834(m)(4)(C)(ii)(I) through 
(VIII) of the Act that specify the particular sites at which the 
eligible telehealth individual must be located at the time the service 
is furnished via a telecommunications system. Specifically, we proposed 
to waive the requirement only when telehealth services are being 
furnished in the CJR beneficiary's home or place of residence during 
the episode. Any service on the list of Medicare approved telehealth 
services and reported on a claim with an ICD-10-CM principal diagnosis 
code that was not excluded from the CJR episode definition (see section 
III.B.2. of the final rule) could be furnished to a CJR beneficiary in 
his or her home or place of residence, unless the service's HCPCS code 
descriptor precludes delivering the service in the home or place of 
residence. For example, subsequent hospital care services could not be 
furnished to beneficiaries in their home since those beneficiaries 
would not be inpatients of the hospital.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters expressed support for CMS's proposal to 
waive the geographic site requirements for telehealth services to allow 
beneficiaries in any community to receive telehealth services. The 
commenters believe that this proposal would allow CJR participant 
hospitals the flexibility and opportunity to deliver needed 
professional services via telehealth throughout LEJR episodes in order 
to improve care coordination and management and respond timely to 
beneficiary health changes over the course of the episode. They urged 
CMS to finalize this proposal.
    Response: Many commenters supported our proposal to waive the 
geographic site requirements for telehealth services. We agree with the 
commenters that this waiver may benefit CJR beneficiaries by allowing 
them to receive clinically appropriate telehealth services regardless 
of their geographic region, especially given the national breadth of 
the final selected MSAs for the model.
    Comment: Many commenters expressed support for CMS's proposal to 
waive the originating site requirements of the Act that specify the 
facility or office site at which the eligible telehealth individual 
must be located at the time the service is furnished via a 
telecommunications system when telehealth services are being furnished 
in the CJR beneficiary's home or place of residence during the episode. 
The commenters believe that home telehealth services would allow timely 
access to needed care for CJR model beneficiaries, improve 
communication among health care professionals caring for the 
beneficiary, enhance care coordination, and contribute to improved 
beneficiary adherence to recommended treatments. Several commenters 
suggested that home telehealth services could be especially valuable 
for specialist physicians treating beneficiaries for surgical 
complications, such as infectious disease specialists providing 
consultation on post-surgical infections. Commenters urged CMS to 
finalize this proposal.
    Additionally, several commenters recommended that CMS modify the 
proposed waiver to waive the originating site requirements of the Act 
to allow telehealth services to be delivered to a model beneficiary 
when the beneficiary is not in a facility, office, or home. A commenter 
provided the example of a beneficiary experiencing an acute event while 
in a car who could pull the car off the road and access needed medical 
services via telehealth for treatment of his or her condition if CMS 
applied the proposed waiver to sites other than the home.
    Response: Commenters supported our proposal to allow telehealth 
services to be covered when furnished in the CJR beneficiary's home or 
place of residence. We agree that home telehealth services may play an 
important role in ensuring efficient, high quality episode care for 
beneficiaries recovering at home following a major lower extremity 
surgical procedure furnished during an anchor hospitalization.
    We do not agree with commenters who suggested we apply this waiver

[[Page 73448]]

beyond the beneficiary's home or place of residence. Given the breadth 
of originating sites under section 1834(m)(4)(C)(ii) of the Act, which 
include the office of a physician or practitioner, a CAH, a rural 
health clinic, a federally qualified health center, a hospital, a 
hospital-based or CAH-based renal dialysis center (including 
satellites), a SNF, and a community mental health center (CMHC), and 
our waiver to allow telehealth services in the model beneficiary's home 
or place of residence, we do not believe it is necessary to include 
additional locations for beneficiaries to receive telehealth services 
during a CJR model episode. For urgent needs while traveling or 
otherwise not at home, we expect beneficiaries would seek care as they 
currently would for such circumstances to ensure timely services. For 
non-urgent needs, consistent with coordinated episode care that is a 
goal of the CJR model, we expect that beneficiaries would seek care 
from treating physicians and NPPs that could be delivered in one of the 
sites permitted under the statute and our limited waiver of the 
originating site requirements.
    Comment: Several commenters recommended that CMS provide additional 
waivers that would allow payment for telehealth services other than 
those on the list of Medicare-approved telehealth services. Some 
commenters suggested that CMS should allow payment of any services 
delivered by telehealth, while other commenters requested that CMS 
permit certain additional services to be furnished by telehealth. 
Requested services include telemental health, teleconsultations, 
telenursing, and home monitoring services, including those services 
that are currently bundled and not separately paid by Medicare. Given 
that CJR beneficiaries are in LEJR episodes and would commonly require 
substantial rehabilitation services during their post-operative 
recovery period, many commenters recommended that CMS allow 
telerehabilitation services to be furnished by telehealth, including 
physical therapy, occupational therapy, and speech language pathology 
services.
    Response: We appreciate the interest of the commenters in 
furnishing additional services to CJR model beneficiaries via 
telehealth. However, do not agree that we should waive additional 
requirements to increase the list of services that surpass those 
currently on the Medicare-approved telehealth list. We note that some 
of the requested services, including individual psychotherapy and 
certain other mental health services, are already on the Medicare-
approved list of telehealth services and could, therefore, be furnished 
to a CJR beneficiary during an episode in the beneficiary's home or 
place of residence or at any geographic location under our proposed 
waiver. Certain consultation services, such as initial inpatient or 
emergency department consultations or follow-up inpatient hospital or 
SNF consultations, are also already on the Medicare-approved telehealth 
list and could be furnished via telehealth regardless of a CJR 
beneficiary's geographic location under our proposed waiver. We do not 
believe it would be appropriate to pay separately for currently bundled 
services, as this could lead to duplicate payment. Furthermore, we do 
not believe it would be appropriate to add rehabilitation services to 
the telehealth list as we expect that in-person therapy services 
already will be available to many CJR model beneficiaries in the home, 
such as during home health care episodes or furnished by therapists in 
private practice. We note that the CJR episode payment model is testing 
episode payment to improve care coordination and management to achieve 
higher quality care at a lower cost and, therefore, it is not a 
telehealth model testing the quality and cost outcomes due to different 
services furnished by telehealth. Thus, we plan to continue to rely on 
the list of Medicare-approved telehealth services to specify those 
services that may be furnished via telehealth to CJR beneficiaries. 
That list is updated annually and is posted on the CMS Web site at 
https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/Telehealth-Codes.html.
    Comment: Several commenters recommended that CMS waive the existing 
requirements that define the interactive telecommunications system that 
is required for telehealth services to mean multimedia communication 
equipment that includes, at a minimum, audio and video equipment 
permitting two-way, real-time interactive communication between the 
patient and distant site physician or practitioner. Some commenters 
specifically recommended that CMS permit store and forward technologies 
to be used, while other commenters suggested that CMS let providers 
determine the manner in which the specific telehealth service could be 
furnished, such as store and forward, passive remote monitoring, or 
audio only, assuming all other requirements for billing the services 
are met. These commenters recommended that such changes would expand 
access to telehealth services for CJR model beneficiaries who would 
benefit from enhanced monitoring and care management.
    Response: We appreciate the information from commenters on 
alternative approaches to providing care to patients that are not in-
person. We note that the CJR model is not testing a telehealth model 
and, therefore, we do not intend to fundamentally change the scope of 
telehealth requirements for payment under Medicare. Rather, we proposed 
to waive certain existing telehealth requirements to provide 
participant hospitals with additional tools to improve episode quality 
and efficiency given the constraints on physician time for in-person 
visits at distant locations or in the beneficiary's home. The proposed 
waivers would allow greater physician engagement via telehealth in CJR 
beneficiary care coordination and management following surgery, 
regardless of the beneficiary's geographic location or home location. 
We believe that under the CJR model it is important for beneficiaries 
to receive telehealth services in a way that permits them to interact 
with treating health care professionals in real-time, including being 
able to both see and interact with those providers, and the treating 
health care professionals being able to see and listen to the 
beneficiaries. Beneficiaries recovering at home following major joint 
replacement surgery benefit from meaningful engagement in care that is 
patient-centered in order to improve their understanding and adherence 
to treatment regimens. Therefore, we do not believe it would be 
appropriate to allow telehealth services to be furnished to CJR model 
beneficiaries that do not meet the existing Medicare telehealth 
requirements for communications technology.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposal, without modification, to 
waive the geographic site requirements of section 1834(m)(4)(C)(i)(I) 
through (III) of the Act that limit telehealth payment to services 
furnished within specific types of geographic areas or in an entity 
participating in a federal telemedicine demonstration project approved 
as of December 31, 2000. Any service on the list of Medicare-approved 
telehealth services and reported on a claim with an ICD-10-CM principal 
diagnosis code that is not excluded from the CJR episode definition 
(see section III.B.2. of this final rule) can be furnished to a CJR 
beneficiary, regardless of the beneficiary's geographic location. We

[[Page 73449]]

also are finalizing our proposal to waive the originating site 
requirements of section 1834(m)(4)(C)(ii)(I) through (VIII) of the Act 
that specify the particular sites at which the eligible telehealth 
individual must be located at the time the service is furnished via a 
telecommunications system only when telehealth services are being 
furnished in the CJR beneficiary's home or place of residence during 
the episode. Any service on the list of Medicare approved telehealth 
services and reported on a claim with an ICD-10-CM principal diagnosis 
code that is not excluded from the CJR episode definition (see section 
III.B.2. of this final rule) can be furnished to a CJR beneficiary in 
his or her home or place of residence, unless the service's HCPCS code 
descriptor precludes delivering the service in the home or place of 
residence. We will continue to require that telehealth services 
furnished under the CJR model telehealth waiver be furnished using an 
interactive telecommunications system, consistent with the current 
requirement for payment of telehealth services under the MPFS.
    The existing set of codes used to report evaluation and management 
(E/M) visits are extensively categorized and defined by the setting of 
the service, and the codes describe the services furnished when both 
the patient and the practitioner are located in that setting. Section 
1834(m) of the Act provides for particular conditions under which 
Medicare can make payments for office visits when a patient is located 
in a health care setting (the originating sites authorized by statute) 
and the eligible practitioner is located elsewhere. However, in the 
proposed rule, we stated that we did not believe that the kinds of E/M 
services furnished to patients outside of health care settings via 
real-time, interactive communication technology are accurately 
described by any existing E/M codes. This would include circumstances 
when the patient is located in his or her home and the location of the 
practitioner is at another location. Therefore, in order to create a 
mechanism to report E/M services accurately under the CJR model, we 
proposed to create a specific set of HCPCS G-codes to describe the E/M 
services furnished to CJR beneficiaries in their homes via telehealth 
when the physician or practitioner is in another location.
    Among the existing E/M visit services, we stated that we envision 
these services would be most similar to those described by the office 
and other outpatient E/M codes. Therefore, we proposed to structure the 
new codes similarly to the office/outpatient E/M codes but adjusted to 
reflect the location as the beneficiary's residence and the virtual 
presence of the practitioner. Specifically, we proposed to create a 
parallel structure and set of descriptors currently used to report 
office or other outpatient E/M services, (CPT codes 99201 through 99205 
for new patient visits and CPT codes 99212 through 99215 for 
established patient visits). For example, in the proposed rule we 
discussed a HCPCS G-code for a level 3 E/M visit for an established 
patient would be a telehealth visit for the evaluation and management 
of an established patient in the patient's home, which requires at 
least 2 of the following 3 key components:
     An expanded problem focused history.
     An expanded problem focused examination.
     Medical decision making of low complexity.
    Counseling and coordination of care with other physicians, other 
qualified health care professionals or agencies are provided consistent 
with the nature of the problem(s) and the patient's or family's needs 
or both. Usually, the presenting problem(s) are of low to moderate 
severity. Typically, 15 minutes are spent with the patient or family or 
both via real-time, audio and video intercommunications technology. The 
preceding text would be included in the code descriptor for the 
proposed level 3 established patient telehealth E/M visit HCPCS G-code, 
just as this information is currently included in the code descriptor 
for the corresponding level 3 established patient office/outpatient E/M 
CPT code.
    In the proposed rule, we noted that we were not proposing a HCPCS 
G-code to parallel the level 1 office/outpatient visit for an 
established patient, since that service does not require the presence 
of the physician or other practitioner. We stated our belief that this 
would duplicate the home visits for non-homebound beneficiaries 
previously discussed in this section.
    We proposed to develop payment rates for these new telehealth G-
codes for E/M services in the patient's home that are similar to the 
payment rates for the office/outpatient E/M services, since the codes 
will describe the work involved in furnishing similar services. 
Therefore, we proposed to include the resource costs typically incurred 
when services are furnished via telehealth. In terms of the relative 
resource costs involved in furnishing these services, in the proposed 
rule we stated our belief that the efficiencies of virtual presentation 
generally limit resource costs other than those related to the 
professional time, intensity, and MP risk to marginal levels. 
Therefore, we proposed to adopt work and MP RVUs associated with the 
corresponding level of office/outpatient codes as the typical service 
because the practitioner's time and intensity and MP liabilities when 
conducting a visit via telehealth are comparable to the office visit. 
We stated that final RVUs under the CY 2016 MPFS would be included in 
the CJR final rule. Additionally, we proposed to update these values 
each year to correspond to final values established under the MPFS.
    We considered whether each level of visit typically would warrant 
support by auxiliary licensed clinical staff within the context of the 
CJR model. The cost of such staff and any associated supplies, for 
example, would be incorporated in the practice expense (PE) RVUs under 
the MPFS. For the lower level visits, levels 1 through 3 for new visits 
and 2 and 3 for established visits, we did not believe that the visit 
would necessarily require auxiliary clinical staff to be available in 
the patient's home. We anticipated these lower level visits would be 
the most commonly furnished and would serve as a mechanism for the 
patient to consult quickly with a practitioner for concerns that can be 
easily described and explained by the patient. We did not propose to 
include PE RVUs for these services, since we did not believe that 
virtual visits envisioned for this model typically incur the kinds of 
costs included in the PE RVUs under the MPFS. For higher level visits, 
we typically would anticipate some amount of support from auxiliary 
clinical staff. For example, wound examination and minor wound 
debridement would be considered included in an E/M visit and would 
require licensed clinical staff to be present in the beneficiary's home 
during the telehealth visit in order for the complete service to be 
furnished. We stated our belief that it would be rare for a 
practitioner to conduct as complex and detailed a service as a level 4 
or 5 E/M home visit via telehealth for CJR beneficiaries in LEJR 
episodes without licensed clinical staff support in the home.
    However, we also noted that the proposed model already includes 
several avenues for licensed clinical staff to be in the patient's 
home, either through a separately paid home visit as proposed for the 
model or through home health services as discussed earlier in this 
final rule. Therefore, although we considered support by auxiliary 
clinical staff to be typical for level 4 or 5 E/M visits furnished to 
CJR beneficiaries in

[[Page 73450]]

the home via telehealth, we did not propose to incorporate these costs 
through PE RVUs. Given the anticipated complexity of these visits, we 
noted that we would expect to observe level 4 and 5 E/M visits to be 
reported on the same claim with the same date of service as a home 
visit or during a period of authorized home health care. If neither of 
these occurs, we proposed to require the physician to document in the 
medical record that auxiliary licensed clinical staff were available on 
site in the patient's home during the visit and if they were not, to 
document the reason that such a high-level visit would not require such 
personnel.
    We noted that because the services described by the HCPCS G-codes 
for the proposed model, by definition, are furnished remotely using 
telecommunications technology, they therefore are paid under the same 
conditions as in-person physicians' services and they do not require a 
waiver to the requirements of section 1834(m) of the Act. We also noted 
that because these home telehealth services would be E/M services, all 
other coverage and payment rules regarding E/M services would continue 
to apply.
    We additionally noted that under the CJR model, this proposal to 
waive the originating site requirements and create new home visit 
telehealth HCPCS codes would support the greatest efficiency and timely 
communication between providers and beneficiaries by allowing 
beneficiaries to receive telehealth services at their places of 
residence.
    The following is a summary of the comments received and our 
response.
    Comment: Several commenters expressed support for CMS's proposal to 
establish specific HCPCS G-codes for reporting telehealth visits 
furnished in the beneficiary's home or place of residence. They believe 
these codes would facilitate tracking these services and improve 
understanding of the role of these visits in episode care. Several 
commenters suggested that the resources required to deliver these 
visits would be similar to the existing CPT office and other outpatient 
care E/M visit codes paid under the MPFS, consistent with CMS's 
proposal. A commenter suggested that as the CPT Editorial Panel 
develops CPT codes to report telehealth services, CMS should consider 
their use in the future for the CJR model.
    Response: We agree that currently specific HCPCS G-codes are the 
most appropriate way for telehealth visits furnished in the CJR 
beneficiary's home or place of residence to be reported and paid. We 
have established that the work and MP RVUs for these new HCPCS G-codes 
will be the same as those for the comparable office and other 
outpatient E/M visit codes under the CY 2016 MPFS. The HCPCS G-codes, 
their descriptors, and the CPT codes upon which their RVUs are based 
are displayed in Table 27. As noted in the proposed rule, we will not 
be including PE RVUs in the payment rate for these unique CJR model 
services as we believe any practice expenses incurred to furnish these 
services are marginal or are paid for through other MPFS services. 
Accordingly, we are waiving section 1834(m)(4)(2)(B) to allow this 
deviation from the payment of office/outpatient visits for purposes of 
the CJR model telehealth in-home visit services. Finally, we will 
consider new CPT codes as they are released according to our usual 
processes, and will specifically evaluate whether they may be used in 
the future to report home telehealth visits for CJR model 
beneficiaries.
    Final Decision: After considering the public comments we received, 
we are finalizing our proposal, without modification, to create 9 HCPCS 
G-codes to report home telehealth E/M visits furnished under the CJR 
waiver as displayed in Table 27. These codes will be payable for CJR 
model beneficiaries beginning April 1, 2016, the start date of the 
first CJR model performance year as discussed in section III.C.2.a. of 
this final rule. Rather than finalizing the RVUs for the new HCPCS 
codes in this final rule, we are finalizing them through reference to 
the RVUs for other CPT codes paid under the MPFS as equal to the work 
and MP RVUs that will be established for the comparable office/
outpatient visits in the CY 2016 MPFS final rule.
    The final CY 2016 RVUs, geographic practice cost indices and 
conversion factor that determine the payment rates for the CPT codes 
will be included in the CY 2016 MPFS final rule.
    We will update the RVUs for the CJR model HCPCS telehealth G-codes 
annually by crosswalking them to the corresponding CPT codes as part of 
the annual MPFS update, and information on the updates will be included 
in the MPFS final rule each year.

      Table 27--HCPCS Codes for Telehealth Visits for CJR Model Beneficiaries in Home or Place of Residence
----------------------------------------------------------------------------------------------------------------
                                                                                         Work and MP RVUs Equal
                                                                                             to Those of the
                                                                                          Corresponding Office/
           HCPCS Code No.                 Long descriptor          Short descriptor     Outpatient E/M Visit CPT
                                                                                         Code for Same Calendar
                                                                                           Year under the MPFS
----------------------------------------------------------------------------------------------------------------
G9481...............................  Remote in[dash]home
                                       visit for the
                                       evaluation and
                                       management of a new
                                       patient for use only
                                       in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires these 3 key
                                       components:
                                       A problem
                                       focused history;.
                                       A problem
                                       focused examination;
                                       and.
                                      
                                       Straightforward
                                       medical decision
                                       making, furnished in
                                       real time using
                                       interactive audio and
                                       video technology..
                                      Counseling and           Remote E/M new pt                          99201
                                       coordination of care     10mins.
                                       with other physicians,
                                       other qualified health
                                       care professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are self limited or
                                       minor. Typically, 10
                                       minutes are spent with
                                       the patient or family
                                       or both via real time,
                                       audio and video
                                       intercommunications
                                       technology.

[[Page 73451]]

 
G9482...............................  Remote in[dash]home      Remote E/M new pt                          99202
                                       visit for the            20mins.
                                       evaluation and
                                       management of a new
                                       patient for use only
                                       in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires these 3 key
                                       components:
                                       An expanded
                                       problem focused
                                       history;.
                                       An expanded
                                       problem focused
                                       examination;.
                                      
                                       Straightforward
                                       medical decision
                                       making, furnished in
                                       real time using
                                       interactive audio and
                                       video technology.
                                       Counseling and
                                       coordination of care
                                       with other physicians,
                                       other qualified health
                                       care professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are of low to moderate
                                       severity. Typically,
                                       20 minutes are spent
                                       with the patient or
                                       family or both via
                                       real time, audio and
                                       video
                                       intercommunications
                                       technology.
G9483...............................  Remote in[dash]home      Remote E/M new pt                          99203
                                       visit for the            30mins.
                                       evaluation and
                                       management of a new
                                       patient for use only
                                       in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires these 3 key
                                       components:
                                       A detailed
                                       history;.
                                       A detailed
                                       examination;.
                                       Medical
                                       decision making of low
                                       complexity, furnished
                                       in real time using
                                       interactive audio and
                                       video technology.
                                       Counseling and
                                       coordination of care
                                       with other physicians,
                                       other qualified health
                                       care professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are of moderate
                                       severity. Typically,
                                       30 minutes are spent
                                       with the patient or
                                       family or both via
                                       real time, audio and
                                       video
                                       intercommunications
                                       technology..
G9484...............................  Remote in[dash]home      Remote E/M new pt                          99204
                                       visit for the            45mins.
                                       evaluation and
                                       management of a new
                                       patient for use only
                                       in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires these 3 key
                                       components:
                                       A
                                       comprehensive history;.
                                       A
                                       comprehensive
                                       examination;.
                                       Medical
                                       decision making of
                                       moderate complexity,
                                       furnished in real time
                                       using interactive
                                       audio and video
                                       technology. Counseling
                                       and coordination of
                                       care with other
                                       physicians, other
                                       qualified health care
                                       professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are of moderate to
                                       high severity.
                                       Typically, 45 minutes
                                       are spent with the
                                       patient or family or
                                       both via real time,
                                       audio and video
                                       intercommunications
                                       technology.
G9485...............................  Remote in[dash]home      Remote E/M new pt                          99205
                                       visit for the            60mins.
                                       evaluation and
                                       management of a new
                                       patient for use only
                                       in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires these 3 key
                                       components:
                                       A
                                       comprehensive history;.
                                       A
                                       comprehensive
                                       examination;.
                                       Medical
                                       decision making of
                                       high complexity,
                                       furnished in real time
                                       using interactive
                                       audio and video
                                       technology. Counseling
                                       and coordination of
                                       care with other
                                       physicians, other
                                       qualified health care
                                       professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are of moderate to
                                       high severity.
                                       Typically, 60 minutes
                                       are spent with the
                                       patient or family or
                                       both via real time,
                                       audio and video
                                       intercommunications
                                       technology..
G9486...............................  Remote in[dash]home      Remote E/M est. pt                         99212
                                       visit for the            10mins.
                                       evaluation and
                                       management of an
                                       established patient
                                       for use only in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires at least 2 of
                                       the following 3 key
                                       components:
                                       A problem
                                       focused history;.
                                       A problem
                                       focused examination;.
                                      
                                       Straightforward
                                       medical decision
                                       making, furnished in
                                       real time using
                                       interactive audio and
                                       video technology.
                                       Counseling and
                                       coordination of care
                                       with other physicians,
                                       other qualified health
                                       care professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are self limited or
                                       minor. Typically, 10
                                       minutes are spent with
                                       the patient or family
                                       or both via real time,
                                       audio and video
                                       intercommunications
                                       technology..

[[Page 73452]]

 
G9487...............................  Remote in[dash]home      Remote E/M est. pt                         99213
                                       visit for the            15mins.
                                       evaluation and
                                       management of an
                                       established patient
                                       for use only in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires at least 2 of
                                       the following 3 key
                                       components:
                                       An expanded
                                       problem focused
                                       history;.
                                       An expanded
                                       problem focused
                                       examination;.
                                       Medical
                                       decision making of low
                                       complexity, furnished
                                       in real time using
                                       interactive audio and
                                       video technology.
                                       Counseling and
                                       coordination of care
                                       with other physicians,
                                       other qualified health
                                       care professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are of low to moderate
                                       severity. Typically,
                                       15 minutes are spent
                                       with the patient or
                                       family or both via
                                       real time, audio and
                                       video
                                       intercommunications
                                       technology..
G9488...............................  Remote in[dash]home      Remote E/M est. pt                         99214
                                       visit for the            25mins.
                                       evaluation and
                                       management of an
                                       established patient
                                       for use only in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires at least 2 of
                                       the following 3 key
                                       components:
                                       A detailed
                                       history;.
                                       A detailed
                                       examination;.
                                       Medical
                                       decision making of
                                       moderate complexity,
                                       furnished in real time
                                       using interactive
                                       audio and video
                                       technology. Counseling
                                       and coordination of
                                       care with other
                                       physicians, other
                                       qualified health care
                                       professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are of moderate to
                                       high severity.
                                       Typically, 25 minutes
                                       are spent with the
                                       patient or family or
                                       both via real time,
                                       audio and video
                                       intercommunications
                                       technology.
G9489...............................  Remote in[dash]home      Remote E/M est. pt                         99215
                                       visit for the            40mins.
                                       evaluation and
                                       management of an
                                       established patient
                                       for use only in the
                                       Medicare[dash]approved
                                       CJR model, which
                                       requires at least 2 of
                                       the following 3 key
                                       components:
                                       A
                                       comprehensive history;.
                                       A
                                       comprehensive
                                       examination;.
                                       Medical
                                       decision making of
                                       high complexity,
                                       furnished in real time
                                       using interactive
                                       audio and video
                                       technology. Counseling
                                       and coordination of
                                       care with other
                                       physicians, other
                                       qualified health care
                                       professionals or
                                       agencies are provided
                                       consistent with the
                                       nature of the
                                       problem(s) and the
                                       needs of the patient
                                       or the family or both.
                                       Usually, the
                                       presenting problem(s)
                                       are of moderate to
                                       high severity.
                                       Typically, 40 minutes
                                       are spent with the
                                       patient or family or
                                       both via real time,
                                       audio and video
                                       intercommunications
                                       technology..
----------------------------------------------------------------------------------------------------------------

    With respect to home health services paid under the HH PPS, in the 
proposed rule we emphasized that telehealth visits under this model 
cannot substitute for in-person home health visits per section 
1895(e)(1)(A) of the Act. Furthermore, telehealth services by social 
workers could not be furnished for CJR beneficiaries who are in a home 
health episode of care because medical social services are included as 
home health services per section 1861(m) of the Act and paid for under 
the Medicare HH PPS. However, telehealth services permitted under 
section 1834 of the Act and furnished by physicians or other 
practitioners, specifically physician assistants, nurse practitioners, 
clinical nurse specialists, certified nurse midwives, nurse 
anesthetists, psychologists, and dieticians, could be furnished for CJR 
beneficiaries who are in a home health episode of care. Finally, 
sections 1835(a) and 1814(a) of the Act require that the patient has a 
face-to-face encounter with the certifying physician or an allowed NPP 
working in collaboration with or under the supervision of the 
certifying physician before the certifying physician certifies that the 
patient is eligible for home health services. Under Sec.  
424.22(a)(1)(v), the face-to-face encounter can be performed up to 90 
days prior to the start of home health care or within 30 days after the 
start of home health care. Section 424.22(a)(1)(v)(A) also allows a 
physician, with privileges, who cared for the patient in an acute or 
PAC setting (from which the patient was directly admitted to home 
health) or an allowed NPP working in collaboration with or under the 
supervision of the acute or PAC physician to conduct the face-to-face 
encounter.
    Although sections 1835(a) and 1814(a) of the Act allow the face-to-
face encounter to be performed via telehealth, we did not propose that 
the waiver of the telehealth geographic site requirement for telehealth 
services and the originating site requirement for telehealth services 
furnished in the CJR beneficiary's home or place of residence would 
apply to the face-to-face encounter required as part of the home health 
certification when that encounter is furnished via telehealth. In other 
words, when a face-to-face encounter furnished via telehealth was used 
to meet the requirement for home health certification, the usual 
Medicare

[[Page 73453]]

telehealth rules would apply with respect to geography and eligibility 
of the originating site. We discussed our expectation that this policy 
would not limit CJR beneficiaries' access to medically necessary home 
health services because beneficiaries receiving home health services 
during a CJR episode would have had a face-to-face encounter with 
either the physician or an allowed NPP during their anchor 
hospitalization or a physician or allowed NPP during a PAC facility 
stay prior to discharge directly to home health services.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters recommended that CMS waive additional 
telehealth requirements to allow HHAs, physical therapists, 
occupational therapists, and speech language pathologists to furnish 
telehealth services to CJR model beneficiaries.
    Response: Commenters expressed interest in increasing the types of 
providers and suppliers eligible to deliver telehealth services to CJR 
model beneficiaries; however, we believe it is most appropriate to 
continue to limit the health care professionals who can furnish 
telehealth services under the CJR model to those currently authorized 
to provide telehealth services under the statute, specifically, 
physicians, nurse practitioners, physician assistants, nurse-midwives, 
clinical nurse specialists, certified registered nurse anesthetists, 
clinical psychologists, clinical social workers, and registered 
dieticians or nutrition professionals. Given the services on the 
Medicare-approved telehealth list and CMS's experience with telehealth 
services furnished by currently eligible physicians and practitioners, 
we do not believe it is necessary to increase the types of 
practitioners eligible to provide telehealth services under the CJR 
model. As discussed earlier in this section, we are not adding 
additional types of services to the telehealth list and, therefore, we 
do not see a need to add other types of health care professionals to 
the list of those currently authorized to furnish telehealth services. 
We note that the model is not a test of telehealth services and that 
the proposed telehealth waivers under the CJR model are designed to 
increase the opportunities for care management and coordination for 
this test of episode payment. Finally, we expect that CJR model 
beneficiaries in home health episodes of care will commonly receive in-
home health nursing visits and therapy services by HHAs on a regular 
basis. We note that while we expect the proposed telehealth waivers to 
increase access to services in the home where otherwise beneficiaries 
would not have access to such services, this would not hold true for 
HHAs who typically currently provide services in the home to Medicare 
beneficiaries under existing program rules.
    Comment: Several commenters recommended that CMS permit the 
certification for home health services to occur via telehealth, 
regardless of the geographic location of the beneficiary, as well as at 
the beneficiary's home or place of residence.
    Response: Commenters expressed interest in broadening the 
circumstances in which home health certification may occur via 
telehealth, as discussed previously we do not believe that the 
limitations under current law will lead to access problems for CJR 
model beneficiaries. During a CJR episode most beneficiaries would have 
had a face-to-face encounter with either the physician or an allowed 
NPP during their anchor hospitalization or a physician or allowed NPP 
during a PAC facility stay prior to discharge directly to home health 
services. Therefore, the usual Medicare telehealth rules would apply to 
these CJR beneficiaries with respect to geography and eligibility of 
the originating site.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, without modification, to 
allow telehealth services furnished under the CJR model waiver of 
telehealth requirements to be furnished only by physicians and 
practitioners currently eligible to furnish Medicare-approved 
telehealth services under the MPFS. In addition, the usual Medicare 
rules regarding geography and originating site will continue to apply 
to the face-to-face encounter required for home health certification.
    As we further discussed in the proposed rule, under the proposed 
waiver of the geographic site requirement and originating site 
requirement, all telehealth services would be required to be furnished 
in accordance with all Medicare coverage and payment criteria, and no 
additional payment would be made to cover set-up costs, technology 
purchases, training and education, or other related costs. The facility 
fee paid by Medicare to an originating site for a telehealth service 
would be waived if there is no facility as an originating site (that 
is, the service was originated in the beneficiary's home). Finally, 
providers and suppliers furnishing a telehealth service to a CJR 
beneficiary in his or her home or place of residence during the episode 
would not be permitted to bill for telehealth services that were not 
fully furnished when an inability to provide the intended telehealth 
service is due to technical issues with telecommunications equipment 
required for that service. Beneficiaries would be able to receive 
services furnished in accordance with the telehealth waivers only 
during the CJR LEJR episode.
    The following is a summary of the comments received and our 
response.
    Comment: Several commenters recommended that CMS pay a technology 
fee for telehealth services originating in a model beneficiary's home, 
comparable to the facility originating site fee. The commenters 
recommended that such a fee was necessary to pay the costs of 
technology required in the home for a beneficiary to receive a 
telehealth visit furnished via a real-time interactive 
telecommunications system.
    Response: We appreciate the commenters' perspective on the 
beneficiary's technology needs for telehealth visits. However, we do 
not plan to provide a fee because we believe that in most 
circumstances, the technology can be available to the beneficiary in 
the home if necessary for a telehealth visit without requiring 
additional resources. Many beneficiaries may already have such 
technology in their home, such as a computer with the needed capacity. 
In addition, we expect that clinical staff furnishing visits paid under 
a home health episode of care or providing post-discharge home visits 
will commonly carry such technology that could be used if the timing of 
the telehealth visit is coordinated with the presence of such clinical 
staff in a beneficiary's home. We expect that in some cases, efficient 
and effective care management during an episode may result in closer 
collaboration among treating providers and clinical staff caring for 
CJR beneficiaries such that such coordinated visits may occur. As 
discussed earlier in this section, we believe that it would be rare for 
a practitioner to conduct as complex and detailed a service as a level 
4 or 5 E/M home visit via telehealth for CJR beneficiaries in LEJR 
episodes without licensed clinical staff support in the home. Finally, 
we note that as discussed in section III.C.10.a.(2) of this final rule, 
participant hospitals are permitted to furnish certain beneficiary 
incentives to CJR beneficiaries, including items of technology that 
could be used for a beneficiary telehealth visit.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposal, without

[[Page 73454]]

modification, to waive the facility fee for telehealth services 
furnished in a beneficiary's home or place of residence under the CJR 
model.
    Summary of Final Decisions: For CJR model beneficiaries, with the 
exception of the existing geographic site requirement for a face-to-
face encounter for home health certification, we are finalizing our 
proposal, without modification, to waive the geographic site 
requirements of section 1834(m)(4)(C)(i)(I) through (III) of the Act 
that limit telehealth payment to services furnished within specific 
types of geographic areas or in an entity participating in a federal 
telemedicine demonstration project approved as of December 31, 2000. 
Any service on the list of Medicare-approved telehealth services and 
reported on a claim with an ICD-10-CM principal diagnosis code that is 
not excluded from the CJR episode definition (see section III.B.2. of 
this final rule) can be furnished to a CJR beneficiary, regardless of 
the beneficiary's geographic location. For CJR model beneficiaries, 
with the exception of the existing originating site requirement for a 
face-to-face encounter for home health certification, we are also 
finalizing our proposal, without modification, to waive the originating 
site requirements of section 1834(m)(4)(C)(ii)(I) through (VIII) of the 
Act that specify the particular sites at which the eligible telehealth 
individual must be located at the time the service is furnished via a 
telecommunications system only when telehealth services are being 
furnished in the CJR beneficiary's home or place of residence during 
the episode. Any service on the list of Medicare-approved telehealth 
services and reported on a claim with an ICD-10-CM principal diagnosis 
code that is not excluded from the CJR episode definition (see section 
III.B.2. of this final rule) can be furnished to a CJR beneficiary in 
his or her home or place of residence, unless the service's HCPCS code 
descriptor precludes delivering the service in the home or place of 
residence.
    We are also finalizing our proposal, without modification, to 
create 9 HCPCS G-codes to report home telehealth E/M visits furnished 
under the CJR waiver of telehealth requirements as displayed in Table 
27. These codes will be payable for CJR model beneficiaries beginning 
April 1, 2016. We are also waiving the requirement that the same 
payment made for comparable office/outpatient visits be made to 
eligible distant site practitioners for services reported with the new 
HCPCS G-codes that we are creating for the CJR model to reflect that 
these CJR model telehealth home visit services do not require 
significant practice expenses. In addition, we are finalizing our 
proposal, without modification, that if a level 4 or 5 home telehealth 
visit is furnished and a post-discharge home visit is not billed on the 
same claim with the same date of service or the beneficiary is not in a 
period of authorized home health care, we will require that the 
physician or NPP furnishing the home telehealth visit document the 
presence of auxiliary licensed clinical staff in the home or include an 
explanation in the medical record as to the specific circumstances 
precluding the need for auxiliary staff for the specific telehealth 
visit. Finally, providers and suppliers furnishing a telehealth service 
to a CJR beneficiary in his or her home or place of residence during 
the episode will not be permitted to bill for telehealth services that 
were not fully furnished when an inability to provide the intended 
telehealth service is due to technical issues with telecommunications 
equipment required for that service.
    Under the waiver of the geographic site requirement and originating 
site requirement for the CJR model, we are finalizing our proposal, 
without modification, that no additional payment will be made to cover 
set-up costs, technology purchases, training and education, or other 
related costs. The facility fee paid by Medicare to an originating site 
for a telehealth service will be waived if there is no facility as an 
originating site (that is, the service is originated in the 
beneficiary's home).
    All other requirements for Medicare coverage and payment of 
telehealth services not otherwise waived in this final rule will 
continue to apply, including the list of services approved to be 
furnished by telehealth and the eligible distant site practitioners. 
Beneficiaries can receive services furnished under the telehealth 
waivers only during the CJR LEJR episode.
    The final telehealth policies are set forth at Sec.  510.605. We 
have revised Sec.  510.605(a) and (b) to clarify that the telehealth 
waivers do not apply to the requirements for a face-to-face encounter 
for home health certification. We have revised Sec.  510.605(c) to 
specify the two waivers of selected payment provisions, moving the 
waiver of the facility fee if the telehealth service is provided in the 
beneficiary's home from proposed Sec.  510.605(b)(2) to Sec.  
510.605(c)(1) and adding Sec.  510.605(c)(2) for the waiver of the 
payment requirements under section 1834(m)(2)(B) for the in-home 
telehealth visit HCPCS G-codes created for the CJR model. We have 
renumbered proposed Sec.  510.605(c) to new (d).
    We note that we plan to monitor patterns of utilization of 
telehealth services under CJR to monitor for overutilization or 
reductions in medically necessary care, and significant reductions in 
face-to-face visits with physicians and NPPs. We will specifically 
monitor the distribution of new telehealth home visits, as we 
anticipate greater use of lower level telehealth visits than higher 
level telehealth visits for CJR model beneficiaries. Given our concern 
that auxiliary clinical staff be present for level 4 and 5 visits 
furnished remotely, we will also monitor whether these visits are 
billed on the same claim with the same date of service as a post-
discharge home visit or during a period of authorized home health care, 
and, if neither of the prior two conditions are met, whether our final 
requirement that the physician or NPP document the presence of 
auxiliary licensed clinical staff in the home or include an explanation 
in the medical record as to the specific circumstances precluding the 
need for auxiliary staff for the specific visit is met.
d. SNF 3-Day Rule
    In the proposed rule, we discussed our expectation that the CJR 
model would encourage participant hospitals and their provider and 
supplier partners to redesign care for LEJR episodes across the 
continuum of care extending to 90 days post-discharge from the anchor 
hospitalization. We stated our belief that hospitals would seek to 
develop and refine the most efficient care pathways so beneficiaries 
receive the lowest intensity, clinically appropriate care at each point 
in time throughout the episode. We understand that in some cases, 
particularly younger beneficiaries undergoing total knee replacement, 
certain beneficiaries receiving LEJR procedures may be appropriately 
discharged from the acute care hospital to a SNF in less than the 3 
days required under the Medicare program for coverage of the SNF stay. 
While total knee arthroplasty (TKA) remains payable by Medicare to the 
hospital only when furnished to hospital inpatients, we have heard from 
some stakeholders that these procedures may be safely furnished to 
hospital outpatients with a hospital outpatient department stay of only 
24 hours. Finally, we noted that the current geometric mean hospital 
length of stay for LEJR procedures for beneficiaries without major 
complications or comorbidities (MS-DRG 470) is only 3 days and that for 
MS-DRG 469 for beneficiaries with such complications or comorbidities 
is 6 days. Thus, in the

[[Page 73455]]

proposed rule we stated our belief that it is possible that hospitals 
working to increase episode efficiency may identify some CJR 
beneficiaries who could be appropriately discharged from the hospital 
to a SNF in less than 3 days, but that early discharge would eliminate 
Medicare coverage for the SNF stay unless a waiver of Medicare 
requirements were provided under CJR.
    The Medicare SNF benefit is for beneficiaries who require a short-
term intensive stay in a SNF, requiring skilled nursing or skilled 
rehabilitation care or both. In accordance with section 1861(i) of the 
Act, beneficiaries must have a prior inpatient hospital stay of no 
fewer than 3-consecutive days in order to be eligible for Medicare 
coverage of inpatient SNF care. We refer to this as the SNF 3-day rule. 
We note that the SNF 3-day rule has been waived or is not a requirement 
for Medicare SNF coverage under other CMS models or programs, including 
BPCI Model 2. BPCI Model 2 awardees that request and are approved for 
the waiver can discharge Model 2 beneficiaries in less than 3 days from 
an anchor hospital stay to a SNF, where services are covered under 
Medicare Part A as long as all other coverage requirements for such 
services are satisfied.
    Currently, FFS Medicare beneficiary discharge patterns to a SNF 
immediately following hospitalization for an LEJR procedure vary 
regionally across the country, from a low of approximately 10 percent 
of Medicare beneficiaries to a high of approximately 85 percent.\50\ 
Additionally, a study of Medicare beneficiaries has shown that over the 
period of time between 1991 and 2008, as the inpatient hospital length-
of-stay for total hip arthroplasty (THA) decreased from an average of 
9.1 days to an average of 3.7 days, the average percentage of primary 
THA patients discharged directly to home declined from 68 percent to 48 
percent while the proportion discharged directly to skilled care 
(primarily SNFs) increased from 17.8 percent to 34.3 percent,\51\ 
reflecting that nationally there has been increasing SNF utilization 
over almost two decades for beneficiaries following discharge from a 
hospitalization for primary THA. Similar to the proposed CJR payment 
policies that we discuss in section III.C. of this final rule, which 
would require participating CJR hospitals to repay Medicare for excess 
episode spending beginning in performance year 2, participants in BPCI 
Model 2 assume financial responsibility for episode spending for 
beneficiaries included in a Model 2 episode. Episode payment models 
like BPCI and CJR have the potential to mitigate the existing 
incentives under the Medicare program to overuse SNF benefits for 
beneficiaries, as well as to furnish many fragmented services that do 
not reflect significant coordinated attention to and management of 
complications following hospital discharge. The removal of these 
incentives in an episode payment model lays the groundwork for offering 
participant hospitals greater flexibility around the parameters that 
determine SNF stay coverage. BPCI participants considering the early 
discharge of a beneficiary in accordance with the waiver during a Model 
2 episode must evaluate whether early discharge to a SNF is clinically 
appropriate and SNF services are medically necessary. Next, they must 
balance that determination and the potential benefits to the hospital 
in the form of internal cost savings due to greater financial 
efficiency with the understanding that a subsequent hospital 
readmission, attributable to premature discharge or low quality SNF 
care, could substantially increase episode spending while also 
resulting in poorer quality of care for the beneficiary. Furthermore, 
early hospital discharge for a beneficiary who would otherwise not 
require a SNF stay (that is, the beneficiary has no identified skilled 
nursing or rehabilitation need that cannot be provided on an outpatient 
basis) following a hospital stay of typical length does not improve 
episode efficiency under an episode payment model such as BPCI or CJR.
---------------------------------------------------------------------------

    \50\ ``Analysis of Medicare claims with admission dates from 
July 1, 2013 through June 30, 2014 accessed through the Chronic 
Conditions Warehouse.''
    \51\ Cram P, Lu X, Kaboli PJ, et al. Clinical Characteristics 
and Outcomes of Medicare Patients Undergoing Total Hip Arthroplasty, 
1991-2008. JAMA. 2011;305(15):1560-1567.
---------------------------------------------------------------------------

    Because of the potential benefits we see for participating CJR 
hospitals, their provider partners, and beneficiaries, we proposed to 
waive in certain instances the SNF 3-day rule for coverage of a SNF 
stay following the anchor hospitalization under CJR beginning in 
performance year 2 of the model, when we proposed that repayment 
responsibility for actual episode spending that exceeds the target 
price would begin. We proposed to use our authority under section 1115A 
of the Act with respect to certain SNFs that furnish Medicare Part A 
post-hospital extended care services to beneficiaries included in an 
episode in the CJR model. We stated our belief that this waiver is 
necessary to the model test so that participant hospitals can redesign 
care throughout the episode continuum of care extending to 90 days 
post-discharge from the anchor hospitalization in order to maximize 
quality and hospital financial efficiency, as well as reduce episode 
spending under Medicare. However, we did not propose to waive this 
requirement in performance year 1, when we did not propose that 
participating hospitals would be responsible for excess actual episode 
spending. In the proposed rule, we stated our belief that there is some 
potential for early hospital discharge followed by a SNF stay to 
increase actual episode spending over historical patterns unless 
participant hospitals are particularly mindful of this potential 
unintended consequence. Without participant hospital repayment 
responsibility in performance year 1, we were concerned that Medicare 
would be at full risk under the model for increased episode spending 
because, without a financial incentive to closely manage care, 
hospitals might be more likely to discharge beneficiaries to SNFs 
early, leading to increased episode spending for which the hospital 
would bear no responsibility. Beginning in performance year 2 and 
continuing through performance year 5, we proposed to waive the SNF 3-
day rule because we proposed that participant hospitals would bear 
responsibility (capped at the proposed stop-loss limit described in 
section III.C.8. of this final rule) for excess episode actual 
spending, thereby providing a strong incentive in those years for 
participant hospitals to redesign care with both quality and efficiency 
outcomes as priorities. All other Medicare rules for coverage and 
payment of Part A-covered SNF services would continue to apply to CJR 
beneficiaries in all performance years of the model.
    In addition, because the average length of stay for Medicare 
beneficiaries hospitalized for LEJR procedures without major 
complications or comorbidities is already relatively short at 3 days, 
and in view of our concerns over protecting immediate CJR beneficiary 
safety and optimizing health outcomes, we proposed to require that 
participant hospitals may only discharge a CJR beneficiary under this 
proposed waiver of the SNF 3-day rule to a SNF with an overall rating 
of three stars or better by CMS based on information publicly available 
at the time of hospital discharge. Problem areas due to early hospital 
discharge may not be discovered through model monitoring and evaluation 
activities until well after the episode has concluded, and the 
potential for later negative findings alone may not afford sufficient 
beneficiary protections. CMS

[[Page 73456]]

created a Five-Star Quality Rating System for SNFs to allow SNFs to be 
compared more easily and to help identify areas of concerning SNF 
performance. The Nursing Home Compare Web site (www.medicare.gov/NursingHomeCompare/) gives each SNF an overall rating of between 1 and 
5 stars. SNFs with 5 stars are considered to have much above average 
quality, and SNFs with one star are considered to have quality much 
below average, while SNFs with three stars are considered to have 
average quality. Published SNF ratings include distinct ratings of 
health inspection, staffing, and quality measures, with ratings for 
each of the three sources combined to calculate an overall rating. 
These areas of assessment are all relevant to the quality of SNF care 
following discharge from the anchor hospitalization initiating a CJR 
episode, especially if that discharge occurs after less than three days 
in the hospital. A study of the clinical factors that kept patients in 
a Danish hospital unit dedicated to discharge in three days or fewer 
following total hip and knee arthroscopy procedures found that that 
pain, dizziness, and general weakness were the main clinical reasons 
for longer hospitalization, as well as problems with personal care and 
walking 70 meters with crutches.\52\ Medicare beneficiaries discharged 
from the hospital to a SNF in less than three days may be at higher 
risk of these uncomfortable symptoms and disabling functional problems 
not being fully resolved at hospital discharge, although we expected 
that under the CJR episode payment model participant hospitals would 
have a strong interest in ensuring appropriate discharge timing so that 
hospital readmissions and complications would be minimized. Therefore, 
because of the potential greater risks following early inpatient 
hospital discharge, in the proposed rule we stated our belief that it 
would be appropriate for all CJR beneficiaries discharged from the 
participant hospital to a SNF in less than 3 days be admitted to a SNF 
that has demonstrated that it is capable of providing quality care to 
patients with significant unresolved post-surgical symptoms and 
problems. We believed such a SNF would need to provide care of at least 
average overall quality, which would be restated by an overall rating 
of three-stars or better.
---------------------------------------------------------------------------

    \52\ Husted H, Lunn TH, Troelsen A, Gaarm-Larsen L, Kristensen 
BB, Kehlet H. Why still in hospital after fast-track hip and knee 
arthroplasty? Acta Orthopaedica. 2011; 82(6)679-684.
---------------------------------------------------------------------------

    We proposed that the waiver be available for the CJR beneficiary's 
care. The SNF would insert a Treatment Authorization Code on the claim 
for a beneficiary in the model where the SNF seeks to the use the 
waiver. This process would promote coordination between the SNF and the 
participant hospital, as the SNF would need to be in close 
communication with the participant hospital to ensure that the 
beneficiary is in the model at the time the waiver is used. We proposed 
that where the beneficiary would be eligible for inclusion in a CJR 
episode of care at the time of hospital discharge, use of the waiver 
would be permitted where it is medically necessary and appropriate to 
discharge the beneficiary to a SNF prior to a 3-day inpatient stay.
    Beneficiaries would be eligible to receive services furnished under 
the 3-day rule waiver only during the CJR episode. In the proposed 
rule, we described our plan to monitor patterns of SNF utilization 
under CJR, particularly with respect to hospital discharge in less than 
3 days to a SNF, to ensure that beneficiaries are not being discharged 
prematurely to SNFs and that they are able to exercise their freedom of 
choice without patient steering. We sought comment on our proposal to 
waive the SNF 3-day stay rule for stays in SNFs rated overall as three 
stars or better following discharge from the anchor hospitalization in 
CJR episodes.
    The following is a summary of the comments received and our 
responses.
    Comment: Most commenters expressed strong support for CMS's 
proposal to waive the SNF 3-day rule to allow CJR model beneficiaries 
to be discharged to a SNF after less than a 3-day inpatient hospital 
stay where such a discharge is clinically appropriate and medical 
necessary. These commenters stated that this flexibility would be very 
important to participant hospitals developing partnerships with PAC 
providers to redesign care for LEJR episodes for CJR model 
beneficiaries. The commenters agreed with CMS that participant 
hospitals would be incentivized to use this waiver judiciously because 
they will be actively managing care with their eye on the approach of 
downside risk. A commenter estimated that approximately 20 percent of 
elective joint replacement patients would need to be discharged to a 
SNF and would be able to do so safely after fewer than 3 inpatient 
hospital days. A small number of commenters opposed the waiver 
altogether because of concerns that, without sufficient protections to 
ensure beneficiaries' readiness for early hospital discharge, bundled 
payment could encourage premature hospital discharge so hospitals could 
reduce their internal costs for the anchor hospitalization.
    Given the importance of this waiver to care redesign for LEJR 
episodes, many commenters recommended that CMS implement the waiver in 
the first performance year of the model, even though CMS proposed that 
hospitals would have no repayment responsibility in that year. The 
commenters asserted that participant hospitals would be focused in the 
first year of the model on creating and implementing episode care 
processes and procedures in order to achieve successful quality and 
episode spending performance. These activities would include 
establishing or reviewing discharge planning protocols and clinical 
pathways. The commenters stated that if the waiver were unavailable 
until performance year 2, hospitals would have to undertake many of 
these activities again in the second performance year, creating 
inefficiency and unnecessary administrative burden.
    Response: Commenters supported our proposal of the SNF 3-day rule 
waiver to allow CJR model beneficiaries to be discharged to a SNF with 
an overall rating of three stars or better after less than a 3-day 
inpatient hospital stay. As we discussed in the proposed rule, an 
episode payment model like CJR has the potential to mitigate the 
existing incentives under the Medicare program to overuse SNF benefits 
for beneficiaries, as well as to furnish many fragmented services that 
do not reflect significant coordinated attention to and management of 
complications following hospital discharge. The reduction of these 
incentives in an episode payment model lays the groundwork for offering 
participant hospitals greater flexibility around the parameters that 
determine SNF stay coverage. We understand from many current BPCI Model 
2 participants engaged in LEJR episodes that this waiver plays an 
important role in their care redesign efforts to streamline and improve 
the quality of care, as they work closely with their SNF partners. 
While we appreciate the concerns of those commenters identifying the 
need for sufficient protections for beneficiaries, we believe that our 
proposal to limit use of the SNF 3-day stay rule waiver to discharges 
of beneficiaries to SNFs with an overall rating of three stars or 
better, as discussed later in this section, provides sufficient 
protection against premature hospital discharge, especially in the 
context of the financial and quality incentives under the model itself.
    Regarding the commenters' request to make the SNF 3-day stay rule 
waiver available to participant hospitals in the

[[Page 73457]]

first year of the model, we remain concerned that without participant 
hospital repayment responsibility in performance year 1, hospitals may 
be more likely to discharge beneficiaries to SNFs early leading to 
increased episode spending for which the hospital would bear no 
responsibility. Given that we are delaying the start date of the model 
to April 1, 2016 as discussed in section III.C.2. of this final rule, 
we believe hospitals will be engaged in care redesign through most of 
the 9 months of the shortened performance year 1 and, knowing the 
waiver will be available in performance year 2, can plan care processes 
with the appropriate use of the waiver in mind so no duplication of 
hospital effort will be necessary. Most commenters requesting a delayed 
start date for the model provided extensive information about the 
necessary and lengthy preparatory activities required for success under 
the CJR model, such as obtaining and analyzing CMS data to identify 
areas for performance improvement, establishing systems to track 
patients across the continuum of care, and forming the necessary 
financial arrangements. Many commenters estimated that this work would 
take 6 to 12 months or more. These commenters suggested that under our 
proposed start date of January 1, 2016, the participant hospitals 
moving into performance year 2 would likely have been able to complete 
only limited work toward restructuring care. Thus, based on our final 
timeline for the model performance years, the lack of hospital 
repayment responsibility in performance year 1, and our understanding 
of the work that will need to be done by participant hospitals to 
redesign care over the first performance year, we do not believe it is 
necessary or appropriate to make the SNF 3-day stay rule waiver 
available in performance year 1 in order to test the CJR model.
    Comment: Many commenters requested that CMS make the SNF 3-day stay 
rule available for all medically appropriate CJR beneficiary discharges 
in less than 3 days from the anchor hospitalization, regardless of the 
star rating of the admitting SNF. The commenters asserted that such a 
limitation on the SNFs where a beneficiary could be discharged would 
limit beneficiary freedom of choice, despite CMS's assertions elsewhere 
in the rule that beneficiaries would retain freedom of choice about all 
providers and suppliers. Several commenters questioned what would 
happen if a beneficiary chose a SNF rated two stars or lower and was 
discharged in less than 3 days.
    The commenters opposing the proposal to allow the waiver to be used 
only for CJR model beneficiaries' discharges to SNFs with an overall 
rating of three stars or better recommended that this proposal would 
create two tiers of separate and unequal care because the percentage of 
SNFs that meet this requirement in the selected MSAs was so variable. 
The commenters asserted that participant hospitals located in those 
MSAs with an adequate supply of three star or greater SNFs, such as 
where half or more of the SNFs meet the quality requirement, would be 
able to establish flexible, patient-centered care pathways, where 
participant hospitals located in those MSAs with an inadequate supply 
of three star or better SNFs, such as where less than half of the SNFs 
meet the quality requirement, would need to create more restrictive 
care pathways driven by CMS's SNF overall star rating requirements. 
Some commenters estimated that the variation in the percentage of 
qualifying SNFs in the selected MSAs was 20 percent to 80 percent, and 
recommended that this variation created an unlevel playing field for 
hospitals required to participate in the CJR model.
    A number of commenters acknowledged the quality rationale for CMS's 
proposal but stated arguments about why the SNF overall star rating was 
not appropriate for use as the quality requirement for waiver use. 
These commenters asserted that the overall star rating provides little 
information about the quality of care for short stay residents, the 
category that CJR model beneficiaries would fall into, because few of 
the assessment questions would apply to them. Some commenters pointed 
out that the current star rating does not incorporate important 
measures of quality of care for LEJR episode beneficiaries, such as 
function, the ability to ambulate, hospital readmissions, and emergency 
department utilization. Other commenters believe that periodic 
recalibration activities by CMS that alter SNF scores could lead high 
quality SNFs working in close partnership with CJR participant 
hospitals to suddenly become ineligible to treat model beneficiaries 
under the waiver. These commenters described significant month-to-month 
fluctuations in SNF overall star ratings for individual SNFs that could 
be highly disruptive to stable care redesign under the CJR model. 
Several commenters suggested that SNFs with embedded specialty 
expertise, such as behavioral health, might be unable to admit CJR 
model beneficiaries who required that specialized SNF expertise.
    Some commenters recommended that CMS provide accommodation for 
those MSAs with low percentages of qualifying SNFs, but did not specify 
the parameters that should accompany such accommodation. Other 
commenters recommended that CMS deem all hospital-owned SNFs eligible 
for the waiver, regardless of their star rating, or beneficiaries may 
need to leave their home geographic area. A commenter pointed out that 
swing beds in CAHs that may function as PAC providers do not have star 
ratings and, under CMS's proposal, would therefore be ineligible for 
payment under the SNF 3-day rule waiver for CJR model beneficiaries. 
The commenter suggested that CMS waive the proposed three star or 
better requirement when the PAC provider is a CAH swing bed, because 
these PAC providers can be an excellent choice for rural beneficiaries 
following an LEJR procedure due to the available resources in the CAH 
and the proximity of the facility to beneficiary's home.
    A number of commenters recommended that CMS modify its proposal to 
base SNF eligibility on the overall star rating to instead base SNF 
eligibility on a rating of three stars or better on two of the three 
criteria used in the overall rating, specifically quality measures and 
staffing. These commenters recommended that these two criteria are 
meaningful for LEJR episode patients, while including the state survey 
criterion (the third criterion in the overall star rating) would lead 
to large facilities being disadvantaged because state surveyors would 
be more likely to find deficiencies based on larger numbers of 
residents. The commenters asserted that different states and different 
surveyors could lead to unpredictable results on the health inspections 
criterion for various SNFs that would unfairly affect the overall star 
rating and, therefore, the ability of SNFs to accept CJR model 
beneficiaries under the waiver. However, several other commenters 
pointed out that two of the three criteria used in the SNF overall star 
rating are self-reported by SNFs without verification, observing that 
only the annual inspection is derived from assessment by an independent 
observer.
    Several commenters observed that the BPCI SNF quality requirement 
for use of the waiver is less stringent. BPCI Model 2 Awardees are 
approved to use the waiver for all of the Awardee's BPCI Model 2 
beneficiaries based on their submission of partner SNFs each quarter, 
where the majority of those

[[Page 73458]]

SNFs had a three star or better overall rating for 7 of the 12 months 
based on the most recent SNF star data. Once approved, however, there 
is no requirement that a BPCI beneficiary discharged under the waiver 
actually go to one of the SNFs on the partner list, thereby ensuring 
beneficiary freedom of choice. The commenters recommended that CMS 
adopt a similar policy for the CJR model if CMS believes quality 
criteria must be applied.
    Response: Commenters expressed concern about our proposal to limit 
the use of the waiver for CJR model beneficiaries to SNFs with an 
overall star rating of three stars or better. We reiterate that this 
proposal applies only to circumstances where the beneficiary is 
medically appropriate for discharge and requires a SNF stay after less 
than a 3-day inpatient hospital stay. Medicare will continue to cover 
SNF stays for CJR model beneficiaries who require SNF care and remain 
in the hospital 3 days or longer under all existing rules for Medicare 
coverage and payment of Part A-covered SNF services, and these rules do 
not include a star rating requirement. In this way, the CJR model 
waiver of the SNF 3-day stay rule is an extension of existing coverage 
for a Part A-covered SNF stay, and is not a limit on it.
    As we stated in the proposed rule, we continue to believe that 
because of the potential risk of premature hospital discharge before a 
beneficiary is medically stable and of care stinting that may result 
from the financial incentives under the CJR model to reduce actual 
episode spending and generate hospital internal cost savings, we need 
to ensure that when a CJR beneficiary is discharged to a SNF before 
having stayed in the hospital for a qualifying 3-day or longer stay, 
discharges are to SNFs that provide care of at least average overall 
quality. Balancing beneficiary protection with the potential for 
participant hospitals to create patient-centered care pathways that 
improve quality and episode efficiency, we believe it is most 
appropriate for all CJR beneficiaries discharged from the participant 
hospital to a SNF in less than 3 days be admitted to a SNF that has 
demonstrated that it is capable of providing quality care to patients 
with significant unresolved post-surgical symptoms and problems. Thus, 
we believe that establishing a quality performance requirement for SNFs 
accepting each CJR beneficiary under the waiver is important, 
especially given the geographic distribution and variety of hospitals 
included in the CJR model, as well as the estimate from a commenter of 
the significant number of model beneficiaries (20 percent of elective 
THA and TKA model beneficiaries) that could be eligible for early 
hospital discharge to a SNF.
    We do not believe that adopting the BPCI Model 2 SNF 3-day stay 
waiver policy in totality is appropriate. Under BPCI Model 2, so long 
as the participant identifies sufficient partnerships with SNFs with an 
overall rating of three stars or better, then the 3-day stay 
requirement is waived for that participant's discharges of BPCI model 
beneficiaries, even if beneficiaries are admitted to SNFs with an 
overall star rating of fewer than three stars. In other words, the 3-
day stay rule waiver applies at the level of the financially 
responsible entity. Moreover, BPCI is a voluntary model where 
participants sign participation agreements with CMS after having 
assessed the opportunities under the model and chosen to participate, 
and can select among 48 different clinical episodes. These design 
features of BPCI reduce the potential risks of decreased access to care 
and care stinting. In contrast, under the CJR model which requires 
participation of substantially all IPPS hospitals in the selected MSAs, 
where the participant hospitals have varying levels of readiness to 
develop the care pathways and partnerships necessary for high quality 
and cost performance under an episode payment model, we believe it is 
necessary and appropriate to apply the waiver at the SNF level. That 
is, we believe that in the CJR model, it is necessary to ensure that 
every CJR beneficiary discharged to a covered SNF stay after less than 
a 3-day anchor hospitalization is discharged to a SNF that provides 
care of at least average quality.
    In terms of establishing the quality requirement for SNFs accepting 
CJR model beneficiaries under the waiver, while we appreciate the 
variation in qualifying SNFs under our proposal across the 
participating MSAs, we need to balance the goal of improved efficiency 
under an episode payment model through additional access to a covered 
SNF stay after an anchor hospitalization of less than 3 days with 
protecting beneficiaries from the risks of care stinting and premature 
discharge from the hospital that may result from the financial 
incentives of episode payment. We estimate that although the national 
average percentage of SNFs rated three stars or better is greater than 
60 percent, the percentage of qualifying SNFs in the MSAs selected for 
this model range from 22 percent to over 80 percent. However, we note 
that every MSA does have at least one SNF that would qualify for the 
waiver under our proposal and, therefore, all CJR model beneficiaries 
would have access to at least one SNF in the MSA of the participant 
hospital that meets the SNF overall star rating requirement for the 
waiver.
    We believe it is appropriate to restrict access to the waiver for 
beneficiaries who are eligible for discharge to a medically necessary 
SNF stay after less than a 3-day anchor hospitalization to discharge to 
a SNF with an overall star rating of three stars or better in order to 
ensure SNF quality and, therefore, protect the beneficiary from 
potential harm that could arise from the financial incentives of the 
CJR episode payment model. We believe we need to balance the importance 
of beneficiary access to the waiver with our concerns about sufficient 
beneficiary protections under this innovative episode payment model 
that otherwise alters the rules under which Medicare pays hospitals and 
allows different financial arrangements among providers and suppliers. 
Problem areas due to early hospital discharge may not be discovered 
through model monitoring and evaluation activities until well after the 
episode has concluded, and we do not believe the potential for later 
negative findings alone provides sufficient beneficiary protections. 
Thus, we believe it is appropriate to establish a quality requirement 
for SNFs accepting patients for Part A-covered stays under the waiver, 
and believe that participant hospitals will need to convey all relevant 
information to CJR model beneficiaries who require SNF stays and are 
candidates for discharge from the anchor hospitalization in less than 3 
days. If a CJR beneficiary is discharged to a SNF with an overall 
rating of two stars or less without a preceding 3-day anchor inpatient 
hospital stay, the SNF stay will not be covered under Medicare Part A, 
consistent with existing Medicare rules. However, we note that imposing 
conditions upon a waiver that, in effect, provides for additional 
coverage of certain SNF stays is not the same as restricting access to 
certain SNFs. We are not restricting beneficiary choice of SNFs. We 
believe it is important for beneficiaries to have unrestricted choice 
of providers under this model as well as access to SNFs with 
appropriate specialty expertise or located in their immediate 
community. We refer readers to section III.F.2. of this final rule for 
further discussion of the beneficiary choice and notification issues 
under this model, including their applicability to model beneficiaries 
who may be discharged in less than 3 days to a SNF.

[[Page 73459]]

    Finally, for the reasons previously discussed regarding our need to 
balance access to the waiver with beneficiary protections, we are not 
making any exceptions to the overall star rating requirement for PAC 
providers without a star rating or hospital-owned SNFs. We note that 
all existing Medicare program rules will continue to apply to these 
providers regarding Part A-covered SNF stays, and CJR model 
beneficiaries will continue to be able to be discharged to these PAC 
providers for a Medicare-covered stay as long as the preceding 
inpatient hospital stay extends at least 3 days.
    We appreciate the suggestions of commenters regarding alternatives 
to using the SNF overall star rating to determine the eligibility of a 
SNF to be paid for CJR model beneficiaries under the waiver based on 
the quality of SNF care. However, we continue to believe that SNF 
overall star ratings reflect important differences in quality among 
SNFs that are applicable to care for CJR model beneficiaries recovering 
after LEJR surgery. CMS rates nursing homes on three categories: 
Results from onsite inspections by trained surveyors, performance on 
certain quality measures, and levels of staffing. We use these three 
categories to create an overall star rating, which balances facility-
reported information with independent observation. While consumers can 
see and focus on any of the three individual categories, we believe for 
purposes of this model that the overall star rating that incorporates 
all three categories of SNF quality performance in an overall rating is 
the most appropriate choice to determine SNF eligibility for use of the 
waiver under the CJR model, based on the SNF's record of average or 
better care as reflected in the most comprehensive SNF quality rating 
that takes into account all categories of information about SNF 
quality.
    We acknowledge the disruption to partnerships among hospital 
participants and SNFs that may occur due to the potential for month-to-
month changes in a SNF's quality rating and periodic CMS recalibration. 
We understand the substantial effort necessary for provider 
collaboration in care redesign and do not want the SNF 3-day stay 
waiver policies of the CJR model to unnecessarily disrupt or hamper 
these partnerships. We proposed to require that participant hospitals 
may only discharge a CJR beneficiary under the proposed waiver of the 
SNF 3-day rule to a qualified SNF with an overall rating of three stars 
or better by CMS based on information publicly available at the time of 
hospital discharge. However, in order to create more stability in our 
determination of SNF eligibility based on a pattern of quality 
performance, and in response to comments, we are modifying our 
proposal. Under our final policy, we will determine a SNF's 
qualification for payment under the CJR model waiver based on an 
overall star rating of three stars or better for at least 7 of the 12 
preceding months according to the most recent star rating data 
available for the quarter in which the CJR beneficiary's admission to 
the SNF occurs. Specifically, we will prepare and make publicly 
available a list of qualified SNFs for each calendar quarter of the CJR 
model performance years, based on our examination of the most recent 
rolling 12-month period of SNF overall star ratings, and the waiver 
will apply for admissions to SNFs on our list during the relevant 
calendar quarter, assuming all other requirements for the waiver are 
met as discussed in this final rule. The use of such a list to 
determine qualified SNFs who are eligible for payment under the waiver 
will facilitate the ease of administration of the policy through CMS's 
shared systems, as well as ensure a common understanding among 
participant hospitals, SNFs, CJR model beneficiaries and other 
providers and suppliers about the specific SNFs who are qualified for 
Medicare Part A payment under the waiver at any given time in the model 
performance period.
    While we will be using the pattern of SNF quality performance 
reflected over a rolling 12-month period to qualify SNFs for the 3-day 
stay waiver under the CJR model, similar to our examination of 12 
months of SNF overall star ratings for BPCI partner SNFs, in contrast 
to BPCI Model 2, the CJR model waiver will only permit a Part A-covered 
SNF stay if the CJR beneficiary receives care at a qualified SNF, 
defined as a SNF that meets our quality requirements as determined by 
its inclusion on the applicable quarterly list of qualified SNFs at the 
time of the CJR beneficiary's admission to that SNF. In this regard, 
our standard under the CJR model is more stringent than under BPCI 
Model 2, in order to provide additional beneficiary protections under 
this model that includes substantially all IPPS hospitals in 67 MSAs, 
rather than Awardees participating in a voluntary model such as BPCI. 
As discussed earlier in this section, we believe that stronger 
beneficiary protections under the CJR model are necessary due to the 
required, rather than voluntary, hospital participation in the model, 
which will include hospitals at varying stages of readiness for 
engagement in the care redesign and partnerships necessary for high 
quality and cost performance under episode payment.
    We expect that the most recent SNF quality data will lag the 
admission to the SNF under the CJR by several months, at a minimum. As 
under BPCI Model 2, we will update our determination of SNFs that 
qualify for the CJR model waiver every quarter, to ensure that we 
regularly incorporate updated SNF star ratings reflective of the most 
recent SNF quality performance into our determinations of SNF 
eligibility to admit CJR model beneficiaries under the waiver. To 
minimize any confusion about SNF qualification for participant 
hospitals and SNFs, we will post to the CMS Web site prior to the 
beginning of each quarter the list of qualified SNFs who may use the 
waiver for admissions of CJR model beneficiaries with less than a 3-day 
anchor hospitalization. We believe the use of a rolling 12-month period 
to assess SNF qualification based on the pattern of overall star 
ratings appropriately balances our interest in ensuring SNF quality for 
a beneficiary during a timeframe that is reasonably close to the CJR 
beneficiary's admission to the SNF, with our interest in encouraging 
stable, effective arrangements between SNFs that furnish high quality 
care and participant hospitals in the CJR model.
    Comment: Several commenters requested clarification about whether 
the waiver of the SNF 3-day stay rule would only apply to those CJR 
model beneficiaries discharged in less than 3 days directly from the 
anchor hospitalization to a SNF or whether a beneficiary who was 
discharged to home in less than 3 days but later in the episode 
developed complications could be admitted to a SNF under the waiver.
    Response: We note that the waiver under this model would make Part 
A post-hospital extended stay coverage available, in the context of all 
other current Medicare rules for coverage and payment of Part A-covered 
SNF services, to CJR model beneficiaries who are discharged in less 
than 3 days from the anchor hospitalization. Thus, in regard to the 
scenario stated by the commenters, if a CJR beneficiary is discharged 
to home after less than a 3-day inpatient hospital stay and requires 
SNF services within the first 30 days after discharge from the anchor 
hospitalization, the CJR beneficiary could be admitted to a SNF for a 
Part A-covered stay, assuming all other requirements for coverage and 
payment of Part-A covered SNF services are met and the SNF meets the 
quality

[[Page 73460]]

requirements for use of the waiver by its inclusion on the list of 
qualified SNFs for the calendar quarter in which the SNF admission 
occurs.
    Comment: Several commenters posed a variety of operational 
questions to CMS about how the proposed waiver would be implemented, 
such as from whom would a SNF get a treatment authorization code and 
how could the waiver be used because at the time of SNF billing 
services could already have been rendered.
    Response: Commenters expressed interest in a better understanding 
of the operational plans for implementing the SNF 3-day stay rule 
waiver. We note that since the waiver will not be available until 
performance year 2, CMS will publicly release various provider 
education materials, such as MLN Matters articles, prior to performance 
year 2 to educate providers regarding the use of the treatment 
authorization code and other billing instructions. For an example of a 
MLN Matters article intended for SNFs submitting claims to MACs for 
BPCI Model 2 beneficiaries that conveys information regarding the 
waiver use in that model, we refer readers to the CMS Web site at: 
https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM8792.pdf. We note that this is an 
example only, and providers caring for CJR model beneficiaries should 
await information specific to the CJR model before making changes to 
their systems.
    We expect that SNFs using this waiver to bill for a Part A-covered 
SNF stay for a CJR beneficiary discharged from a participant hospital 
after an inpatient stay of less than 3-days will need to work closely 
with the participant hospital to determine the applicability of the 
waiver prior to admitting the beneficiary to the SNF because billing 
will not occur until after the SNF services are rendered. Specifically 
all of the following requirements will need to be met for the stay to 
be covered under the waiver:
     The hospitalization does not meet the prerequisite 
hospital stay of at least 3 consecutive days for Part A coverage of 
``extended care'' services in a SNF. If the hospital stay would lead to 
covered PAC SNF treatment in the absence of the waiver, then the waiver 
is not necessary for the stay.
     The discharge is from a participant hospital in the CJR 
model. Participant hospitals can be confirmed by a posted file on the 
CMS Web site.
     The beneficiary's discharge is from MS-DRG 469 or MS-DRG 
470.
     The beneficiary must have been discharged from the CJR 
model participant hospital for one of the two specified MS-DRGs within 
30 days prior to the initiation of SNF services.
     The beneficiary meets the criteria for inclusion in the 
CJR model at the time of SNF admission: That is, he or she is enrolled 
in Part A and Part B, eligibility is not on the basis of ESRD, is not 
enrolled in any managed care plan, is not covered under a United Mine 
Workers of American health plan, and Medicare is the primary payer.
     The SNF is qualified to admit CJR model beneficiaries 
under the waiver on the date of SNF admission based on its overall star 
rating, which can be confirmed for the applicable date of SNF admission 
by a posted file on the CMS Web site that identifies qualified SNFs 
based on their overall star rating of three stars or better for at 
least 7 of the preceding 12 months. The file will be updated quarterly, 
reflecting a rolling 12-month period of SNF overall star ratings.
    We will provide additional information on the use of this waiver to 
providers through MLN Matters articles and other methods prior to the 
beginning of performance year 2. Medicare will not cover and pay under 
Part A for SNF services under the CJR model SNF 3-day stay rule waiver 
unless all of the previously stated criteria are met. SNFs who report 
the treatment authorization code under circumstances where one or more 
of these criterion are not met will not be paid by Medicare under the 
waiver.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to waive the SNF 3-day rule 
for episodes being tested in the CJR model in performance years 2 
through 5, with modification of the SNF quality requirements. We will 
waive the SNF 3-day rule for a CJR beneficiary following the anchor 
hospitalization only if the SNF is qualified at the time of the CJR 
beneficiary's SNF admission. We define a qualified SNF as one that has 
an overall rating of three stars or better in the Five-Star Quality 
Rating System for SNFs on the Nursing Home Compare Web site for at 
least 7 of the 12 preceding months, as determined by CMS based on the 
most recent rolling 12 months of SNF star rating data available for the 
calendar quarter that includes the date of the beneficiary's admission 
to the SNF. We will post the list of qualified SNFs quarterly to the 
CMS Web site. If a SNF is on this list, the other requirements for the 
waiver as listed previously are met, and other existing Medicare 
coverage requirements are met, the SNF stay for the CJR beneficiary 
will be covered under Part A under the CJR model SNF 3-day rule waiver.
    Beneficiaries will be able to receive a Part A-covered SNF stay 
furnished in accordance with the SNF 3-day stay rule waiver only during 
the CJR episode. All other Medicare rules for coverage and payment of 
Part A-covered SNF services continue to apply.
    The final SNF 3-day stay rule policies are set forth at Sec.  
510.610, where Sec.  510.610(a) has been revised to clarify that the 
waiver applies to SNFs on the calendar quarter list of qualified SNFs 
and subparagraphs (1) and (2) added to reflect CMS's quarterly 
determination of qualified SNFs based on their overall rating of three 
stars or better for at least 7 of the 12 months of rolling data and 
subsequent posting to the CMS Web site of the list of qualified SNFs 
for the calendar quarter.
e. Waivers of Medicare Program Rules To Allow Reconciliation Payment or 
Repayment Actions Resulting From the Net Payment Reconciliation Amount 
(NPRA)
    In order to make reconciliation payment to or carry out repayment 
from a participant hospital that results from the NPRA calculation for 
each performance year as discussed in section III.C.6.a. of this final 
rule, in the proposed rule we stated our belief that we would need to 
waive certain Medicare program rules. Therefore, in accordance with the 
authority granted to the Secretary in section 1115A(d)(1) of the Act, 
we proposed to waive requirements of the Act for all Medicare Part A 
and Part B payment systems only to the extent necessary to make 
reconciliation payments or receive repayments based on the NPRA that 
reflect the episode payment methodology under the proposed payment 
model for CJR participant hospitals selected in accordance with CMS's 
proposed selection methodology. In addition, we did not propose that 
reconciliation payments or repayments change beneficiary cost-sharing 
from the regular Medicare program cost-sharing for the related Part A 
and Part B services that were paid for CJR beneficiaries and aggregated 
to determine actual episode spending in the calculation of the NPRA. We 
therefore proposed to waive the requirements of sections 1813 and 
1833(a) of the Act to the extent that they would otherwise apply to 
reconciliation payments or repayments from a participant hospital under 
the CJR model. We sought comment on our proposed waivers related to 
repayment and repayment actions as a result of the NRPA calculated.

[[Page 73461]]

    Final Decision: We received no public comments on the proposed 
waivers of the requirements of sections 1813 and 1833(a) of the Act to 
the extent that they would otherwise apply to reconciliation payments 
or repayments from a participant hospital under the CJR model. 
Therefore, we are finalizing our proposal, without modification, to 
waive requirements of the Act for all Medicare Part A and Part B 
payment systems only to the extent necessary to make reconciliation 
payments or receive repayments based on the NPRA that reflect the 
episode payment methodology under the final payment model for CJR 
participant hospitals selected in accordance with CMS's final selection 
methodology. Reconciliation payments or repayments will not change 
beneficiary cost-sharing from the regular Medicare program cost-sharing 
for the related Part A and Part B services that were paid for CJR 
beneficiaries and aggregated to determine actual episode spending in 
the calculation of the NPRA.
    This waiver is set forth at new Sec.  510.620.
12. Enforcement Mechanisms
    CMS must have certain mechanisms to enforce compliance with the 
requirements of the model, either by the participant hospital, or by an 
entity or individual included in the CJR model by furnishing a service 
to a beneficiary during a CJR episode. The following discussion details 
the enforcement mechanisms we proposed to make available to CMS for the 
CJR model.
    We proposed an enforcement structure that would be consistent with 
other CMMI models. We believed that Model 2 of the BPCI initiative is 
an appropriate model for comparison, given that Model 2 and CJR share 
many of the same policy characteristics, particularly with respect to 
episode definition. For example, the participation agreement between 
CMS and a participant (called an Awardee) in BPCI Model 2 provides that 
CMS may immediately or with advance notice terminate the awardee's 
participation in the model or require the Awardee to terminate its 
agreement (``participant agreement'') with a participating provider or 
supplier that is not in compliance with BPCI requirements. In such 
circumstances, CMS may direct the Awardee to terminate its participant 
agreement with a participating provider or supplier because the Awardee 
has a participation agreement with CMS, whereas the participating 
provider or supplier does not. CMS may require termination of the 
Awardee or a participating provider or supplier if--
     CMS determines that it no longer has the funds to support 
the BPCI model;
     CMS terminates the model pursuant to section 
1115A(b)(3)(B) of the Act; or
     The BPCI awardee or an individual or entity participating 
in BPCI under the awardee does any of the following:
    ++ Takes any action that threatens the health or safety of 
patients; avoids at-risk Medicare beneficiaries, as this term is 
defined in Sec.  425.20; or avoids patients on the basis of payer 
status.
    ++ Is subject to sanctions or final actions of an accrediting 
organization or federal, state or local government agency that could 
lead to the inability to comply with the requirements and provisions of 
the BPCI agreement.
    ++ Takes or fails to take any action that CMS determines for 
program integrity reasons is not in the best interests of the BPCI 
initiative.
    ++ Is subject to action by HHS (including OIG and CMS) or the 
Department of Justice to redress an allegation of fraud or significant 
misconduct, including intervening in a False Claims Act qui tam matter, 
issuing a pre-demand or demand letter under a civil sanction authority, 
or similar actions.
    Under the terms of the BPCI agreement, upon CMS's termination of 
the agreement for any of the reasons previously listed in this section, 
CMS may immediately cease the distribution of positive reconciliation 
payments to the awardee and the awardee must immediately cease the 
distribution of any gainsharing payments.
    Many CMMI models also allow for CMS to impose remedial actions to 
address noncompliance by either a participant that has a direct 
relationship (participation agreement) with CMS, or by any individual 
or entity participating in the CMMI model pursuant to an agreement with 
the participant hospital. For example, with respect to the BPCI Model 
2, where CMS determines that there may be noncompliance, CMS may take 
any or all of the following actions:
     Notify the BPCI awardee of the specific performance 
problem.
     Require the awardee to provide additional data to CMS or 
its designees.
     Require the awardee to stop distributing funds to a 
particular individual or entity.
     Require the awardee to forgo the receipt of any positive 
reconciliation payments from CMS.
     Request a corrective action plan from the awardee.
    ++ If CMS requests a corrective action plan, then the following 
requirements apply to awardees in the BPCI initiative:

--The awardee must submit a corrective action plan for CMS approval by 
the deadline established by CMS.
--The corrective action plan must address what actions the awardee will 
take within a specified time period to ensure that all deficiencies are 
corrected and that it remains in compliance with the BPCI agreement.

    Under the CJR model, we proposed that CMS would have the 
enforcement mechanisms detailed in this section available for use 
against participant hospitals and any entity or individual furnishing a 
service to a beneficiary during a CJR episode, where the participant 
hospital or such entity or individual: (1) Does not comply with the CJR 
model requirements; or (2) is identified as noncompliant via CMS' 
monitoring of the model or engage in behavior related to any of the 
reasons previously described that apply to the BPCI initiative. These 
mechanisms will support the goals of CJR to maintain or improve quality 
of care. Given that participant hospitals may receive reconciliation 
payments, and choose to distribute or share those payments with other 
providers or suppliers (``CJR collaborators'') we believed that 
enhanced scrutiny and monitoring of participant hospitals and CJR 
collaborators under the model is necessary and appropriate. Participant 
hospitals and CJR collaborators will also be subject to all existing 
requirements and conditions for Medicare participation not otherwise 
waived under section 1115A(d)(1) of the Act.
    We proposed that CMS would have the option to use any one or more 
of the following enforcement mechanisms for participant hospitals in 
CJR. We further proposed that these enforcement mechanisms could be 
instituted and applied in any order, as is consistent with other CMMI 
models:
     Warning letter--We proposed to give CMS the authority to 
issue a warning letter to participant hospitals to put them on notice 
of behavior that may warrant additional action by CMS. This letter 
would inform participant hospitals of the issue or issues identified by 
CMS leading to the issuance of the warning letter.
     Corrective Action Plan--We proposed to give CMS the 
authority to request a corrective action plan from participant 
hospitals. We proposed the following requirements for corrective action 
plans:
    ++ The participant hospital would be required to submit a 
corrective action plan for CMS approval by the deadline established by 
CMS.
    ++ The corrective action plan would be required to address what 
actions the

[[Page 73462]]

participant hospital will take within a specified time period to 
correct the issues identified by CMS.
    ++ The corrective action plan could include provisions requiring 
that the participant hospital terminate collaborator agreements with 
CJR collaborators that are determined by HHS to be engaging in 
activities involving noncompliance with the provisions of this final 
rule, engaged in fraud or abuse, providing substandard care, or 
experiencing other integrity problems.
    ++ The participant hospital's failure to comply with the corrective 
action plan within the specified time period could result in additional 
enforcement action, including: (1) Termination; (2) automatic 
forfeiture of all or a portion of any reconciliation payments as that 
term is defined in section III.C. of the proposed rule; (3) CMS's 
discretionary reduction or elimination of all or a portion of the 
hospital's reconciliation payment; or (4) a combination of such 
actions.
     Reduction or elimination of reconciliation amount--We 
proposed to give CMS the authority to reduce or eliminate a participant 
hospital's reconciliation amount based on noncompliance with the 
model's requirements, negative results found through CMS' monitoring 
activities, or the participant hospital's noncompliance associated with 
a corrective action plan. For example, where CMS requires a participant 
hospital to submit a corrective action plan, the result of the 
participant hospital's failure to timely comply with that requirement 
could be a 50 percent reduction in the reconciliation amount due to the 
participant hospital at the end a performance year, where the 
participant hospital's reconciliation report reflects a positive 
reconciliation amount. We solicit comments on whether negative 
monitoring results and noncompliance with program requirements or 
corrective action plans should result in automatic forfeiture of all or 
a portion of positive NPRA, the amount that could be forfeited or 
reduced, the number of performance periods over which NPRA may be 
forfeited or reduced per instance or episode of noncompliance, whether 
the amount should be a fixed percentage of NPRA or a variable amount 
depending on the nature and severity of the noncompliance, and the 
criteria CMS should use in deciding the severity of noncompliance.
    Where the participant hospital's reconciliation report reflects a 
repayment amount, forfeiture of a reconciliation amount would not be an 
option for that performance year. In such a case, we considered whether 
CMS would require the participant hospital to forfeit a certain 
percentage of a reconciliation amount in the reconciliation report for 
a future performance year. However, in the case of a failure to comply 
with the model's requirements, presence of negative results found 
through CMS's monitoring activities, or noncompliance associated with a 
corrective action plan, we believed a policy that would increase the 
amount of repayment amount on the reconciliation report for the 
performance year in which the noncompliance occurred by the participant 
hospital is more likely to result in compliance from the hospital. 
Therefore, we proposed to add 25 percent to a repayment amount on a 
reconciliation report, where the participant hospital fails to timely 
comply with a corrective action plan or is noncompliant with the 
model's requirements. We sought comments on this forfeiture policy, 
including the percentage to be added to a repayment amount on a 
reconciliation report; the number of performance periods over which a 
reconciliation amount may be forfeited or reduced per instance or 
episode of noncompliance; whether the amount should be a fixed 
percentage of a reconciliation amount or repayment amount, as 
applicable, or a variable amount depending on the nature and severity 
of the noncompliance; and the criteria CMS should use in deciding the 
severity of noncompliance.
     Termination from the model--Given the provisions we 
proposed outlining the participation of hospitals in the model, we 
believed that, in contrast to other CMS models, termination from the 
CJR model would contradict the model's design. As a result, in some 
circumstances termination from the model may be unlikely to be a 
sufficient mechanism to deter noncompliance by participant hospitals. 
While we believed termination is a remedy unlikely to be frequently 
used by CMS in this model, we nonetheless leave open the possibility 
that in extremely serious circumstances termination might be 
appropriate, and for that reason, we proposed to include it as an 
available enforcement option. Where a participant hospital is 
terminated from the CJR model, we proposed that the hospital would 
remain liable for all negative NPRA generated from episodes of care 
that occurred prior to termination. We proposed that CMS may terminate 
the participation in CJR of a participant hospital when the participant 
hospital, or a CJR collaborator that has a collaborator agreement with 
a participant hospital and performs functions or services related to 
CJR activities, fails to comply with any of the requirements of the CJR 
model. We further proposed that CMS could terminate the participant 
hospital's participation in the model, or require a participant 
hospital to terminate a collaborator agreement with a CJR collaborator 
for reasons including, but not limited to the following:
     CMS determines that it no longer has the funds to support 
the CJR model.
     CMS terminates the model pursuant to section 
1115A(b)(3)(B) of the Act.
     The CJR participant hospital, or an individual or entity 
participating in CJR under the participant hospital does any of the 
following:
    ++ Takes any action that threatens the health or safety of 
patients; avoids at-risk Medicare beneficiaries, as this term is 
defined in Sec.  425.20; or avoids patients on the basis of payer 
status.
    ++ Is subject to sanctions or final actions of an accrediting 
organization or federal, state or local government agency that could 
lead to the inability to comply with the requirements and provisions of 
this final rule.
    ++ Takes or fails to take any action that CMS determines for 
program integrity reasons is not in the best interests of the CJR 
model.
    ++ Is subject to action by HHS (including OIG and CMS) or the 
Department of Justice to redress an allegation of fraud or significant 
misconduct, including intervening in a False Claims Act qui tam matter, 
issuing a pre-demand or demand letter under a civil sanction authority, 
or similar actions.
    ++ Is subject to action involving violations of the physician self-
referral law, civil monetary penalties law, federal anti-kickback 
statute, antitrust laws, or any other applicable Medicare laws, rules, 
or regulations that are relevant to the CJR model.
     Other Enforcement Mechanisms--We seek to incorporate 
policies regarding enforcement mechanisms that are necessary and 
appropriate to test the CJR model. Thus, we sought public comment on 
additional enforcement mechanisms that would contribute to the 
following goals:
    ++ Allow CMS to better operate or monitor the model.
    ++ Appropriately engage and encourage all entities and individuals 
furnishing a service to a beneficiary during a CJR episode to comply 
with the requirements and provisions of the CJR model.

[[Page 73463]]

    ++ Preserve the rights of Medicare beneficiaries to receive 
medically necessary care, to not be endangered by providers and 
suppliers engaging in noncompliant activities, and to be able to choose 
from whom they want to receive care.
    We sought public comment on these proposals and invited commenters 
to propose additional safeguards we should consider in the final rule.
    The following is a summary of the comments received and our 
responses.
    Comment: Several comments focused on our proposal regarding 
termination of participant hospitals from the model. Most of these 
comments recommended that we add requirements such as the provision of 
substandard care and patient steering to the list of circumstances 
meriting termination. Another related line of comments suggested that a 
participant hospital should be appropriately penalized if it is found 
to have provided substandard care, delayed or withheld medically 
necessary care, or engaged in patient steering.
    Response: Issues associated with care stinting, provision of 
substandard care, or denial of medically necessary care are serious 
matters. In no way does this final rule permit providers and suppliers 
furnishing services to beneficiaries in a CJR episode to engage in 
these sorts of behaviors. Thus, we appreciate the comments on this 
matter and the opportunity to clarify how we have included protections 
for beneficiaries by including language at Sec.  510.410(b) that allows 
CMS to take action against any participant hospital that takes any 
action that threatens the health or safety of patients. Providers and 
suppliers furnishing services to CJR beneficiaries must comply with 
applicable Medicare CoPs and similar requirements. Nothing in this 
final rule alters the CoPs and similar requirements for providers and 
suppliers that furnish services to CJR beneficiaries. If a participant 
hospital or its CJR collaborator is found to have taken any action that 
threatens the health or safety of patients, including but not limited 
to withholding or delaying medically necessary care, providing 
substandard health care, or steering beneficiaries to certain providers 
or suppliers, this final rule allows CMS to take action against the 
participant hospital that is noncompliant or has a collaborator 
agreement with the noncompliant entity. These actions include the 
institution of corrective action plans, reduction or elimination of 
reconciliation payments, increased repayment amounts, and termination 
from the model. Furthermore, existing laws, rules, and regulations 
governing these matters also continue to apply to providers and 
suppliers furnishing services to CJR beneficiaries. Where HHS 
(including CMS and OIG) discovers noncompliance with existing laws, 
rules, and regulations, participation in the CJR model would not 
provide protection for participant hospitals or CJR collaborators 
engaging in actions that implicate care stinting, provision of 
substandard care, denial of medically necessary care, or any other 
scheme or action that is illegal or causes beneficiary harm.
    Comment: Other commenters stated that CMS should strengthen the 
accountability of participant hospitals by implementing a separate 
financial penalty for hospitals found to have deliberately withheld 
medically necessary care or steered a patient toward a health care 
provider known to be delivering substandard care. Commenters suggested 
that such a penalty should be sizable enough to act as a disincentive 
for hospitals and other providers that might consider stinting as 
potentially profitable.
    Response: As we described in our previous response, given the 
enforcement mechanisms delineated in this final rule, as well as the 
prevalence of existing laws, rules, and regulations prohibiting care 
stinting, provision or substandard care, or denial of medically 
necessary care, we believe that it unnecessary to implement processes 
for a separate financial penalty specifically for this model outside of 
the enforcement mechanisms we have already proposed. Where a 
participant hospital engages in these behaviors, CMS could consider 
reducing or eliminating that participant hospital's reconciliation 
payment, as well as notifying our Federal program integrity colleagues 
and, where appropriate, law enforcement, of such behavior, particularly 
in instances in which HHS (including CMS and OIG) discovered knowing 
violations or patterns of violations of requirements that directly 
impacted the safety and health of patients.
    Comment: Some commenters suggested that CMS specify the amount by 
which it would reduce a reconciliation payment in instances of 
noncompliance. By contrast, other commenters recommended that CMS 
should have the discretion to assess penalties based on the severity of 
the violation or noncompliance; the degree of negligence, recklessness, 
or willful behavior of the parties; and evidence of patterns or 
practice of noncompliance or violations by participant hospitals. These 
commenters suggested that CMS should not be locked into a set penalty 
percentage, but rather should take into account all the facts and 
circumstances of each confirmed noncompliance or violation and set a 
penalty that is appropriate to address the problem and encourage 
improvement by the parties.
    Response: We appreciate comments on this issue and agree with the 
latter group of commenters. We intend to exercise our authority to 
reduce or eliminate a participant hospital's reconciliation payment 
based on the severity of the noncompliance. We believe that this is a 
prudent approach, particularly given that, as some commenters noted, 
these instances are often complex and fact-specific. However, we are 
finalizing our proposal to add 25 percent to a repayment amount on the 
participant hospital's reconciliation report in the following 
circumstances: (1) CMS has required a corrective action plan from a 
participant hospital; (2) the participant hospital is not due a 
positive reconciliation payment but instead owes a repayment amount to 
CMS; and (3) the participant hospital fails to timely comply with a 
corrective action plan or is noncompliant with the model's 
requirements. This provision is added as new Sec.  510.410(b)(3).
    We leave open the possibility for future rulemaking on the issue of 
enforcement mechanisms for this model. We believe that providing, at a 
minimum, a non-exhaustive list of the types of behaviors against which 
CMS would use each of these enforcement mechanisms could offer useful 
clarification for participant hospitals and CJR collaborators.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal with a modification to apply 
these enforcement mechanisms only to participant hospitals. We also 
have included a non-exhaustive list of examples of behaviors that may 
lead to application of these enforcement mechanisms. These policies are 
set forth in regulation at Sec.  510.410.
    We had proposed that CMS would have the enforcement mechanisms 
detailed in this section available for use against participant 
hospitals and any entity or individual furnishing a service to a 
beneficiary during a CJR episode, where the participant hospital or 
such entity or individual: (1) Does not comply with the CJR model 
requirements; or (2) is identified as noncompliant via CMS' monitoring 
of the model, or (3) engage in behavior related to any of the reasons 
previously described that apply to the BPCI initiative.

[[Page 73464]]

    We are finalizing this proposal with a modification to clarify that 
CMS will enforce the model's requirements against participant 
hospitals. Given that participant hospitals may receive reconciliation 
payments, and choose to distribute or share those payments with other 
providers or suppliers (``CJR collaborators'') we believe that enhanced 
scrutiny and monitoring of participant hospitals is necessary and 
appropriate. We also believe that by making the participant hospital 
responsible for compliance with the CJR model, CMS will be indirectly 
ensuring CJR collaborators compliance, in addition to any direct 
monitoring by HHS (including CMS and OIG) of providers and suppliers 
that are CJR collaborators. However, because entities and individuals 
that are not participant hospitals are not actually participants in the 
CJR model, we will hold the participant hospital responsible for their 
own and their CJR collaborators' compliance with applicable model 
requirements. Thus, where CMS, HHS, or its designees discovers an 
instance of noncompliance by a CJR collaborator with the requirements 
of the CJR model, CMS, HHS, or its designees may take remedial action 
against the participant hospital, which may include requiring the 
participant hospital to terminate a collaborator agreement with a CJR 
collaborator and prohibit further engagement in the CJR model by that 
CJR collaborator. Participant hospitals and CJR collaborators remain 
subject to all existing requirements and conditions for Medicare 
participation not otherwise waived for this model under section 
1115A(d)(1) of the Act.
    We are finalizing our proposal to give CMS the option to use any 
one or more of the following enforcement mechanisms for participant 
hospitals in CJR. These enforcement mechanisms may be instituted and 
applied in any order, as is consistent with other CMS models:
     Warning letter--We are finalizing our proposal to give CMS 
the authority to issue a warning letter to participant hospitals to put 
them on notice of behavior that may warrant additional action by CMS. 
This letter will inform participant hospitals of the issue or issues 
identified by CMS leading to the issuance of the warning letter.
     Corrective Action Plan--We are finalizing our proposal to 
give CMS the authority to request a corrective action plan from 
participant hospitals. We are finalizing our proposal the following 
requirements for corrective action plans:
    ++ The participant hospital will be required to submit a corrective 
action plan for CMS approval by the deadline established by CMS.
    ++ The corrective action plan will address what actions the 
participant hospital must take within a specified time period to 
correct the issues identified by CMS.
    ++ The corrective action plan may include provisions requiring that 
the participant hospital terminate collaborator agreements with CJR 
collaborators that are determined by CMS, HHS, or its designees to be 
engaging in activities involving noncompliance with the provisions of 
this final rule, engaged in fraud or abuse, providing substandard care, 
or experiencing other integrity problems.
    ++ The participant hospital's failure to comply with the corrective 
action plan within the specified time period could result in additional 
enforcement action, including: (1) Termination; (2) automatic 
forfeiture of all or a portion, at CMS' discretion, of any 
reconciliation payments as that term is defined in section III.C. of 
the proposed rule; or (3) a combination of such actions.
     Reduction or elimination of reconciliation amount--We are 
finalizing our proposal to give CMS the authority to reduce or 
eliminate a participant hospital's reconciliation payment based on 
noncompliance with the model's requirements, negative results found 
through CMS' monitoring activities, or the participant hospital's 
noncompliance associated with a corrective action plan (as noted 
previously). For example, where CMS requires a participant hospital to 
submit a corrective action plan, the result of the participant 
hospital's failure to timely comply with that requirement could be a 50 
percent reduction in the reconciliation payment due to the participant 
hospital at the end a performance year, where the participant 
hospital's reconciliation report reflects a reconciliation payment.
    Where the participant hospital's reconciliation report reflects a 
repayment amount, forfeiture of a reconciliation payment would not be 
an option for that performance year. Therefore, we are finalizing our 
proposal to add 25 percent to a repayment amount on a reconciliation 
report, where the participant hospital fails to timely comply with a 
corrective action plan or is otherwise noncompliant with the model's 
requirements. This provision includes noncompliance by CJR 
collaborators with the model's requirements.
     Termination from the model--Given this model's provisions 
outlining the participation of hospitals in the model, we believe that, 
in contrast to other CMS models, termination from the CJR model would 
contradict the model's design. Nonetheless, we believe it is important 
for CMS to have this enforcement mechanism as an available option, and 
thus we are finalizing our proposal that CMS may terminate a 
participant hospital from the CJR model if the participant hospital, or 
its CJR collaborator that has a collaborator agreement with a 
participant hospital and performs functions or services related to CJR 
activities, fails to comply with any of the requirements of the CJR 
model or is noncompliant in other respects, which are discussed in 
detail later in this section. These areas of noncompliance are set 
forth in regulation at Sec.  510.410(b)(1).
    The effect of termination from the model is that the hospital would 
no longer be a participant hospital in the CJR model. We note, however, 
that any information collected by CMS in relation to termination of a 
hospital from the model would be shared with our program integrity 
colleagues at HHS, the Department of Justice, and their designees. 
Should a participant hospital, or one of its CJR collaborators, be 
noncompliant with the requirements of the CJR model or engage in 
unlawful behavior related to participation in the CJR model, we note 
that such information could be used in proceedings unrelated to the 
enforcement mechanisms in this section.
    Where a participant hospital is terminated from the CJR model, we 
are finalizing our proposal that the hospital would remain liable for 
all repayment amounts from episodes of care that occurred prior to 
termination. CMS may terminate a participant hospital from the CJR 
model when the participant hospital, or its CJR collaborator performs 
functions or services related to CJR activities, fails to comply with 
any of the requirements of the CJR model. CMS may terminate a 
participant hospital's participation in the model, or require a 
participant hospital to terminate a collaborator agreement with a CJR 
collaborator for reasons including, but not limited to the following:
     The CJR participant hospital, a CJR collaborator that has 
a collaborator agreement with the participant hospital, or an 
individual or entity participating in the CJR model under the 
participant hospital does any of the following:
    ++ Takes any action that threatens the health or safety of 
patients; avoids at-risk Medicare beneficiaries, as this term is 
defined in Sec.  425.20; or avoids patients on the basis of payer 
status.
    ++ Is subject to sanctions or final actions of an accrediting 
organization or

[[Page 73465]]

federal, state or local government agency that could lead to the 
inability to comply with the requirements and provisions of this final 
rule.
    ++ Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the CJR model, or fails to take 
any action that CMS determines for program integrity reasons should 
have been taken to further the best interests of the CJR model.
    ++ Is subject to action by HHS (including OIG and CMS) or the 
Department of Justice to redress an allegation of fraud or significant 
misconduct, including intervening in a False Claims Act qui tam matter, 
issuing a pre-demand or demand letter under a civil sanction authority, 
or similar actions.
    ++ Is subject to action involving violations of the physician self-
referral prohibition, civil monetary penalties law, federal anti-
kickback statute, antitrust laws, or any other applicable Medicare 
laws, rules, or regulations that are relevant to the CJR model.
    Finally, we are clarifying our proposal that CMS may terminate the 
CJR model for reasons including but not limited to the following:
     CMS determines that it no longer has the funds to support 
the CJR model.
     CMS terminates the model pursuant to section 
1115A(b)(3)(B) of the Act. As provided by section 1115A(d)(2) of the 
Act, termination of the model is not subject to administrative or 
judicial review. This provision is set forth in regulation at new Sec.  
510.900

D. Quality Measures and Display of Quality Metrics Used in the CJR 
Model

1. Background
a. Purpose of Quality Measures in the CJR Model
    In section III.D.1.a. of the proposed rule, we stated that the 
priorities of the National Quality Strategy \53\ include making care 
safer and more affordable, promoting effective communication and 
coordination as well as engaging patients and families in their care. 
We also stated our belief that quality measures that encourage 
providers to focus on the National Quality Strategy priorities will 
ultimately improve quality of care and cost efficiencies. In section 
III.C.5. of the proposed rule, we proposed that in order for a hospital 
in the model to receive a reconciliation payment for the applicable 
performance year, the participant hospital's measure results must meet 
or exceed certain thresholds compared to the national hospital measure 
results calculated for all HIQR-participant hospitals for all three 
measures for each performance period. More specifically, for 
performance years 1 through 3, a participant hospital's measure results 
must be at or above the 30th percentile of the national hospital 
measure results calculated for all hospitals under the HIQR Program for 
each of the three measures for each performance period (for a detailed 
discussion see section III.C.5.b. of the proposed rule). For 
performance years 4 and 5, a participant hospital's measure results 
must be at or above the 40th percentile of the national hospital 
measure results (for a detailed discussion see section III.C.5.b. of 
the proposed rule). In section III.D. of the proposed rule we proposed 
and described quality measures that will be used for public reporting 
and to determine whether a participant hospital is eligible for the 
reconciliation payment under the model. We proposed a Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) complications 
measure and readmissions measure, as well as a patient experience 
survey measure for the model. We stated that these measures assess the 
priorities of safer care, transitions of care and effective 
communication, and engagement of patients in their care, respectively. 
Specifically, we proposed the following three CMS outcome measures:
---------------------------------------------------------------------------

    \53\ National Quality Strategy. Working for Quality: About the 
National Quality Strategy. Available at: https://www.ahrq.gov/workingforquality/about.htm#develnqs. Accessed on April 15, 2015.
---------------------------------------------------------------------------

     The Hospital-level risk-standardized complication rate 
(RSCR) following elective primary total hip arthroplasty (THA) and/or 
total knee arthroplasty (TKA) (NQF #1550) (as referred to as THA/TKA 
Complications measure (NQF #1550)).
     The Hospital-level 30-day, all-cause risk-standardized 
readmission rate (RSRR) following elective primary total hip 
arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1551) (as 
referred to as THA/TKA Readmissions measure (NQF #1551)).
     Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAHPS) Survey measure (NQF #0166).
    We indicated in the proposed rule that these measures are fully 
developed for the inpatient hospital settings, are endorsed by the 
National Quality Forum (NQF), and recommended by the NQF Measure 
Application Partnership (MAP) with subsequent implementation in the 
HIQR Program, HVBP Program, and the HRRP (see FY 2015 IPPS/LTCH final 
rule 79 FR 50031, 50062, 50208 through 50209, and 50259). These 
measures are also publicly reported on the Hospital Compare Web site.
    We previously stated that an important purpose of the proposed 
quality measures for the model is to provide transparent information on 
hospital performance for the care of patients undergoing eligible 
elective joint replacement surgery, and to ensure that care quality is 
either maintained or improved. The proposed measures assess the 
following key outcomes for patients undergoing elective joint 
replacement surgery:
     Serious medical and surgical complications.
     Unplanned readmissions.
     Patient experience.
    In the proposed rule we discussed the impact of THA/TKA procedures 
on complications and unplanned readmissions. We noted that THA/TKA 
procedure complications and readmissions result in excess inpatient and 
PAC spending, and reductions in these undesirable events will improve 
patient outcomes while simultaneously lowering healthcare spending. To 
this end, we also stated that the THA/TKA Complications measure (NQF 
#1550) will inform quality improvement efforts targeted towards 
minimizing medical and surgical complications during surgery and the 
postoperative period, and that the THA/TKA Readmissions measure (NQF 
#1551) captures the additional priorities of care provided in the 
transition to outpatient settings and communication between patients 
and providers, during and immediately following inpatient admission. We 
stated our belief that improved quality of care, specifically achieved 
through coordination and communication among providers, and with their 
patients and their caregivers, can favorably influence performance on 
these measures. We continue to believe improvement in measure 
performance will also mean improved quality of care and reduced cost.
    We also stated in the proposed rule our continued focus on patient 
experience during hospitalizations, and our belief that the HCAHPS 
Survey measure (NQF #0166) provides not only the opportunity for 
patients to share their LEJR hospital experience, but also for 
hospitals to improve quality of care based on patient experience. For 
example, the HCAHPS Survey measure (NQF #0166) ``categories of patient 
experience'' specifically provides areas (for example, communication 
with doctors and nurses, responsiveness of hospital staff, pain 
management) in which a hospital could improve transition of care and 
increase patient safety (80 FR 41282). We also

[[Page 73466]]

summarized that the HCAHPS survey includes measures related to nurse 
and physician communication, pain management, timeliness of assistance, 
explanation of medications, discharge planning and cleanliness of the 
hospitals to provide specific areas for hospitals to improve on,\54\ 
and indicated in the proposed rule the some of the specific questions 
on provider communication included the following:
---------------------------------------------------------------------------

    \54\ Manary MP, Boulding W, Staelin R, Glickman SW. The Patient 
Experience and Health Outcomes. New England Journal of Medicine. Jan 
2013; 368(3):201-203.
---------------------------------------------------------------------------

     How often the patient believed providers listened 
carefully to his or her questions?
     Whether the purpose of medications and associated adverse 
events were explained?
     Whether discussions on post-discharge instructions and 
plans occurred so that the patient had a clear understanding of how to 
take medications and an understanding of his or her responsibilities in 
managing his or her health post-discharge?
    In the proposed rule we addressed how these areas of patient 
experience would be invaluable to improving hospital quality of care. 
We noted that Manary, et al.\2\ suggested that by focusing on patient 
outcomes, hospitals could improve patient experience and highlighted 
that timeliness of measuring patient experience is important due to the 
potential for recall inaccuracies. We noted that administration of the 
HCAHPS Survey measure (NQF #0166) must begin between 2 and 42 days 
after discharge from a hospital.
    We also briefly addressed the concern regarding the question of 
whether there is a relationship between patient satisfaction and 
quality of surgical care. We addressed this question by noting the work 
of Tsai, et al.\55\ We noted that Tsai et al. recently assessed patient 
satisfaction using the HCAHPS survey results and correlated quality 
performance using nationally implemented structural, process and 
outcome surgical measures (that is, structural, process and outcome 
surgical measures in the HVBP program and the HRRP). The study found a 
positive relationship between patient experience of care and surgical 
quality of care, among the 2,953 hospitals that perform six high cost 
and high frequency surgical procedures that are also associated with 
morbidity and mortality in Medicare beneficiaries. The study also 
included hip replacement procedures, and specifically noted that those 
hospitals with high patient satisfaction also had high performance on 
nationally implemented surgical quality measures (such as the Surgical 
Care Improvement Project measures and 30-day risk-adjusted readmission 
and perioperative mortality outcome measures). We noted that although 
the HCAHPS Survey measure (NQF #0166) is not specific to joint 
replacements, the survey provides all patients the opportunity to 
comment on their hospital experience, including patients who have 
received LEJRs, having all patients responding to the survey helps to 
inform hospitals on areas for improvement. We also indicated that while 
HCAHPS scores are aggregated at the hospital level, the surgical 
service line is one of three service lines encompassed by the 
survey.\56\
---------------------------------------------------------------------------

    \55\ Tsai TC, Orav EJ, Jha AK. Patient Satisfaction and quality 
of surgical care in US hospitals. Annals of Surgery. 2015; 261:2-8.
    \56\ Giordano LA, Elliott MN, Goldstein E, Lehrman WG, Spencer 
PA. Development, Implementation, and Public Reporting of the HCAHPS 
Survey. Medical Care Research and Review. 2010;67(1):27-37.
---------------------------------------------------------------------------

    Finally we shared our goal to strive to align as many measures and 
programs as is feasibly possible, and stated our belief that proposing 
fully developed measures that are used in other CMS hospital quality 
programs will minimize the burden on participant hospitals for having 
to become familiar with new measures, while still allowing us to 
appropriately capture quality data for the model.
    The following is a summary of the many comments received and our 
responses.
    Comment: We note multiple stakeholders supported the proposed three 
measures and the THA/TKA voluntary data submission in the CJR model. 
Others specifically supported the mandatory nature of the measures 
because it encourages hospitals to improve quality of care for THA/TKA 
patients.
    Response: We appreciate support by multiple stakeholders for the 
measures and the THA/TKA voluntary data submission in the CJR model.
    Comment: A few commenters indicated concerns over beneficiary 
protections and potential for stinting of care as it relates to the 
financial incentives of the CJR model, and there were concerns about 
the three proposed measures being insufficient metrics to assess CJR 
beneficiary health care outcomes, such as a return to activities of 
daily life. Other beneficiary protection concerns included the 
potential unintended consequences of encouraging: (1) Inappropriate 
care shifting by providers within the 90-day post-operative day window 
for the THA/TKA Readmissions measure (NQF #1551); (2) readmissions 
related to infection, hematoma, pulmonary embolus following THA or TKA 
replacement which may not be controllable despite adherence to best 
practices should not be included in the episode of care; and (3) 
providers may decrease or deny access to care for patients with 
comorbidities, in order to improve rates on the THA/TKA Readmissions 
measure (NQF #1551) and THA/TKA Complications measure (NQF #1550).
    Response: We appreciate the commenters' concerns about potential 
unintended consequences for beneficiaries resulting from implementation 
of the three proposed measures. We note that the CJR model does address 
beneficiary protections, access to care, quality of care, and delayed 
care, as discussed in section III.F. of this final rule.
    Regarding the concern about the proposed measures being inadequate 
to determine whether the care provided to the patient was sufficient to 
promote an adequate recovery and return to activities of daily life, we 
acknowledge that the proposed measures do not specifically address 
activities of daily living, but we note that the THA/TKA PRO data 
collection does include survey instruments (that is, PROMIS and VR-12 
surveys) that assess activities of daily life information and pain 
management. Through this voluntary initiative, we believe we will begin 
to address this gap in the current measure set for the CJR model.
    Regarding the concern about the potential unintended consequences 
of care shifting by providers to prevent poor performance on the THA/
TKA Readmissions measure (NQF #1551), we note from the beneficiary 
protection perspective that the model allows beneficiaries to choose 
their providers and suppliers, and has processes where CMS will be 
monitoring claims data from participant hospitals--for example, to 
compare a hospital's case mix relative to a pre-model historical 
baseline, to determine whether complex patients are being 
systematically excluded. We will also be publishing this data as part 
of the model evaluation to promote transparency and an understanding of 
the model's effects. We note from a quality measurement perspective 
that the readmission measure assesses unplanned readmissions in the 30 
days following discharge from an eligible hospitalization. As 
previously discussed in the context of the HIQR Program (77 FR 53521), 
the measure uses a 30-day timeframe because it is a clinically 
meaningful and sufficient time period for hospitals to show the result 
of their

[[Page 73467]]

efforts to reduce readmissions. However, we believe that hospitals 
should be monitored for shifts in patient care. In the context of the 
Hospital Readmission Reduction Program (77 FR 53376), we acknowledged 
stakeholders' concerns for unintended consequences of inappropriate 
shifting of care, increased morbidity and mortality and other negative 
unintended consequences for patients. We stated our commitment to 
monitor the outcome measures and assess unintended consequences over 
time. In addition to internal monitoring of hospital performance and 
potential unintended consequences, we specifically publish online each 
year the Medicare Hospital Quality Chartbook (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/OutcomeMeasures.html). This annual Chartbook 
provides new information about recent trends and variation in condition 
specific and surgical procedure outcomes by location, hospital 
characteristics, and patient disparities. In the FY2016 IPPS/LTCH final 
rule (80 FR 49674 through 49690), we finalized reporting of two new 
excess days in acute care measures that will complement the existing 
readmission measures by providing addition information and insight 
about patients that return to the hospital for emergency department 
visits, observation stays or inpatient readmissions after 
hospitalization for acute myocardial infarction and heart failure.
    Regarding the concern that readmissions related to infection, 
hematoma, and pulmonary embolus following THA or TKA replacement may 
not be controlled despite adherence to best practices, we acknowledge 
that we do not expect hospitals to achieve a hospital-level THA/TKA 
RSRR of zero, but instead expect hospitals to seek and implement 
processes to improve their annual THA/TKA RSRR. We base this belief on 
the need to improve THA/TKA RSRRs, based on Medicare FFS administrative 
claims data from July 1, 2011 to June 30, 2014, which revealed a median 
RSRR of 4.8 percent with a range of 2.6 percent to 8.5 percent. A range 
of 2.6 percent to 8.5 percent suggests room for improvement. Further, 
we note that we measure all-cause readmission, including readmission 
for conditions such as infection, hematoma, and pulmonary embolus, 
rather than a narrowly defined set of conditions, to assess performance 
for several reasons. First, from the patient perspective, readmission 
for any reason is likely to be an undesirable outcome of care after an 
acute hospitalization. Secondly, readmissions not directly related to 
hip/knee replacement may still be a result of the care received during 
hospitalization for the procedure. For example, a patient who underwent 
a THA/TKA procedure who develops a hospital-acquired infection may 
ultimately be readmitted for sepsis. It would be inappropriate to treat 
this readmission as unrelated to the care the patient received during 
the index hospitalization. Furthermore, the range of potentially 
avoidable readmissions also includes those not directly related to the 
initial hospitalization, such as those resulting from poor 
communication at discharge or inadequate follow-up. In addition, 
readmissions for rare reasons completely unrelated to hospital care, 
such as car accidents involving the patient as a passenger, are likely 
to be distributed randomly across hospitals and are not expected to 
introduce bias into the measure results.
    We appreciate the concern expressed by the commenter that surgeons 
may choose not to operate on patients who have comorbid conditions in 
order to improve the hospital's performance on the readmission measure. 
We had similar concerns about this potential unintended consequence, 
and for this reason the THA/TKA Readmissions measure (NQF #1551) risk 
adjusts for patients' risk factors, thereby taking into account case 
mix differences across providers. Adjusting for case mix is an 
important aspect for measuring a RSRR that accurately reflects factors 
that can confound an outcome rate when not adequately adjusted.
    Finally, we do not believe that the proposed measures are 
insufficient metrics to assess CJR model patients. We note that 
hospitals are the unit of analysis for this model and that the proposed 
measures are hospital-level measures. We believe that these hospital-
level measures do assess how hospitals provide care for THA/TKA 
patients since the measures assess complications, which are costly, and 
assess patients' perspectives on their hospital experience, which also 
includes patient feedback on communication with doctors, communication 
with nurses, responsiveness of hospital staff, pain management, 
communication about medicines, discharge information, cleanliness of 
the hospital environment, quietness of the hospital environment, and 
transition to post-hospital care. While we acknowledge that the 
proposed measures do not include reported functional outcomes, we have 
proposed the THA/TKA voluntary data submission initiative to begin to 
assess post-operative functional outcomes. To our knowledge a hospital-
level risk-adjusted patient-reported functional outcome measure using a 
non-proprietary instrument to assess the measure outcome does not exist 
nor did we receive any suggestions from the public for measures that 
fit this description. We anticipate including hospital-level risk-
adjusted patient-reported functional outcome measure in years 4 and 5 
of this model.
    Comment: Some commenters expressed concern that the current CJR 
model measure set does not adequately protect patients, since the 
measure set does not include what LEJR patients care most about, which 
is being able to walk following their joint replacement surgery and 
minimizing post-surgical pain. These commenters suggested that the CJR 
model require measures that address assessment of how well pain was 
managed, the patient's pain experience and the inclusion of a 
functional measure that meaningfully assesses the ability to walk after 
surgery.
    Response: We note that the three proposed measures address 
inpatient care and that outpatient care will begin to be assessed by 
the by the voluntary data submission for the THA/TKA patient-reported 
outcome-based measure currently in development (80 FR 41284 through 
41289). The HCAHPS Survey measure (NQF #0166) was created to capture 
many different aspects of care experienced by inpatients. The proposed 
HCAHPS Survey measure (NQF #0166) specifically assesses how well 
hospital staff help patients manage pain, how responsive hospital staff 
are to patients' needs and how well the patients are prepared for the 
transition to post-hospital care. Because the HCAHPS Survey measure 
(NQF #0166) begins to address areas of pain management and ambulation 
by assessing transition to post-hospital care, and because hospitals 
are very familiar with the HCAHPS Survey measure (NQF #0166), we 
believe that this measure is a good starting point to assess and 
quantify how well patients' pain was managed and whether patients' pain 
experience was assessed during a hospitalization. Furthermore, we 
believe that the THA/TKA voluntary PRO data submission portion of the 
CJR model does begin to address the concerns of patients, as this 
measure in development included patients as members of the Technical 
Expert Panel convened by the measure developer. The Technical Expert 
Panel, which included patient members, provided input into all aspects 
of the

[[Page 73468]]

development of this measure, including the proposed pre-operative and 
post-operative THA/TKA voluntary data elements (80 FR 41285 and 41286). 
We also note that patient participation was integral to the creation of 
the THA patients' Hip disability and Osteoarthritis Outcome Score 
(HOOS) and TKA patients' Knee injury and Osteoarthritis Outcome Score 
(KOOS) surveys. For these reasons, we believe the HCAHPS Survey measure 
(NQF #0166) and the HOOS and KOOS surveys in the voluntary submitted 
data for the THA/TKA patient-reported outcome based measure do address 
the perspective of patients regarding pain management, the quality of 
pain care and the functional assessment of walking post-primary 
elective THA and TKA. Finally, we emphasize we anticipate that a fully 
specified and tested THA/TKA patient-reported outcome-based performance 
measure will be included in years 4 and 5 of the CJR model.
    Comment: Many commenters requested that CMS assess patient 
experience regarding pain experience, pain management and ambulation. 
In addition, they requested that measures be instituted that assess 
pain management frequently to counterbalance the economic interests of 
hospitals. Some shared that pain measures should be conducted every day 
and long-term measures be conducted quarterly during the first post-
operative year.
    Response: We appreciate the suggestions to expand the measure set 
for the CJR model to include inpatient and outpatient experience 
regarding pain management and ambulation. We note that the HCAHPS 
Survey measure (NQF #0166) does include inpatient pain management 
experience and that the THA/TKA voluntary data submission also 
addresses post-operative ambulation. To our knowledge, there are no 
other hospital-level risk-adjusted outcome measures for patient 
experience that assesses pain experience, pain management and 
ambulation. As the CJR model continues to refine its measure set we 
will consider the recommendation for pain management patient experience 
of care measures that are applied frequently to counterbalance hospital 
economic interests.
    Comment: Commenters suggested placing a greater weight on measures 
that address assessment of how well pain was managed, the patient's 
pain experience and the inclusion of a functional measure that 
meaningfully assesses the ability to walk after surgery.
    Response: As discussed in a prior related comment, we note that the 
HCAHPS Survey measure (NQF #0166) specifically assesses how well 
hospital staff help patients manage pain, how responsive hospital staff 
are to patients' needs and how well the patient was prepared for the 
transition to post-hospital care. We also note that section 
III.C.5.(c)(ii) of the proposed rule discussed an alternative link to 
quality and payment provided a weight of 30 percent to the HCAHPS 
Survey measure (NQF #0166). We refer reviewers to section III.C.5. of 
this final rule for responses to this comment from a payment 
perspective for a full discussion of the finalized policy for 
reconciliation payment based on measure performance. From an HCAHPS 
Survey measure (NQF #0166) perspective, we note that the HCAHPS survey 
captures the inpatient experience from the patient's perspective and 
the survey must be conducted within 48 hours and 6 weeks of discharge. 
We also note that the THA/TKA voluntary PRO data submission includes 
both pre-operative surveys covering 90 to 0 days of care, and post-
operative surveys focus on days 270 to 365 post-surgery for the primary 
elective THA/TKA procedure.
    Comment: Many commenters supported the proposed three measures, and 
specifically the mandatory nature of the measures and the proposed 
weights in the reconciliation payment composite quality score 
methodology (80 FR 41241 Table 8).
    Response: We appreciate the support of the mandatory nature of the 
three proposed measures in the CJR model.
    Comment: We received comments regarding how the CJR model links 
quality and payment. The comment was made based on the already low 
complication and readmission rates, with the suggestion to have 
incentive payments for sustained top performance.
    Response: For a discussion of how the CJR model links quality and 
payment and incentive payments, we refer readers to section III.C.5. of 
this final rule.
    Regarding that portion of the comment stating that the THA/TKA 
complications and readmissions rates are already low, we note that 
there is still room for improvement related to the complication and 
readmission rates for primary elective THA/TKA procedures. As 
previously noted in the preamble the median hospital-level primary 
elective THA/TKA RSCR's for April 1, 2011 through March 31, 2014 was 
3.1 percent with a range from 1.4 percent to 6.9 percent. Similarly, 
the data on the THA/TKA RSRR for a 3-year period (July 1, 2011 to June 
30, 2014) revealed a median RSRR of 4.8 percent with a range of 2.6 
percent to 8.5 percent. We believe both sets of data with the median 
RSCR and RSRR and the associated ranges, rather than suggesting a low 
rate, suggest room for improvement in preventing complications. 
Finally, we believe, from a patient's perspective, that readmissions 
and complications are undesirable outcome of care, and therefore 
providers should strive to improve all aspects of health care that 
influence the occurrence of complications and readmissions so that the 
median RSCR, RSRR, and their ranges consistently improve over time.
    Comment: A commenter while supporting the three proposed measures 
and the THA/TKA voluntary data submission, indicated that CMS needs to 
provide a stronger financial incentive and compensation for additional 
costs related to submission of THA/TKA voluntary PRO data.
    Response: We appreciate the support of the three proposed measures 
and the THA/TKA voluntary PRO data submission. Regarding the comment 
indicating that CMS needs to provide a stronger financial incentive and 
compensation for additional costs related to submission of THA/TKA 
voluntary data, we refer readers to section III.C.5.b.(5)(c)(iii) of 
this final rule.
    Comment: Many commenters suggested various ways to adjust the 
robustness of the current proposed measure set for the CJR model. 
Suggestions included that we (1) add more patient-reported functional 
measures that address ambulation and pain management, such as specific 
functional measures like Functional Change: Change in Motor Score (NQF 
#2287), CARE: Improvement in Mobility (NQF #2612) and CARE: Improvement 
in Self Care (NQF #2613); (2) add measures used in the BPCI model 2, 
including the all-cause mortality and the emergency department use 
without hospitalization; (3) have appropriateness measure (measuring 
appropriateness of care at the beginning of the episode) or a 
utilization measure (assessing utilization patterns and case mix as 
part of the evaluation); (4) have measures specific to assess care 
provided in a continuum consistent with the episode of care and 
inclusive of the PAC settings in general and specifically for home 
health agencies; (5) have a measure set that is similar to the 
Physician Quality Reporting System (PQRS) Total Knee Replacement 
Measures Group; and (6) incorporate Unique Device Identification (UDI) 
of

[[Page 73469]]

hip and knee replacements into administrative claims data since it 
would benefit the CJR model by providing better information to 
hospitals on device quality and costs, and could enhance data to CMS to 
ensure quality.
    Response: We appreciate these suggestions for ways to increase the 
robust nature of the CJR model measure set.
    We appreciate the suggestion for the Functional Change: Change in 
Motor Score (NQF #2287), as it helps us to be sure we have considered 
all possible measures. We note that the suggested measure of Functional 
Change: Change in Motor Score (NQF #2287) was developed for use in 
inpatient rehabilitation facilities (IRFs). Specifically, the 
Functional Change: Change in Motor Score (NQF #2287) measure is based 
upon the Functional Independence Measure (FIM), which is intended for 
use with nursing home residents and IRF patients and assesses 
functional status items relevant to that patient population, including 
Feeding, Grooming, Dressing Upper Body, Dressing Lower Body, Toileting, 
Bowel, Expression, Memory, Transfer to/from Bed/Chair/Wheelchair, 
Transfer to/from Toilet, Locomotion and Stairs. Since the unit of 
analysis is not acute care hospitals, this measure would not be 
appropriate for CJR model. We note that the TEP convened by the measure 
development contractor, which included clinical and technical experts 
as well as patients, believed the HOOS/KOOS, VR-12 and PROMIS-Global 
instruments assessed more meaningful pain and function outcomes at 270 
to 365 days after elective primary THA/TKA patient population, which 
led to our proposal of the HOOS/KOOS, VR-12 and PROMIS-Global 
instruments. Additionally, we note that the suggested Functional 
Change: Change in Motor Score (NQF #2287) measure does not focus on 
acute care hospital care of THA/TKA patients, which is important since 
CJR hospitals are the unit of analysis for this model. We acknowledge 
the importance of assessing patient-reported functional changes, which 
is why we also proposed the THA/TKA voluntary data for patient-reported 
functional outcomes. We note that the voluntary submission of THA/TKA 
voluntary data for patient-reported functional outcomes using the 
proposed survey tools will begin to address functional outcomes of 
ambulation, thereby adding to the HCAHPS Survey measure (NQF #0166), 
which assesses inpatient pain management.
    Regarding the suggestion to use BPCI model 2 measures that assessed 
all-cause mortality and the emergency department use without 
hospitalization. We note that these were not measures but instead 
interim analyses performed to assess these aspects of the model. Since 
the CJR model is specific to LEJR we chose to identify measures that 
were not only specific to these procedures but were risk-adjusted and 
developed for acute care hospitals. We also chose the proposed measures 
for the reasons outlined in Background sections of III.D.1.a., 
III.D.2.a., III.D.2.b. and III.D.2.c.
    Regarding the suggestions for specific PAC measures (for example, 
CARE: Improvement in Mobility (NQF #2612) and CARE: Improvement in Self 
Care (NQF #2613)), and the general comment to add measures that: (1) 
Address care across the continuum of the CJR model episode of care; (2) 
are specific to the PAC setting; and (3) and/or are similar to the 
Total Knee Replacement (TKR) Measures Group found in the PQRS, we note 
that for this CJR model we restricted our choice of measures to 
hospital-level measures given that attribution of the model is at the 
hospital level, and specifically to risk-adjusted hospital-level 
outcome measures. In addition, although these suggested functional 
outcome measures assess functional change in the PAC setting and 
potentially across the continuum of the episode of care, they are not 
specific to the THA/TKA procedure patients in our 5-year CJR model.
    Regarding the suggestion to include an appropriateness measure or a 
utilization measure, we are unaware of existing consensus guidelines as 
to what pre-operative level of pain or functional disability justifies 
elective primary THA or TKA procedures. Therefore, we believe it is 
premature to create an appropriateness measure without engaging with 
patients and providers to define appropriateness. Further, while we 
have developed a measure of Hospital-Level, Risk-Standardized Payment 
Associated with a 90-Day Episode of Care for Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA), this measure 
will not have been publicly reported until July 2016 and was therefore 
not considered for the CJR model at this time. We will consider changes 
to the quality measure components for the CJR during future rulemaking 
as appropriate.
    Regarding the suggestion to consider device selection in measures, 
we understand this comment to be about post-marketing surveillance of 
medical devices used in THA/TKA procedures. We note that the addition 
of device selection and the ability to capture it through 
administrative claims codes will impact many other measures and CMS 
programs. We will evaluate this concern in the future as needed.
    Comment: A single commenter requested that quality measurements 
between hospitals and physicians should be delinked when determining 
eligibility for savings, so that high-performing physicians are 
eligible for savings even when a hospital is underperforming.
    Response: We note that section III.B. of the proposed rule provides 
a detailed summary of the episode definition (80 FR 41212) and a 
detailed discussion on why hospitals are the unit of analysis for the 
CJR model episode of care and the proposed quality measures. We refer 
reviewers to section III.C. of this final rule for a discussion on how 
physicians could influence their eligibility for savings under the CJR 
model. We note that the quality measures are all hospital-level since 
acute care hospitals are the unit of analysis for quality measures and 
that physicians will continue to be assessed through programs such as 
the Physician Quality Reporting System. As the CJR model undergoes 
refinement in the subsequent years, if it becomes reasonable and 
feasible to implement physician-level measures, we will consider 
implementing such changes to the CJR model through notice-and-comment 
rule making.
    Comment: Some stakeholders recommended that CMS, over time, require 
information about patients' changes in function so that this data can 
be used as an outcome measure. They also agreed with the MedPAC's 
public comment that CMS consider collection of the same information on 
function that is required of PAC providers to comply with the 
requirements of the Improving Medicare Post-Acute Care Transformation 
(IMPACT) Act of 2014.
    Response: We note that CMS recently finalized an application of 
Percent of Long-Term Care Hospital Patients With an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
(NQF #2631; endorsed on July 23, 2015) in multiple PAC settings for FY 
2018 and subsequent years (for the IRF setting, see 80 FR 47100; for 
the LTCH setting, see 80 FR 49739). This is a process measure that 
requires the collection of admission and discharge functional status 
data using standardized clinical assessment items, or data elements 
that assess specific functional activities, that is, self-care and 
mobility activities across

[[Page 73470]]

PAC settings. In addition to proposing a process-based measure for the 
domain in the IMPACT Act of functional status, cognitive function, and 
changes in function and cognitive function, we also intend to develop 
outcomes-based quality measures, including functional status and other 
quality outcome measures, to further satisfy this domain. Although 
these measures will assess functional change for each care setting as 
well as across care settings, they will not be specific to the THA/TKA 
procedure patients in the 5-year performance period of the CJR model.
    Notwithstanding the important changes instituted by the IMPACT Act, 
we note that current patient function data collected in various PAC 
PPSs gather patient function data from the provider's perspective, that 
is, these data are provider-reported, while the proposed THA/TKA 
voluntary data submission collects functional data from the patient's 
perspective (that is, patient-reported). We are committed to 
prioritizing patient-reported outcomes as these data are likely to 
focus attention on the most patient-centered care feasible. We also 
note that the PAC data are collected after the THA/TKA procedure and 
therefore cannot be used to assess the patient's response to this 
elective intervention. In addition, these data are collected at 
admission and discharge from PAC settings. Therefore, these data are 
not captured over a standard time period, and changes in these 
assessments may not reflect differences in quality of care across 
providers. Finally, these assessments are administered to patients 
during the acute recovery phase following these procedures, as they are 
intended to assess the quality of care provided during the immediate 
post-operative rehabilitation period. Patient function during this 
period is usually restricted by the responsible physician for a period 
of weeks to ensure prosthetic joint stability; patients' activities are 
then advanced as tolerated over time. Therefore, short-term functional 
assessments are inadequate for capturing the full patient outcomes 
after these procedures, and the Technical Expert Panel convened by our 
measure development contractor strongly urged post-operative data be 
collected at least 9 months after surgery. For all of these reasons, we 
believed the proposed voluntary PRO data collection specifications 
better reflect outcomes meaningful to patients undergoing elective 
joint replacement surgery and better assess hospital-level quality of 
care. We also note that depending on the quality measure used and the 
setting in which the measure is applied, the measure may not allow 
collection of identical patient function data across all settings, 
since an applicable patient-related functional data element in one 
setting may not necessarily be applicable in another setting. For 
example, if the intent of a patient functional measure is to assess the 
frequency of post-operative infections for hospitals, the same measure 
may not be applicable to an IRF or a HHA.
    Finally, we note that we are committed to considering the 
implementation of quality measures that are standardized and 
interoperable across PAC and hospital settings using standardized 
patient assessment data.
    Comment: Some commenters believed that linking quality measure 
performance to eligibility for reconciliation payment in order to 
ensure continued attention to quality of care throughout the duration 
of the program and promote collaboration among all parties involved in 
beneficiaries' care approach fails to reflect the quality of care to be 
delivered in the context of the model. These commenters believe that 
the currently proposed methodology to determine performance on quality 
measures and linkage to reconciliation payment eligibility uses 
arbitrary distinctions in performance among hospitals that are not 
borne out by the data or even by CMS's own method of rating performance 
on the Hospital Compare Web site. Further, these commenters recommend 
that we adopt a balanced approach by using a methodology similar to the 
confidence intervals used in Hospital Compare that distinguishes 
performance based on the three categories of comparison to the national 
average. They recommended using only the performance on THA/TKA 
Complications measures (NQF #1550) and the THA/TKA Readmissions measure 
(NQF #1551) to determine if a hospital is eligible for reconciliation 
payment. Specifically, they recommended that if performance on both of 
these two measures is both statistically worse than the national 
average, then a hospital should not be eligible for reconciliation 
payment. Additionally, other commenters agreed that use of measure 
result point estimates to determine percentiles may not be appropriate 
because--(1) The measures are a ratio comparing observed to expected, 
where expected is based on the national performance. An individual 
hospital's performance should be assessed within confidence intervals 
as the measure was originally specified, tested, and endorsed by the 
NQF; and (2) they believe that there may not be a distinguishable 
difference in the performance of hospitals at the 50th percentile and 
the 30th percentile. These commenters specifically recommended a 
solution that uses confidence intervals similar to how outcome measure 
results are presented in Hospital Compare, where hospitals are grouped 
into ``no different than the national rate,'' ``better than the 
national rate,'' or ``worse than the national rate.'' Hospitals that 
are ``no different than the national rate'' or ``better than the 
national rate'' should automatically be deemed eligible for any 
potential savings.
    Response: We appreciate these comments and refer reviewers to 
section III.C.5.b.(5)(c)(iii) of this final rule for a detailed 
response to these concerns.
    Comment: A single commenter sought guidance on how a hospital 
system will measure quality of care delivered by outside agencies.
    Response: We understand the commenter to be referring to guidance 
on measuring the quality of care delivered by PAC providers. CMS has 
several PAC quality and payment programs with quality metrics. We 
encourage hospitals to review the--(1) IRF Program Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/; (2) Long-Term Care 
Hospital Quality Reporting Program Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/?redirect=/LTCH-Quality-Reporting/; and (3) 
Skilled Nursing Facility Quality initiative Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/SNF-Quality-Reporting.html. At this 
time, these three PAC quality programs do not report quality measure 
results on a Compare Web site. For Home Health Agencies please see: 
https://www.medicare.gov/homehealthcompare/) and for Nursing Homes 
please see ``about the data'' tab at https://www.medicare.gov/nursinghomecompare/ for an explanation of the measures used in these 
programs. We also refer the public to Data.Medicare.gov (see: https://data.medicare.gov/) for a list of measures in these two programs. Both 
the Home Health Compare and Nursing Home Compare Web sites explain 
their respective data sources and may be of help in guiding hospital 
systems that are interested in measuring quality of care delivered by 
home health agencies and nursing homes. For example, in the Home Health 
Compare Web site the section entitled ``About the Data''

[[Page 73471]]

indicates that data come from the following two sources: (1) CMS's 
health inspection database--Includes the nursing home characteristics 
and health deficiencies issued during the 3 most recent state 
inspections and recent complaint investigations. Data about staffing 
and penalties made against nursing homes also come from this database; 
and (2) National database known as the Minimum Data Set (MDS)--Data for 
quality measures come from the MDS Repository. The MDS is an assessment 
done by the nursing home at regular intervals on every resident in a 
Medicare- or Medicaid-certified nursing home. Information is collected 
about the resident's health, physical functioning, mental status, and 
general well-being. These data are used by the nursing home to assess 
each resident's needs and develop a plan of care. Understanding how CMS 
and states assess the care of home health agencies and becoming 
familiar with the guidelines that CMS sets for home health agencies can 
help to inform individual hospitals or hospital systems on how to 
assess quality of care by PAC agencies.
    Comment: Some commenters had concerns regarding the proposed 
requirement that hospitals pass all three thresholds in order to 
realize and receive payment for savings. They expressed concern that 
such a requirement will have the effect of filtering out close to 60 
percent of the participants, and believe that the proposed measures act 
as a triple filter and are biased against teaching hospitals and urban 
hospitals. They believe that the HCAHPS Survey measure (NQF #0166) is 
particularly biased against teaching and urban hospitals. They believe 
that CMS should establish a quality metric or a set of metrics that 
more accurately reflect care during the performance period, that are 
based on a set threshold, and that do not remove a certain percentage 
of the participants.
    Response: In section III.C.5.b.(5)(c). of the proposed rule, we 
discussed how we would link performance on quality measures with the 
reconciliation payments, including the proposal to use a 30 percent 
threshold for the first 2 years of the model, followed by a 40 percent 
threshold for years 3-5 of the model. We refer reviewers to section 
III.C.5. of this final rule for a full discussion regarding this 
proposal and our final policy.
    In section III.D. of the proposed rule (80 FR 41276), we discussed, 
in detail, the three proposed measures. From a measure perspective, we 
believe that the proposed measures (80 FR 41276 through 41290) of the 
THA/TKA Complications measure (NQF #1550), THA/TKA Readmissions (NQF 
#1551) and the HCAHPS Survey measure (NQF #0166) all accurately reflect 
the care provided by hospitals and their services as defined in the 
episode definition proposed in section III.B. of the proposed rule. 
Additionally, we believe that the proposed THA/TKA voluntary data 
submission initiative (80 FR 41284 through 41289) is also appropriate 
for the CJR model. We believe the proposed measures are appropriate 
because they are risk-adjusted outcome measures which assess important 
patient outcomes that are consistent with the National Quality Strategy 
(80 FR 41276), which acknowledges that complications and readmissions 
are disruptive to patients and caregivers, costly to the healthcare 
system, and puts patients at additional risk of hospital-acquired 
infections, and specifically recognizes that readmissions are also a 
major source of patient and family stress and may contribute 
substantially to loss of functional ability, particularly in older 
patients. We believe through the HCAHPS Survey measure (NQF #0166), CMS 
programs continue to highlight the importance of assessing patient 
experience of care. While we acknowledge that the current set of 
proposed measures do not include assessment of patient-reported 
functional outcomes in PAC settings, we note that the CJR model episode 
of care has acute care hospitals as the unit of analysis for this 
model. To our knowledge a hospital-level, risk-adjusted patient-
reported outcome functional measure does not exist for ready use in the 
CJR model. We believe that the THA/TKA voluntary PRO data submission 
initiative begins to address this gap in available patient-reported 
outcome functional measures through this model. While the proposed 
outcome measures and the THA/TKA voluntary PRO data submission 
initiative are not all inclusive of all CJR model episode of care 
settings, these measures address the concerns of patients. Also, since 
this is a test model we believe the current measures begin to inform us 
of ways to improve future models. We also have indicated that we will 
be reviewing the quality measure landscape for measures that can 
provide further insight on hospital-level quality of care for THA/TKA 
procedures.
    Comment: A commenter was concerned that some of the savings in the 
CJR model will occur after discharge and that the savings associated 
with the post-discharge care could impact quality of care. In order to 
assess this potential unintended consequence, the commenter suggested 
as a potential future research topic that CMS consider assessing in 
which setting the cost savings occur and compare that result to the 
quality data for the associated provider. The goal would be to answer 
the following questions: (1) Did any other quality measures decline as 
a result of the cost savings; and (2) if costs increased in a 
particular service area, what was the impact on the quality measures? 
The commenter believes that by answering these questions, we would 
potentially have data to help CMS better align quality measures and 
incentives in future models. Some commenters suggested that we assess 
the impact of quality measures in the CJR model and especially changes 
in performance amongst PAC settings relative to those participant 
hospitals that experienced cost savings.
    Response: We will take these suggestions into consideration as CMS 
assesses ways in which to improve the CJR model. We are committed to 
ensuring that the CJR model continues to anticipate and identify 
unintended consequences that may adversely impact beneficiary care.
    Comment: Some commenters, including consumers, strongly agreed with 
the quality measure thresholds of 30 percent and, later, 40 percent for 
earning savings. These commenters believe that retaining these 
standards is an essential component of the demonstration that is needed 
to mitigate risks of reduced care or quality for consumers.
    Response: We appreciate the support of the proposed measures and 
the suggestion to retain the proposed quality measure thresholds of 30 
percent and, in later years of the CJR model 40 percent, in order to 
mitigate the unintended consequence of reduced quality of care for 
consumers. We are also concerned about mitigating unintended 
consequences for consumers and refer readers to section III.C.5. of 
this final rule, where the policy for use of 30 percent threshold is 
fully discussed, and section III.F. of this final rule, where we have 
outlined our intent to monitor and ensure beneficiary protection 
against potential unintended consequences. We appreciate the importance 
of mitigating risks of reduced quality of care for CMS beneficiaries by 
finalizing thresholds that will encourage hospitals and other PAC 
settings to strive for improvement on measure performance. We note that 
in section III.C.5.b.(5)(c)(iii) of this final rule in the composite 
quality scoring methodology that a 30 percent threshold

[[Page 73472]]

was set in order to begin receiving points for performance on a 
measure.
    Comment: A few commenters urged CMS to harmonize measures so that 
the goals of care will be consistent across the care continuum.
    Response: While we acknowledge that the current proposed measures 
are hospital-level measures, we note that acute care hospitals are the 
unit of analysis for this model. As the CJR model continues, we will 
take into consideration ways in which to add measures to the model in 
order to have a more robust set of measures assessing all aspects of 
the CJR model episode.
    Comment: Many commenters supported the use of all three proposed 
measures, while many others opposed the use of proposed measures since 
the measure cohorts are not completely aligned with the proposed CJR 
model cohorts, which are based on the MS-DRGs of 469 and 470. These MS-
DRGs include all LEJR and non-elective THA/TKA procedures. Those 
opposed to the THA/TKA Complications measure (NQF #1550) and the THA/
TKA Readmissions measure (NQF #1551) noted that the measure cohorts are 
limited to primary elective THA/TKA patients and that the HCAHPS Survey 
measure (NQF #0166) applies to all inpatients. The primary concern was 
that the THA/TKA Complications measure (NQF #1550) and the THA/TKA 
Readmissions measure (NQF #1551) fail to provide insight on quality for 
a significant portion of the patient population included in the CJR 
model. A few commenters indicated that they would not be opposed to 
these measures if the CJR model cohorts were completely aligned with 
the measure cohorts. Finally, a commenter requested clarification on 
the implication of using the THA/TKA Complications measure (NQF #1550), 
which assesses primary elective procedures and does not include 
patients undergoing PHA procedures.
    Response: We appreciate the comments of those that supported the 
proposed measures. We also appreciate commenters' concerns regarding 
the lack of complete alignment between the CJR model cohorts and the 
proposed measure cohorts. We note, however, that the goal of the CJR 
model and the proposed episode definition are fully discussed in 
section III.B. of this final rule. The implication of not aligning with 
the MS-DRG 469 and 470 CJR model cohorts is that it will be difficult 
to assess the smaller percentage of non-elective THA and TKA patients. 
We note that elective THA and TKA cases make up the majority of MS-DRG 
469 and 470 cases. We also note that the THA/TKA Complications measure 
(NQF #1550) was created to assess hospital performance on THA and TKA 
procedures that are not only primary procedures but also elective. In 
addition, the measure cohort was defined, with the input of clinical 
experts, a nationally convened Technical Expert Panel convened by our 
measure development contractor and public comment, to create a 
clinically coherent group of patients for whom appropriate risk 
prediction could be accomplished. As partial arthroplasty procedures 
are primarily done for hip fractures and are typically performed on 
patients who are older, frailer, and have more comorbid conditions, the 
clinical experts and other Technical Expert Panel members believed that 
these procedures represented a distinct clinical risk group and should 
therefore be excluded from the measure. As discussed in the proposed 
rule (80 FR 41278), THA and TKA elective procedures are commonly 
performed, and the associated complication rates are rare. However, 
because the rate of elective THA and TKA procedures continues to 
increase, the overall cost of elective THA and TKA procedure 
complications is high. Further, for patients undergoing elective 
procedures, the associated risks are particularly important to 
understand and weigh during their decision-making process. Current 
quality improvement measures for patients undergoing elective THA and 
TKA procedures are generally limited to evidence-based processes of 
care. Measurement of patient outcomes, such as complications, allows 
for a more comprehensive view of quality of care, capturing more 
complex and critical aspects of care, such as communication between 
providers, prevention of and response to complications, patient safety, 
and coordinated transitions to the outpatient environment. To date, the 
THA/TKA Complications measure (NQF #1550) and the THA/TKA Readmissions 
measure (NQF #1551) are the only outcomes measures comparing hospital 
performance in the care of patients undergoing elective primary THA/
TKA. For these reasons, we believe that using a hospital-level risk-
adjusted outcome measure is the fairest way to assess quality 
performance for THA and TKA procedures in the CJR model participant 
hospitals. As with other CMS quality and payment programs and models, 
we are constantly monitoring for valid and reliable measures that could 
be considered for the CJR model. We also may explore the possibility of 
further measure development to address the inclusion of non-elective 
THA/TKA procedures.
    Comment: Some commenters suggested that there should be adjustment 
to the quality framework because the CJR model does not provide enough 
time or data to adequately prepare for the model.
    Response: We disagree that there is inadequate time to prepare for 
the model. We note for the HIQR Program that the THA/TKA Complications 
measure (NQF #1550) was finalized in FY 2012 IPPS/LTCH Final Rule (77 
FR 53534) for implementation in FY 2015, and the THA/TKA Readmissions 
measure (NQF #1551) and the most updated HCAHPS Survey measure (NQF 
#0166) were finalized in FY 2014 IPPS/LTCH final rule (78 FR 50807). We 
believe hospitals have received ample time to identify ways in which to 
improve their performance on these three measures. In proposing these 
measures, we specifically considered how familiar hospitals are with 
the proposed measure, knowing that hospitals will have had enough time 
to institute appropriate changes in order to perform well on these 
measures.
    Final Decision: After consideration of the public comments, we 
acknowledge that the current set of measures are hospital-centric in 
order to be consistent with the goals of this model, one of which is to 
encourage collaboration between providers (for example, hospitals, PAC 
facilities, and other types of providers) in order to achieve better 
care with cost savings while holding the acute care hospitals 
financially responsible. We recognize the gaps in the current measure 
set relative to other settings in which patients receive care post-
operatively. However, we believe that given the current design of the 
test model where the hospital is the unit of analysis, that the 
proposed measures are well developed, hospital-level risk-adjusted 
outcome measures that do address patient experience and outcomes that 
are important to patients like complications and readmissions. Further, 
we believe hospitals, in comparison to other health care facilities, 
are more likely to have resources that will allow them to appropriately 
coordinate and manage care throughout the episode, and hospital staff 
members who are already involved in hospital discharge planning and PAC 
recommendations for recovery, which are key dimensions of high quality 
and efficient care for the episode. For these reasons, we believe it is 
appropriate to implement hospital-level measures. We acknowledge that 
as CMS gains more experience with this model, there may be future

[[Page 73473]]

opportunities to create a more robust set of quality measures for this 
model where we can broaden the scope of measures to include those 
applicable to PAC settings. As with any new initiative, we will 
continue to assess the ever-changing inventory of measures with the 
goal to build a more robust set of measures that support the intent of 
this model. We intend to continue to refine the measure set based on 
future public comments, any changes in the payment methodology that may 
require specific measures, and recommendations from the participating 
hospitals as CMS learns more about the impact of the model on quality 
improvement and cost savings.
b. Public Display of Quality Measures in the CJR Model
    In section III.D.5. of the proposed rule, we stated our belief that 
the display of measure results is an important way to educate the 
public on hospital performance and increase the transparency of the 
model, and therefore proposed, for the model, to display quality 
measure results on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/). We also stated our belief that the 
public and hospitals are familiar with this Web site and the display of 
hospital quality measure information, and also noted that the public 
and hospitals are familiar with the proposed measures, as these 
measures have been displayed on the Hospital Compare Web site over the 
past few years. Finally, we indicated our intent to align the display 
of quality measure results and access to this data for the model with 
other CMS hospital quality programs by proposing to post model quality 
measure results and data on the Hospital Compare Web site (80 FR 
41290).
2. Quality Measures for Performance Year 1 (CY 2016) and Subsequent 
Years
a. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1550)
(1) Background
    As stated in the proposed rule (80 FR 41278 through 41280), THA and 
TKA are commonly performed procedures for the Medicare population that 
improve quality of life. We indicated that between 2009 and 2012, there 
were 337,419 total hip arthroplasty (THA) procedures and 750,569 total 
knee arthroplasty (TKA) procedures for Medicare FFS patients 65 years 
and older,\57\ that the post-operation complications of these 
procedures are high considering these are elective procedures, and 
recognized that complications are devastating to patients. We 
highlighted as an example, the rates for periprosthetic joint 
infection, which is a rare but devastating complication. We indicated 
reported rates of 2.3 percent for THA/TKA patients with rheumatoid 
arthritis after 1 year of follow-up,\58\ and 1.6 percent in Medicare 
patients undergoing TKA after 2 years of follow up.\59\ In the proposed 
rule (80 FR 41278), we also shared complication rates based on studies 
reporting on 90-day death rates following THA,60 61 reported 
rates for pulmonary embolism following TKA,62 63 64 
septicemia during an index admission,\65\ and 90-days following 
discharge for primary TKA,\66\ and rates for bleeding and hematoma 
following TKA.\67\ \68\ For combined THA and TKA procedures, we also 
noted in the proposed rule that these two procedures account for the 
largest payments for procedures under Medicare.\69\ We shared our 
observation that while both hip and knee arthroplasty procedures 
improve the function and quality of life of patients with disabling 
arthritis, the volume and cost associated with these procedures are 
very high, and we believe it is important to assess the quality of care 
provided to Medicare beneficiaries who undergo one or both of these 
procedures.
---------------------------------------------------------------------------

    \57\ Suter L, Grady JL, Lin Z et al.: 2013 Measure Updates and 
Specifications: Elective Primary Total Hip Arthroplasty (THA) And/Or 
Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-
Standardized Readmission Measure (Version 2.0). 2013. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \58\ Bongartz, T, Halligan CS, Osmon D, et al. Incidence and 
risk factors of prosthetic joint infection after total hip or knee 
replacement in patients with rheumatoid arthritis. Arthritis Rheum. 
2008; 59(12): 1713-1720.
    \59\ Kurtz S, Ong K, Lau E, Bozic K, Berry D, Parvizi J. 
Prosthetic joint infection risk after TKA in the Medicare 
population. Clin Orthop Relat Res. 2010;468:5.
    \60\ Cram P, Vaughan-Sarrazin MS, Wolf B, Katz JN, Rosenthal GE. 
A comparison of total hip and knee replacement in specialty and 
general hospitals. J Bone Joint Surg Am. Aug 2007;89(8):1675-1684. 
Soohoo NF, Farng E, Lieberman JR, Chambers L, Zingmond, DS. Factors 
That Predict Short-term Complication Rates After Total Hip 
Arthroplasty. Clin Orthop Relat Res. Sep 2010;468(9):2363-2371.
    \61\ Soohoo NF, Farng E, Lieberman JR, Chambers L, Zingmond DS. 
Factors that predict short term complication rates after total hip 
arthroplasty. Clin Orthop Relat Res. Sep 2010; 468(9): 2363-2371.
    \62\ Mahomed NN, Barrett JA, Katz JN, et al. Rates and outcomes 
of primary and revision total hip replacement in the United States 
Medicare population. J Bone Joint Surg Am. Jan 2003;85- A(1):27-32.
    \63\ Khatod M, Inacio M, Paxton EW, et al. Knee replacement: 
epidemiology, outcomes, and trends in Southern California: 17,080 
replacements from 1995 through 2004. Acta Orthop. Dec 
2008;79(6):812-819.
    \64\ Solomon DH, Chibnik LB, Losina E, et al. Development of a 
preliminary index that predicts adverse events after total knee 
replacement. Arthritis & Rheumatism. 2006;54(5):1536-1542.
    \65\ Browne, JA, Cook C, Hofmann A, Bolognesi MP. Postoperative 
morbidity and mortality following total knee arthroplasty with 
computer navigation. Knee. 2010;17(2): 152-156.
    \66\ Cram P, Vaughan-Sarrazin MS, Wolf B, Katz JN, Rosenthal GE. 
A comparison of total hip and knee replacement in specialty and 
general hospitals. J Bone Joint Surg Am. Aug 2007;89(8):1675-1684.
    \67\ Browne, JA, Cook C, Hofmann A, Bolognesi MP. Postoperative 
morbidity and mortality following total knee arthroplasty with 
computer navigation. Knee. 2010;17(2): 152-156.
    \68\ Huddleston JI, Maloney WJ, Wang Y, Verzier N, Hunt DR, 
Herndon JH. Adverse Events After Total Knee Arthroplasty: A National 
Medicare Study. The Journal of Arthroplasty. 2009;24(6, Supplement 
1): 95-100.
    \69\ Bozic KJ, Rubash HE, Sculco TP, Berry DJ., An analysis of 
Medicare payment policy for total joint arthroplasty. J 
Arthroplasty. Sep 2008; 23(6 Suppl 1):133-138.
---------------------------------------------------------------------------

    In order to address these concerns and our reasons for proposing 
the Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1550) measure, we shared historical 
information about this measure regarding its development, 
implementation in CMS programs, and its public display. Briefly, we 
indicated in the proposed rule (80 FR 41278) that the median hospital-
level RSCR 2008 was 4.2 percent, with a range from 2.2 percent to 8.9 
percent in hospitals and that we believe variation in complication 
rates suggests that there are important differences in the quality of 
care delivered across hospitals, and therefore room for quality 
improvement. In response to noted 2008 variation in complication rates, 
we developed, in 2010, the proposed measure of Hospital-Level RSCR 
Following Elective Primary THA and/or TKA, which attained National 
Quality Forum endorsement (NQF #1550) and recommendations from the NQF 
Measure Application Partnership (MAP) for use in the HIQR Program.\70\ 
We also shared in the proposed rule that this measure has additionally 
been implemented in the HVBP program and that CMS has not submitted 
this measure to the NQF MAP for recommendations on use in the PAC 
settings since the measure was developed for the acute care hospital 
setting. Regarding public display of this measure, we indicated that 
this measure has been publicly reported on Hospital

[[Page 73474]]

Compare Web site (https://www.hospitalcompare.hhs.gov/) since FY 2014 
and in the HIQR Program since FY 2015 (FY 2015 IPPS/LTCH final rule, 79 
FR 50062).
---------------------------------------------------------------------------

    \70\ National Quality Forum. MAP Final Reports. Available at: 
https://www.qualityforum.org/Publications/2012/02/MAP_Pre-Rulemaking_Report_Input_on_Measures_Under_Consideration_by_HHS_for_2012_Rulemaking.aspx . Accessed on April 1 6, 2015, page 78.
---------------------------------------------------------------------------

    Finally, in the proposed rule we explained what the measure 
assesses, which is a hospital's risk standardized complication rate. We 
also specifically shared that the measure focuses on the rate of 
complications occurring 90 days after elective primary THA and TKA 
surgery. We explained that the 90-day period begins with the date of 
the index admission for a specific hospital, and that the index 
admission is the hospitalization to which the complications outcome is 
attributed. We also explained that either one or more of the following 
are considered complications in this measure: Acute myocardial 
infarction, pneumonia, or sepsis/septicemia within 7 days of admission; 
surgical site bleeding, pulmonary embolism or death within 30 days of 
admission; or mechanical complications, periprosthetic joint infection 
or wound infection within 90 days of admission. To highlight more 
recent data on THA/TKA procedure complications, we shared a comparison 
of the median hospital-level RSCRs for hospitals between April 1, 2011 
and March 31, 2014 and noted a that there continues to be a performance 
gap (median RSCR of 3.1 percent with a range from 1.4 percent to 6.9 
percent) indicating there is still room for quality improvement.\71\
---------------------------------------------------------------------------

    \71\ Suter L, Zang W, Parzynski C, et al. 2015 Procedure-
Specific Complication Measures Update and Specifications: Elective 
Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty 
(TKA) Risk-Standardized Complication Measure (Version 4.0). 2015.
---------------------------------------------------------------------------

(2) Data Sources
    In the proposed rule (80 FR 41279), we proposed to use Medicare 
Part A and Part B FFS claims submitted by the participant hospital as 
the data source to calculate the measure. We also explained that the 
index admission diagnoses and in-hospital comorbidities are assessed 
using Medicare Part A claims, and that additional comorbidities prior 
to the index admission are assessed using Part A inpatient, outpatient, 
and Part B office visit Medicare claims in the 1 to 2 months prior to 
the index (initial) admission. Finally, in the proposed rule, we stated 
that enrollment and post-discharge mortality status are obtained from 
Medicare's enrollment database which contains beneficiary demographic, 
benefits/coverage, and vital status information.
(3) Cohort
    In the proposed rule (80 FR 41279), we proposed that the cohort for 
the THA/TKA Complications measure (NQF #1550) would include Medicare 
FFS beneficiaries, aged 65 years or older, admitted to non-federal 
acute care hospitals for elective primary THA or TKA. We explained that 
THA and TKA procedures eligible for inclusion are defined using ICD-9-
CM codes 81.51 and 81.54, respectively. We also proposed that the 
cohort would include all hospitals included in the model, but also 
noted the model cohort may differ slightly from the hospital cohort 
that is currently captured in the measures through the HIQR Program. We 
noted this difference because the model cohort is a randomly selected 
group of acute care hospitals and therefore may not include all of the 
HIQR Program acute care hospitals (for a detailed discussion on 
selection of hospitals for the model, see section III.A.4. of the 
proposed rule).
(4) Inclusion and Exclusion Criteria
    We also proposed inclusion and exclusion criteria (80 FR 41279). We 
indicated that an index admission is the hospitalization to which the 
complication outcome is attributed. We also proposed that the measure 
include the following index admissions for patients:
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Enrolled in Part A and Part B Medicare for the 12 months 
prior to the date of index admission and during the index admission.
     Having a qualifying elective primary THA/TKA procedure; 
elective primary THA/TKA procedures are defined as those procedures 
without any of the following:
    ++ Femur, hip, or pelvic fractures coded in principal or secondary 
discharge diagnosis fields of the index admission.
    ++ PHA procedures with a concurrent THA/TKA.
    ++ Revision procedures with a concurrent THA/TKA.
    ++ Resurfacing procedures with a concurrent THA/TKA.
    ++ Mechanical complication coded in the principal discharge 
diagnosis field.
    ++ Malignant neoplasm of the pelvis, sacrum, coccyx, lower limbs, 
or bone/bone marrow or a disseminated malignant neoplasm coded in the 
principal discharge diagnosis field.
    ++ Removal of implanted devices/prostheses.
    ++ Transfer from another acute care facility for the THA/TKA.
    In the proposed rule, we indicated that the THA/TKA Complications 
measure (NQF #1550) would exclude the following admissions:
     Admissions for patients discharged against medical advice 
(AMA).
     Admissions for patients with more than two THA/TKA 
procedure codes during the index hospitalization.
     Consistent with the FY 2016 IPPS/LTCH proposed rule, 
admissions for patients without at least 90 days post-discharge 
enrollment in FFS Medicare; this exclusion is an update to the measure 
signaled in the HIQR Program section of the FY2016 IPPS/LTCH proposed 
rule (80 FR 24572 through 24574) to ensure that disproportionate 
Medicare FFS disenrollment does not bias the measure results.
    We further explained in the proposed rule that once the exclusion 
criteria were applied, we randomly select one index admission for 
patients with multiple index admissions in a calendar year. Therefore, 
we exclude the other eligible index admissions in that year. 
Identification and use of a single index admission in a calendar year 
is done because this measure includes mortality as an outcome and the 
probability of death increases with each subsequent admission, 
preventing each episode of care from being mutually independent. 
Therefore only one index admission is selected to maintain measure 
integrity.
    In the proposed rule, we also noted that THA/TKA Complications 
measure (NQF #1550) does not capture patients undergoing PHA 
procedures. We explained why we exclude PHA procedures, and this is 
primarily because PHA procedures are done for hip fractures and 
therefore are not elective procedures. We also shared that PHA 
procedures are typically performed on patients who are older, frailer, 
and have more comorbid conditions. We noted that although this 
exclusion is not fully harmonized with MS-DRG 469 and 470, which 
include PHA procedures, this measure still provides strong incentive 
for improving and maintaining care quality across joint replacement 
patients as hospitals typically develop protocols for lower extremity 
joint arthroplasty that will address perioperative and post-operative 
care for both total and PHA procedures. As previously cited in our 
discussion of the Episode Definition of the model (80 FR 41212 through 
41219), the frequency of administrative claims data using ICD-9 codes 
for 2014 indicated that PHA (ICD-9 code: 81.52) accounted for 12 
percent of the administrative claims, while Total Hip replacement (ICD-
9 code: 81.51) and Total Knee replacement (ICD-9 code: 81.54) accounted 
for 87 percent of the administrative claims for 2014. We also

[[Page 73475]]

noted that the same surgeons and care teams frequently perform both 
procedures, and therefore quality improvement efforts initiated in 
response to the THA/TKA Complications measure (NQF #1550) are likely to 
benefit patients undergoing similar elective procedures, such as PHA 
and revision THA/TKA procedures, and possibly even non-elective THA/TKA 
procedures, such as fracture-related THA.
(5) Risk-Adjustment
    We note that we chose to align this measure with the risk-
adjustment methodologies adopted for the HIQR Program and the HRRP in 
accordance with section 1886(b)(3)(B)(viii)(VIII) of the Act (FY 2013 
IPPS/LTCH final rule 77 FR 53516 through 53518 and FY 2015 IPPS/LTCH 
final rule; 79 FR 50024, 50031, and 50202). We also indicated in the 
proposed rule (80 FR 41279) that the risk-adjustment takes into account 
the patient case-mix to assess hospital performance. The patient risk 
factors are defined using the Hierarchical Condition Categories (CC), 
which are clinically relevant diagnostic groups of ICD-9-CM codes.\72\ 
The CCs used in the risk adjustment model for this measure, are 
provided on the CMS QualityNet Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772783162). We noted that the measure uses all Part A and B 
administrative claims ICD-9 codes for the year prior to and including 
the index admission. The Part A and B administrative claims ICD-9 codes 
are used to inform the risk prediction for each patient; diagnostic 
codes from PAC settings are included in the measure, but this 
information is only used to identify a hospital's patient case mix in 
order to adequately adjust for differences in case mix across 
hospitals. Furthermore, we stated that use of the Part A and B data 
does not mean the measures are applicable to PAC settings, only that 
they use comprehensive data to predict the risk of the outcome and 
adjust for hospital patient case mix. The measure would meet the 
requirement if it applied, because risk-adjustment adjusts for hospital 
patient mix, including age and comorbidities, to ensure that hospitals 
that care for a less healthy patient population are not penalized 
unfairly. In addition, we indicated that the measure methodology 
defines ''complications'' as acute myocardial infarction (AMI); 
pneumonia; sepsis/septicemia; pulmonary embolism; surgical site 
bleeding; death; wound infection; periprosthetic joint infection; and 
mechanical complication within 0 to 90-days post the index date of 
admission, depending on the complication. We explained that the 
decision to determine appropriate follow-up period of 0 to 90 days was 
based on our analysis of 90-day trends in complication rates using the 
2008 Medicare FFS Part A Inpatient Data. We found that rates for 
mechanical complications are elevated until 90 days after the date of 
index admission. We also found that the rates for four other 
complications--death, surgical site bleeding, wound infection, and 
pulmonary embolism--are elevated for 30 days, and that rates for AMI, 
pneumonia, and sepsis/septicemia level off 7 days after the date of 
index admission.
---------------------------------------------------------------------------

    \72\ Pope G, Ellis R, Ash A, et al., Principal Inpatient 
Diagnostic Cost Group Models for Medicare Risk Adjustment. Health 
Care Financing Review. 2000;21(3):26.
---------------------------------------------------------------------------

(6) Calculating the Risk-Standardized Complication Rate (RSCR) and 
Performance Period
    In the proposed rule (80 FR 41280), we shared that analogous to how 
we calculate hospital risk-standardized readmission rates with all 
readmission measures and risk-standardized mortality rates with the 
mortality measures used in CMS hospital quality programs, we also 
calculate the hospital RSCR by producing a ratio of the number of 
''predicted'' complications (that is, the adjusted number of 
complications at a specific hospital based on its patient population) 
to the number of ''expected'' complications (that is, the number of 
complications if an average quality hospital treated the same patients) 
for each hospital and then multiplying the ratio by the national raw 
complication rate. As noted in the proposed rule, the THA/TKA 
Readmissions measure (NQF #1551) uses a 30-day window of follow-up, 
which is different from the 90-day window of follow-up used in the THA/
TKA Complications measure (NQF #1550).
    We also indicated that we would use a 3-year rolling performance 
period to be consistent with that used for the measure as it is 
implemented in the HIQR Program (FY 2015 IPPS/LTCH final rule, 79 FR 
50208 and 50209). For performance year 1 of the model, we proposed that 
the performance period for the THA/TKA Complications measure (NQF 
#1550) would be April 2013 through March 2016. Section III.D.4. of this 
final rule summarizes performance periods for years 1 through 5 of the 
CJR model.
    We sought public comment on this proposal to assess quality 
performance through implementation of the Hospital-level risk-
standardized complication rate (RSCR) following elective primary total 
hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550) 
measure.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters supported CMS's payment reform efforts 
and specifically focused on the need to improve complication rates 
through improvement of wound healing. They supported the use of the 
THA/TKA Complications measure (NQF #1550) as a means to change behavior 
and reduce complications.
    Response: We thank these commenters for their support of payment 
reform and our efforts to reduce complications through the THA/TKA 
Complications measure (NQF #1550).
    Comment: Commenters questioned the use of a 90-day episode 
timeframe for measuring patient outcomes following THA/TKA. One of the 
commenters specifically questioned the use of 2008 data to define the 
90-day THA/TKA Complications measure (NQF #1550) timeframe, noting 
there may have been a significant shift in the occurrence of 
complications in the past 7 years.
    Response: From a quality measure perspective, we note that the THA/
TKA Complications measure (NQF #1550) uses different follow-up 
timeframes, up to 90 days, to assess different complications. We noted 
our rationale for the 90-day timeframe in the preamble of the proposed 
rule (80 FR 41217). Our measure development contractor consulted a 
Technical Expert Panel to review appropriate follow-up timeframes for 
each complication. Clinical experts agreed that the specified 
complications are more likely to be attributable to the index procedure 
if they occur within the specified timeframes. Additionally, we 
requested public comments during measure development, the rulemaking 
process, and regular measure maintenance during NQF and MAP review. We 
conduct annual and comprehensive reevaluation of the measure's 
methodology. We will take the commenter's suggestion to evaluate shifts 
in the occurrence of complications into consideration during the annual 
measure reevaluation process.
    Comment: A commenter sought confirmation that CMS has quality 
improvement efforts that included the use of intermittent pneumatic

[[Page 73476]]

compression devices (IPCD) to minimize medical and surgical 
complications during surgery and the postoperative period.
    Response: We appreciate this inquiry regarding the inclusion of 
IPCD in CMS quality improvement efforts. We note that HIQR Program 
implemented two of The Joint Commission's venous thromboembolism 
measures that cover the use of IPCDs: 1) Venous thromboembolism 
prophylaxis measure 1 (VTE-1) (NQF #0371); and 2) Intensive Care Unit 
VTE Prophylaxis (VTE-2) (NQF #0372). We refer reviewers to FY 2016 
IPPS/LTCH final rule (80 FR 49649) for discussion of use of these 
measures in the HIQR Program. These results are also available on 
Hospital Compare (available at: https://www.medicare.gov/hospitalcompare/search.html).
    Comment: There were many comments requesting risk-adjustment of the 
payment methodology and/or the risk-adjustment at the measure level for 
socio-economic status or socio-demographic status. We noticed the terms 
socio-economic status and socio-demographic status were used 
interchangeably throughout many of the public comments. For clarity and 
simplicity, we will use socio-demographic status (SDS) to signify both 
socio-economic status and socio-demographic status. Some stakeholders 
indicated that the SDS of patients should be taken into account in the 
THA/TKA Complications measure (NQF #1550) and the THA/TKA Readmissions 
measure (NQF #1551). These stakeholders indicated that income factors 
such as percentage of dual eligible patients or Supplemental Security 
Income percentage, and family size or other post-discharge support 
measures should be risk adjusted. Some stakeholders shared their 
anecdotal data that demonstrated lower SDS was associated with poorer 
patient outcomes compared to other levels of SDS status.
    Response: We continue to align our policy on SDS risk adjustment at 
the measure level across our quality and payment programs. Consistent 
with statements made in the FY 2016 IPPS/LTCH final rule (80 FR 49531 
through 49532) and final rules related to PAC quality programs (IRF, 80 
FR 47088; LTCH, 80 FR 49731; and SNF, 80 FR 46435), while we appreciate 
the importance of the role that SDS plays in the care of patients, we 
continue to have concerns about holding hospitals to different 
standards for the outcomes of their patients of low sociodemographic 
status because we do not want to mask potential disparities or minimize 
incentives to improve the outcomes of disadvantaged populations. We 
routinely monitor the impact of sociodemographic status on hospitals' 
results on our measures. To date, we have found that hospitals that 
care for large proportions of patients of low sociodemographic status 
are capable of performing well on our measures (for example, we refer 
readers to the 2014 Chartbook pages 48-57, 70-73, and 78 at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf).
    NQF is currently undertaking a two-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For two years, NQF will conduct a trial of a 
temporary policy change that will allow inclusion of sociodemographic 
factors in the risk-adjustment approach for some performance measures. 
At the conclusion of the trial, NQF will determine whether to make this 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, ASPE is conducting research to examine the impact of 
socioeconomic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of these reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs and the CJR model at such time as they are available.
    Comment: A commenter expressed concern that the penalty for the 
quality threshold is biased against low-volume hospitals. The commenter 
stated that one or two readmissions or complications at a low-volume 
hospital would have a larger impact on the quality threshold, which 
would make it more difficult for to become eligible for incentive 
payments.
    Response: We appreciate the commenter's concern, and note that we 
adopted a risk adjustment modeling methodology that takes into account 
volume. We acknowledge that smaller hospitals typically have less 
certain estimates because they have fewer cases for use in assessing 
quality. Our approach to modeling addresses the concern that the 
measures are biased against small hospitals due to random variation, 
and this challenge is inherent in outcome measurements. However, one 
advantage of the statistical model used for the measures is that it 
allows for the inclusion of small hospitals while characterizing the 
certainty of their estimates. The hierarchical logistic regression 
model that we use to calculate the risk-standardized measures allows 
the inclusion of hospitals with relatively few observations, but takes 
into account the uncertainty associated with sample size in estimating 
their risk-standardized outcome rates. The model takes into account the 
uncertainty in the estimate of outcome rates for low-volume hospitals 
by assuming that each hospital is a typically performing hospital. It 
weighs that assumption along with the outcomes for the particular 
hospital in calculating the outcome rate. Therefore, the estimated 
outcome rates for smaller hospitals will likely be closer to the 
national average because the limited number of eligible cases in the 
hospital indicated relatively little about that hospital's true outcome 
rate.
    Comment: A commenter recommended that CMS incorporate pre-operative 
global physical function, BMI, smoking status, musculoskeletal 
comorbidities and Charlson comorbidity index into the existing THA/TKA 
Complications (NQF #1550) and Readmissions (NQF #1551) measures' risk 
models.
    Response: In addition to risk adjusting for multiple comorbid 
medical conditions, these measures currently risk adjust for ICD-9-CM 
codes 278.01 Morbid Obesity, 755.63 Skeletal Deformities and 716.15/
716.16 Post-Traumatic Osteoarthritis, as well as a large number of 
other musculoskeletal conditions. We undertake a comprehensive measure 
reevaluation of our existing publicly reported outcome measures each 
year. Currently, these measures utilize administrative claims data for 
risk adjustment. When additional risk factor data sources become widely 
available, we will take these recommendations under advisement for 
incorporation into future iterations of these measures through 
rulemaking.
    Final Decision: After consideration of the public comments we 
received, we are finalizing and adopting the THA/TKA Complications 
measure (NQF #1550) as proposed. Regarding the requests for socio-
demographic risk-adjustment at the measure level, we will not be risk-
adjusting the CJR model measures for socio-demographic variables at 
this time. As previously noted, we await further information from 
ASPE's research and recommendations. Finally, we are codifying adoption 
of the Hospital-Level

[[Page 73477]]

Risk-Standardized Complication Rate (RSCR) Following Elective Primary 
Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF 
#1550) in Sec.  510.400(a)(1).
b. Hospital-Level 30-Day, All-Cause Risk-Standardized Readmission Rate 
(RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or 
Total Knee Arthroplasty (TKA) (NQF #1551)
(1) Background
    In the proposed rule (80 FR 41280), we stated that the objective of 
CMS's Hospital-level 30-day, all-cause risk-standardized readmission 
rate (RSRR) following elective primary total hip arthroplasty (THA) 
and/or total knee arthroplasty (TKA) (NQF #1551) (as referred to as 
THA/TKA Readmissions measure (NQF #1551)) measure is to assess 
readmission from any cause within 30 days of discharge from the 
hospital following elective primary THA and TKA. As previously stated, 
outcome measures such as complications and readmissions are the 
priority areas for the HIQR Program, and elective primary THA and TKA 
are commonly performed procedures that improve quality of life. We also 
stated our belief that THA and TKA readmissions are disruptive to 
patients' quality of life, costly to the Medicare program, and that 
data support that readmission rates can be improved through better care 
coordination and other provider actions.\73\ Furthermore, we stated our 
belief that there is an opportunity for hospitals to improve quality of 
life for the patient. We shared in the proposed rule that from July 1, 
2011 to June 30, 2014, Medicare FFS claims data indicate that 30-day 
hospital-level risk-standardized readmission rates ranged from 2.6 
percent to 8.5 percent among hospitals with a median rate of 4.8 
percent with a mean risk-standardized readmission rate of 4.9 
percent.\74\ This range in variation suggests there are important 
differences in the quality of care received across hospitals, and that 
there is room for improvement. We shared our belief that a measure that 
addresses readmission rates following THA and TKA procedures not only 
provides an opportunity to provide targets for efforts to improve the 
quality of care and reduction in costs for patients undergoing these 
elective procedures, but also increases transparency for consumers and 
provides patients with information that could guide their choices. We 
indicated our belief that a risk-adjusted readmission outcome measure 
can provide a critical perspective on the provision of care, and 
supports improvements in care for the Medicare patient population 
following THA/TKA hospitalization. In the proposed rule, we provided 
historical background on the THA/TKA Readmissions measure (NQF #1551), 
indicating that the measure has wide stakeholder support, with NQF 
endorsement in January 2012, and recommendations by the NQF MAP for use 
in the HIQR Program (2012 Pre-Rulemaking report \19\), and in the HRRP 
(2013 Pre-Rulemaking report).\75\ Finally, we shared that the THA/TKA 
Readmissions Measure (NQF #1551) has been publicly reported since FY 
2014 (79 FR 50062), and was implemented in both the HIQR Program (77 FR 
53519 through 53521) and HRRP (78 FR 50663 and 50664).
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    \73\ Mistiaen P, Francke AL, Poot E. Interventions aimed at 
reducing problems in adult patients discharged from hospital to 
home: A systematic meta-review. BMC Health Services Research. 
2007;7:47.
    \74\ Suter L, Desai N, Zang W, et al. 2015 Procedure-Specific 
Readmission Measures Updates and Specifications Report: Elective 
Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty 
(TKA) Risk-Standardized Readmission Measure (Version 4.0), Isolated 
Coronary Artery Bypass Graft (CABG) Surgery--Version 2.0. 2015; 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \75\ National Quality Forum. MAP Final Reports. Available at: 
https://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_-__-_February_2013.aspx. Accessed on April 16, 
2015, page 143.
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(2) Data Sources
    In the proposed rule (80 FR 41280), we proposed to use Medicare 
Part A and Part B FFS claims submitted by the participant hospital as 
the data source for calculation of the THA/TKA Readmissions measure 
(NQF #1551). We stated that index admission diagnoses and in-hospital 
comorbidity data are assessed using Medicare Part A claims and that 
additional comorbidities prior to the index admission are assessed 
using Part A inpatient, outpatient, and Part B office visit Medicare 
claims in the 12 months prior to index (initial) admission. We shared 
that enrollment status is obtained from Medicare's enrollment database 
which contains beneficiary demographic, benefit/coverage, and vital 
status information.
(3) Cohort
    In the proposed rule (80 FR 41281), we indicated that THA/TKA 
Readmissions measure (NQF #1551) includes Medicare FFS beneficiaries, 
aged 65 years or older, admitted to non-federal acute care hospitals 
for elective primary THA or TKA. We explained that the THA and TKA 
procedures eligible for inclusion are defined using ICD-9-CM codes 
81.51 and 81.54, respectively, and proposed that the cohort will 
include all hospitals included in the model, but the model cohort may 
differ slightly from the hospital cohort that is currently captured in 
the measures through the HIQR Program. That is, the model cohort is a 
randomly selected group of acute care hospitals and therefore may not 
include all of the HIQR Program acute care hospitals (for a detailed 
discussion on selection of hospitals for the model see section III.A. 
of the proposed rule).
(4) Inclusion and Exclusion Criteria
    In the proposed rule (80 FR 41281), we proposed that an index 
admission is the anchor hospitalization to which the readmission 
outcome is attributed. The measure includes the following index 
admissions for patients:
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Discharged from non-federal acute care hospitals alive.
     Enrolled in Medicare Part A and Part B for the 12 months 
prior to the date of index admission and during the index admission.
     Having a qualifying elective primary THA/TKA procedure; 
elective primary THA/TKA procedures are defined as those procedures 
without any of the following:
    ++ Femur, hip, or pelvic fractures coded in principal or secondary 
discharge diagnosis fields of the index admission.
    ++ PHA procedures with a concurrent THA/TKA.
    ++ Revision procedures with a concurrent THA/TKA.
    ++ Resurfacing procedures with a concurrent THA/TKA.
    ++ Mechanical complication coded in the principal discharge 
diagnosis field.
    ++ Malignant neoplasm of the pelvis, sacrum, coccyx, lower limbs, 
or bone/bone marrow or a disseminated malignant neoplasm coded in the 
principal discharge diagnosis field.
    ++ Removal of implanted devices/prostheses.
    ++ Transfer from another acute care facility for the THA/TKA.
     This measure excludes index admissions for patients--
    ++ Without at least 30 days post-discharge enrollment in FFS 
Medicare;
    ++ Discharged against medical advice (AMA);
    ++ Admitted for the index procedure and subsequently transferred to 
another acute care facility; and
    ++ With more than two THA/TKA procedure codes during the index 
hospitalization.

[[Page 73478]]

    Finally, we also indicated that for the purpose of this measure, 
admissions within 30 days of discharge from an index admission are not 
eligible to also be index admissions. Thus, no hospitalization will be 
counted as both a readmission and an index admission in this measure.
    In the proposed rule, we also stated that this measure does not 
capture patients undergoing PHA procedures, as partial hip 
arthroplasties are primarily done for hip fractures and are typically 
performed on patients who are older, frailer, and have more comorbid 
conditions. We also shared that although this exclusion is not fully 
harmonized with MS-DRG 469 and 470, which include PHA procedures, this 
measure would still provide strong incentive for improving and 
maintaining care quality across joint replacement patients. We shared 
our belief that the THA/TKA Readmissions measure (NQF #1551) provides 
strong incentive for quality improvement because hospitals typically 
develop protocols for lower extremity joint arthroplasty that will 
address perioperative and post-operative care for both total and 
partial hip arthroplasties, and the same surgeons and care teams 
frequently perform both procedures. Therefore, quality improvement 
efforts initiated in response to the THA/TKA Readmissions measure (NQF 
#1551) are likely to benefit patients undergoing similar elective 
procedures, such as PHA and revision THA/TKA procedures, and possibly 
even non-elective THA/TKA procedures, such as fracture-related THA.
(5) Risk-Adjustment
    In the proposed rule (80 FR 41281), we noted that we chose to align 
this measure with the risk-adjustment methodologies adopted for 
Readmissions measure (NQF #1551) under the HIQR Program in accordance 
with section 1886(b)(3)(B)(viii)(VIII) of the Act, as finalized in FY 
2013 IPPS/LTCH PPS final rule (77 FR 53519 through 53521). We also 
noted that the measure risk-adjustment takes into account patient age 
and comorbidities to allow a fair assessment of hospital performance. 
Further, we noted that the measure defines the patient risk factors for 
readmission using diagnosis codes collected from all patient claims 1 
year prior to patient index hospitalization for THA and TKA. We also 
indicated that as previously noted for the THA/TKA Complications 
measure (NQF #1550), Parts A and B administrative claims ICD-9 codes 
are used to inform the risk prediction for each patient; diagnostic 
codes from PAC settings are included in the measure, but this 
information is only used to identify a hospital's patient case mix in 
order to adequately adjust for differences in case mix across 
hospitals. We stated that use of the Part A and B data does not mean 
the measures are applicable to PAC settings, only that they use 
comprehensive data to predict the risk of the outcome and adjust for 
hospital patient case mix. We noted that the patient diagnosis codes 
are grouped using Hierarchical Condition Categories (CCs), which are 
clinically relevant diagnostic groups of ICD-9-CM codes.\76\ The CCs 
used in the risk adjustment model for this measure, are provided on the 
CMS QualityNet Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069856694). We concluded with the summary that age and comorbidities 
present at the time of admission are adjusted for differences in 
hospital case mix (patient risk factors), and that the measure uses the 
hierarchical logistic regression model (HLM) statistical methodology 
for risk adjustment.
---------------------------------------------------------------------------

    \76\ Pope G, Ellis R, Ash A, et al., Principal Inpatient 
Diagnostic Cost Group Models for Medicare Risk Adjustment. Health 
Care Financing Review. 2000; 21(3):26.
---------------------------------------------------------------------------

(6) Calculating the Risk-Standardized Readmission Rate and Performance 
Period
    In the proposed rule (80 FR 41281), we proposed to calculate 
hospital risk-standardized readmission rates consistent with the 
methodology used to risk standardize all readmission measures and 
mortality measures used in CMS hospital quality programs. We stated 
that using HLM, we calculate the hospital-level elective primary THA/
TKA risk-standardized readmission rate by producing a ratio of the 
number of ``predicted'' readmissions (that is, the adjusted number of 
readmissions at a specific hospital) to the number of ``expected'' 
readmissions (that is, the number of readmissions if an average quality 
hospital treated the same patients) for each hospital and then 
multiplying the ratio by the national raw readmission rate. We also 
indicated that use of the 3-year rolling performance period would be 
consistent with that used for the HIQR Program (FY 2015 IPPS/LTCH final 
rule 79 FR 50208 and 50209). For performance year one of the model, we 
proposed that the performance period for the THA/TKA Readmissions 
measure (NQF #1551) would be July 2013 through June 2016. As noted in 
the proposed rule for the section on the THA/TKA Complications measure 
(NQF #1550), there is a 90-day window of follow-up, which is different 
from the THA/TKA Readmissions measure (NQF #1551). Section III.D.4. of 
this final rule summarizes performance periods for years 1 through 5 of 
the model years.
    We invited public comments on this proposal to include Hospital-
level 30-day, all-cause risk-standardized readmission rate (RSRR) 
following elective primary total hip arthroplasty (THA) and/or total 
knee arthroplasty (TKA) (NQF #1551) or both in the model to assess 
quality performance. We also invited public comment on inclusion of 
other potential quality measures in the model.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter noted the variation in 30-day readmission 
rates (80 FR 41280) and stated that the variation may not only be due 
to differences in quality of care, but also patient age, comorbid 
conditions, and geographic location.
    Response: We appreciate the commenter's input. We note that the 
THA/TKA Readmissions measure (NQF #1551) risk adjusts for patients' 
risk factors, including age and comorbid conditions, thereby taking 
into account case mix differences across providers. Adjusting for case 
mix is an important aspect for measuring a RSRR that accurately 
reflects factors that can confound an outcome rate when not adequately 
adjusted. The goal of risk adjustment for this measure is to account 
for patient and procedure characteristics and comorbid conditions that 
are clinically relevant and have strong relationships with readmission, 
while illuminating important quality differences between hospitals. The 
measure does not adjust for geographic location because location is 
associated with the different care patterns than those the measure 
seeks to illuminate.
    Comment: A commenter sought clarification regarding the readmission 
exclusions described in section III.D.2.b.(4). of this final rule for 
the CJR model episode definition. The commenter stated that they were 
unclear on the rationale that CMS used to determine that all medical 
MS-DRGs for readmission be included in the episodes as related services 
with the exception of oncology and trauma medical MS-DRGs.
    Response: We note that there are two separate discussions about 
readmissions in the CJR model proposed rule found in sections III.B. 
and III.D. of this final rule, in which the episode definition and the 
THA/TKA Readmissions measure (NQF #1551) are, respectively,

[[Page 73479]]

discussed in detail. In section III.B. of the proposed rule, the 
discussion of the Episode Definition and its related services describes 
the services included and excluded in an episode of care for this model 
(80 FR 41213 through 41215). We note that section III.B.2.b. of this 
final rule is specific to the discussion of readmission exclusions 
related to the oncology and trauma MS-DRGs. In section III.D. of the 
proposed rule, we detailed the measure specifications of the THA/TKA 
Readmissions measure (NQF #1551). We note, from the measure 
perspective, two important aspects of what is included or excluded from 
the measure: (1) The THA/TKA Readmissions measure (NQF #1551) does 
count all unplanned readmissions, including those related to trauma 
since a trauma patient is not considered a planned readmission; and (2) 
the THA/TKA Readmissions measure (NQF #1551) is designed to capture 
readmissions that arise from acute clinical events requiring urgent 
readmission within 30 days of discharge. These two important aspects of 
the measure exist because we use all-cause unplanned readmission for 
several reasons. First, from the patient perspective, readmission for 
any cause is a key concern. Second, limiting the measure to THA/TKA-
related readmissions may make it susceptible to gaming. Moreover, it is 
often hard to exclude quality issues and accountability based on the 
documented cause of readmission. For example, a THA/TKA patient who 
develops a hospital-acquired infection may ultimately be readmitted for 
sepsis. It would be inappropriate to treat this readmission as 
unrelated to the care the patient received during their admission for a 
THA/TKA procedure. Finally, while the measure does not presume that 
each readmission is preventable, appropriate interventions have 
generally shown reductions in all-cause readmission. Examples of 
appropriate interventions include, but are not limited to, adherence to 
clinical guidelines to prevent hospitals-acquired infections and 
surgical complications, as well as coordination of follow-up care at 
the time of discharge, patient education regarding the dosing and 
purpose of their medications, and ensuring appropriate follow-up. 
Planned readmissions, which are generally not a signal of quality of 
care, are not counted in the measure outcome. The measure uses CMS's 
Planned Readmission Algorithm Version 3.0--THA/TKA Population to define 
planned readmissions for exclusion from the measure outcome. Therefore, 
from a measure perspective, oncology patients who are readmitted to 
receive maintenance chemotherapy are not counted as being readmitted by 
the algorithm and are therefore not considered readmissions in the 30-
day all cause THA/TKA RSRR measure. As previously stated, a trauma 
patient is not considered a planned readmission and will be counted in 
the measure outcome for the reasons stated previously.
    Comment: We received a comment from the MedPAC with which many 
other commenters cited and with which they expressed agreement. The 
commenters encouraged CMS not to use the THA/TKA Readmissions measure 
(NQF #1551) in more than one payment program. A few of the commenters 
also recommended to not use the HCAHPS Survey measure (NQF #0166) in 
two payment programs. Some commenters made suggestions to remove the 
THA/TKA Readmissions measure (NQF #1551) from the Hospital Readmission 
Reduction Program or the HCAHPS Survey measure (NQF #0166) from the 
Hospital Value-Based Purchasing program if these measures were 
implemented in the CJR model.
    Response: We acknowledge the request of many commenters to remove 
the THA/TKA Readmissions measure (NQF #1551) from the CJR model due to 
the incentives, already in place by the HRRP, for hospitals to lower 
excess readmission rates. Upon further consideration of the quality 
measure set proposed for use in the CJR model, and to be responsive to 
stakeholder concerns, we have decided not to finalize inclusion of the 
THA/TKA Readmissions measure (NQF #1551) for the CJR model. We believe 
that finalizing the THA/TKA Complications measure (NQF #1550) and the 
HCAHPS Survey measure (NQF #0166) effectively supports the intent of 
the CJR model to decrease cost while ensuring that quality of care for 
LEJR episodes is maintained or improved. We note that the THA/TKA 
Complications measure (NQF #1550) focuses on primary elective THA and 
TKA procedure cases that will help to provide necessary information 
about quality performance for patients and providers considering an 
elective procedure and that the HCAHPS Survey measure (NQF #0166) will 
help provide important information about patient experience during 
hospitalizations. We still consider THA/TKA Readmissions measure rates 
to be an important metric for providing information about hospital 
performance, and while we did not propose any changes to the HIQR 
Program or HRRP, we note that we will continue to use the THA/TKA 
Readmissions measure (NQF #1551) in the HIQR Program and HRRP for 
public reporting and payment purposes. We note that there is still room 
for hospitals to improve on this measure based on the previously 
discussed distribution of hospital measure results in the proposed rule 
(80 FR 41280 section III.D.2.b.(1)).
    With respect to some commenters' concerns regarding the overlap of 
the measures chosen for the CJR model with measures used in other 
Medicare payment programs, we acknowledge that there is some overlap in 
quality measures between the CJR model and the HVBP program and HRRP. 
While we are aware that commenters object to the possibility of scoring 
hospitals on certain measures under more than one program or model, we 
note that the measures we are finalizing for the CJR model cover topics 
of critical importance to quality improvement for THA/TKA patients, 
namely, post-surgical complications and patient experience during 
hospitalizations, as well as the CJR model's broader goals of improving 
care coordination while lowering costs. In light of the CJR model's 
goals, we believe it is appropriate to provide strong incentives for 
hospitals to improve these aspects of patient care quality by using the 
finalized measures under more than one program or model.
    We also note that the CJR model is separate and distinct from the 
HVBP program and HRRP, which have different purposes and policy goals. 
The CJR model aims to improve the care experience of Medicare patients 
who receive joint replacements by focusing on coordinated, patient-
centered care while also lowering costs. On the other hand, the HVBP 
Program is an incentive program that redistributes a portion of the 
Medicare payments made to hospitals based on their performance on 
various measures. HRRP is an incentive program that links Medicare 
payments to hospitals based on their performance on readmission 
measures compared to the national rate for excess readmissions. 
Therefore, although the measures finalized for the CJR model exist in 
more than one program, the measures are used and calculated for 
distinct purposes. Accordingly, we believe that the critical importance 
of these measures to THA/TKA patient safety and experience warrant 
their inclusion in more than one program. We will monitor the use of 
the THA/TKA Complications measure (NQF #1550) and the HCAHPS Survey 
measure (NQF #0166) in the CJR model, including any unintended 
consequences of having a measure in more than one program, and

[[Page 73480]]

will revise the measure set in one or more programs if needed through 
rulemaking. We will not be finalizing the THA/TKA Readmissions measure 
(NQF #1551) in the CJR model.
    Final Decision: After consideration of the many public comments 
received on the proposal to adopt the THA/TKA Readmissions measures 
(NQF #1551) for the CJR model, we are not finalizing the THA/TKA 
Readmissions measure (NQF #1551) for the CJR model for the reasons 
discussed in this section.
c. Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) Survey (NQF #0166)
(1) Background
    In the proposed rule (80 FR 41282), we proposed to adopt the HCAHPS 
Survey (NQF #0166) measure. We indicated that the HCAHPS Survey measure 
(NQF #0166) is a CMS survey and a national, standardized, publicly 
reported survey of patients' experience of hospital care, and that CMS 
is the measure steward. We also shared that the HCAHPS Survey measure 
is endorsed by the NQF (#0166), and stated that the HCAHPS survey (NQF 
#0166), also known as CAHPS[supreg] Hospital Survey, is a survey 
instrument and data collection methodology for measuring patients' 
perceptions of their hospital experience. We explained how the HCAHPS 
survey asks recently discharged patients 32 questions about aspects of 
their hospital experience that they are uniquely suited to address, 
where the core of the survey contains 21 items that ask ``how often'' 
or whether patients experienced a critical aspect of hospital care. We 
also indicated that the survey also includes four items to direct 
patients to relevant questions, five items to adjust for the mix of 
patients across hospitals, and two items that support Congressionally-
mandated reports (see 77 FR 53513 through 53515).
    In the proposed rule, we noted that eleven HCAHPS measures (seven 
composite measures, two individual items and two global items) are 
currently publicly reported on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/) for each hospital participating in the 
HIQR Program (see 79 FR 50259.) Each of the seven currently reported 
composite measures is constructed from two or three survey questions. 
The seven composites summarize the following:
     How well doctors communicate with patients.
     How well nurses communicate with patients.
     How responsive hospital staff are to patients' needs.
     How well hospital staff helps patients manage pain.
     How well the staff communicates with patients about 
medicines.
     Whether key information is provided at discharge.
     How well the patient was prepared for the transition to 
post-hospital care.
    Lastly, the two individual items address the cleanliness and 
quietness of patients' rooms, while the two global items report 
patients' overall rating of the hospital, and whether they would 
recommend the hospital to family and friends. We proposed to adopt a 
measure in the model that uses HCAHPS survey data to assess quality 
performance and capture patient experience of care.
(2) Data Sources
    In the proposed rule (80 FR 41282), we explained that the HCAHPS 
survey is administered to a random sample of adult inpatients between 
48 hours and 6 weeks after discharge. As discussed in section III.D.5. 
of the proposed rule, we noted the following: (1) The HCAHPS survey 
data is collected on inpatient experience, is not limited to Medicare 
beneficiaries, and does not distinguish between types of Medicare 
beneficiaries; (2) patients admitted in the medical, surgical and 
maternity care service lines are eligible for the survey; the survey is 
not restricted to Medicare beneficiaries; (3) hospitals may use an 
approved survey vendor, or collect their own HCAHPS data (if approved 
by CMS to do so) (for a detailed discussion, see 79 FR 50259); and (4) 
to accommodate hospitals, the HCAHPS survey can be implemented using 
one of the following four different survey modes:
     Mail.
     Telephone.
     Mail with telephone follow-up.
     Active Interactive Voice Recognition (IVR).
    We also noted that regardless of the mode used, hospitals are 
required to make multiple attempts to contact patients, and that 
hospitals may use the HCAHPS survey alone, or include additional 
questions after the 21 core items discussed previously. We also 
indicated the timeframes (that is, surveying must begin from 48 hours 
to 42 days following hospital discharge) and number of patients that 
hospitals must survey patients monthly throughout the year (80 FR 41282 
in section III.D.2.c.(2) and III.D.2.c.(3) of the proposed rule), and 
that hospitals participating in the HIQR Program must target at least 
300 completed surveys over 4 calendar quarters in order to attain the 
reliability criterion CMS has set for publicly reported HCAHPS scores 
(see 79 FR 50259). Finally we noted that the survey itself and the 
protocols for sampling, data collection, coding, and file submission 
can be found in the current HCAHPS Quality Assurance Guidelines manual, 
available on the HCAHPS Web site located at: https://www.hcahpsonline.org. (The HCAHPS survey is available in several 
languages, and all official translations of the HCAHPS survey 
instrument are available in the current HCAHPS Quality Assurance 
Guidelines at https://www.hcahpsonline.org/qaguidelines.aspx.)
(3) Cohort
    In the proposed rule (80 FR 41282), we noted that hospitals, or 
their survey vendors, submit HCAHPS data in calendar quarters (3 
months). Consistent with other quality reporting programs, we proposed 
that HCAHPS scores would be publicly reported on the Hospital Compare 
Web site (https://www.hospitalcompare.hhs.gov/) based on 4 consecutive 
quarters of data. For each public reporting, the oldest quarter of data 
is rolled off, and the newest quarter is rolled on (see 79 FR 50259).
(4) Inclusion and Exclusion Criteria
    In the proposed rule (80 FR 41282), we stated that the HCAHPS 
survey is broadly intended for patients of all payer types who meet the 
following criteria:
     Eighteen years or older at the time of admission.
     Admission includes at least one overnight stay in the 
hospital.
     Non-psychiatric MS-DRG/principal diagnosis at discharge.
     Alive at the time of discharge.
    There are a few categories of otherwise eligible patients who are 
excluded from the sample frame as follows:
     ``No-Publicity'' patients--Patients who request that they 
not be contacted.
     Court/Law enforcement patients (that is, prisoners); 
patients residing in halfway houses are included.
     Patients with a foreign home address (U.S. territories--
Virgin Islands, Puerto Rico, Guam, American Samoa, and Northern Mariana 
Islands are not considered foreign addresses and are not excluded).
     Patients discharged to hospice care (Hospice-home or 
Hospice-medical facility).
     Patients who are excluded because of state regulations.
     Patients discharged to nursing homes and SNFs.
    We also indicted that the HCAHPS survey is intended for short-term, 
acute care hospitals. Both IPPS and CAHs

[[Page 73481]]

participate in the survey; specialty hospitals, psychiatric hospitals 
and children's hospitals do not.
(5) Case-Mix-Adjustment
    In the proposed rule (80 FR 41282 through 41283), we stated that to 
ensure that HCAHPS scores allow fair and accurate comparisons among 
hospitals, CMS adjusts for factors that are not directly related to 
hospital performance but which affect how patients answer survey items. 
This includes the mode of survey administration and characteristics of 
patients that are out of a hospital's control. Patient-mix adjustments 
(also known as case-mix adjustment) control for patient characteristics 
that affect ratings and that are differentially distributed across 
hospitals. Most of the patient-mix items are included in the ``About 
You'' section of the survey, while others are taken from hospital 
administrative records. Based on the HCAHPS mode experiment,\77\ and 
consistent with previous studies of patient-mix adjustment in HCAHPS 
and in previous hospital patient surveys, we employ the following 
variables in the patient-mix adjustment model:
---------------------------------------------------------------------------

    \77\ The Effects of Survey Mode, Patient Mix, and Nonresponse on 
CAHPS Hospital Survey Scores.'' M.N. Elliott, A.M. Zaslavsky, E. 
Goldstein, W. Lehrman, K. Hambarsoomian, M.K. Beckett and L. 
Giordano. Health Services Research, 44(2): 501-518. 2009.
---------------------------------------------------------------------------

     Self-reported general health status (specified as a linear 
variable).
     Education (specified as a linear variable).
     Type of service (medical, surgical, or maternity care).
     Age (specified as a categorical variable).
     Admission through emergency room (discontinued in 2010).
     Lag time between discharge and survey completion.
     Age by service line interaction.
     Language other than English spoken at home.
    Finally, we indicated that once the data are adjusted for patient-
mix, there is a fixed adjustment for the mode of survey administration 
(mail, telephone, mail with telephone follow-up, and active Interactive 
Voice Response) and information on patient-mix adjustment (risk 
adjustment) and survey mode adjustment of HCAHPS scores can be found at 
https://www.hcahpsonline.org/modeadjustment.aspx.
(6) HCAHPS Scoring
    In the proposed rule (80 FR 41283), we outlined the methodology 
used to assess hospitals in the HIQR Program as reasonable for use in 
the model since this is a survey that many hospitals and patients are 
familiar with. In determining HCAHPS performance, we proposed to 
utilize the HLMR score because the HLMR summarizes performance across 
the 11 publicly reported HCAHPS measures for IPPS hospitals with 100 or 
more completed HCAHPS surveys in a 4-quarter period. We stated that the 
HLMR is calculated by taking the average of the linear mean scores 
(LMS) for each of the 11 publicly reported HCAHPS measures. We noted 
that the LMS, which was created for the calculation of HCAHPS Star 
Ratings, summarizes all survey responses for each HCAHPS measure; a 
detailed description of LMS can be found in HCAHPS Star Rating 
Technical Notes, at https://www.hcahpsonline.org/StarRatings.aspx.
    We proposed that hospitals participating in the model also have at 
least 100 completed HCAHPS surveys over a given 4-quarter period to be 
evaluated on HCAHPS for the model.
    We noted in the proposed rule that responses to the survey items 
used in each of the 11 HCAHPS measures described previously are 
combined and converted to a 0 to 100 linear-scaled score (LMS) as 
follows:
     ``Never'' = 0; ``Sometimes'' = 33\1/3\; ``Usually'' = 
66\2/3\; and ``Always'' = 100 (For HCAHPS Survey items 1-9, 11, 13-14, 
and 16-17).
     ``No'' = 0; and ``Yes'' = 100 (For items 19 and 20).
     Overall Rating ``0'' = 0; Overall Rating ``1'' = 10; 
Overall Rating ``2'' = 20; . . . ; Overall Rating ``10'' = 100 (For 
item 21).
     ``Definitely No'' = 0; ``Probably No'' = 33\1/3\; 
``Probably Yes'' = 66\2/3\; and ``Definitely Yes'' = 100 (For item 22).
     ``Strongly Disagree'' = 0; ``Disagree'' = 33\1/3\; 
``Agree'' = 66\2/3\; and ``Strongly Agree'' = 100 (For items 23, 24, 
and 25).
    The 0 to 100 linear-scaled HCAHPS scores are then adjusted for 
patient mix, survey mode, and quarterly weighting, see https://www.hcahpsonline.org/files/HCAHPS_Stars_Tech_Notes_Apr2015.pdf.
    The HLMR summarizes performance across the 11 HCAHPS measures by 
taking an average of each of the LMS of the 11 HCAHPS measures, using a 
weight of 1.0 for each of the 7 HCAHPS composite measures, and a weight 
of 0.5 for each of the single item measures (Cleanliness, Quietness, 
Overall Hospital Rating and Recommend the Hospital). The HLMR is 
calculated to the second decimal place. Once the HLMR score is 
determined for a participant hospital, the hospital's percentile of 
performance can be determined based on the national distribution of 
hospital performance on the score.
(7) Performance Period
    In the proposed rule (80 FR 41283), we proposed to be consistent 
with the HIQR Program, which uses four quarters of data (79 FR 50259). 
For the model, we proposed to use the most recently available HCAHPS 4-
quarter roll-up to calculate the HLMR score for the initial year of the 
model. The performance period would assess data on patients discharged 
from July 1, 2015 through June 30, 2016 for the first year of the 
model. Section III.D.4. of this final rule summarizes performance 
periods for years 1 through 5 of the model years.
    We invited public comments on this proposal to include HCAHPS 
Survey measure (NQF #0166) in the model to assess quality performance 
and capture patient experience of care.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters supported the inclusion of the HCAHPS 
Survey measure in the model and strongly recommended increasing the 
relative weighting of the HCAHPS Survey measure (NQF #0166) in the 
model. Commenters also cited the fact that the proposed HCAHPS Survey 
measure (NQF #0166) assesses both access to care and pain management. 
By contrast, many commenters said that the proposed HCAHPS Survey 
measure (NQF #0166) should not be included in the model because it does 
not capture the patient experience of care during the full 90-day 
episode.
    Response: We thank the commenters for these observations and agree 
with the commenters supporting inclusion of the measure, as we believe 
it represents an important patient experience measure. We acknowledge 
that this survey is restricted to the inpatient population by capturing 
inpatients' experience of care at acute care hospitals. While we do not 
have an outpatient experience of care survey, we note that the acute 
care hospitals are the unit of analysis for the model from a measure 
perspective. Based on the currently available hospital-level patient 
experience measures, the HCAHPS Survey measure (NQF #0166) is the best 
available measure for capturing, assessing and comparing the inpatient 
experience of joint replacement patients at the hospital-level. 
Regarding the suggestion to increase the weighting of the HCAHPS Survey 
measure (NQF #0166) in the CJR model we refer readers to section 
III.C.5.b.(5)(c)(iii) in this final rule for detailed discussion of the 
relative weighting of this measure in reconciliation payment.

[[Page 73482]]

    Comment: Many commenters stated that the HCAHPS Survey measure (NQF 
#0166) is inappropriate because it will capture a wide range of 
hospital inpatients along with hip and knee replacement surgery 
inpatients. CMS, they stated, should collect HCAHPS data on only 
patients who had undergone an elective THA/TKA, or had procedures 
captured by MS-DRG 469 and 470 who were involved in the CJR model and 
compensate hospitals for any additional costs incurred in this effort. 
A commenter stated that participating hospitals with a ``center of 
excellence'' program for total joint replacement patients may have in 
that dedicated unit excellent patient satisfaction scores, but other 
inpatient units may have less satisfied patients. Thus, HCAHPS scores 
derived from patients in the joint replacement unit would be undermined 
by combination at the hospital level with lower scores from other 
units. Another commenter stated essentially the opposite: That better 
patient experience of care in other hospital units would mask poorer 
performance in the joint replacement unit.
    Response: We appreciate the concerns from the commenters about the 
broad patient population covered by this measure. Although the HCAHPS 
Survey encompasses a broader range of patients than does the model 
episode definition, we are not aware of evidence that such patients' 
experience of care differs markedly from those of the larger group of 
eligible patients after patient-mix adjustment for service line 
(surgery) and age have been applied. From a survey implementation 
standpoint, it is not feasible to target only Medicare beneficiaries 
who had hip or knee replacement surgery, or to calculate the HCAHPS 
Linear Mean Roll-up score on the basis of only those hip or knee 
replacement surgical patients. In addition to complicating the 
administration of the survey, the number of completed surveys from such 
a narrow set of patients would be, for many hospitals, too small to 
support reliable measurement or comparison. The inclusion of the HCAHPS 
Survey measure (NQF #0166) as currently implemented and the HLMR 
derived from it in the CJR model will present participating hospitals 
with a further incentive to improve experience of care for all 
patients.
    We are finalizing our proposal to employ the HCAHPS Survey measure 
(NQF #0166) as currently implemented. HCAHPS, which was launched in 
2006 and has been continuously administered ever since, is familiar to 
over 4,000 hospitals. Modifications to the standardized implementation 
protocols would be disruptive to the other programs that employ HCAHPS 
data, which include the HIQR Program and Hospital Value-Based 
Purchasing program.
    Comment: Some commenters had questions about the HCAHPS Linear Mean 
Roll-up score proposed as the patient experience of care measure in the 
model, specifically regarding how it was calculated.
    Response: We note that the HLMR summarizes in one statistic all 
survey responses to all 11 HCAHPS measures from all eligible patients 
discharged in a four-quarter period. As such, it is an efficient and 
complete summary of hospital patients' experience of care. The HLMR is 
created in the production of the HCAHPS Summary Star Ratings now 
displayed on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/) and is derived directly from the linear 
mean scores of the 11 publicly reported HCAHPS measures. Information on 
the calculation of the HCAHPS linear mean scores can be found in the 
HCAHPS Star Rating Technical Notes on the HCAHPS On-Line Web site, 
https://www.hcahpsonline.org/StarRatings.aspx. The HLMR summarizes 
performance across the 11 HCAHPS measures by taking an average of each 
of the linear mean scores of the 11 HCAHPS measures, using a weight of 
1.0 for each of the 7 HCAHPS composite measures, and a weight of 0.5 
for each of the single-item measures (Cleanliness, Quietness, Overall 
Hospital Rating and Recommend the Hospital). The HLMR is calculated to 
the second decimal place (x.xx) and can range from 0.00 to 100.00.
    Comment: Some commenters suggested that the HCAHPS Survey be 
modified to encompass patients discharged to nursing homes and SNFs 
before being used in the model.
    Response: Patients discharged to nursing homes and SNFs are 
excluded from HCAHPS survey administration because of the difficulty 
contacting such patients and consistently surveying them in a timely 
manner. We are not aware of evidence that patients discharged to a 
nursing home or SNF have different experience of care than other 
inpatients in the hospital.
    Comment: Some commenters stated that the HCAHPS Survey was 
arbitrarily biased against certain categories of hospitals such as 
urban hospitals, major teaching hospitals, safety-net hospitals, 
hospitals that receive a high proportion of their inpatients through 
the emergency department, and hospitals that serve a disproportionate 
share of uninsured, Medicaid, or Medicare dual-eligible patients.
    Response: We have not seen evidence that the HCAHPS Survey is 
biased against any particular category of hospital. Both rural and 
urban hospitals and teaching and non-teaching hospitals have been found 
to perform well on the HCAHPS survey.\78\ Currently, major teaching 
hospitals' performance on HCAHPS measures are sometimes lower, 
sometimes the same, and sometimes higher than that of minor teaching 
hospitals and non-teaching hospitals (available at: https://www.hcahpsonline.org/SummaryAnalyses.aspx). The hospital characteristic 
definitions are derived from a survey of hospitals conducted by the 
American Hospital Association (AHA) in 2012 and published in the AHA 
Guide 2014 Edition.
---------------------------------------------------------------------------

    \78\ Lehrman WG, Elliott MN, Goldstein E, Beckett MK, Klein DJ, 
Giordano LA. Characteristics of Hospitals Demonstrating Superior 
Performance in Patient Experience and Clinical Process Measures of 
Care. Medical Care Research and Review, 67(1): 38-55. 2010.
---------------------------------------------------------------------------

    Comment: A commenter stated that the HCAHPS Survey would not be 
informative because of its low response rate.
    Response: We do not believe that the response rate of the HCAHPS 
Survey degrades its ability to fairly capture patient experience of 
care. The national response rate for the HCAHPS Survey is currently 31 
percent. The patient-mix adjustment that is applied to HCAHPS results 
prior to public reporting adequately addresses the non-response bias 
that would otherwise exist.\79\ Recent meta-analyses suggest that non-
response bias is less related to response rate per se than to the use 
of rigorous and standardized survey protocols.80 81
---------------------------------------------------------------------------

    \79\ Elliott MN, Zaslavsky AM, Goldstein E, Lehrman WG, 
Hambarsoomian K, Beckett MK, Giordano LA. The Effects of Survey 
Mode, Patient Mix, and Nonresponse on CAHPS Hospital Survey Scores. 
Health Services Research, 44(2): 501-518. 2009.79.
    \80\ Groves RM. Nonresponse rates and nonresponse bias in 
household surveys. Public Opin Q. 2006; 70:646-675.
    \81\ Groves RM, Peytcheva E. ``The impact of nonresponse rates 
on nonresponse bias: a meta-analysis''. Public Opin Q. 2008; 72:167-
189.
---------------------------------------------------------------------------

    Comment: Many commenters suggested that CMS replace the HCAHPS 
Survey with a patient experience of care measure targeted at only 
surgical patients, such as the CAHPS Surgical Care Survey, or only 
those patients eligible for the CJR model. A commenter stated that, 
while it would be inappropriate to use the CAHPS Surgical Care Survey 
as a pay-for-reporting or pay-for-performance tool because CMS had not 
tested this survey for national implementation, the

[[Page 73483]]

CAHPS Surgical Care Survey could be used for model evaluation purposes 
in the context of the CJR model's bundled payment approach. Many 
commenters suggested that CMS create a new survey instrument 
specifically for the CJR model that would capture the 90-day episode of 
care and combine patient experiences of care across all the providers 
that a patient encountered during that period.
    Response: The CAHPS Surgical Care Survey is focused on the 
physician who performed inpatient or outpatient surgery, not the 
hospital, and encompasses a range of surgical patients, not just those 
included in the CJR model. We do not believe the CAHPS Surgical Care 
Survey measure is feasible or appropriate to adopt for the CJR model.
    While a patient experience survey customized for only LEJR patients 
might have a tighter focus, developing and implementing such a measure 
would require significant resources and take a number of years. Given 
the relatively small number of patients at a hospital who undergo LEJR, 
collecting enough completed surveys to attain acceptable levels of 
reliability for such a measure would also be a challenge. Segregating 
HCAHPS Surveys from patients who had undergone LEJR surgery would often 
result in a small number of completed surveys as well as demand 
modifications in well-established survey implementation protocols. 
Tracing a patient over a 90-day episode through a number of different 
types of healthcare providers would be very difficult given the de-
identified nature of HCAHPS data. Replacement of the HCAHPS Survey 
measure (NQF #0166) with a physician-based survey would remove the 
hospital experience from the model.
    We have no reason to believe that patients undergoing LEJR differ 
in their patient experience compared with other HCAHPS-eligible 
patients in the same hospital. Similarly, we have no evidence that 
patients who are excluded from the HCAHPS Survey measure (NQF #0166) 
because of discharge to nursing homes or SNFs have different experience 
of care than other inpatients, but we have found that consistently 
contacting and surveying such patients is difficult. Thus, we believe 
that the HCAHPS Survey is the most viable and practical measure of 
patient experience of care available for the model at this time.
    Comment: A commenter suggested using an electronic platform to 
capture and report the HCAHPS Survey for only the patients in the 
bundled episodes.
    Response: The HCAHPS Survey currently permits four modes of survey 
administration: mail, telephone, mail with telephone follow-up (mixed 
mode), and Interactive Voice Response. CMS has tested the feasibility 
of offering an Internet mode for the HCAHPS Survey but determined that 
issues related to low response rates and poor comparability with the 
other existing survey modes preclude implementation of a Web-based mode 
at this time.\82\
---------------------------------------------------------------------------

    \82\ Elliott MN, Brown JA, Lehrman WG, Beckett MK, Hambarsoomian 
LA, Giordano LA, Goldstein E. A Randomized Experiment Investigating 
the Suitability of Speech-Enabled IVR and Web Modes for Publicly 
Reported Surveys of Patients' Experience of Hospital Care. Medical 
Care Research and Review, 70(2): 165-184. 2013.
---------------------------------------------------------------------------

    Comment: Concerned that the proposed measures are 
disproportionately hospital-focused, many commenters suggested that CMS 
develop a CAHPS measure that would capture both the in-hospital and 
post-hospital phases of the 90-day episode for Medicare beneficiaries 
who had experienced joint replacement surgery and devise a blended 
CAHPS score across all settings involved with the 90-day episode.
    Response: CMS patient experience of care surveys are targeted 
toward providers (hospitals, HHAs, etc.) and assess performance at the 
provider level. CMS does not possess a survey instrument that tracks 
hospital inpatients across a 90-day episode or across different types 
of providers or other settings. Developing such an instrument would be 
difficult because HCAHPS data submitted to CMS by hospitals or their 
survey vendors are patient de-identified in order to ensure HIPAA 
compliance. As such, it would not be feasible to link patient-level 
HCAHPS results to the same patient-level results on other surveys or 
other measures from other settings or providers.
    Comment: A commenter requested that CMS publicly report the HCAHPS 
Linear Mean Roll-up score of all hospitals on a quarterly basis in 
order for hospitals to be able to understand where they stand on this 
measure relative to other hospitals and to facilitate hospitals' 
ability to rapidly improve performance and assess financial risk.
    Response: We plan to share information with hospitals on their 
scores on the quality measures included in the model, including the 
HCAHPS Linear Mean Roll-up score, on an annual basis. Information on 
performance will be shared with hospitals through their ongoing 
Hospital Compare Preview Reports on an annual basis. Hospital scores on 
the model measures will be publicly reported on Hospital Compare Web 
site (https://www.hospitalcompare.hhs.gov/) on an annual basis. We note 
that a goal for the CJR model is to align as many quality measure 
processes (including public reporting) as is reasonably possible with 
the HIQR program and for this reason we will be publicly reporting 
HCAHPS Survey measure (NQF #0166) annually instead of quarterly.
    Comment: A commenter suggested that CMS implement the quality 
thresholds in performance year 2 or later, especially for HCAHPS, to 
help hospitals to understand their quality performance compared to the 
thresholds and allow them time to make meaningful improvements to 
quality of care.
    Response: Hospitals participating in the CJR model have had several 
years of experience with the HCAHPS survey. Since July 2007, hospitals 
subject to the IPPS annual payment update provisions have been required 
to collect and submit HCAHPS data in order to receive their full annual 
payment update (71 FR 48037). Non-IPPS hospitals, such as CAHs, may 
voluntarily participate in HCAHPS. The incentive for IPPS hospitals to 
improve patient experience was further strengthened by the Patient 
Protection and Affordable Care Act of 2010 (Pub. L. 111-148), which 
specifically included HCAHPS performance in the calculation of the 
value-based incentive payment in the Hospital Value-Based Purchasing 
program beginning with October 2012 discharges.
    With respect to the HCAHPS Linear Mean Roll-up score measure that 
CMS has proposed for the model, hospitals began receiving HCAHPS 
Summary Star Rating in their December 2014 Hospital Compare Preview 
Report. The HLMR is the basis for the HCAHPS Summary Star Rating; see 
HCAHPS Star Rating Technical Notes at https://www.hcahpsonline.org/StarRatings.aspx. While the HLMR is a new calculation from the existing 
measures, hospitals have been using the HCAHPS survey for many years 
and have had time to become familiar with it, with their results, and 
with their standing relative to other hospitals through information 
presented on the HCAHPS On-Line Web site such as the HCAHPS Percentiles 
tables (https://www.hcahpsonline.org/SummaryAnalyses.aspx). IPPS 
hospitals have available their HCAHPS scores' relative rank compared to 
other hospitals participating in the HVBP program. As such, we believe 
that hospitals are familiar with their individual and relative 
performance on

[[Page 73484]]

the HCAHPS Survey measure (NQF #0166).
    Comment: A commenter suggested that the HCAHPS Survey measure (NQF 
#0166) be removed from the CJR model unless adjusted for socio-economic 
status.
    Response: As discussed in our responses to public comments on the 
Complications measure (NQF #1550), we do not adjust the measure for 
patients' socio-economic status directly. However, the patient-mix 
adjustment of HCAHPS survey scores does include an adjustment for 
patients' self-reported level of education, which is correlated with 
other SES indicators; see HCAHPS On-Line Web site: https://www.hcahpsonline.org/modeadjustment.aspx.
    The intent of the HCAHPS survey is to provide a standardized survey 
instrument and data collection methodology for measuring patients' 
perspectives of hospital care. In order to achieve the goal of fair 
comparisons across all hospitals that participate in HCAHPS survey, it 
is necessary to adjust for factors that are not directly related to 
hospital performance but do affect how patients answer HCAHPS survey 
items. These factors include the mode of survey administration and the 
characteristics of patients in participating hospitals, often referred 
to as patient-mix.
    Patient-mix refers to patient characteristics that are not under 
the control of the hospital that may affect patient reports of hospital 
experiences. The goal of adjusting for patient-mix is to estimate how 
different hospitals would be rated if they all provided care to 
comparable groups of patients. In developing the HCAHPS patient-mix 
adjustment (PMA) model, we sought important and statistically 
significant predictors of patients' HCAHPS ratings that also vary 
meaningfully across hospitals. The following PMA variables are included 
in the HCAHPS patient-mix models: Service line (medical, surgical, or 
maternity care), age, education, self-reported health status, language 
other than English spoken at home, age by service line interactions, 
and percentile response order, also known as ``relative lag time,'' 
which is based on the time between discharge and survey completion. 
This adjustment approach is grounded in more than ten years of CAHPS 
research of case-mix/patient-mix adjustment, reflects the input of a 
wide variety of stakeholders, has been subject to extensive empirical 
testing, and has been accepted in the peer-reviewed scientific 
literature.\83\
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    \83\ Elliott, MD, Zaslavsky AM, Goldstein E, Lehrman,WG, 
Hambarsoomian K, Beckett, MK, Giordano L. The Effects of Survey 
Mode, Patient Mix, and Nonresponse on CAHPS Hospital Survey 
Scores.'' Health Services Research, 44(2): 501-518. 2009.
---------------------------------------------------------------------------

    Comment: A commenter stated that the HCAHPS survey represents a 
significant delay in reporting results and that the reporting time 
frame does not coincide with the reporting time for the model.
    Response: The HCAHPS surveys used to construct the HCAHPS Linear 
Mean Roll-up score measure in the CJR model corresponds to a similar 
time frame as that proposed for the Complications and Readmissions 
measures illustrated in Table 17 of the proposed rule (80 FR 41290). We 
note that the HCAHPS uses a one year performance period closer to the 
CJR model initiation date in 2016, and therefore we do not believe the 
proposed one year performance period of July 1, 2015-June 30, 2016 
represents a significant delay in reporting results for the CJR model.
    Comment: Several commenters suggested that inclusion of the HCAHPS 
Survey measure (NQF #0166) in the CJR model could harm ``essential'' 
hospitals because hospitals with higher volume of patients admitted 
through the emergency department may score lower on the HCAHPS survey. 
Commenters also stated that hospitals with high proportions of 
Medicaid, Medicare dual-eligible, and uninsured patients would be 
adversely affected by the inclusion of the HCAHPS Survey measure (NQF 
#0166) in the model.
    Response: We have examined the performance of so-called ``safety 
net'' hospitals, sometimes referred to as ``essential'' hospitals, on 
the HCAHPS component of the HVBP program. Although we do not have an 
official definition or designation of ``safety net'' hospital, we 
understand that a safety net status typically entails one or more of 
three criteria: High Medicaid share; high proportion of uncompensated 
patients; and high county-associated poverty rate.
    In general, after all HCAHPS adjustments are applied (patient mix 
and survey mode), we believe that so-called safety net hospitals, as we 
understand the term perform similarly to other hospitals. The current 
adjustment approach that CMS employs is both well-validated and 
necessary to ensure fair comparisons of HCAHPS scores across hospitals. 
When these adjustments are applied according to the rules currently in 
place, the performance of safety net hospitals for the HCAHPS portion 
of HVBP is typical of hospitals in general.
    Comment: Many commenters stated that there is an inherent bias in 
the HCAHPS survey that is difficult to adjust for. A few commenters 
pointed out that California hospitals rank in the bottom quartile of 
HCAHPS scores.
    Response: We do not believe that there is an inherent bias in the 
HCAHPS survey. We do not believe that there is an inherent bias in the 
HCAHPS Survey. Along these lines, we have noted over the years that 
some stakeholders believe that patient experience of care surveys are 
subjective or that patients are unable to judge the quality of care 
provided (76 FR 26502). However, CAHPS surveys are designed to measure 
topics where the patient is the best or only source of information. 
Beginning in 2002, CMS partnered with the Agency for Healthcare 
Research and Quality (AHRQ), another agency in the federal Department 
of Health and Human Services, to develop and test the HCAHPS survey. 
AHRQ and its CAHPS Consortium carried out a rigorous and multi-faceted 
scientific process, including a public call for measures; literature 
review; cognitive interviews; consumer focus groups; stakeholder input; 
a three-state pilot test; extensive psychometric analyses; consumer 
testing; and numerous small-scale field tests. We provided three 
opportunities for the public to comment on the HCAHPS survey and 
responded to over a thousand comments. The survey, its methodology and 
the results published by CMS are in the public domain.
    In May 2005, the HCAHPS survey was endorsed by the National Quality 
Forum, a national organization that represents the consensus of many 
healthcare providers, consumer groups, professional associations, 
purchasers, federal agencies, and research organizations. In December 
2005, the federal Office of Management and Budget gave its final 
approval for the national implementation of the HCAHPS survey for 
public reporting purposes. The NQF has twice re-endorsed the HCAHPS 
survey, most recently in 2014. Performance on the HCAHPS survey varies 
nationally. CMS believes that this variation reflects true differences 
in patient experience of care, not inherent bias.
    Comment: A commenter recommended that the HCAHPS survey measures 
used in the CJR model and the Hospital Value-Based Purchasing program 
be the same and that the HCAHPS survey measures used to evaluate 
performance be harmonized across programs.

[[Page 73485]]

    Response: The HCAHPS survey measures used in the HIQR Program, HVBP 
program and the model are tailored to reflect the respective purposes 
of those programs. CMS chose to use the HCAHPS Linear Mean Roll-up 
score for the model because it efficiently captures the full range of 
survey responses in a single statistic. The Patient and Caregiver-
Centered Experience of Care/Care Coordination Domain score in the HVBP 
program is more complicated, comprising achievement, improvement and 
consistency components and entailing a comparison between a baseline 
year and a later performance year (76 FR 26516). The HIQR Program 
includes a wider and deeper array of measures and provides more 
detailed information about HCAHPS survey performance, which may be 
useful to consumers.
    In the CJR model, the HCAHPS survey measures and their relative 
weighting are very similar to the HVBP program. Both the CJR model and 
the HVBP program use a four-quarter roll-up of HCAHPS scores and set a 
threshold of 100 completed HCAHPS surveys for hospital participation 
(76 FR 26502). The two programs are also similar in that their HCAHPS 
component is created from the data submitted for the HIQR Program, thus 
requiring no additional data collection or submission. While there are 
differences in the HCAHPS survey measures used in the HVBP program and 
the CJR model, the measures are strongly correlated. Given that the 
HIQR and HVBP programs and the CJR model all employ the same HCAHPS 
survey data, patient experience quality improvement efforts targeted 
toward hospital performance on any one of these programs will redound 
to the benefit of all programs.
    Comment: A commenter suggested that a functional measurement, such 
as HOOS, KOOS or VR-12, replace the proposed HCAHPS measures in the CJR 
model so to provide a valid assessment of improvement in patient health 
and status.
    Response: The HCAHPS survey (NQF #0166) measures hospital 
inpatients' experience of care. The HCAHPS survey is not a functional 
measurement. As such, the HCAHPS survey could not be adequately 
replaced by a functional measurement because these two types of measure 
assess different aspects of patient care. We note that the CJR model 
has included the THA/TKA voluntary data submission initiative (section 
III.D.3.a. of this final rule) which includes functional patient-
reported outcome assessment.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to implement the HCAHPS Survey 
measure (NQF #0166), as it is the best available measure of patient 
experience of care for hospitals that perform LEJR procedures. Over 
4,000 hospitals currently participate in the HCAHPS survey, and the 
instrument is also familiar to patients. The HCAHPS survey was 
carefully designed, developed and implemented, is subject to continuous 
oversight, has been found to meet high standards of reliability and 
validity, has been endorsed and re-endorsed by the National Quality 
Forum, and is currently used in both the HIQR and Hospital Value-Based 
Purchasing programs. We believe that HCAHPS Survey measure (NQF #0166) 
is a fair and unbiased measure of patient experience of care at all 
types of hospitals.
    We have no reason to believe that patients undergoing LEJR differ 
in their patient experience compared with other HCAHPS-eligible 
patients in the same hospital. Similarly, we have no evidence that 
patients who are excluded from the HCAHPS Survey measure (NQF #0166) 
because of discharge to nursing homes or SNFs have different experience 
of care than other inpatients, but we have found that consistently 
contacting and surveying such patients is difficult. Thus, we believe 
that the HCAHPS survey is the most viable and practical measure of 
patient experience of care available for the model at this time. 
Finally, we are codifying adoption of the HCAHPS Survey measure (NQF 
#0166) in Sec.  510.400(a)(2).
d. Applicable Time Period
    In the proposed rule (80 FR 41283), in order to align as much as is 
reasonably possible with other CMS hospital quality and public 
reporting programs in which these three measures are implemented, we 
proposed for the THA/TKA Complications measure (NQF #1550) and the THA/
TKA Readmissions measure (NQF #1551) performance time periods to be 
consistent with the HIQR Program, HVBP program and HRRP. We noted that 
these programs use a 3-year rolling performance period (that is, the 
applicable period; see section III.D.2.b.(6) of the proposed rule) for 
the Hospital-level 30-day, all-cause risk-standardized readmission rate 
(RSRR) following elective primary total hip arthroplasty (THA) and/or 
total knee arthroplasty (TKA) (NQF #1551) and the Hospital-level risk-
standardized complication rate (RSCR) following elective primary total 
hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550) 
measures. We proposed a 3-year rolling performance period for the THA/
TKA Complications measure (NQF #1550) and the THA/TKA Readmissions 
measure (NQF #1551) because a 3-year performance period yields the most 
consistently reliable and valid measure results. We also proposed the 
3-year rolling performance periods for the THA/TKA Complications 
measure (NQF #1550) and the THA/TKA Readmissions measure (NQF #1551) 
because hospitals are intimately familiar with these measures. We noted 
that reconciliation payments to hospitals as part of the CJR model are 
dependent upon both cost and quality outcome measures, and that making 
reconciliation payments solely based on cost has the potential to lead 
to reduced access and stinting of care. We stated that in order to 
address these possibilities the inclusion of performance on outcome 
measures is critical to ensure access and high-quality care for 
patients undergoing these procedures, and that the only way to include 
reliable quality measures in the model upon which to base 
reconciliation payments for 2016, is to use measures that have a 
performance period that precedes the start date of the model. We 
explained that, from a measure reliability and validity perspective, it 
is imperative to have at least 4 quarters of data for HCAHPS survey 
measures and 3 years of data for the THA/TKA readmissions and 
complications measures. We intentionally chose outcome and patient 
experience measures for which hospitals that are already financially 
accountable in other IPPS programs. Consequently, the performance 
periods are the same periods for the THA/TKA Readmissions and 
Complications measures between the model, HIQR Program, HVBP program 
and HRRP. For the HCAHPS survey measures, there is overlap with the 
performance periods for the model and the HIQR Program.
    We stated our belief that it is appropriate and necessary to use 
performance periods that precede the start date of the model because: 
(1) There is no downward payment adjustment associated with the model; 
(2) hospitals are already familiar with these measures as part of the 
HIQR Program, HVBP program, and HRRP; and (3) hospitals are already 
held financially accountable for these measures. For the HCAHPS Survey 
measure (NQF #0166), we would continue to use a 4 quarter performance 
period as in the HIQR Program, but would not align with the HIQR 
Program performance period. We shared how we

[[Page 73486]]

initially considered using the same HIQR Program performance period for 
the HCAHPS Survey measure (NQF #0166), but realized that should we use 
the same HIQR Program performance periods for the model, other model 
timeframes and policy goals would not be met. We indicated such policy 
goals like calculating reconciliation payment adjustments in a timely 
fashion during the 2nd quarter of each year might not be met, and we 
also noted that HCAHPS survey results are not available until the 3rd 
quarter of each year. For these reasons, we did not propose that the 
HCAHPS survey performance period follow the HIQR Program performance 
periods. We also proposed that HCAHPS survey scores be calculated from 
4 consecutive quarters of survey data. We closed the proposal by 
indicating that public reporting of HCAHPS survey results are also 
based on 4 quarters of data (79 FR 50259).
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters supported the three-year rolling period of 
performance for the THA/TKA Complications measure (NQF #1550) and the 
THA/TKA Readmissions measure (NQF #1551). Others did not support the 
three-year rolling performance period for these two measures and 
expressed concerns because--(1) With a start date of January 1, 2016, 
hospitals would only have three months to improve on the performance 
for the three measures; (2) the three-year rolling performance period 
does not coincide with the 12-month performance period used by the CJR 
model to determine the reconciliation payment; (3) a three-year rolling 
performance period exacerbates the lack of correlation between the CJR 
model 12-month performance and the measure performance periods; (4) the 
three-year rolling performance period includes a significant amount of 
data that pre-date the start of the model proposed for January 1, 2016 
; and (5) the potential impact that a single year of poor performance 
may have on the subsequent 2 years of performance. Most commenters 
recommended that the THA/TKA Complications measure (NQF #1550) and the 
THA/TKA Readmissions measure (NQF #1551) coincide with the CJR model 
12-month performance period used to determine the reconciliation 
payment.
    Response: We appreciate the concerns regarding the use of the 
three-rolling performance period for the THA/TKA Complications measure 
(NQF #1550) and the THA/TKA Readmissions measure (NQF #1551). We note 
that these measures rely on administrative claims data that are at 
least a year old because providers have up to one year to submit 
administrative claims for payment and that the measures are designed to 
include only administrative claims that are final action claims. The 
measures use final action claims in order to ensure consistency in the 
type of hospital data is used in the measures. Additionally, use of 
performance periods up to 3 years ensures adequate sample size for 
administrative claims based measures. For these reasons we believe it 
is reasonable to use a 3 year-rolling performance period, and in order 
to have sufficient data for the first year of the model use of data 
that precedes the start of the CJR model will help to provide a 
reliable estimate of a hospital's performance on the THA/TKA 
Complications measure (NQF #1550).
    Regarding the concern that hospitals would only have 3 months to 
improve on the performance for the three proposed measures, we note for 
the HIQR Program that the THA/TKA Complications measure (NQF #1550) and 
the THA/TKA Readmissions measure (NQF #1551) were finalized in the FY 
2013 IPPS/LTCH Final Rule (77 FR 53534) for implementation in FY 2015, 
and the most updated HCAHPS Survey measure (NQF #0166) was finalized in 
FY 2014 IPPS/LTCH final rule (78 FR 50807) and in the HVBP program (76 
FR 26502). We therefore believe hospitals have received ample time to 
identify ways in which to improve their performance on these three 
measures. Finally, we specifically considered this aspect of the 
measures knowing that hospitals were familiar with these measures and 
had more than likely instituted quality improvement activities in order 
to perform well on these measures.
    Regarding the request to use a 12-month performance period, we note 
that from a measure reliability perspective--(1) A rolling 3-year 
performance period consistently identifies more eligible index 
admissions for each hospital as compared to a single year of hospital 
performance data or a 3-month period of data. Using a larger number of 
index admissions improves the precision of the estimation of each 
hospital's results for the THA/TKA Readmissions measure (NQF #1551) and 
THA/TKA Complications measure (NQF #1550). We note that if we were to 
have a 12-month performance period, the reliability of these measure 
results would become questionable; (2) a rolling 3-year performance 
period provides larger sample sizes, which will allow the calculation 
of measure results that are better able to more meaningfully 
distinguish hospital performance; and (3) in order to provide 
meaningful measures results that use claims data, we believe it is 
important to use claims data that has completed the appropriate 
opportunities for appeal and correction through the CMS administrative 
claims submission process. Without opportunities for hospitals to 
correct claims errors, the measure results may not be valid and 
reliable for making quality improvements in hospital processes. For 
these reasons we believe that having a rolling 3-year performance 
period is reasonable for the THA/TKA Complications measure (NQF #1550). 
We note that the THA/TKA Readmissions measure (NQF #1551) is not 
finalized for the CJR model.
    After review of public comments, we are finalizing the three-year 
rolling performance period as proposed for the THA/TKA Complications 
measure (NQF #1550). Similarly, for the HCAHPS Survey measure (NQF 
#0166), we are finalizing our proposal that the HCAHPS survey scores be 
calculated from 4 consecutive quarters of survey data and that publicly 
reported HCAHPS results are based on 4 quarters of data (79 FR 50259). 
Since we are not finalizing the THA/TKA Readmissions measure (NQF 
#1551), as discussed in section III.D.2.b. of this final rule, we will 
not be finalizing any applicable period for this measure.
3. Possible New Outcomes for Future Measures
a. Hospital-Level Performance Measure(s) of Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty
(1) Background
    In the proposed rule (80 FR 41284), we stated that part of our goal 
to move towards outcome measures that assess patient-reported outcomes, 
we had begun development on a measure to assess improvement in patient-
reported outcomes following THA/TKA procedures. We shared that the 
Hospital-Level Performance Measure(s) of Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty 
(hereinafter referred to as ''THA/TKA patient-reported outcome-based 
measure'') is currently under development. In our proposal, we shared 
that we specifically chose to focus on THA/TKA procedures since THA/
TKAs are important, effective procedures performed on a broad 
population, and the patient outcomes for these procedures (for example, 
pain, mobility, and quality of life) can be

[[Page 73487]]

measured in a scientifically sound way and are also influenced by a 
range of improvements in care.84 85 86 We also shared that 
THA/TKA procedures are specifically intended to improve function and 
reduce pain, making patient-reported outcomes the most meaningful 
outcome metric to assess for these common, costly procedures. We 
outlined that patient-reported outcomes will be assessed separately for 
THA and TKA procedures, though these results may be combined into a 
single composite measure for reporting, and indicated that we would 
refer to a single measure, while acknowledging the possibility of two 
measures, one for THA patients and one for TKA patients.
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    \84\ Monticone M, Ferrante S, Rocca B, et al. Home-based 
functional exercises aimed at managing kinesiophobia contribute to 
improving disability and quality of life of patients undergoing 
total knee arthroplasty: A randomized controlled trial. Archives of 
physical medicine and rehabilitation. Feb 2013;94(2):231-239.
    \85\ Galea MP, Levinger P, Lythgo N, et al. A targeted home- and 
center-based exercise program for people after total hip 
replacement: A randomized clinical trial. Archives of physical 
medicine and rehabilitation. Aug 2008;89(8):1442-1447.
    \86\ Moffet H, Collet JP, Shapiro SH, Paradis G, Marquis F, Roy 
L. Effectiveness of intensive rehabilitation on functional ability 
and quality of life after first total knee arthroplasty: A single 
blind randomized controlled trial. Archives of physical medicine and 
rehabilitation. Apr 2004;85(4):546-556.
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    In the proposed rule we provided background on measure development, 
and shared our discovery that in order to complete measure development, 
we would need access to a nationally representative sample of THA and 
TKA inpatient surgical procedure patient-reported outcome data set that 
is also consistently collected at the hospital-level and contains risk 
variables identified by orthopedists. Further, we noted that our 
rationale for requesting access to a national THA and TKA inpatient 
surgical procedures patient-reported data source was twofold--(1) A 
national data source would provide us with hospital-level data 
representative of the total number of THA and TKA procedures performed 
in hospitals, as well as representative data on hospital-level case-
mix; and (2) access to a national THA and TKA inpatient surgical 
procedures patient-reported data source would allow us to assess and 
identify a set of parsimonious data elements that will minimize the 
data collection burden by patients, physicians and hospitals. We shared 
our belief that--(1) Access to such data would allow for completion and 
testing of the current measure under development so that it could be 
appropriately used for nationwide hospital performance evaluation; and 
(2) the model provides a unique opportunity to resolve these measure 
development issues through the collection of THA and TKA patient-
reported outcome data. We stated that access to this data through the 
model would address the following:
     Current data sources are not consistently collected nor 
collected in a uniform process and in a standardized format (that is, 
data elements are not consistently defined across different data 
sources). We note that currently available data sources tend to be 
limited to single hospitals or regional registries which are associated 
with complex data access sharing requirements.
     Current lack of uniform hospital-level data that can be 
used in measure development.
     Lack of incentive for physicians and hospitals to collect 
patient-reported outcome data such as that through the model's 
financial incentives associated with voluntary data submission.
     Current lack of a technically simple and feasible 
mechanism for hospitals to submit patient-reported data to CMS. This 
model would help create and optimize such a mechanism, potentially 
enabling future measure implementation.
    Additionally we stated that the voluntary data collection 
initiative in the model would provide an opportunity to collect data 
from the patient's perspective, data that is necessary to finalize and 
test the measure specifications, including the risk model. In the 
proposed rule, we shared how access to this national representative 
voluntarily submitted data would enable us to do the following:
     Determine a parsimonious set of risk factors that are 
statistically adequate for risk adjustment for patient-reported 
outcome.
     Examine the differences in hospital performance related to 
different components in the patient-reported outcome (such as 
functional status, pain, etc.) to finalize the statistical modeling 
methodology for risk adjustment.
     Evaluate the reliability of the patient-reported outcome 
measure.
     Examine validity of the patient-reported outcome measure 
upon finalization of the risk adjustment model via potential testing 
methods such as face validity testing with national experts, comparing 
the measure results to similar results based on other data sources if 
feasible, etc.
    We also addressed the importance of encouraging participation with 
voluntary data submission of patient-reported outcome data, so we 
proposed to reward voluntary participation in submission of THA/TKA 
patient-reported outcome-based measure data as outlined in section 
III.D.3.a. of the proposed rule. We also indicated that we would not 
publicly report the THA/TKA voluntary data.
    Finally, we shared our intention to use a fully tested and 
completed THA/TKA patient-reported outcome-based measure in CMS models 
or programs when appropriate. We stated that if there is a decision to 
implement the fully developed THA/TKA patient-reported outcome-based 
measure, such as in the CJR model, we would propose to adopt the 
measure through notice-and-comment rulemaking. We also referenced draft 
measure specifications in the Downloads section of the Measure 
Methodology Web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The following is a summary of the comments received and our 
responses. Please note the use of the following acronyms: (1) Patient-
reported outcome will be noted as PRO; (2) patient-reported outcome 
measure (PROM) is a patient-reported outcome survey instrument; and (3) 
patient-reported outcome-based performance measure will be noted as 
PRO-PM. These terms are consistent with the National Quality Forum 
Patient Reported Outcomes (PROs) in Performance Measurement, January 
10, 2013 (available at: https://www.qualityforum.org/Publications/2012/12/Patient-Reported_Outcomes_in_Performance_Measurement.aspx).
    Comment: Many commenters supported CMS's goal to measure and 
improve patient-reported outcomes. Many commenters supported the PRO 
data voluntary reporting proposal. Multiple commenters specifically 
urged CMS to adopt the proposal to gather PRO data for the purpose of 
completing development of the hospital-level THA/TKA PRO-PM. A 
commenter supported linking the reconciliation payment to quality 
performance. A commenter supports the financial incentive for hospitals 
that participate in the voluntary data collection initiative.
    Response: For a detailed discussion of the payment perspective for 
use of the THA/TKA voluntary PRO data in determining reconciliation 
payment, including our responses to public comments, we refer readers 
to section III.C.5.b.(5)(b) through III.5.b.(5)(c) of this final rule.
    Comment: Several commenters recommended that CMS fully develop the 
PRO-PM before implementing the

[[Page 73488]]

measure's use in a payment model. Several commenters stated that the 
proposed quality measures are not rigorous in the way in which they 
were developed and the selection of specifications such as PROM 
instruments in the PRO-PM.
    Response: We note that the purpose of this voluntary PRO and risk 
variable data collection is to complete the development of a THA/TKA 
PRO-PM. We will not use the THA/TKA voluntary and limited risk variable 
data to assess hospitals' performance, but instead will use the 
voluntary submitted data to complete development of a PRO-PM measure 
for future use in the CJR model. Finally, we would like to use the 
innovative strategy to encourage THA/TKA voluntary PRO and risk 
variable data submission by rewarding hospitals that successfully 
submit THA/TKA voluntary and risk variable data. We believe our measure 
development process is rigorous and transparent. We created a list of 
candidate PROM instruments following an environmental scan and 
literature review. Our measure development contractor convened a 
Technical Expert Panel through a public process. Based on input from 
the Technical Expert Panel and a public comment period, we proposed 
validated, non-proprietary PROMs that have been tested in patients 
undergoing THA/TKA or, in the case of the PROMIS-Global, had undergone 
rigorous testing during development with plans to test in patients 
undergoing THA/TKA. The final rule is limited to a voluntary PRO data 
collection initiative that will inform our standard measure development 
process set forth in NQF guidance for outcome measures,\87\ CMS 
Measures Management System (MMS) guidance,\88\ and the guidance 
articulated in the American Heart Association Statement ``Standards for 
Statistical Models Used for Public reporting of Health Outcomes.'' \89\ 
Once finalized, the THA/TKA PRO-PM that will be developed using the 
voluntary PRO and risk variable data will be incorporated into the CJR 
model through rulemaking to address public comments strongly 
recommending the model include a measure of functional status. The 
application of a patient-reported outcome measure in the CJR model is 
important for providers to understand where they can adjust or change 
their processes in order to improve the care they are providing. Having 
a PRO-PM measure will also provide important information about provider 
care for the beneficiaries and their families and caretakers.
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    \87\ National Quality Forum. Measure Evaluation Criteria and 
Guidance. April 2015. Available at: https://www.qualityforum.org/Measuring_Performance/Submitting_Standards.aspx. Accessed on 
September 22, 2015.
    \88\ Measures Management System Overview.2015; https://www.cms.gov/Medicare/Quality-InitiativesPatient-AssessmentInstruments/MMS/?redirect=/MMS/19_MeasuresManagementSystemBlueprint.asp. Accessed September 8, 
2015.
    \89\ Krumholz H, Brindis R, Brush J, et al. Standards for 
Statistical Models Used for Public Reporting of Health Outcomes: An 
American Heart Association Scientific Statement from the Quality of 
Care and Outcomes Research Interdisciplinary Writing Group: 
Cosponsored by the Council on Epidemiology and Prevention and the 
Stroke Council. Endorsed by the American College of Cardiology 
Foundation. Circulation. Jan 24 2006;113(3):456-462.
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    Comment: A commenter recommended that CMS facilitate collaboration 
among hospitals to share best practices for PRO data collection.
    Response: We agree with the commenter's recommendation. We intend 
to support hospitals that choose to collect PRO data as part of the CJR 
model by providing education and dissemination of successful practices.
    Comment: A commenter recommended reporting separate total hip and 
knee arthroplasty PRO-PMs.
    Response: We appreciate the recommendation to report separate total 
hip and knee arthroplasty measures. As indicated on pages 14 and 16 in 
the Patient-Reported Outcomes Following Elective Primary Total Hip and/
or Total Knee Arthroplasty: Hospital-Level Performance Measure(s) Phase 
3 Measure Methodology Report posted on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html, we agree 
with the commenter that hospital performance for the care of THA and 
TKA patients be assessed using separate PRO-PMs and intend to develop a 
THA/TKA PRO-PM that assesses THA and TKA PROM results separately and 
then combine them into a composite score that preserves the 
distinctions in clinical outcomes between these patient groups if 
needed for adequate sample sizes to ensure stable performance 
estimates. The PRO-based measure remains under development, and this 
input will inform future measure development work.
    Comment: A commenter noted a high response rate within their group, 
and cautioned that poor response rates will undermine validity and 
comparisons across settings.
    Response: We appreciate the commenter's support of measuring PROs 
and concerns about obtaining adequate PROM response rates and applaud 
the commenter's success in this realm. We encourage the commenter to 
share any insights regarding optimizing PRO response rates with CMS to 
further this important measurement effort. We appreciate the concern 
that poor response rates will undermine the validity of the data 
collected and the ability to compare outcomes across settings. We note 
that section III.D.3.a.(9) of this final rule addresses this concern by 
finalizing a different definition of successful THA/TKA voluntary data 
submission.
    Comment: Some commenters recommended that the THA/TKA PRO-PM should 
be tested, reviewed, and endorsed by the NQF.
    Response: We plan to submit the THA/TKA PRO-PM to the appropriate 
NQF project upon completion of measure development.
    Comment: A commenter urged CMS to validate the risk adjustment 
methodology before hospitals' results on the PRO-PM are reported on the 
Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/) or the 
Physician Compare Web site (https://www.medicare.gov/physiciancompare/
).
    Response: We note that the THA/TKA PRO-PM is currently under 
development. We plan to validate the risk adjustment methodology prior 
to implementing the measure into any public reporting program. As noted 
in the proposed rule (80 FR 41290), the THA/TKA voluntary data will not 
be publicly reported, but instead a symbol will used to acknowledge CJR 
model hospitals that successfully submitted the voluntary data.
    Final Decision: After consideration of the public comments, we 
wanted to express our appreciation for the support for this THA/TKA 
voluntary PRO data submission initiative. As with all of our measures 
in development, when appropriate, they are reviewed by NQF for 
endorsement and by the NQF Measure Applications Partnership for 
implementation in programs. Finally, we appreciate the recommendations 
to facilitate collaboration among hospitals to share best practices for 
PRO data collection and, as stated previously, will be looking for ways 
to support this recommendation. We are finalizing the THA/TKA voluntary 
PRO and risk variable data submission initiative as previously 
discussed.
(2) Data Sources
    In the proposed rule (80 FR 41285), we shared that this measure is 
under development, and we proposed to reward participant hospitals that 
volunteer to submit provider- and patient-level data elements. We 
shared our observation that currently, there is

[[Page 73489]]

little uniformity across hospitals regarding collection of specific 
provider- and patient-level data elements that are used to assess 
patient outcomes after THA and TKA inpatient procedures. We also shared 
for the voluntary data submission for the THA/TKA patient-reported 
outcome-based measure initiative, our goal to identify a uniform set of 
provider- and patient-level data elements that are accurate, valid, and 
reliable pieces of information that can be used in the determination of 
improvement in various patient characteristics like those previously 
listed (that is, pain, mobility, and quality of life). We also shared 
our goal to minimize patient, provider and hospital burden associated 
with data collection and submission of provider- and hospital-level 
data elements, by proposing a variety of data sources for measure 
development. We provided the following three categories of anticipated 
data sources for public comment:
     Patient-reported data.
     Administrative claims-based data.
     One or both physician-reported and electronic health 
record data.
    As a way to minimize burden on patients, providers, and hospitals 
we proposed to request that participant hospitals provide 
administrative claims-based data whenever possible; we also requested 
that participant hospitals submit either hospital documentation, chart 
abstraction, or abstraction from the electronic health records. The 
list of proposed data elements are summarized in the proposed rule (80 
FR 41285).
    Finally, we stated that as the measure continues to undergo 
development that the list of data elements may be simplified consistent 
with our previously stated goal in this section entitled Data Sources, 
that we intend to identify a uniform set of provider- and patient-level 
data elements that are accurate, valid and reliable pieces of 
information that can be used in the determination of improvement in 
various patient-reported outcomes like those previously listed (that 
is, pain, mobility, and quality of life). We shared our anticipation 
that via public comment and experience with the voluntary data 
submission, that the set of data elements listed previously will be 
simplified.
    In accordance with, and to the extent permitted by, the HIPAA 
Privacy Rule and other applicable law, we proposed to request that 
participant hospitals submit the data specified in the request, which 
we would limit to the minimum data necessary for us to conduct quality 
assessment and improvement activities. Regarding the process for data 
collection, we proposed the THA/TKA voluntary data will be submitted to 
and collected by a CMS contractor in a manner and format similar to 
existing CMS data submission processes. For example, CMS would supply 
applicable hospitals with a file template and instructions for 
populating the file template with data and submitting the data; the 
hospitals will populate the template, log in to a secure portal, and 
transmit the file to the appropriate CMS contractor; the CMS contractor 
would also match the submitted data to Medicare administrative claims-
based data and calculate completeness for determination of the 
reconciliation payment as noted in section III.C.5. of the proposed 
rule (or validated subscales or abbreviated versions of these 
instruments). We stated our belief that participation in the submission 
of THA/TKA--voluntary data will provide the minimum information we 
would need that would inform us on how to continuously improve the 
currently specified measure in development.
    Finally, we noted that some of these data elements are closely 
aligned with data elements in electronic clinical quality measures 
submitted by eligible professionals for the Medicare EHR Incentives 
Program for Eligible Professionals. Specifically these EHR Incentives 
Program measures for eligible professionals are: (1) Functional Status 
Assessment for Knee replacement (CMS 66); and (2) Functional Status 
Assessment for Hip replacement (CMS 56). We refer reviewers to CMS.gov 
EHR Incentives Program 2014 Eligible Professional June 2015 zip file 
update at https://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Downloads/eCQM_2014_EP_June2015.zip for full 
measure specifications. We stated our belief that it is possible that 
many health IT vendors are already certified to capture, calculate and 
report these provider-level measures of functional status on total knee 
and total hip arthroplasty, and therefore we anticipate that the 
provider-level data elements that are identical to the THA/TKA patient-
reported outcome voluntary data elements previously listed may not be 
as burdensome for the CJR model participant hospitals to voluntarily 
submit.
    The following is a summary of the comments received and our 
responses. We received many public comments on the Data Sources section 
and have divided the public comments and our responses into two 
categories--(1) Public comments not specifically related to the 
proposed PRO and risk variable data elements (80 FR 41825); and (2) 
public comments specifically related to the proposed PRO and risk 
variable data elements.
    The following are public comments made that are not specifically on 
the proposed instruments (80 FR 41825) and our responses.
    Comment: A commenter questioned whether CMS will include economic 
or clinician-reported outcomes in addition to clinical outcomes.
    Response: We will be capturing generic health-related quality of 
life assessments with the VR-12 and PROMIS-Global, which will 
supplement the clinical outcomes of the HOOS/KOOS Jr. or specified 
HOOS/KOOS subscales (see Table 28). We will not be capturing patient-
reported economic or clinician-reported outcomes. The purpose of this 
voluntary PRO data collection is to complete the development of a THA/
TKA PRO-PM. We will not use the THA/TKA voluntary data to assess 
hospitals' performance during Years 1-3 of the CJR model, but instead 
will use the submitted data to complete development of a PRO-PM 
measure. Finally, we would like to use the innovative strategy to 
encourage THA/TKA voluntary data submission by rewarding hospitals that 
successfully submit THA/TKA voluntary data during Years 1-3. 
Comparisons with other outcome measures can be made when such a measure 
is fully developed. Once finalized, the THA/TKA PRO-PM that will be 
developed using the voluntary PRO and risk variable data will be 
incorporated into the CJR model through rulemaking to address public 
comments strongly recommending the model include a measure of 
functional status.
    Comment: A few commenters recommended that CMS use existing 
measures, such as Functional Status Change for Patients with Knee 
Impairments (NQF #0422) and Functional Status Change for Patients With 
Hip Impairments (NQF #0423), both of which are stewarded by Forum on 
Therapeutic Outcomes, Inc. (FOTO), to measure patients' functional 
status in the CJR model. The commenters stated that these NQF-endorsed 
measures are in the public domain, are economical and are not 
burdensome to patients or clinicians. The commenters noted that these 
measures are already in use in the PQRS and that developing a new 
measure instrument is an imprudent use of government resources.
    Response: To the best of our knowledge, the FOTO measures (NQF 
#0422 and #0423) are not specifically tested in THA/TKA patients, but 
rather medical patients with hip or knee complaints who initiated 
rehabilitation

[[Page 73490]]

treatment. We also note that, to the best of our knowledge, the FOTO 
measures lack data demonstrating the validity in the elective primary 
THA/TKA patient population. Furthermore, although the FOTO measures are 
NQF-endorsed and in the public domain, to the best of our knowledge, 
the measures can only be reported using a proprietary web-based patient 
assessment system to collect the data. In keeping with our goal to 
minimize burden for hospitals and after receiving input in previous 
rulemaking urging CMS to avoid adoption of rules that require or 
incentivize that hospitals use proprietary tools, such as 
interoperability standards (71 FR 68198), or pay to participate in a 
specific registry (73 FR 48609), we have decided not to pursue these 
measures. As such, we prioritized the use of non-proprietary PROM 
instruments as part of the PRO data collection initiative. Finally, we 
note that we are not developing a PROM instrument and therefore 
disagree that CMS is acting unwisely with government resources. On the 
contrary, we have investigated using instruments that are in the public 
domain and are non-proprietary. The purpose of this voluntary PRO and 
risk variable data collection is to complete the development of a THA/
TKA PRO-PM. We will not use the THA/TKA voluntary and risk variable 
data to assess hospitals' performance, but instead will use the 
voluntary submitted data to complete development of a PRO-PM measure. 
Finally, we would like to use the innovative strategy to encourage THA/
TKA voluntary and risk variable data submission by rewarding hospitals 
that successfully submit THA/TKA voluntary data. We note that the THA/
TKA voluntary and risk variable data will assess hospital quality of 
care for patients undergoing elective primary THA/TKA procedures. Once 
finalized, the THA/TKA PRO-PM that will be developed using the 
voluntary PRO and risk variable data will be incorporated into the CJR 
model through rulemaking to address public comments strongly 
recommending the model include a measure of functional status.
    Comment: A commenter stated developing a new measurement instrument 
for this project and specifically for THA and TKA patients is 
unnecessary, time-consuming, and costly.
    Response: To clarify, we are not developing a PROM instrument. We 
will use existing, validated, non-proprietary PROM instruments for a 
voluntary PRO data collection for the development of a future hospital-
level patient-reported outcomes performance measure.
    Comment: A few commenters recommended expanding the PRO-PM to 
capture patients' experience in PAC settings.
    Response: The purpose of this voluntary PRO data collection is to 
complete the development of a THA/TKA PRO-PM. We will use the THA/TKA 
voluntary data to complete development of a PRO-PM measure. We note 
that, the intention of the future PRO-PM measure is to capture patient-
reported outcomes that are meaningful to patients undergoing elective 
primary THA/TKA procedures. As the purpose of a majority of elective 
primary THA/TKA procedures is the long-term improvement in pain and 
functional outcomes, we believe that measuring such outcomes and 
attributing them to the hospital where the procedure is performed is 
most appropriate. We will consider adapting any future measure to other 
care settings as appropriate.
    Comment: A few commenters recommended that CMS consider 
performance-based measures of function, such as the 6-minute walk test.
    Response: We appreciate the commenter's input. The decision to 
focus on patient-reported assessments rather than functional 
performance assessment reflects CMS's commitment to patient-centered 
care. The validated PRO instruments that are proposed for voluntary 
data collection reflect outcomes meaningful to patients. A functional 
performance assessment offers an objective evaluation of function, but 
may not accurately reflect the patient's own experience and health 
status; one individual may experience a marked improvement in their 6-
minute walk test after THA, but they may be unable to rise from a 
seated position or bend over to tie their shoes or pick up an object, 
which are critical functional outcomes not necessarily captured by a 6-
minute walk test. Once fully developed, the THA/TKA PRO-PM, which will 
be developed using the voluntary PRO and risk variable data and will 
capture functional outcomes such as those stated in the text (ability 
to rise from a seated position or bend, to tie their shoes), will be 
incorporated into the CJR model in the future, through rulemaking, and 
therefore will address public comments strongly recommending the model 
include a measure of functional status.
    Comment: A commenter expressed concern that data obtained from 
PROMs are mostly comprised of patient-subjective responses.
    Response: We believe that patient-reported outcomes are a critical 
type of outcome needed for healthcare quality assessment. PROMs are 
intended to capture patients' self-assessments of their health. They 
provide a direct way to capture patients' experience of care and its 
results. PROMs can assess multiple health domains, including physical 
health, emotional well-being, and social functioning, through measuring 
outcomes relevant to each domain, such as symptoms, functional status, 
and mental status. As a result, they provide rich information on how 
care affects multiple dimensions of patients' well-being. PROMs can 
provide timely information on patient health status, function, and 
symptoms over time that can be used to improve patient-centered care 
and inform clinical decision-making.\90\
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    \90\ Cella D, Hahn EA, Jensen SE., Butt Z, Nowinski CJ, Rothrock 
N. Methodological Issues In The Selection, Administration And Use Of 
Patient-Reported Outcomes In Performance Measurement In Health Care 
Settings: Final Manuscript. Prepared for the National Quality Forum 
Consensus Development Project on Patient-Reported Outcomes. 
September 28, 2012.
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    Comment: A commenter recommended using the PRO data to develop 
three registries: Hip implants, knee implants, and surgeon-specific 
performance.
    Response: The purpose of this voluntary PRO data collection is to 
complete the development of a THA/TKA PRO-PM. We will not use the THA/
TKA voluntary PRO and risk variable data to assess hospitals' 
performance, but instead will use the voluntary submitted data to 
complete development of a PRO-PM measure. Finally, we would like to use 
the innovative strategy to encourage THA/TKA voluntary and risk 
variable data submission by rewarding hospitals that successfully 
submit THA/TKA voluntary data. Once finalized, the THA/TKA PRO-PM, that 
will be developed using the voluntary PRO and risk variable data, will 
be incorporated into the CJR model through rulemaking to address public 
comments strongly recommending the model include a measure of 
functional status. There are several existing regional and national 
registries, many in collaboration with surgical specialty societies, 
which are collecting data on a variety of outcomes and information 
about patients undergoing THA/TKA procedures.
    Comment: Several commenters suggested that CMS work with joint 
registries to which hospitals voluntarily report to reduce burden by 
using existing mechanisms of data collection. A commenter suggested CMS 
partner with the California Joint Replacement Registry (CJRR). Other 
commenters suggested CMS partner with the

[[Page 73491]]

American Joint Replacement Registry (AJRR).
    Response: We note that we have been collaborating with CJRR and 
AJRR as part of the development of the THA/TKA PRO-PM. However, at this 
time we are not requiring hospitals to pay to participate in specific 
registries as part of the PRO data collection initiative. We note that 
previous public comments regarding the use of proprietary registries 
urged CMS to avoid adoption of policies that require or incentivize 
hospitals to join a specific registry (73 FR 48609) in order to provide 
data for CMS quality and payment programs.
    Comment: Several commenters requested that CMS make patient-
reported data collection a mandatory component of the CJR model. Some 
of the commenters suggested significantly increasing incentives for 
patient-reported data collection under the proposed voluntary approach. 
Commenters suggested a phase-in approach to fully implementing the 
fully developed patient-reported outcome performance-based measure as 
part of the CJR model.
    Response: We appreciate the suggestion to make the THA/TKA 
voluntary data collection mandatory and may consider it as we continue 
to improve the model. We did not make this initiative to collect THA/
TKA PRO data mandatory for the following reasons: (1) This is a measure 
in development; and (2) we sought not to burden hospitals with 
additional financial costs while testing a new payment structure. We 
believe this is consistent with a phase-in approach to fully 
implementing the fully developed patient-reported outcome performance-
based measure as part of the CJR model.
    The following are public comments that specifically address the 
proposed instruments and our responses include the following:
    Comment: A few commenters recommended the use of Oxford Hip and 
Knee Scores (OHS/OKS) which are two separate PROM instruments. A 
commenter suggested the Oxford PROMs have been evaluated independently 
and found to be the most reliable systems for assessment of hip and 
knee replacement.
    Response: We appreciate the commenter's recommendation to use the 
OHS/OKS. We considered the OHS/OKS as candidate PROM instruments. In 
the early phases of measure development, we created a list of candidate 
PROMs through an environmental scan and literature review. Then, a 
Technical Expert Panel convened by our measure development contractor 
reviewed the list of candidate PROMs. The Technical Expert Panel 
questioned the usability of the OHS/OKS and expressed concern over 
their proprietary nature, and recommended removing them from the list 
of candidate PROMs. The condition-specific PROMs recommended by the 
Technical Expert Panel and proposed for this model represent validated, 
non-proprietary PROMs that have been tested in patients undergoing THA/
TKA. For additional rationale for the selected PROM instruments, we 
refer readers to page 20 of the Patient-Reported Outcomes Following 
Elective Primary Total Hip and/or Total Knee Arthroplasty: Hospital-
Level Performance Measure(s) Phase 3 Measure Methodology Report posted 
on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Comment: A few commenters requested that CMS use non-proprietary 
(or open access) PROM instruments to avoid requiring purchasing and 
maintenance costs.
    Response: We agree with the commenters and note that the proposed 
PROM instruments are non-proprietary instruments. We received similar 
input in previous rulemaking urging CMS to avoid adoption of rules that 
require or incentivize that hospitals use proprietary tools, such as 
interoperability standards (71 FR 68198), or pay to participate in a 
specific registry (73 FR 48609). As such, we prioritized the use of 
non-proprietary PROM instruments as part of the PRO data collection 
initiative.
    Comment: A commenter shared, and did not suggest, a list of THA 
PROM instruments currently in use at their health system: VR-12, HOOS, 
UCLA Activity Level Rating Form, and Modified Harris Hip Form. The 
commenter also shared a list of instruments that are in development to 
be used across their health system's orthopedic sites: FAAM Sport, 
quick DASH, Forgotten Joint Score, KOOS, Knee Society Score, Neck 
Disability Index, SRS-22, DASH, Pelvic Floor Disability Inventory-20, 
and PODCI.
    Response: We appreciate the list of instruments in use at the 
commenter's health system. We note that we reviewed many of these 
instruments, as did the Technical Expert Panel convened by our measure 
development contractor. Among the listed instruments, the Technical 
Expert Panel strongly favored the VR-12, HOOS, and KOOS because of 
their appropriateness for the primary elective THA/TKA patient 
population. We provide further rationale on our selection of PROM 
instruments in response to other comments within this rule. 
Nonetheless, we applaud the commenter's use of PROM THA instruments to 
assess quality and patient outcomes on those under their care. We also 
appreciate the added knowledge shared by the commenters regarding their 
instruments under development.
    Comment: A commenter recommended obtaining PROM data as early as 90 
days postoperative. Another commenter recommended obtaining 
postoperative PROM data not less than 6 months after discharge for the 
THA or TKA. A commenter recommended obtaining postoperative PROM data 
not less than nine months after discharge for the THA or TKA.
    Response: The window for post-operative data collection was 
selected based upon consultation with national clinical experts and 
empiric data from literature indicating that patients continue to 
improve until approximately 180 days post-operatively and have 
generally experienced the full benefit of their surgery by 270 to 365 
days after THA/TKA. Moreover, the post-operative data collection period 
between 270 to 365 days aligns with one-year follow-up visits and thus, 
addresses the concern of low post-operative PROM completion rate if 
administered prior to 270 days. For additional rationale and citations, 
we refer readers to page 18 in the Patient-Reported Outcomes Following 
Elective Primary Total Hip and/or Total Knee Arthroplasty: Hospital-
Level Performance Measure(s) Phase 3 Measure Methodology Report posted 
on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Comment: A commenter recommended that CMS consider using the 
Forgotten Joint Knee Score. Another commenter recommended the SF-36.
    Response: We considered the SF-36 and SF-12, a shorter version of 
the SF-36, as alternative to the VR-12, as did the Technical Expert 
Panel convened by our measure development contractor. The Forgotten 
Joint Knee Score had not been published at the time of our literature 
review and environmental scan and was not raised by the Technical 
Expert Panel as an option. The SF-36, SF-12 and the Forgotten Joint 
Knee Score are all proprietary instruments, and after consideration of 
these instruments and prior situations in which proprietary tools or 
databases were suggested and not found favorable with the public, we 
decided on the non-

[[Page 73492]]

proprietary VR-12, PROMIS-Global, HOOS Jr. and KOOS Jr. (or HOOS/KOOS 
subscales listed in Table 28). We believe using non-proprietary 
instruments will not place an added financial burden on CJR model 
participant hospitals.
    Comment: A commenter requested that CMS develop a ``gold standard'' 
PROM instrument that is easily administered and has a small and 
targeted number of questions.
    Response: We appreciate the commenter's recommendation, and we note 
that we are not currently developing a PROM instrument. CMS is 
developing a PRO-PM outcomes measure and not the instrument to collect 
functional outcome data. The purpose of this voluntary PRO data 
collection is to collect the data required to develop the future PRO-
based performance measure that will assess hospital quality of care for 
patients undergoing elective primary THA/TKA procedures. We believe 
that there are numerous instruments already available in the public 
domain, which through our Technical Expert Panel have been recommended 
for our consideration in the THA/TKA PRO-PM in development.
    Comment: A commenter supported the proposal to collect the VR-12 
and PROMIS Global instruments. Several commenters supported the 
proposal to use the HOOS and KOOS instruments. Many commenters 
recommended allowing participating hospitals to submit either the VR-12 
or the PROMIS Global instruments to satisfy the PRO data collection 
requirement because the proposed required PRO data elements for the 
voluntary PRO data collection are too burdensome. Several commenters 
specifically recommended PROMIS Global, but not VR-12 because it is 
duplicative and does not add value.
    Response: We appreciate the commenters' input on the PRO voluntary 
data collection proposal. We appreciate the support of our proposal to 
collect the VR-12 and PROMIS Global instruments and the HOOS or KOOS 
instruments.
    We also appreciate the public comments that indicated that the 
proposed required PRO data elements for the voluntary PRO data 
collection are too burdensome. We acknowledge evidence indicating that 
the PROMIS-Global and VR-12 are highly correlated.\91\ Based on the 
supporting evidence, and in response to public comments, we will allow 
CJR model hospital participants to collect and submit either the VR-12 
or the PROMIS-Global for purposes of determining ``successful'' 
voluntary patient-reported outcome data collection. These data must be 
collected both pre-operatively (90 to 0 days prior to the THA/TKA 
procedure) and post-operatively (270 to 365 days after the THA/TKA 
procedure). As hospitals may already be collecting VR-12 or PROMIS-
Global data for other purposes, we believe providing this option for 
submitting to CMS data using either instrument is the least burdensome 
option for hospitals.
---------------------------------------------------------------------------

    \91\ Schalet BD, Rothrock NE, Hays RD, Kazis LE, Cook KF, 
Rutsohn JP, Cella D. Linking Physical and Mental Health Summary 
Scores from the Veterans RAND 12-Item Health Survey (VR-12) to the 
PROMIS[supreg] Global Health Scale. J Gen Intern Med. 2015 Jul 16. 
[Epub ahead of print]
---------------------------------------------------------------------------

    Comment: Several commenters supported CMS's consideration of an 
abbreviated version of HOOS/KOOS. Commenters recommended the HOOS/KOOS 
pain and function subscales, the Western Ontario and McMaster 
Universities Osteoarthritis Index (WOMAC), or the HOOS Jr/KOOS Jr as 
possible alternatives to the full HOOS/KOOS, and cautioned that both 
pain relief and functional gain are important outcomes and that both 
should be measured. Specifically, a joint statement from multiple 
surgical specialty societies indicated new data validating shortened 
versions of the HOOS/KOOS instruments in THA/TKA patients. These 
shortened versions have been named the HOOS Jr. (6 items) and KOOS Jr. 
(7 items); both shorter versions are highly responsive in the THA/TKA 
patient population (standardized response means 1.7 to 2.4). In 
addition, the HOOS/KOOS Jr. were highly correlated with the Pain and 
Function, Daily Living subscales of the full HOOS/KOOS instruments and 
the Western Ontario and McMaster Universities Osteoarthritis Index 
(WOMAC) (Spearman's correlation 0.80-0.94). These findings on the HOOS/
KOOS Jr. were presented at the 2015 AAOS Annual Meeting \92\ and 2015 
International Society of Arthroplasty Registries (ISAR) Annual Meeting, 
respectively.
---------------------------------------------------------------------------

    \92\ Lyman S, Lee YY, Padget DE. HOOS, JR. a shorter hip 
outcomes survey. Podium (#413) AAOS 2015 Annual Meeting, Las Vegas, 
NV.
---------------------------------------------------------------------------

    Response: We note that the WOMAC is a proprietary instrument. As 
previously discussed, we sought not to burden hospitals with a 
proprietary instrument and therefore did not consider this instrument.
    Regarding the HOOS/KOOS PROMs, we appreciate the consistent comment 
that the HOOS/KOOS instruments for this specific voluntary PRO data 
submission proposal are too burdensome. These instruments were 
recommended by a diverse, nationally convened Technical Expert Panel 
assisting our contractor with the development of this measure. During 
review of these instruments, the Technical Expert Panel acknowledged 
the length of the instruments as a limitation for its use. For reasons 
outlined in prior responses, the Technical Expert Panel recommended 
these instruments over shorter, proprietary joint-specific PROM 
instruments. We noted in review of the public comments, a joint 
statement from multiple surgical specialty societies indicated new data 
validating shortened versions of the HOOS/KOOS instruments in THA/TKA 
patients. Further, the HOOS/KOOS instruments were originally developed 
to create five specific subscale scores: Pain, other Symptoms, Function 
in daily living (ADL), Function in sport and recreation (Sport/Rec) and 
knee related Quality of life (QOL) (https://www.koos.nu/).
    Based upon the fact that the HOOS/KOOS instruments were developed 
to create specific subscale scores intended for independent scoring as 
well as additional evidenced-based data supporting the use of 
meaningful information on THA/TKA PROMs gathered in substantially less 
burdensome, non-proprietary instruments and broadly supported by the 
orthopedic community, we believe it is reasonable to replace the 
previously proposed collection of the full HOOS or KOOS survey with the 
shorter HOOS Jr. and KOOS Jr. or with the following list of HOOS and 
KOOS subscales.
    For hospitals seeking to voluntarily collect and submit PRO data on 
THA patients, we would require collection and submission of all of the 
following for purposes of determining ``successful'' voluntary patient-
reported outcome data collection:
     Either VR-12 or PROMIS-Global [collected both pre-
operatively (90 to 0 days prior to the THA procedure) and post-
operatively (270 to 365 days after the THA procedure], the revised list 
of risk variables [Table 28, collected only pre-operatively (90 to 0 
days prior to the THA procedure)], and
     Either (A) the HOOS Jr. (6 items total) [collected both 
pre-operatively (90 to 0 days prior to the THA procedure) and post-
operatively (270 to 365 days after the THA procedure] or (B) the 
original HOOS Pain Subscale (10 items), AND the original HOOS Function, 
Daily Living Subscale (17 items, for a total of 27 items) [collected 
both pre-operatively (90 to 0 days prior to the THA procedure) and 
post-operatively (270 to 365 days after the THA procedure].

[[Page 73493]]

    For hospitals seeking to voluntarily collect and submit PROM data 
on TKA patients, we will require collection and submission of all of 
the following for purposes of determining ``successful'' voluntary 
patient-reported outcome data collection:
     Either VR-12 or PROMIS-Global [collected both pre-
operatively (90 to 0 days prior to the TKA procedure) and post-
operatively (270 to 365 days after the TKA procedure)], the revised 
list of risk variables [Table 28, collected only pre-operatively (90 to 
0 days prior to the TKA procedure)], and
     Either (A) the KOOS Jr. (7 items total) [collected both 
pre-operatively (90 to 0 days prior to the TKA procedure) and post-
operatively (270 to 365 days after the TKA procedure)] or (B) the 
original KOOS Stiffness Subscale (2 items), AND the original KOOS Pain 
Subscale (9 items) and the original KOOS Function, Daily Living 
Subscale (17 items, for a total of 28 items) [collected both pre-
operatively (90 to 0 days prior to the TKA procedure) and post-
operatively (270 to 365 days after the TKA procedure)].
    Finally, the PROM instrument data will be collected both pre-
operatively (90 to 0 days prior to the THA/TKA procedure) and post-
operatively (270 to 365 days after the THA/TKA procedure); the risk 
variables (Table 28) will be collected only pre-operatively (90 to 0 
days prior to the THA/TKA procedure). The HOOS/KOOS domain of Quality 
of Life will be captured by the validated generic instruments (VR-12 or 
PROMIS-Global); the HOOS/KOOS domain of Function, Sports and 
Recreational Activities includes questions regarding activities (for 
example, running) that THA/TKA patients are commonly advised to 
restrict or avoid after surgery and, as such, is less applicable to 
this patient population.
    Comment: A few commenters raised concerns with the HOOS and KOOS 
instruments, stating that summary scores are not available and the data 
may not be usable by clinicians. These commenters recommended CMS use 
generic PROM instruments in place of the HOOS and KOOS, specifically 
recommending the PROMIS Physical Function Scale, Activity Measure for 
Post-Acute Care (AM-PAC) Basic Mobility Scale, and OA-Function and 
Disability Computer Adaptive Tests. In addition, they recommended CMS 
consider instruments that utilize item response theory (IRT) to develop 
calibrated item banks to measure physical function and mobility.
    Response: We appreciate the commenters' concerns about the HOOS/
KOOS instruments and have changed the PROM instruments to be submitted 
as part of the voluntary PRO data collection. Please see our preceding 
response to other comments for details about the revised PROM 
instruments for submission that we will be finalizing. The new HOOS/
KOOS Jr. instruments provide a single summary score that is strongly 
correlated with pain and function. In addition, each of the HOOS/KOOS 
subscales yields its own score. These data, combined with input from 
this public comment, will be used to develop the THA/TKA PRO-PM. During 
development of the THA/TKA PRO-PM, we will work with patients, 
clinicians and technical experts to produce a final measure that 
provides meaningful information on patients' function and symptoms 
following elective primary THA/TKA. We also appreciate the commenters' 
recommendation to use the PROMIS Physical Function Scale, AM-PAC Basic 
Mobility Scale, and OA-Function and Disability Computer Adaptive Tests 
for the voluntary PRO data collection. The Technical Expert Panel 
convened by our measure development contractor discussed the PROMIS 
Physical Function Scale but favored selection of a combination of 
joint-specific and generic PROM instruments to capture the domains of 
pain and function most relevant to patients and clinicians. The 
Technical Expert Panel also endorsed the use of item response theory 
with computer adaptive testing (CAT), specifically in reference to non-
THA/TKA PROMs developed by NIH, such as the PROMIS[supreg] Computer 
Adaptive Test (https://www.nihpromis.org/software/demonstration), as a 
means to reduce the number of questions while still obtaining 
meaningful outcome information. However, the Technical Expert Panel 
acknowledged that CAT instruments are relatively new and still under-
developed for use in performance measurement for THA/TKA patient 
outcomes and require specific software and/or hardware to collect the 
data. In order to minimize provider as well as patient burden, we have 
reduced the number of data elements to be submitted for the voluntary 
PRO data collection and have chosen to avoid proprietary instruments, 
and at this time chosen to delay using instruments that require 
specific technology to complete collection. We will continue to review 
the selection of PROM instruments as the technology and science 
advances for its ease of use and degree of burden on hospitals.
    Comment: A commenter suggested that CMS assess the patient-
acceptable symptom state (``the highest level of symptom beyond which 
patients consider themselves well'') and minimum clinically important 
change (``the smallest change in measurement that signifies an 
important improvement'') \93\ in addition to the proposed PRO data 
elements.
---------------------------------------------------------------------------

    \93\ Kvien TK, Heiberg T, Hagen KB. Minimal clinically important 
improvement/difference (MCII/MCID) and patient acceptable symptom 
state (PASS): what do these concepts mean? Ann Rheum Dis. 2007 Nov; 
66(Suppl 3): iii40-iii41. doi: 10.1136/ard.2007.079798.
---------------------------------------------------------------------------

    Response: These options were discussed with our contractor's 
Technical Expert Panel, and, based upon the Technical Expert Panel's 
aim to utilize the most parsimonious list of required data elements 
possible and our goal to minimize the burden for hospitals, we decided 
to delay collecting additional data for this model.
    Comment: A commenter recommended that CMS publish, as part of the 
final rule, specific operational definitions of all risk variables, 
such as quantified spinal pain and knee extensor strength, in order to 
allow facilities to educate staff prior to data collection.
    Response: We agree that hospitals cannot be expected to collect 
meaningful clinical data for risk adjustment without clear, reliable 
specifications. Please refer to Table 28 that lists the revised list of 
risk variables required for successful voluntary patient-reported 
outcome data collection. These variables will be accompanied by one or 
more unique patient identifier(s) as necessary to enable matching of 
the PRO data with administrative claims data.

[[Page 73494]]



 Table 28--Summary of Proposed and Finalized Limited Risk Variable and Patient-Reported Outcome Data Elements To
        Be Submitted for Successful Participation in Voluntary Patient-Reported Outcomes Data Collection
----------------------------------------------------------------------------------------------------------------
                                                                Definition of finalized
  Proposed voluntary PRO * and risk     Finalized PRO and risk   PRO and risk variable     Timing of collection
        variable data elements          variable data elements       data elements
----------------------------------------------------------------------------------------------------------------
Age..................................  N/A....................  (Will be captured by     N/A.
                                                                 linking to claims
                                                                 data).
Date of Birth **.....................  Date of Birth..........  (MM/DD/YYYY)...........  -90 to 0 days prior to
                                                                                          and 270 to 365 days
                                                                                          after THA/TKA
                                                                                          procedure (to be used
                                                                                          for linking to claims
                                                                                          data).
Gender...............................  N/A....................  (Will be captured by     N/A.
                                                                 linking to claims
                                                                 data).
Race and Ethnicity **................  Race and Ethnicity.....  Race: American Indian    -90 to 0 days prior to
                                                                 or Alaska Native,        THA/TKA procedure.
                                                                 Asian, Black or
                                                                 African American,
                                                                 Native Hawaiian or
                                                                 Other Pacific
                                                                 Islander, White.
                                       .......................   Ethnicity: Hispanic or
                                                                 Latino, Not Hispanic
                                                                 or Latino.
THA or TKA procedure.................  N/A....................  (Will be captured as     N/A.
                                                                 possible by linking to
                                                                 claims data).
Date of admission to anchor            Date of admission to     (MM/DD/YYYY)...........  270 to 365 days after
 hospitalization **.                    anchor hospitalization.                           THA/TKA procedure (to
                                                                                          be used for linking to
                                                                                          claims data).
Date of discharge from anchor          N/A....................  (Will be captured as     N/A.
 hospitalization.                                                possible by linking to
                                                                 claims data).
Date of eligible THA/TKA procedure **  Date of eligible THA/    (MM/DD/YYYY)...........  270 to 365 days after
                                        TKA procedure.                                    THA/TKA procedure (to
                                                                                          be used for linking to
                                                                                          claims data).
Medicare Health Insurance Claim        Unique Identifier......  Medicare Health          -90 to 0 days prior to
 Number **.                                                      Insurance Claim Number.  and 270 to 365 days
                                                                                          after THA/TKA
                                                                                          procedure (to be used
                                                                                          for linking to claims
                                                                                          data).
PROMIS Global (all items)............  Generic PROM Instrument  VR-12 OR PROMIS-Global.  -90 to 0 days prior to
                                        for THA and TKA                                   and 270 to 365 days
                                        Procedures.                                       after THA/TKA
                                                                                          procedure.
VR-12 (all items.)...................  Generic PROM Instrument  VR-12 OR PROMIS-Global.  -90 to 0 days prior to
                                        for THA and TKA                                   and 270 to 365 days
                                        Procedures.                                       after THA/TKA
                                                                                          procedure.
For TKA patients Knee injury and       Knee-Specific PROM       KOOS Jr. Only OR KOOS    -90 to 0 days prior to
 Osteoarthritis Outcome Score (KOOS     Instrument for TKA       Stiffness Subscale AND   and 270 to 365 days
 \75\) (all items).                     Procedures.              KOOS Pain Subscale AND   after TKA procedure.
                                                                 KOOS Function, Daily
                                                                 Living Subscale.
For THA patients Hip disability and    Hip-Specific PROM        HOOS Jr. Only OR HOOS    -90 to 0 days prior to
 Osteoarthritis Outcome Score (HOOS     Instrument for THA       Pain Subscale AND HOOS   and 270 to 365 days
 \76\) (all items).                     Procedures.              Function, Daily Living   after THA procedure.
                                                                 Subscale.
Body Mass Index **...................  Body Mass Index (or      Body Mass Index (or      -90 to 0 days prior to
                                        height in cm and         height in cm and         THA/TKA procedure.
                                        weight in kg).           weight in kg).
Presence of live-in home support,      N/A....................  (Will be captured by     N/A.
 including spouse.                                               linking to claims
                                                                 data).
Use of chronic (>=90 day) narcotics    Pre-operative use of     Provider-reported yes/   -90 to 0 days prior to
 **.                                    narcotics.               no.                      THA/TKA procedure.
American Society of Anesthesiologists  N/A....................  N/A....................  N/A.
 (ASA) physical status classification.
Charnley Classification..............  N/A....................  N/A....................  N/A.
Presence of retained hardware........  N/A....................  (Will be captured by     N/A.
                                                                 linking to claims
                                                                 data).
Total painful joint count \94\**.....  Patient-Reported Pain    ``What amount of pain    -90 to 0 days prior to
                                        in Non-operative Lower   have you experienced     THA/TKA procedure.
                                        Extremity Joint.         in the last week in
                                                                 your other knee/hip?''
                                                                 (none, mild, moderate,
                                                                 severe, extreme).\95\
Quantified spinal pain **............  Patient-Reported Back    ``My BACK PAIN at the    -90 to 0 days prior to
                                        Pain (Oswestry Index     moment is'' (none,       THA/TKA procedure.
                                        question).               very mild, moderate,
                                                                 fairly severe, very
                                                                 severe, worst
                                                                 imaginable).96 97
Joint range of motion in degrees       N/A....................  N/A....................  N/A.
 (specify hip or knee).
Use of gait aides....................  N/A....................  N/A....................  N/A.
For THA patients abductor muscles      N/A....................  N/A....................  N/A.
 strength.

[[Page 73495]]

 
For THA patients presence of           N/A....................  N/A....................  N/A.
 Trendelenberg gait.
For THA patients history of            N/A....................  (Will be captured as     N/A.
 congenital hip dysplasia or other                               possible by linking to
 congenital hip disease.                                         claims data).
For THA patients presence of angular,  N/A....................  (Will be captured as     N/A.
 translational, or rotational                                    possible by linking to
 deformities of the proximal femur                               claims data).
 (in degrees).
For TKA patients anatomic angle        N/A....................  N/A....................  N/A.
 (femoro-tibial angle) in degrees
 with varus/valgus.
For TKA patients knee extensor         N/A....................  N/A....................  N/A.
 strength.
Single Item Health Literacy Screening  Patient-Reported Health  ``How comfortable are    -90 to 0 days prior to
 (SILS2) questionnaire.**               Literacy.                you filling out          THA/TKA procedure.
                                                                 medical forms by
                                                                 yourself?''
                                                                 (extremely, quite a
                                                                 bit, somewhat, a
                                                                 little bit, or not at
                                                                 all).\98\
----------------------------------------------------------------------------------------------------------------
* PRO: Patient-reported outcome survey instrument (see National Quality Forum. Patient reported outcomes (PROs)
  in Performance Measurement. January 10, 2013. Available at: https://www.qualityforum.org/docs/measure_evaluation_criteria.aspx.
** Risk variable data element.

    Final Decision: After consideration of the public comments we 
received, and in response to many recommendations from the public 
commenters, we are finalizing fewer THA/TKA voluntary PRO data 
submission variables summarized in Table 28 for purposes of 
``successful'' voluntary patient-reported outcome data collection. We 
based our decision to simplify the list of PROM instruments on the 
numerous public comments recommending simplification of list to be the 
least burdensome. While we appreciate the many suggestions for other 
PROM instruments and to use established joint replacement databases and 
PRO-based measures, we note that many of the suggestions included 
proprietary instruments, databases and measures. As discussed 
throughout our responses, when developing measures, we seek to balance 
requests from the public, the needs of the hospitals, the 
recommendations from the Technical Expert Panel convened by our measure 
development contractor regarding identification of the most efficacious 
and least burdensome PROM instruments for the hospitals, and finally 
financial cost. For these reasons, we believe that finalizing the PROM 
instruments listed in Table 28 is the most prudent way to address the 
concerns voiced by the majority of the public commenters to simplify 
the list of PROM instruments while also keeping financial burden in 
mind. Finally, we refer to section III.D.3.a.(9) of this final rule, 
Requirements for ``Successful'' Submission of THA/TKA Voluntary Data, 
for an explanation of the requirements that must be met in order to 
successfully submit THA/TKA PRO data on a voluntary basis and be 
eligible for a reconciliation payment.
---------------------------------------------------------------------------

    \94\ Wallace LS, Rogers ES, Roskos SE, Holiday DB, and Weiss BD. 
BRIEF REPORT: Screening Items to Identify Patients with Limited 
Health Literacy Skills. J Gen Intern Med. 2006;21(8):874-7.
    \95\ Ayers DC, Li W, Oatis C, Rosal MC, Franklin PD. Patient-
reported outcomes after total knee replacement vary on the basis of 
preoperative coexisting disease in the lumbar spine and other 
nonoperatively treated joints: The need for a musculoskeletal 
comorbidity index. J Bone Joint Surg Am. 2013 Oct 16;95(20):1833-7.
    \96\ Fairbank JC, Pynsent PB. The Oswestry Disability Index. 
Spine 2000 Nov 15;25(22):2940-52.
    \97\ Ayers DC, Li W, Oatis C, Rosal MC, Franklin PD. Patient-
reported outcomes after total knee replacement vary on the basis of 
preoperative coexisting disease in the lumbar spine and other 
nonoperatively treated joints: The need for a musculoskeletal 
comorbidity index. J Bone Joint Surg Am. 2013 Oct 16;95(20):1833-7. 
doi: 10.2106/JBJS.L.01007.
    \98\ Wallace LS, Rogers ES, Roskos SE, Holiday DB, and Weiss BD. 
BRIEF REPORT: Screening Items to Identify Patients with Limited 
Health Literacy Skills. J Gen Intern Med. 2006;21(8):874-7.
---------------------------------------------------------------------------

(3) Cohort
    In the proposed rule (80 FR 41286), we stated that the measure 
cohort(s) includes Medicare FFS beneficiaries, aged 65 years or older, 
admitted to non-federal acute care hospitals for elective primary THA 
or TKA. We also indicated that we would exclude from the cohort 
patients with fractures and mechanical complications or those 
undergoing revision procedures. We stated again that THA and TKA 
patient-reported outcomes will be assessed separately but may be 
combined into a single composite measure for reporting.
    Final Decision: We did not receive public comments on the cohort 
proposed for the THA/TKA voluntary data submission. We are finalizing 
the cohort as proposed.
(4) Inclusion and Exclusion Criteria
    In the proposed rule (80 FR 41286), we stated that the measure 
cohort inclusion criteria are all patients undergoing elective primary 
THA/TKA procedures. Exclusion criteria will consist of patients 
undergoing non-elective procedures (that is, patients with fractures 
resulting in THA/TKA), as it is unfeasible to routinely capture pre-
operative patient-reported assessments in these patients; patients with 
mechanical complications of prior hip and knee joint procedures and 
those undergoing revision THA/TKA will also be excluded, as their 
patient-reported outcomes may be influenced by prior care experiences 
and therefore may not adequately represent care quality of the hospital 
performing the revision procedure.
    Final Decision: We did not receive public comments on the inclusion 
or exclusion criteria for the THA/TKA voluntary data submission. We are 
finalizing the inclusion or exclusion criteria as proposed.
(5) Outcome
    In the proposed rule (80 FR 41286), we stated that the measure will 
assess change between pre- and post-operative

[[Page 73496]]

patient-reported outcomes for THA and TKA separately or as a composite 
measure for both procedures. We also stated that the measure will use 
one or more of the following patient-reported outcome instruments (or 
validated subscales or abbreviated versions of these instruments) to 
calculate the measure score: The Patient Reported Outcomes Measurement 
Information Systems (PROMIS)-Global or the Veterans Rand 12 Item Health 
Survey (VR-12), and the Hip dysfunction and Osteoarthritis Outcome 
Score/Knee injury and Osteoarthritis Outcome Score (HOOS/KOOS) 
instruments to measure pre- and postoperative improvement or both. 
These candidate instruments were selected by a Technical Expert Panel 
convened by our measure development contractor based upon their 
meaningfulness to patients and clinicians, performance characteristics 
such as reliability, responsiveness and validity, and their perceived 
burden to both patients and providers. The pre-operative data 
collection timeframe will be 90 to 0 days before surgery, and the post-
operative data collection timeframe will be 270 to 365 days following 
surgery. We also indicated that the approach to calculating the 
improvement or worsening of patient outcomes represented by the pre- 
and postoperative patient-reported survey results has not yet been 
determined, but will use one or more surveys to define the improvement 
or worsening of patient-reported outcomes to reliably identify 
differences between hospitals of varying performance.
    Final Decision: We did not receive public comments on the outcomes 
for the THA/TKA voluntary data submission. We are finalizing the 
outcomes for the THA/TKA voluntary data as proposed.
(6) Risk-Adjustment (If Applicable)
    In the proposed rule (80 FR 41286), we stated that the measure's 
risk model has yet to be developed. We shared that in order to develop 
the risk model, final risk variable selection for the risk model will 
involve empirical testing of candidate risk variables as well as 
consideration of the feasibility and reliability of each variable. The 
risk model will account for the hospital level response rate as well as 
measureable patient-level factors relevant to patient-reported outcomes 
following elective THA/TKA procedures. We indicated that to the extent 
feasible, the risk model methodology will adhere to established 
statistical recommendations.\99\
---------------------------------------------------------------------------

    \99\ Ash AS, Fiengerg SE, Louis TA, Normand ST, Stukel TA, Utts 
J. STATISTICAL ISSUES IN ASSESSING HOSPITAL PERFORMANCE, 
Commissioned by the Committee of Presidents of Statistical 
Societies. Original report submitted to CMS on November 28, 2011, 
Revised on January 27, 2012. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Statistical-Issues-in-Assessing-Hospital-Performance.pdf. Accessed on April 15, 2015.
---------------------------------------------------------------------------

    Final Decision: We did not receive public comments on the risk 
model for the THA/TKA voluntary data submission which has yet to be 
developed. Please see the following section III.D.3.a.(7) of this final 
rule for details on how we have reduced the number of voluntary risk 
variables for collection.
(7) Calculating the Risk-Standardized Rate
    In the proposed rule (80 FR 41286) we stated that the approach to 
reporting this measure(s) has yet to be developed. We outlined in the 
propose rule that the measure will assess change in patient-reported 
outcomes between the pre-operative (90 to 0 days prior to the elective 
primary THA/TKA procedure) and post-operative (270 to 365 days 
following the elective primary THA/TKA procedure) periods.
    We invited public comments on this proposal to seek voluntary 
participation in submitting data for a Hospital-Level Performance 
Measure of Patient-Reported Outcomes Following Elective Primary Total 
Hip and/or Total Knee Arthroplasty. We also welcomed comments on the 
appropriateness of this voluntary data collection for this model and 
the specific data collection requirements (see section III.D.3.a.(9) of 
the proposed rule) and data elements proposed.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters expressed concern about the amount of 
data that CMS requested hospitals to report. Some commenters expressed 
concern that administrative costs of data collection and submission 
will burden hospitals. Several commenters provided specific risk 
factors to consider including in the PRO data collection initiative and 
risk factors to evaluate during future PRO-based measure development. 
Specifically, a joint statement from multiple surgical specialty 
societies listed a prioritized list of 11 risk variables: Body Mass 
Index (BMI), Race/Ethnicity, Smoking Status, Age, Sex, Back Pain, Pain 
in Non-operative Lower Extremity Joint, Health Risk Status, Depression/
Mental Health Status, Chronic or Pre-operative Narcotic Use, and 
Socioeconomic Status. These variables were also highlighted by other 
commenters as being important, priority risk variables for 
consideration for a THA/TKA PRO-PM. Additional specific recommendations 
included the following potential risk factors: Literacy, marital 
status, live-in home support, health risk status identified by 
appropriate comorbid conditions in the Charlson morbidity index or 
Elixhauser morbidity measure as well as all inpatient and outpatient 
diagnosis codes for the year prior to the THA/TKA procedure, Charnley 
classification, retained hardware, total painful joint count, joint 
range of motion, abductor muscle strength (for THA patients), presence 
of Trendelenberg gait (for THA patients), history of congenital hip 
dysplasia or other congenital hip disease (for THA patients), presence 
of angular, translational, or rotational deformities of proximal femur 
(in degrees for THA patients), anatomic angle (femero-tibial angle) in 
degrees with varus/valgus (for TKA patients), knee extensor strength 
(for TKA patients), baseline pain, function and/or mental/emotional 
health as assessed by the HOOS/KOOS and VR-12/PROMIS Global, 
respectively.
    Response: We note that the submission of patient-reported outcomes 
data in the CJR model is voluntary and therefore does not impose a 
mandatory data collection burden on patients or providers. 
Nevertheless, it is our goal to minimize any additional data collection 
beyond the PROM surveys, if possible. We considered ease of collection 
while developing the list of proposed data for collection. 
Specifically, we considered the estimate of time and effort by the 
patient and provider to collect data beyond the additional burden of de 
novo collection of the proposed PROM surveys. If a variable creates a 
data collection burden to patients, surgeons, hospitals, or the 
healthcare system, the value of including the variable in the risk 
model should outweigh the burden.
    We appreciate commenter's recommendations regarding specific risk 
variables for collection. We note the commenter's input that several of 
these variables can be feasibly collected by self-report and will 
consider this information when finalizing the data elements for 
collection.
    We appreciate the public comments that the proposed list of current 
required risk variable data elements for the voluntary PRO data 
collection is too burdensome. Based upon multiple commenters supporting 
the risk

[[Page 73497]]

variables prioritized in a joint statement from multiple surgical 
specialty societies, we have used their list to narrow the risk 
variable data to be collected in the THA/TKA voluntary data. We believe 
that several of the specified variables can be adequately captured 
using administrative claims data (Smoking Status, Age, Sex, Health Risk 
Status, and Socioeconomic Status, using patient- or community-level 
factors identifiable by patient zip code), and others (Depression/
Mental Health Status) can be captured using the generic PROM 
instruments (VR-12/PROMIS Global). Therefore, we have removed risk 
variables not highlighted in the joint statement from multiple surgical 
specialty societies, as well as, risk variables captured by claims data 
or by the specified PROM instruments from the voluntary PRO data 
collection. This leaves eleven risk variables that will be collected, 
along with the PRO instruments as previously detailed, within -90 to 0 
days prior to the THA/TKA procedure for successful completion of the 
voluntary PRO data collection. These eleven risk variables are defined 
in Table 28.
    We will request that all PRO and risk variable data be submitted 
through a secure file transfer mechanism using a file template. 
Hospitals will be able to populate the file template according to their 
own data collection method and format. CMS will plan to augment the 
risk model development for the future PRO-based measure with 
administrative claims, enabling many of the proposed risk variables not 
selected for voluntary collection to be captured without additional 
data collection burden. The proposed risk variables for which 
administrative codes or claims data are available will be considered 
for possible inclusion in the future PRO-based measure risk model. 
These individual codes will be considered in addition to the publicly 
available CMS hierarchical condition categories (CCs) that group the 
more than 15,000 ICD-9 codes into clinically coherent CCs.\100\ 
Consistent with existing claims-based measures, candidate claims-based 
risk-adjustment variables will be obtained from inpatient, outpatient, 
and physician Medicare administrative claims data extending 12 months 
prior to, and including, the index THA/TKA admission.101 102
---------------------------------------------------------------------------

    \100\ Pope G, Kautter J, Ingber M, et al. 2011 Report: 
Evaluation of CMS-HCC Risk Adjustment Model. Centers for Medicare & 
Medicaid Services. 2011. Available at: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Risk-Adjustors.html.
    \101\ Suter LG, Zhang W, Parzynski CS, et al. 2015 Procedure-
Specific Complication Measure Updates and Specifications Report: 
Report prepared for the Centers for Medicare & Medicaid Services. 
2015. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \102\ Suter LG, Desai N, Zhang W, et al. 2015 Procedure-Specific 
Readmission Measures Updates and Specifications Report: Report 
prepared for the Centers for Medicare & Medicaid Services. 2015. 
Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    Final Decision: After consideration of the public comments we 
received, we are finalizing the Hospital-Level Performance Measure of 
Patient-Reported Outcomes following Elective Primary Total Hip and/or 
Knee Arthroplasty cohort, inclusion and exclusion criteria as proposed. 
In response to our request for comment on the data elements to be 
collected, we are finalizing the shortened list of PROM instrument 
elements, and eleven risk variables listed in Table 28.
(8) Performance Period
    In Table 16 of the proposed rule (80 FR 41286 through 41288), we 
proposed defining performance periods for each year of the model (see 
Table 29 of this final rule). A performance period for the voluntary 
THA/TKA data submission, are those timeframes in which an anchor 
hospital admission occurs for eligible THA/TKA voluntary data 
submission procedure. For the first year of the CJR model, hospitals 
voluntarily submitting data will only be requested to submit data for a 
3-month period. The 3-month period for THA/TKA voluntary data reporting 
was identified due to data processing and coordination of other 
proposed timelines in this model. We stated that data submitted for the 
first year would be for cases that fulfill the measure specifications 
described in section III.D.3.a. of the proposed rule, and would be 
restricted to the pre-operative data elements on cases performed 
between April 1, 2016 and June 30, 2016. The proposed timing allows 
matching of the patient-reported data with relevant administrative 
claims-based data in order to accurately calculate the percent of 
eligible elective primary THA/TKA patients for which THA/TKA voluntary 
data was successfully submitted. The April 1st date acknowledges the 
measure requirement of the 90-day window prior to surgery during which 
hospitals can collect pre-operative data. The June 30th end date was 
selected because it correlates with the THA/TKA Readmissions measure 
(NQF #1551) performance period end date currently implemented for the 
HIQR program and the HRRP. Both of these dates provide the greatest 
feasibility for data collection.
    We went on to explain how the THA/TKA voluntary data reporting 
periods would change based on the year of the model and whether the 
data submitted was related to pre- or post-operative THA/TKA 
assessments. Specifically, we stated that for year 2, THA/TKA voluntary 
data reporting would be 3 months of post-operative data for cases 
performed between April 1, 2016 and June 30, 2016, and 12 months of 
pre-operative data for cases performed between July 1, 2016 and June 
30, 2017. We completed our explanation of the duration of performance 
periods by indicating for year 3 and subsequent years of the model, the 
performance periods for submission of voluntary data will consist of 
12-month time periods. We finally noted in our proposal that the 
proposed performance period enables hospitals to receive incentives for 
data collection starting in performance year-one, even though complete 
pre-operative and post-operative data collection requires a minimum 9- 
through 12-month time period. This 9- through 12-month time period, 
between the procedure and post-operative data collection, was defined 
through clinician and stakeholder input and provides for both 
sufficient elapsed time for maximum clinical benefit of THA/TKA 
procedures on patient-reported outcomes and accommodates common 
clinical care patterns in which THA/TKA patients return to their 
surgeon one year after surgery. We invited public comments on our 
proposal of defining performance year-one episodes for a participating 
hospital as an anchor hospital admission for an eligible THA/TKA 
procedure between April 1, 2016 and June 30, 2016, with subsequent year 
performance time periods each being 12-month periods and starting every 
July 1st.

[[Page 73498]]



Table 29--Proposed Potential Performance Periods for Per- and Post-Operative THA/TKA Voluntary Data Submission *
----------------------------------------------------------------------------------------------------------------
                                                                          Patient population   Requirements for
                                                        Duration of the    eligible for THA/  successful THA/TKA
           Model year             Performance period  performance period  TKA voluntary data    voluntary data
                                                                              submission         submission **
----------------------------------------------------------------------------------------------------------------
2016............................  April 1, 2016       3 months **.......  All patients        Submit
                                   through June 30,                        undergoing          PRE[dash]operativ
                                   2016*.                                  elective primary    e data on primary
                                                                           THA/TKA             elective THA/TKA
                                                                           procedures          procedures for
                                                                           performed between   >=80% of
                                                                           April 1, 2016 and   procedures
                                                                           June 30, 2016.      performed between
                                                                                               April 1, 2016 and
                                                                                               June 30, 2016.
2017............................  April 1, 2016       15 months.........  All patients        Submit
                                   through June 30,                        undergoing          POST[dash]operati
                                   2016.                                   elective primary    ve data on
                                                                           THA/TKA             primary elective
                                                                           procedures          THA/TKA
                                                                           performed between   procedures for
                                                                           April 1, 2016 and   >=80% of
                                                                           June 30, 2016.      procedures
                                                                                               performed between
                                                                                               April 1, 2016 and
                                                                                               June 30, 2016.
2017............................  July 1, 2016        All patients        Submit
                                   through June 30,    undergoing          PRE[dash]operativ
                                   2017.               elective primary    e data on primary
                                                       THA/TKA             elective THA/TKA
                                                       procedures          procedures for
                                                       performed between   >=80% of
                                                       July 1, 2016 and    procedures
                                                       June 30, 2017       performed between
                                                                           July 1, 2016 and
                                                                           June 30, 2017.
2018............................  July 1, 2016        24 months.........  All patients        Submit
                                   through June 30,                        undergoing          POST[dash]operati
                                   2017.                                   elective primary    ve data on
                                                                           THA/TKA             primary elective
                                                                           procedures          THA/TKA
                                                                           performed between   procedures for
                                                                           July 1, 2016 and    >=80% of
                                                                           June 30, 2017.      procedures
                                                                                               performed between
                                                                                               July 1, 2016 and
                                                                                               June 30, 2017.
2018............................  July 1, 2017        All patients        Submit
                                   through June 30,    undergoing          PRE[dash]operativ
                                   2018.               elective primary    e data on primary
                                                       THA/TKA             elective THA/TKA
                                                       procedures          procedures for
                                                       performed between   >=80% of
                                                       July 1, 2017 and    procedures
                                                       June 30, 2018       performed between
                                                                           July 1, 2017 and
                                                                           June 30, 2018.
2019............................  July 1, 2017        24 months.........  All patients        Submit
                                   through June 30,                        undergoing          POST[dash]operati
                                   2018.                                   elective primary    ve data on
                                                                           THA/TKA             primary elective
                                                                           procedures          THA/TKA
                                                                           performed between   procedures for
                                                                           July 1, 2017 and    >=80% of
                                                                           June 30, 2018.      procedures
                                                                                               performed between
                                                                                               July 1, 2017 and
                                                                                               June 30, 2018
2019............................  July 1, 2018        All patients        Submit
                                   through June 30,    undergoing          PRE[dash]operativ
                                   2019.               elective primary    e data on primary
                                                       THA/TKA             elective THA/TKA
                                                       procedures          procedures for
                                                       performed between   >=80% of
                                                       July 1, 2018 and    procedures
                                                       June 30, 2019       performed between
                                                                           July 1, 2018 and
                                                                           June 30, 2019..
2020............................  July 1, 2018        24 months.........  All patients        Submit
                                   through June 30,                        undergoing          POST[dash]operati
                                   2019.                                   elective primary    ve data on
                                                                           THA/TKA             primary elective
                                                                           procedures          THA/TKA
                                                                           performed between   procedures for
                                                                           July 1, 2018 and    >=80% of
                                                                           June 30, 2019.      procedures
                                                                                               performed between
                                                                                               July 1, 2018 and
                                                                                               June 30, 2019.
2020............................  July 1, 2019        All patients        Submit
                                   through June 30,    undergoing          PRE[dash]operativ
                                   2020.               elective primary    e data on primary
                                                       THA/TKA             elective THA/TKA
                                                       procedures          procedures for
                                                       performed between   >=80% of
                                                       July 1, 2019 and    procedures
                                                       June 30, 2020       performed between
                                                                           July 1, 2019 and
                                                                           June 30, 2020.
----------------------------------------------------------------------------------------------------------------
* Due to the new start date of the CJR model of April 1, 2016 (III.C.2.a.) the finalized performance period for
  the first year of the model will be July 1, 2016 through August 31, 2016 with the duration of performance
  being 2 months. See Table 30 in section III.D.3.a.(9) of this final rule response to comments.
** Requirements for determining successful submission of THA/TKA voluntary data are located in section
  III.D.3.a.(9). of the proposed rule.

    We did not receive comments on the proposed THA/TKA voluntary data 
submission Performance Period in Table 16 of the proposed rule or for 
Table 29 of this final rule, and will be finalizing the THA/TKA 
voluntary PRO and limited risk variable data submission Performance 
Period as proposed with the exception of the performance periods for 
the first year of the model (that is, 2016). We note in section 
III.C.2.a. of this final rule that the date of implementation will be 
delayed until April 1, 2016. Previously, we had proposed for 2016 the 
data collection periods of April 1, 2016 and June 30, 2016. Due to the 
delay in the implementation date from January 1, 2016 to April 1, 2016, 
we similarly implement a three month delay for the THA/TKA voluntary 
PRO and risk variable data submission Performance Period, with the 
result that we will collect only 2 months of data in 2016 from July 1, 
2016 through August 31, 2016. The finalized THA/TKA voluntary PRO and 
limited risk variable data submission Performance Periods are provided 
in Table 30 of this final rule.
(9) Requirements for ``Successful'' Submission of THA/TKA Voluntary 
Data
    In proposed rule (80 FR 41286), we stated that in order for CMS to 
assess if participant hospitals are eligible for reconciliation payment 
after receiving the THA/TKA voluntary data, requirements to determine 
if the submitted data would inform measure development had been 
identified (80 FR 41288 through 41289). We stated our belief that the 
following criteria should be used to determine if a participant 
hospital has successfully submitted

[[Page 73499]]

THA/TKA voluntary data. We noted that successful THA/TKA voluntary data 
submission, as stated briefly in section III.C.5.b.(5)(b) (80 FR 41240) 
and section III.D.3.a.(9) (80 FR 41288) of the proposed rule, required 
completion of all of the following:
     Submission of the data elements listed in section 
III.D.3.a.(2) of the proposed rule.
     Data elements listed in section III.D.3.a.(2) of the 
proposed rule must be submitted on at least 80 percent of their 
eligible elective primary THA/TKA patients (as described in section 
III.D.3.a.(3) of the proposed rule).
     THA/TKA voluntary data submission must occur within 60 
days of the end of the most recent data collection period.
    We proposed that in order to fulfill THA/TKA voluntary data 
collection criteria for performance year-one, only pre-operative data 
collection and submission on at least 80 percent of eligible elective 
primary THA/TKA patients would be required. We further explained that 
to successfully submit THA/TKA voluntary data for performance years 2 
through 5, hospitals would have to submit both pre-operative and post-
operative patient reported outcome data on at least 80 percent of 
eligible elective primary THA/TKA patients. A potential example of the 
performance periods for which we would like to have THA/TKA voluntary 
data submitted by participant hospitals were summarized in section 
III.D.3.a. of the proposed rule.
    Table 16 of the proposed rule (80 FR 41287 through 41288) 
summarized the performance periods for pre-operative and post-operative 
THA/TKA voluntary data. We also proposed that hospitals volunteering to 
submit THA/TKA data would be required to submit pre-operative data on 
all eligible patients and post-operative data elements only on those 
patients at least 366 days out from surgery. Therefore, hospitals would 
not be expected to collect and submit post-operative THA/TKA voluntary 
data on patients who are fewer than 366 days from the date of surgery.
    We also stated that a THA/TKA eligible patient is described in 
section III.D.3.a.(3) of the proposed rule, and noted that this 
description is important since these patients were those for which we 
proposed to seek submission of voluntary data. We also selected the 
requirement of submitting 80 percent of eligible elective primary THA/
TKA patients' data because this volume of cases would result in a high 
probability that we would have a national sample of THA/TKA patient 
data representative of each hospital's patient case mix. We stated that 
having 80 percent of the eligible elective primary THA/TKA patients 
would enable an accurate and reliable assessment of patient-reported 
outcomes for use in measure development. We noted that data used for 
outcome measure development must adequately represent the population 
that is anticipated to be measured, and in this case that population 
would be those experiencing elective primary THA/TKA inpatient surgical 
procedures. Data that more accurately reflects the patient outcomes and 
case mix of the population to be measured would allow, during measure 
development, a more scientifically accurate and reliable measure. We 
stated our belief that having 80 percent of eligible elective primary 
THA/TKA recipient data would result in a more reliable measure that is 
better able to assess hospital performance than a measure created from 
a less representative patient sample. Furthermore, we considered 
setting the requirement at 100 percent of the eligible elective primary 
THA/TKA patients, but concluded that a requirement of 100 percent data 
collection may not be feasible for all hospitals or may be excessively 
burdensome to achieve. Therefore we proposed to set the requirement at 
80 percent of the eligible elective primary THA/TKA patients. We 
believed acquisition of 80 percent of the eligible elective primary 
THA/TKA patients would provide representative data for measure 
development while decreasing patient, provider and hospital burden. We 
sought public comment of these requirements to determine successful 
voluntary submission of THA/TKA data. We also sought public comment 
specifically on the requirement for data on 80 percent of the eligible 
elective primary THA/TKA patients.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters expressed concern over the proposed 
successful criterion of 80 percent; some noted they had successfully 
achieved PROM response rates over 80 percent but still expressed 
concern that hospitals would be able to meet this criterion. Several 
commenters recommended that CMS wait to establish the successful 
criterion until CMS has further experience with the measure and 
sufficient data to determine an appropriate number. Several commenters 
recommended CMS lower the successful criterion from 80 percent in Year 
1 (A commenter specifically noted 50 percent), and then phase-in higher 
successful criterion over time. A commenter recommended lowering the 
successful criterion because the proposed number would add a 
substantial added cost for active surveillance to achieve 80 percent. A 
commenter recommended a 40 percent successful criterion because an 80 
percent successful criterion--(1) Might prohibit hospitals from 
participating in the voluntary data reporting effort; and (2) might 
prohibit otherwise compliant hospitals from receiving additional 
reconciliation payments through discounted target rates. Another 
commenter recommended that the 2 percent discount should not be lowered 
to pay for the voluntary data submission, but instead the 80 percent 
successful criterion should be lowered. A few commenters recommended 
CMS pay for every case that has data submitted. Some commenters 
recommended that CMS increase the successful criterion. Other 
commenters urged CMS to ensure that the collected data are not biased 
by high-performing providers or selective reporting of cases that have 
positive outcomes.
    Response: We thank the commenters for their input on the proposed 
80 percent criterion that defines successful voluntary data submission 
of voluntary patient-reported outcome data (80 FR 41288). We refer 
reviewers to section III.C.5. of this final rule for the finalized 
policies on how hospital performance on finalized measures and 
successful submission of THA/TKA voluntary data will be assessed for 
purposes of reconciliation payment eligibility.
    We appreciate the commenter's suggestion to increase the successful 
criterion based upon the concern that lowering the successful criterion 
(that is, the patient-reported outcome instrument response and risk 
variable submission rates required for successful participation) may 
produce biased data that are not generalizable to all patients 
undergoing elective primary THA/TKA procedures at a given hospital. To 
assess the amount of data bias, the collected and submitted patient-
reported outcome and risk variable data will be matched to 
administrative claims data, which will allow CMS to determine the 
proportion of a hospital's patients for which the hospitals collected 
and submitted patient-reported outcome and risk variable data. In 
addition, it will allow CMS to determine how representative this 
sampling of patients is of all of the hospital's eligible THA/TKA 
patients, by comparing the number and type of comorbid conditions, 
sociodemographic factors, and post-discharge outcome (for example, 
complication and readmission) rates. This information will be factored 
into any measure development work that

[[Page 73500]]

utilizes the voluntary patient-reported outcome data.
    While there are a few commenters supporting the feasibility of pre- 
and post-operative patient-reported outcome instrument response rates 
exceeding 80 percent for elective THA/TKA procedures, we understand 
that many hospitals may not be able to meet this criterion as proposed 
in the first year of the CJR model. Therefore, based on public comments 
we are finalizing a lower criterion for the ``successful'' voluntary 
patient-reported outcome and limited risk variable data collection for 
year 1, which will entail each participating hospital submitting the 
required pre- and post-operative data elements (see Table 28 for the 
final list of voluntary patient-reported outcomes and limited risk 
variable data elements) on either of the following
     50 percent of eligible procedures during the data 
collection period; or
     A total of 50 eligible procedures during the data 
collection period.


This will allow hospitals the opportunity to actively engage in data 
collection but, consistent with the experiences reported by several 
commenters, acknowledges the realities that such systematic data 
collection efforts require time to implement. It also responds to 
commenters' suggestion for CMMI to pursue a ``phase-in'' approach to 
collecting PRO data. As previously noted, CMS will actively evaluate 
the submitted data for evidence of reporting bias.
    Eligible patients (henceforth for purposes of this discussion, 
patients will be described as procedures) are described in section 
III.D.3.a. of the proposed rule (80 FR 41286). The post-operative data 
collected in year 2 will correspond to the pre-operative data collected 
in year 1 and, similarly, for years 3 through 5. That is, participant 
hospitals will collect and submit post-operative data for the same 
cases for which the hospital submitted pre-operative data in the 
preceding year.
    Based upon commenters' input to reduce the successful criterion, 
including a recommendation specifically to reduce the successful 
criterion to 50 percent, we believe a '50 percent or 50 eligible 
procedures' successful criterion in year 1 provides hospitals with 
flexibility to minimize the data collection burden; using a 50 percent 
or 50 eligible procedures successful criterion in year 1 will also 
allow participant hospitals to submit data regardless of their case 
volume. A 50 percent or 50 eligible procedures successful criterion in 
year 1 also allows participant hospitals an opportunity for financial 
reward for this voluntary initiative. We note having the 50 percent or 
50 eligible procedures successful criterion in year 1 in conjunction 
with a simplified list of PROM instruments and list of risk variables 
(Table 28) markedly decreases the burden of collecting and submitting 
the THA/TKA voluntary PRO and limited risk variable data. We believe 
after the first year of the model, hospitals will become more adept at 
collecting this data, and the public comments indicate that much higher 
patient-reported outcome data collection rates are feasible. For 
example, a commenter shared that its institution reported a reliable 85 
percent response rate for its PROM data collection. Therefore, we 
believe it is reasonable to gradually increase the expected response 
rates to successfully fulfill the THA/TKA voluntary PRO and limited 
risk variable data collection in years 2 through 5 of the model, as 
listed in Table 30. We note that the phase-in approach was suggested by 
a few public commenters. We agree that phasing in of higher percentage 
eligible procedures with each year is a more realistic expectation for 
participating hospitals to meet and a more encouraging manner to 
enhance the THA/TKA voluntary PRO and limited risk variable data 
submission.
    We anticipate completion of measure development for the future 
hospital-level THA/TKA PRO-PM during or before year 3 of the model. The 
measure specifications will be finalized in accordance with our 
standard measure development process set forth in NQF guidance for 
outcome measures,\103\ CMS Measures Management System (MMS) 
guidance,\104\ and the guidance articulated in the American Heart 
Association Statement ``Standards for Statistical models Used for 
Public reporting of Health Outcomes.'' \105\ Given the support for the 
PRO data collection and support for mandatory inclusion of a PRO-PM in 
this model from several commenters during public comment, we anticipate 
integrating this new measure as a mandatory measure in the CJR model in 
years 4 and 5 through future rulemaking. We anticipate that the PRO-PM 
would be considered similarly in the CJR model to the THA/TKA 
Complications measure (NQF #1550), with better performing hospitals 
receiving higher quality scores and therefore higher reconciliation 
payments. The current quality measure weighting system would be 
reconfigured to give this PRO-PM equal weighting with the other quality 
measures included in years 4 and 5 of the model, again through future 
rulemaking. Hospitals participating in the voluntary PRO data 
collection in years 1 through 3 would be better prepared for the 
addition of the hospital-level THA/TKA PRO-PM to the model in years 4 
and 5. The anticipated use of this PRO-PM in this model is consistent 
with stakeholder feedback during public comment strongly encouraging 
mandatory integration of PRO-based measures into the model. We will 
also consider adding or removing patient-reported outcome and/or risk 
variable data elements as indicated by clinical practice and empirical 
analyses supporting or refuting their utility in performance 
measurement. For further discussion on the use of PRO-PM measure, see 
section III.C.5. of this proposed rule.
---------------------------------------------------------------------------

    \103\ National Quality Forum. Measure Evaluation Criteria and 
Guidance. April 2015. Available at: https://www.qualityforum.org/Measuring_Performance/Submitting_Standards.aspx. Accessed on 
September 22, 2015.
    \104\ Measures Management System Overview.2015; https://www.cms.gov/Medicare/Quality-InitiativesPatient-AssessmentInstruments/MMS/?redirect=/MMS/19_MeasuresManagementSystemBlueprint.asp. Accessed September 8, 
2015.
    \105\ Krumholz H, Brindis R, Brush J, et al. Standards for 
Statistical Models Used for Public Reporting of Health Outcomes: An 
American Heart Association Scientific Statement from the Quality of 
Care and Outcomes Research Interdisciplinary Writing Group: 
Cosponsored by the Council on Epidemiology and Prevention and the 
Stroke Council. Endorsed by the American College of Cardiology 
Foundation. Circulation. Jan 24 2006;113(3):456-462.

[[Page 73501]]



      Table 30--Finalized Performance Periods for Pre- and Post-Operative THA/TKA Voluntary Data Submission
----------------------------------------------------------------------------------------------------------------
                                                                      Patient population      Requirements for
                                  Performance     Duration of the    eligible for THA/TKA    successful THA/TKA
          Model year                period          performance         voluntary data         voluntary data
                                                       period             submission             submission
----------------------------------------------------------------------------------------------------------------
2016.........................  July 1, 2016      2 months.........  All patients           Submit
                                through August                       undergoing elective    PRE[dash]operative
                                31, 2016.                            primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between July 1, 2016   procedures for >=50%
                                                                     and August 31, 2016.   or >=50 eligible
                                                                                            procedures performed
                                                                                            between July 1, 2016
                                                                                            and August 31, 2016.
2017.........................  July 1, 2016      13 months........  All patients           Submit
                                through August                       undergoing elective    POST[dash]operative
                                31, 2016.                            primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between July 1, 2016   procedures for >=50%
                                                                     through August 31,     or >=50 eligible
                                                                     2016.                  procedures performed
                                                                                            between July 1, 2016
                                                                                            through August 31,
                                                                                            2016.
2017.........................  September 1,      .................  All patients           Submit
                                2016 through                         undergoing elective    PRE[dash]operative
                                June 30, 2017.                       primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between September 1,   procedures for >=60%
                                                                     2016 through June      or >=75 procedures
                                                                     30, 2017.              performed between
                                                                                            September 1, 2016
                                                                                            through June 30,
                                                                                            2017.
2018.........................  September 1,      22 months........  All patients           Submit
                                2016 through                         undergoing elective    POST[dash]operative
                                June 30, 2017.                       primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between September 1,   procedures for >=60%
                                                                     2016 and June 30,      or >=75 procedures
                                                                     2017.                  performed between
                                                                                            September 1, 2016
                                                                                            and June 30, 2017.
2018.........................  July 1, 2017                         All patients           Submit
                                through June                         undergoing elective    PRE[dash]operative
                                30, 2018.                            primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between July 1, 2017   procedures for >=70%
                                                                     and June 30, 2018.     or >=100 procedures
                                                                                            performed between
                                                                                            July 1, 2017 and
                                                                                            June 30, 2018.
2019.........................  July 1, 2017      24 months........  All patients           Submit
                                through June                         undergoing elective    POST[dash]operative
                                30, 2018.                            primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between July 1, 2017   procedures for >=70%
                                                                     and June 30, 2018.     or >=100 procedures
                                                                                            performed between
                                                                                            July 1, 2017 and
                                                                                            June 30, 2018.
2019.........................  July 1, 2018      .................  All patients           Submit
                                through June                         undergoing elective    PRE[dash]operative
                                30, 2019.                            primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between July 1, 2018   procedures for >=80%
                                                                     and June 30, 2019.     or >=200 procedures
                                                                                            performed between
                                                                                            July 1, 2018 and
                                                                                            June 30, 2019.
2020.........................  July 1, 2018      24 months........  All patients           Submit
                                through June                         undergoing elective    POST[dash]operative
                                30, 2019.                            primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between July 1, 2018   procedures for >=80%
                                                                     and June 30, 2019.     or >=200 procedures
                                                                                            performed between
                                                                                            July 1, 2018 and
                                                                                            June 30, 2019.
2020.........................  July 1, 2019                         All patients           Submit
                                through June                         undergoing elective    PRE[dash]operative
                                30, 2020.                            primary THA/TKA        data on primary
                                                                     procedures performed   elective THA/TKA
                                                                     between July 1, 2019   procedures for >=80%
                                                                     and June 30, 2020.     or >=200 procedures
                                                                                            performed between
                                                                                            July 1, 2019 and
                                                                                            June 30, 2020.
----------------------------------------------------------------------------------------------------------------

    Comment: A commenter recommended the use of ``Advanced Procurement 
Technology'' for submission of PRO data and to alleviate burden of data 
submission by physicians and patients. Specifically, the commenter 
recommended the use of a cloud-based central server to reduce 
administrative costs.
    Response: We note that the future PRO-PM measure will potentially 
employ multiple platforms for data collection, including electronic 
health records (EHRs), as well as other data collection mechanisms, but 
will not be limited to EHRs. We aim to construct a secure data 
collection system that reduces the amount of data submission burden on 
hospitals. We encourage hospitals to collect and transfer the PRO data 
in the most economically efficient mode for individual hospitals.
    Comment: Several commenters suggested CMS consider a pay-for-
reporting approach, which would allow hospitals that successfully 
submit data to be eligible for savings.
    Response: We have been careful to identify a way in which to reward 
hospitals that participated in this initiative, as we understand that 
this could be a potential added burden, but the composite quality score 
methodology initiative also becomes a way for hospitals to learn about 
their patients' outcomes post-primary elective THA/TKA procedures. We 
believe that section III.C.5.b. in this final rule provides a full 
discussion of voluntary PRO data collection from a payment perspective.
    Final Decision: After consideration of the public comments we 
received, we will not be finalizing the proposed successful criterion 
on 80 percent of eligible procedures. In response to public comments we 
are finalizing a modification to the requirements for what will be 
considered as ``successful'' submission of THA/TKA voluntary PRO data, 
as noted in Table 30, in conjunction with a simplified list of PROM 
instruments and list of risk variables (Table 28). We are also 
finalizing the proposed requirement that the required THA/TKA voluntary 
PRO data and the limited list of risk variables be submitted to CMS 
within 60 days of the end of the most recent performance period. We 
believe requirements for the THA/TKA voluntary PRO data and limited 
list of risk variables that we are finalizing will markedly decrease 
the burden of collecting and submitting the THA/TKA voluntary PRO data 
by participant hospitals. We also believe that reducing the data 
collection and submission burden will enhance the opportunity for 
participant hospitals to improve their composite quality score that is 
being finalized for the CJR model.
    We are codifying requirements for successful data submission of 
THA/TKA patient reported outcomes and limited risk variable data in 
Sec.  510.400(b).

[[Page 73502]]

b. Measure That Captures Shared Decision-Making Related to Elective 
Primary Total Hip and/or Total Knee Arthroplasty
    In the proposed rule (80 FR 41289), we shared our belief that, in 
addition to the patient-reported functional status outcomes, shared-
decision making is an important aspect of care around elective patient-
reported outcome procedures such as primary total hip and total knee 
arthroplasty. We also noted that lower episode expenditures achieved 
through improved patient-reported outcome efficiency may yield the 
unintended consequence of a compensatory increase in the number of 
episodes initiated. We stated that use of shared decision-making prior 
to episode initiation can serve as an important tool to ensure 
appropriate care. Though there are no developed measures, we sought 
feedback on the opportunity to capture quality data related to shared 
decision-making between patients and providers. Examples of such a 
measure could include concepts such as a trial of conservative medical 
therapy prior to elective procedures or broader shared decision-making 
measures. We invited public comment on whether such a measure concept 
would be appropriate for the CJR model. If we develop a measure that 
captures shared decision-making related to elective primary total hip 
and total knee arthroplasty or both, we would propose through 
rulemaking or other means to add that measure to the CJR model.
    The following is a summary of the comments received and our 
responses.
    Comment: Many commenters supported the development and use of 
measures related to shared decision-making. Most commenters agreed that 
shared decision-making is critical for the patient-reported outcome 
when patients are deciding whether or not to undergo elective TKA/THA 
procedures, and that CMS should promote shared decision-making as part 
of a way to optimize patient-reported outcomes. A commenter recommended 
that a shared decision-making measure should be documented within the 
referral visit by the primary care physician. Another commenter 
recommended that a shared decision making measure have both a pre- and 
post-intervention component. A commenter recommended that shared 
decision-making be required as part of the model. Multiple commenters 
suggested additional measures that should be paired with shared 
decision-making measures, including a functional outcome measure, a 
measure for risk adjustment, a measure for care planning, quality 
measures that assess clinical excellence, and the pairing of the 
measure with patient-reported outcome criteria to evaluate patterns of 
care. Many commenters recommended that shared decision-making measures 
require or document the use of certified or patient-reported outcome 
decision aids, though no specific decision aids were suggested. 
Finally, a number of commenters recommended that CMS use this 
opportunity to further the research agenda related to shared decision-
making and its measurement.
    Response: We appreciate all of the responses on how we might 
address shared-decision making from the quality measure perspective. 
For a detailed discussion of shared decision-making as it relates to 
beneficiary patient-reported outcomes and experience, please refer to 
beneficiary patient-reported outcome sections in section III.D.3.a. of 
this final rule. We agree that shared decision-making is important for 
patient-reported outcomes, as well as meaningfully measuring shared 
decision-making. Based on the comments we received, we will consider 
the future development of measures related to shared decision-making. 
Should we decide to implement a shared decision-making measure in the 
future, we will do so through notice-and-comment rulemaking.
c. Future Measures Around Care Planning
    In the proposed rule (80 FR 41289), we stated that person-centered 
shared care plan is an important tool that can help providers across 
settings collaborate around a customized plan that reflects a patient's 
goals and offers providers critical information about all of the 
treatment a beneficiary has received. We shared that health IT 
solutions are increasingly supporting the exchange of care plan 
information across settings so that providers and individuals have 
access to necessary information whenever and wherever it is needed. We 
also indicated that in the 2015 Edition of certification criteria for 
health information technology (80 FR 16842), the Office of the National 
Coordinator for Health Information Technology (ONC) proposed the 
adoption of a new criterion to ensure health IT can capture, display, 
and exchange a robust care plan document in accordance with new 
standards released in the Consolidated Clinical Document Architecture 
Release 2.1; this proposal has now been finalized (80 FR 62648). While 
further measure development is needed, we sought comment on the 
appropriateness of a future quality measure which would assess the use 
of shared care plans in the care of beneficiaries participating in the 
CJR model.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters supported the future inclusion of a 
measure focused on shared care planning in the model, pending further 
measure development. A commenter noted that a shared care plan measure 
could help to ensure that hospitals are taking steps to assist patients 
in understanding the potential tradeoffs associated with surgical 
interventions. Another commenter focused specifically on the need for 
advance care planning within a bundled payment model, noting that CMS 
should seek to require the hospital initiating the episode to conduct 
advance care planning discussions and offer beneficiaries the 
opportunity to complete an advance directive. Commenters encouraged CMS 
to incentivize providers to voluntarily submit data that would support 
future measure development in this area.
    Response: While we did not propose to include a measure of care 
planning activities, we will consider these comments as we explore any 
future action in the CJR model. Should we decide to implement a measure 
of care planning activities in the future, we will do so through 
notice-and-comment rulemaking.
d. Future Measures for Use of Health IT and Health Information Exchange
    In the proposed rule (80 FR 41289), we shared our belief that the 
use of health IT tools is a critical component of effective 
coordination across settings of care. Under bundled payment models, in 
which providers across the continuum of care share accountability for 
the clinical management and total cost of an episode of care, the 
capacity to share information electronically across disparate provider 
systems is essential for delivering efficient, safe, high quality care. 
As discussed in the August 2013 Statement ``Principles and Strategies 
for Accelerating Health Information Exchange'' (available at https://www.healthit.gov/sites/default/files/acceleratinghieprinciples_strategy.pdf), we believe that all 
individuals, their families, their healthcare and social service 
providers, and payers should have consistent and timely access to 
health information in a standardized format that can be securely 
exchanged between the patient, providers, and others involved in the 
individual's care. ONC has released a document entitled ``Connecting 
Health and Care for the Nation: A Shared Nationwide Interoperability 
Roadmap'' (available at https://www.healthit.gov/

[[Page 73503]]

sites/default/files/hie-interoperability/nationwide-interoperability-
roadmap-final-version-1.0.pdf), which describes barriers to 
interoperability across the current health IT landscape, the desired 
future state that will be necessary according to the industry to enable 
a learning health system, and a suggested path for moving forward. ONC 
will focus on actions that will enable a majority of individuals and 
providers across the care continuum to send, receive, find and use a 
common set of electronic clinical information at the nationwide level 
by the end of 2017. Under section 1833(z)(3)(D)(i)(I) of the Act, as 
amended by section 101(e) of the MACRA, providers participating in 
qualifying APMs under Medicare will be required to use certified EHR 
technology beginning in 2019. As this date approaches, we believe it 
will be important for providers working in these models to demonstrate 
adoption of health IT.
    We shared our belief that use of certified health IT tools and the 
interoperable exchange of health information is a critical capability 
for model participants to be able to deliver the high-quality care and 
effective coordination across settings that will be required to 
demonstrate success under the model. Moreover, we believe that it will 
be important to incentivize adoption and use of these enabling 
technologies among model participants including PAC providers, by 
linking these activities to participant eligibility to receive 
reconciliation payments.
    While we did not propose to add a measure for certified health IT 
use for the program's initial performance year, we sought comment on 
how we might incorporate such a measure beginning in the 2017 
performance year. We invited stakeholder comment on the following 
questions:
     Is successful attestation as part of the EHR Incentive 
Program for Medicare hospitals in the applicable reporting year the 
most appropriate quality measure for assessing hospital performance on 
the use of health IT and interoperable health information in the model?
     Should the model include a performance measure that would 
be specific to the ability of hospitals to conduct electronic care 
coordination using certified health IT, for instance, the measure of 
transitions of care which hospitals currently report on as part of the 
EHR Incentive Program for Medicare Hospitals?
     What other measures could be used to assess hospital 
performance on the use of health IT and interoperable health 
information while minimizing program and provider collection and 
reporting burden?
    We sought public comments on how we might incorporate an electronic 
measure beginning in the 2017 performance year, and public comments on 
the questions posed previously in this rule.
    We also sought public comment on the appropriateness of quality 
measures for PAC patients, physicians and facilities that care for THA/
TKA surgical procedure patients.
    The following is a summary of the comments received and our 
responses.
    Comment: While commenters noted the importance of health IT systems 
and health information exchange to support the care coordination 
required to succeed under a bundled payment approach, a number of 
commenters expressed concerns about introducing a measure of health IT 
utilization or health IT requirements within the model. A commenter 
suggested that the model should focus on outcomes rather than 
introducing measures of the care delivery process, such as the use of 
health IT. Another commenter believed that health IT requirements would 
restrict the flexibility of model participants to explore different 
modes of care delivery needed to succeed within the model. Another 
commenter noted that a measure of health IT use would not be 
appropriate because hospitals already participate in the EHR Incentive 
Program, and a similar measure under the program would create a 
duplicative penalty.
    Several commenters noted that hospitals have substantially 
increased their adoption of health IT systems in recent years, and that 
participants will need to rely on electronic tools, including EHRs, 
health information exchange services, and other systems, in order to 
deliver effective care for beneficiaries under the model. Commenters 
also noted that many hospitals are seeking to address challenges around 
electronically exchanging patient information with PAC providers. As 
these PAC providers were not eligible for the EHR Incentive Programs, 
many have not yet established health IT systems. However, bundling 
programs such as the CJR model are likely to further incentivize 
hospitals to develop strategies to share information with these 
providers to support care coordination across an episode of care.
    Response: We appreciate the insights and concerns expressed around 
utilizing a measure of health IT tied to participation in the EHR 
Incentive Programs. While we did not propose to include a measure of 
health IT utilization, we will consider these comments as we assess any 
future action for the model. As future measures become available, such 
as measures which focus directly on electronic exchange between all 
providers participating in a bundle, we will continue to explore 
whether there are opportunities to address this important aspect of 
care delivery for model participants. Should we decide to implement a 
measure of health IT utilization in the future, we will do so through 
notice-and-comment rulemaking.
    Final Decision: After seeking comments on shared decision-making, 
and on future measures around Care Planning and future considerations 
for use of electronic health records, we thank the public for these 
comments and will evaluate the suggestions for future consideration.
4. Form, Manner, and Timing of Quality Measure Data Submission
    In the proposed rule (80 FR 41289), we stated that it is important 
to be transparent and to outline the form, manner and timing of quality 
measure data submission so that accurate measure results are provided 
to hospitals, and that timely and accurate calculation of measure 
results are consistently produced to determine annual reconciliation 
payment.
    We proposed that data submission for Hospital-Level Risk-
Standardized Complication Rate (RSCR) Following Elective Primary Total 
Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1550) 
and Hospital-Level Risk-Standardized Readmission Rate (RSRR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1551) (or both) be accomplished through the 
existing HIQR Program processes. Since these measures are 
administrative claims-based measures, hospitals will not need to submit 
data. We proposed that the same mechanisms used in the HIQR Program to 
collect HCAHPS Survey measure (NQF #0166) data also be used in the CJR 
model (79 FR 50259). For the hospitals that voluntarily submit data for 
the THA/TKA patient-reported outcome-based performance measure, we 
anticipated, if it is technically feasible, for data submission 
processes to be broadly similar to those summarized for the HIQR 
Program for chart abstracted and administrative claims-based measures. 
We indicated that we would create a template for hospitals to complete 
with the THA/TKA voluntary data, provide a secure portal for data 
submission, and provide education and outreach on how

[[Page 73504]]

to use these mechanisms for data collection and where to submit the 
THA/TKA voluntary data. We also repeated our description of potential 
processes for voluntary data collection in section III.D.3.a.(2) of the 
proposed rule, and noted that these were broadly similar to those used 
by the HIQR Program.
    We invited public comment on the proposal to collect quality 
measure data through mechanisms similar to those used in the HIQR 
Program.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters requested quarterly releases of measure 
results for the purposes of continuous quality improvement since they 
believed that an annual release of measure results would not facilitate 
effective continuous quality improvement.
    Response: We acknowledge the request for hospitals to more 
frequently receive their measure results in order to enhance effective 
quality improvement. With respect to the measures that we are 
finalizing for the CJR model, we note that hospitals already receive 
their measure results on the THA/TKA Complications measure (NQF #1550) 
and the HCAHPS Survey measure (NQF #0166) through the HIQR Program on 
an annual and quarterly basis, respectively (69 FR 49082 and 78 FR 
50783). With respect to the THA/TKA Complications measure (NQF #1550), 
CMS provides hospitals with their confidential preview reports and 
hospital-specific reports with discharge level information used in the 
calculation of their measure result around April each year before the 
results are publicly reported on the Hospital Compare Web site (77 FR 
53598). We note that the Hospital Compare Web site is the vehicle that 
provides public reporting and within this Web site we indicate that 
this Web site fulfills section 1886(b)(3)(B)(viii)(VII) of the Act, as 
amended by section 3001(a)(2) of the Affordable Care Act, which 
requires the Secretary to establish procedures for making information 
regarding measures submitted available to the public after ensuring 
that a hospital has the opportunity to review its data before they are 
made public. Prior to the release of data on Hospital Compare, 
hospitals are given the opportunity to review data during a 30-day 
preview period via the QualityNet Secure Portal (https://www.qualityreportingcenter.com/wp-content/uploads/2015/07/IQR_FY-2017_Hospital-IQR-Program-Reference-Checklist_Tool_7.21.2015_FINAL508.pdf).
    With respect to the HCAHPS Survey measure (NQF #0166), CMS 
similarly provides hospitals with their confidential preview reports on 
a quarterly basis, before the results are publicly reported on Hospital 
Compare Web site (https://www.hospitalcompare.hhs.gov/) (78 FR 50778). 
We believe that the current frequency of sharing measure results data 
with hospitals is also appropriate for the CJR model and does allow 
effective quality improvement for the following reasons. First of all, 
we note that other CMS IPPS quality programs besides the HIQR Program, 
such as HVBP (77 FR 53579), the HRRP (77 FR 53399), and the Hospital-
Acquired Condition Reduction Program (78 FR 50725), similarly use an 
annual cycle for sharing measure results with hospitals and publicly 
reporting quality measure performance as we are finalizing for the CJR 
model. For example, the HIQR Program and the HRRP release annual 
measure results data to hospitals on their excess readmissions (77 FR 
53399). The acute myocardial infarction, heart failure, pneumonia, 
chronic obstructive pulmonary disease, and ischemic stroke readmission 
measure results have all shown improvements in hospital performance 
between 2010 and 2013 (https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf). This strongly 
suggests that effective continuous quality improvement is possible with 
annual review of measure results by hospitals. Secondly, because the 
THA/TKA Complications measure (NQF #1550) uses a 3-year rolling 
performance period that is 'rolled forward' by 12 months each HIQR 
Program year, quarterly updates to the 3-year performance period would 
yield minimal actionable information to hospitals from one quarter to 
the next, while increasing administrative burden for hospitals to 
download and review their hospital-specific reports and discharge-level 
data. We remind readers that the 3-year performance period is used for 
the THA/TKA Complications measure (NQF #1550) in order to identify a 
greater number of eligible index admissions for each hospital. 
Increasing the sample size by using a larger number of index admissions 
to identify the measure cohort improves the reliability and precision 
of the estimation of each hospital's results for the THA/TKA 
Complications measure (NQF #1550), as well as allow for the calculation 
of measure results that more meaningfully distinguish hospital 
performance. For these reasons, we do not believe that providing more 
frequent measure results data to participant hospitals in the CJR model 
than are already provided to them in the HIQR Program will provide 
sufficiently new, actionable information to meaningfully enhance their 
continuous improvement processes.
    Comment: A commenter recommended that CMS establish the low-volume 
thresholds for the quality measures prior to the first performance year 
and exclude low-volume hospitals from the CJR model.
    Response: As noted in the proposed rule (80 FR 41242), a 
participant hospital with an insufficient volume of episodes on which 
to determine performance on an individual measure will be assigned to 
the 50th percentile so as not to disadvantage a participant hospital 
based on its low volume because that hospital may in actuality provide 
high quality of care. Additionally, we proposed that data submission 
for Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1550) be accomplished through the existing 
HIQR program processes (80 FR 41290). By using existing HIQR program 
processes we intend to apply the same low-volume case thresholds 
applied to all claims based measures which is set at 25 cases for 
public reporting (75 FR 50185 and 76 FR 51609). For the HCAHPS Survey 
measure (NQF #0166) we have previously indicated in section III.D.2.c. 
of this final rule that a minimum of 100 cases is required for the 
measure which is also consistent with the threshold set for HVBP 
program (76 FR 26502)
    Comment: A commenter recommended beginning the process of vendor 
certification as soon as possible with respect to patient-reported 
outcome data collection. Specifically, the commenter recommended CMS 
use previously established vendor guidelines such as those governing 
the data submission process for chart-abstracted measures or electronic 
clinical quality measures (eCQM).
    Response: We will consider this recommendation when and if patient-
reported outcome data collection is mandatory. The current patient-
reported outcome data collection is voluntary, and hospitals can 
collect the data using whatever mechanisms are available to them.
    Comment: A few commenters recommended we use a standardized data 
collection file template with respect to patient-reported outcome data

[[Page 73505]]

collection. A commenter recommended creating a file template for data 
collection in a web-based platform.
    Response: We plan to create a standardized file template to assist 
hospitals' data collection and submission efforts for the patient-
reported outcome data. We will take the commenter's recommendation to 
create a web-based data collection template into account when we design 
the template prior to the start date of the CJR model.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposals as to the form, manner, and 
timing of data submissions to CMS by participant hospitals for THA/TKA 
Complications measure (NQF #1550) and the HCAHPS Survey measure (NQF 
#0166) used in the CJR model, the frequency of sharing of measure 
results with participant hospitals annually, and the proposed 
performance periods set forth in Table 32. We note that the form, 
manner, and timing of data submissions to CMS by participant hospitals 
for THA/TKA Readmissions measure (NQF #1551) is not finalized since the 
THA/TKA Readmissions measure (NQF #1551) is not being adopted for the 
CJR model.
5. Display of Quality Measures and Availability of Information for the 
Public From the CJR Model
    In the proposed rule (80 FR 41290), we stated our belief that 
display of quality data is an important way to educate the public on 
hospital performance. We have used several methods to report quality 
data to the public, including posting data on the Hospital Compare and 
data.medicare.gov Web sites. We shared that data have been available 
for viewing on these Web sites and in downloadable databases since 
2005, and are well-known mechanisms for providing information to the 
public. We proposed to post data for measures included in the CJR model 
for each participant hospital on the Hospital Compare Web site in an 
easily understood format. The proposed applicable time periods for the 
measures during the CJR model initiative are summarized in Table 17 of 
the proposed rule (80 FR 41290) and in the following Table 31.

                               Table 31--Summary of Proposed Quality Measure Performance Periods by Year of the CJR Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Model year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
THA/TKA Complication *.............  April 1, 2013-March     April 1, 2014-March     April 1, 2015-March    April 1, 2016-March    April 1, 2017-March
                                      31, 2016.               31, 2017.               31, 2018.              31, 2019.              31, 2020.
THA/TKA \**\ Readmission...........  July 1, 2013-June 30,   July 1, 2014-June 30,   July 1, 2015-June 30,  July 1, 2016-June 30,  July 1, 2017-June 30,
                                      2016.                   2017.                   2018.                  2020.                  2016.
HCAHPS \***\.......................  July 1, 2015-June 30,   July 1, 2016-June 30,   July 1, 2017-June 30,  July 1, 2018-June 30,  July 1, 2019-June 30,
                                      2016.                   2017.                   2018.                  2019.                  2020.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA)
  (NQF #1550).
** Hospital-Level Risk-Standardized Readmission Rate (RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA)
  (NQF #1551).
*** HCAHPS Survey measure (NQF #0166).

    We stated that the proposed time periods for the THA/TKA 
Complications measure (NQF #1550), and the THA/TKA Readmissions measure 
(NQF #1551) are consistent with HIQR Program performance periods for 
July 2017 public reporting. The HCAHPS Survey measure (NQF #0166) 
results performance periods as previously stated in section III.D.2.c. 
of this final rule would not align with the HIQR program. We also 
stated our belief that the public is familiar with the proposed 
measures, which have been publicly reported in past releases of 
Hospital Compare as part of the HIQR Program. Finally, we clarified in 
the propose rule our intent to minimize confusion and facilitate access 
to the data on the measures included in the CJR model by proposing to 
post the data on each participant hospital's performance on each of the 
3 proposed quality measures in a downloadable format in a section of 
the Hospital Compare and data.medicare.gov Web sites specific to the 
CJR model, similar to what is done for the Hospital Readmissions 
Reduction Program and the Hospital-Acquired Conditions Reduction 
Program. We also proposed to post data on whether or not each 
participant hospital met the proposed threshold (section III.C.5.b. of 
the proposed rule) for receiving a reconciliation payment in the same 
downloadable database; we note that section III.C.5. of this final rule 
provides a detailed discussion on the final decision for indicating 
which hospitals are eligible for a reconciliation payment.
    In addition, we also stated our belief that information about 
functional status both pre- and post-operatively is important for hip 
and knee replacements. We are developing a functional status measure 
that we believe will provide this needed information. The measure, 
Hospital-Level Performance Measure(s) of Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty 
(see section III.D.3. of the proposed rule for a detailed description), 
requires comprehensive testing before it can be used in a CMS program. 
As part of the effort to collect data on functional status voluntarily 
from hospitals, we proposed that hospitals that voluntarily submit data 
for this measure be acknowledged through the use of a symbol on 
Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/). The 
data submitted voluntarily for the functional status measure would not 
be publicly reported along with the other measures in the program.
    We also provide clarification for the performance periods proposed 
for years 4 and 5 in Table 17 (80 FR 41290) in the proposed rule, and 
in Table 31 of this final rule, for the THA/TKA Readmissions measure 
(NQF #1551). In Table 17 of the proposed rule we had indicated a year 4 
performance period of: July 1, 2016 through June 30, 2020 and for year 
5 July 1, 2017 through June 30, 2016. We note that these proposed time 
frames are not consistent with prior proposals (80 FR 41290) and would 
like to clarify that the correct proposed performance periods for the 
THA/TKA Readmissions measure (NQF #1551) for year 4 is: July 1, 2016 
through June 20, 2019; and for year 5: July 1, 2017 through June 30, 
2020. We also note that the THA/TKA Readmissions measure (NQF #1550) 
has not been finalized for this model.

[[Page 73506]]

    We invited public comments on these proposals to post data for 
mandatorily required measures on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/) and to acknowledge hospitals that 
voluntarily submit data for the functional status measure with an icon 
on the Hospital Compare Web site.
    The following is a summary of the comments received and our 
responses.
    Comment: A few commenters supported the public reporting of measure 
results.
    Response: We appreciate the support of our proposal to publicly 
report measure results implemented in the CJR model.
    Comment: A commenter recommended that CMS give participant 
hospitals a year-long preview of measure performance prior to the 
public release of data. Another suggested that CMS delay public 
reporting of performance data for at least one year into the CJR model 
while allowing participant hospitals to preview their measure results 
during that time.
    Response: We appreciate these two comments, and note our belief 
that the availability of quality data to the public is an important way 
to educate the public, including patients, consumers, and their family 
members and care givers, on hospital performance and that not publicly 
reporting such quality data as soon as they are available would not be 
consistent with our policy to be transparent with CMS quality and 
payment programs. Further, the finalized measures are currently used in 
the HIQR Program, and hospital performance information is publicly 
reported for this program on the Hospital Compare Web site. We refer 
reviewers to section III.C.5.b. of this final rule for further 
discussion of pay-for-reporting during the first year of the model from 
a payment perspective.
    Comment: A few commenters requested clarification as to whether CMS 
intends to provide PRO data preview reports for participating 
hospitals.
    Response: To provide further clarification regarding the release of 
quality measure results information to hospitals prior to public 
reporting on Hospital Compare Web site, we stated in the proposed rule 
(80 FR 41290) that we would use existing CMS hospital public reporting 
processes as in the HIQR Program. We also emphasized in the proposed 
rules the importance of providing accurate measure results to hospitals 
and the timely and accurate calculation of measure results that are 
consistently produced to determine annual reconciliation payments (80 
FR 41290). As in the HIQR Program for outcome measures, we will deliver 
confidential reports and accompanying confidential discharge level 
information, as applicable to the measure, to participant hospitals on 
an annual basis. These reports will contain hospital-specific 
information on the THA/TKA Complications measure (NQF #1550), the 
HCAHPS Survey measure (NQF #0166), and whether a hospital has 
successfully submitted the voluntary patient-reported outcome data. The 
reports will be delivered in participant hospitals' secure QualityNet 
accounts prior to the information being made available to the public.
    We will provide participant hospitals a period of 30 days to review 
and submit corrections to calculations of measure results and 
determinations of successful patient-reported outcome data submission 
using a process that is similar to the process currently used for 
posting results on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/) in programs such as the HIQR, HVBP, HRRP 
programs and the Hospital-Acquired Condition Reduction Program. Our 
intent in providing this information is two-fold--(1) To facilitate 
hospitals' verification of their measure results calculations; and (2) 
to facilitate hospitals' quality improvement efforts with respect to 
the care provided to LEJR patients. More specifically, this 30-day 
period will begin when the participant hospitals' confidential reports 
and accompanying discharge-level information are posted to their 
QualityNet accounts. This time period will enable us to evaluate 
correction requests in a timely manner in order to provide accurately 
calculated measure results for the determination of annual 
reconciliation payments. We believe that this review and corrections 
process will ensure that hospitals are able to fully and fairly review 
their measure results as they will be used in the CJR model and 
publicly reported on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/).
    We note that with respect to the claims based THA/TKA Complications 
measure (NQF #1550), the review and correction process will not include 
submitting additional corrections related to the underlying claims data 
we used to calculate the measure result, nor adding new claims to the 
data extract we used to calculate the measure result. This is because 
it is necessary to take a static ``snapshot'' of the claims in order to 
perform the calculations. For purposes of the CJR model, we would 
calculate the THA/TKA Complications measure (NQF #1550) result using a 
static snapshot (that is, data extract) taken at the conclusion of the 
90-day period following the last date of discharge used in the 
applicable performance period. This is consistent with our policy for 
all claims-based measures used in the HIQR, HVBP, HRRP programs, and 
the Hospital-Acquired Condition Reduction Program (for example, see 77 
FR 53399 through 53401 as this policy is applied for HRRP and 78 FR 
50725 through 50727 as this policy is applied in the Hospital-Acquired 
Condition Reduction Program). We recognize that under our current 
timely claims filing policy, hospitals have up to 1 year from the date 
of discharge to submit a claim to us. However, in using claims data to 
calculate quality measure results for the CJR model, we will create 
claims data extracts approximately 90 days after the last discharge 
date in the applicable performance period. For example, for model year 
one of the CJR model, the last discharge date in the performance period 
for the THA/TKA Complications measure (NQF #1550) is March 31, 2016, so 
we would create the data extract on or around June 30, 2016 and use 
that data to calculate the measure result for the April 1, 2013 to 
March 31, 2016 performance period. Participant hospitals are already 
familiar with this 90-day claims ``run-out'' period, which we apply 
when creating data extracts for all of our claims-based outcome 
measures used in the HIQR, HVBP, HRRP Programs, and the Hospital-
Acquired Condition Reduction Program (for example, see 77 FR 53399 
through 53401 as this policy is applied for HRRP and 78 FR 50725 
through 50727 as this policy is applied in the Hospital-Acquired 
Condition Reduction Program).
    Comment: A commenter requested clarification regarding the 1-year 
difference in performance periods for FY 2016's HIQR Program and the 
proposed performance periods for the CJR model (80 FR 41290, Table 17). 
The clarification request was specific to the THA/TKA Complications 
measure (NQF #1550) where they indicated that the FY 2016 HIQR Program 
THA/TKA Complications measure (NQF #1550) is April 2012 through March 
2015 and for the CJR model THA/TKA Complications measure (NQF #1550) 
performance period is April 2013 through March 2016.
    Response: Table 17 of the proposed rule (80 FR 41290), had set 
forth the performance periods for each of the proposed quality measures 
for the 5 performance years of the CJR model. As we state in section 
III.D.5. of this final rule, we are finalizing Table 32 with respect to 
the THA/TKA Complications

[[Page 73507]]

measure (NQF #1550) and the HCAHPS Survey measure (NQF #0166) with the 
performance periods as previously set forth, but we are not finalizing 
the THA/TKA Readmissions measure (NQF #1550). In addition, we want to 
provide further clarification on the CJR model performance periods for 
the THA/TKA Complications measure (NQF #1550) as compared to the 
performance periods that will be used in the HIQR Program. As we stated 
in the proposed rule (80 FR 41290), the performance periods are 
intended to align with the public reporting timeline for this measure 
in the HIQR Program. For example, for the first performance year of the 
CJR model, the performance period of the THA/TKA Complications measure 
(NQF #1550) is April 1, 2013 through March 31, 2016. When we are 
calculating reconciliation payment determinations for model year one 
(that is, CY 2016) during the spring of 2017, we will be using quality 
measure data that are the most currently available, which will be from 
the April 1, 2013 through March 31, 2016 performance period for the 
THA/TKA Complications measure (NQF #1550). The HIQR Program will be 
using data from the same period to prepare for public reporting on 
Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/) in July 
2017. When information on each participant hospital's performance in 
the CJR model will be publicly reported on Hospital Compare Web site 
(https://www.hospitalcompare.hhs.gov/) in July 2017, the performance 
period for the THA/TKA Complications measure (NQF #1550) will align 
with the performance period used for the same measure in the HIQR 
Program. We believe that aligning the performance periods for the THA/
TKA Complications measure (NQF #1550) in this manner will reduce the 
potential for confusion among users of the Hospital Compare Web site 
(https://www.hospitalcompare.hhs.gov/) and also ensure that the CJR 
model uses the most currently available measure results for calculating 
participant hospital reconciliation payment determinations. The CJR 
model will not use measure results data from the HIQR Program's July 
2016 public reporting, which will be April 1, 2012 through March 31, 
2015 for the THA/TKA Complications measure (NQF #1550), for the reasons 
previously described.
    Comment: A commenter urged CMS to rapidly disclose hospitals' 
results on the THA/TKA PRO-PM to the public.
    Response: We will not publicly report the voluntary patient-
reported outcomes and limited risk variable data during or after this 
model. We note that the data will be used to complete measure 
development of the THA/TKA patient reported performance based outcome 
measure. We intend to acknowledge those hospitals that are voluntarily 
submitting PRO and limited risk variable data via an icon or symbol by 
the hospital's name on the Hospital Compare Web site. If we consider 
adopting such a measure for the CJR model, we would do so through 
rulemaking.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposals to publicly report quality 
measure results each year on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov/), including acknowledgment of hospitals 
that voluntarily submit data for the functional status measure with an 
icon on the Hospital Compare Web site. We are finalizing the public 
reporting of measure results each year for the THA/TKA Complications 
measure (NQF #1550) and the HCAHPS Survey measure (NQF #0166). Measure 
results for the THA/TKA Readmissions measure (NQF #1551) will not be 
publicly reported each year since we are not finalizing this measure. 
We have also provided further clarification as to the sharing of 
quality measure results with participant hospitals, the use of 
confidential reports that participant hospitals will receive, and the 
opportunity they will have to review and submit correction requests for 
their measure result calculations prior to public reporting on Hospital 
Compare Web site.

                               Table 32--Summary of Finalized Quality Measure Performance Periods by Year of the CJR Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        CJR Model year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
THA/TKA Complications *............  April 1, 2013-March     April 1, 2014-March     April 1, 2015-March    April 1, 2016-March    April 1, 2017-March
                                      31, 2016.               31, 2017.               31, 2018.              31, 2019.              31, 2020.
HCAHPS **..........................  July 1, 2015-June 30,   July 1, 2016-June 30,   July 1, 2017-June 30,  July 1, 2018-June 30,  July 1, 2019-June 30,
                                      2016.                   2017.                   2018.                  2019.                  2020.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA)
  (NQF #1550).
** Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure (NQF #0166).

    This final policy is set forth at Sec.  510.400.

E. Data Sharing

1. Overview
    In section III.E. of the proposed rule, we proposed to provide data 
to the hospital participants of the CJR model. We have experience with 
a range of efforts designed to improve care coordination for Medicare 
beneficiaries, including the Medicare Shared Savings Program (Shared 
Savings Program), Pioneer ACO Model, and BPCI, all of which make 
certain data available to participants. In section III.C.2. of the 
proposed rule, we proposed a model to financially incentivize 
hospitals, through retrospective bundled payments, to engage in care 
redesign efforts to improve quality of care and reduce spending for the 
aggregate Part A and B FFS spending for beneficiaries included in the 
model during the inpatient hospitalization and 90 days post-discharge. 
Given this, we expressed our belief that it is necessary to provide 
historical and ongoing claims data representing care furnished during 
episodes of care for LEJRs to hospitals so that they can, among other 
things, adequately structure their care pathways, coordinate care for 
beneficiaries, and estimate acute inpatient and PAC spending within 
LEJR episodes.
    As noted previously, this would not be the first instance in which 
we have provided claims data to entities participating in a CMS model 
or program. For example, participants in Shared Savings Program 
initially receive aggregate information on their historical financial 
performance as well as quarterly data throughout their tenure in the 
program. In addition, Shared Savings Program ACOs receive certain 
beneficiary-identifiable claims information in accordance with our 
regulations. (For more information, see

[[Page 73508]]

the November 2, 2011 final rule titled ``Medicare Program; Medicare 
Shared Savings Program: ACOs'' (76 FR 67844 through 67849)). The Shared 
Savings Program final rule noted that while an ACO may have complete 
information for the services it provides or coordinates on behalf of 
its FFS beneficiary population, it may not have access to complete 
information on a FFS beneficiary who chose to receive services, 
medications or supplies from non-ACO providers and suppliers. Thus, we 
decided to provide ACOs participating in the Shared Savings Program 
with an opportunity to request CMS claims data on the premise that more 
complete beneficiary-identifiable information would enable 
practitioners in an ACO to better coordinate and target care 
strategies. Recently, we noted that the ACOs participating in the 
Shared Savings Program have reported that the beneficiary identifiable 
claims data that they receive from us are being used effectively to 
better understand the FFS beneficiaries that are receiving services 
from their providers. These data give ACOs valuable insight in to 
patterns of care for their beneficiary population; enable them to 
improve care coordination among and across providers and suppliers and 
sites of care, including providers and suppliers and sites of care not 
affiliated with the ACO; and allow them to identify and address gaps in 
patient care. (For more information, see the Medicare Shared Savings 
Program final rule (80 FR 32733 through 32734.)
    Similarly, participants in the Pioneer ACO model can request 
historical claims data of beneficiaries aligned with the particular 
Pioneer ACO entity, and the entities continue to receive certain 
ongoing data regarding the services furnished to those beneficiaries. 
(For more information, see the CMS Web site https://innovation.cms.gov/Files/fact-sheet/Pioneer-ACO-Model-Beneficiaries-Rights-Fact-Sheet.pdf). In addition, we provide BPCI participants with the 
opportunity to request beneficiary-level claims data regarding their 
own patients, both for the historical period of 2009 to 2012 that was 
used to set baseline prices for entities participating in BPCI, as well 
as ongoing monthly claims feeds containing Medicare FFS claims for 
beneficiaries that could have initiated an episode of care for that 
particular BPCI participant. These monthly claims feeds provide BPCI 
participants with data for both acute and PAC spending for 
beneficiaries that could have initiated an episode of care at that BPCI 
participant.
    As noted in the proposed rule, based on our experience with these 
efforts, we believe that providing a similar opportunity for hospitals 
participating in the CJR model to request data is necessary for 
participant hospitals to have the relevant information to allow for 
practice changes supported by CJR and to identify services furnished to 
beneficiaries receiving LEJRs under the model. Specifically, providing 
participant hospitals with certain claims and summary information on 
beneficiaries in accordance with established privacy and security 
protections would improve their understanding of the totality of care 
provided during an episode of care. With this greater understanding, we 
anticipate that hospitals would be better equipped to evaluate their 
practice patterns and actively manage care delivery so that care for 
beneficiaries is better coordinated, quality and efficiency are 
improved, and payments aligned more appropriately to the medically 
necessary services beneficiaries have a right to receive. We also 
expect that providing this data to CJR participants will benefit 
beneficiaries by allowing providers to use the data to improve care 
coordination activities in areas that may be currently lacking. 
However, we also noted our expectation that CJR hospitals are able to, 
or will work toward, independently identifying and producing their own 
data, through electronic health records, health information exchanges, 
or other means that they believe are necessary to best evaluate the 
health needs of their patients, improve health outcomes, and produce 
efficiencies in the provision and use of services.
    Accordingly, we believe that making certain data available to CJR 
hospitals, as we do with ACOs participating in the Shared Saving 
Program and Pioneer ACO Model, would help them to monitor trends and 
make needed adjustments in their practice patterns. In order for CJR 
participants to understand and track their care patterns, we proposed 
to provide the participants with beneficiary-level claims data for the 
historical period used to calculate a CJR hospital's target price as 
well as ongoing quarterly beneficiary-identifiable claims data in 
response to their request for such data in accordance with our 
regulations. Given that the CJR model also proposes to incorporate 
regional pricing in the calculation of target prices, we also proposed 
to provide participants with aggregate regional data.
    Comment: Some commenters noted that CMS expects that hospitals are 
able to, or will work toward, independently identifying and producing 
their own data. These commenters concurred that hospitals were making 
these efforts, but noted that there were challenges in doing so.
    Response: We appreciate hospitals' efforts to independently 
identify and produce performance data, and believe that our proposal, 
which makes certain financial performance data available, will be 
supportive of these efforts.
2. Beneficiary Claims Data
    In the proposed rule we noted that, based on our experience with 
BPCI participants, we recognize that hospitals vary with respect to the 
kinds of beneficiary claims information that would be most helpful. 
While many hospitals located in MSAs that are selected for 
participation in CJR model may have the ability to analyze raw claims 
data, other hospitals may find it more useful to have a summary of 
these data. Given this, we proposed to make beneficiary claims 
information available through two formats.
    First, for participant hospitals that lack the capacity to analyze 
raw claims data, we proposed to provide summary beneficiary claims data 
reports on beneficiaries' use of health care services during the 
baseline and performance periods. These reports would allow participant 
hospitals to assess summary data on their relevant beneficiary 
population without requiring sophisticated analysis of raw claims data. 
Such summary reports will provide tools to monitor, understand, and 
manage utilization and expenditure patterns as well as to develop, 
target, and implement quality improvement programs and initiatives. For 
example, if the data provided by CMS to a particular hospital 
participant reflects that a certain PAC provider admits beneficiaries 
who then have significantly higher rates of inpatient readmissions than 
the rates experienced by other beneficiaries with similar care needs at 
similarly situated PAC providers, that may be evidence that the 
hospital could consider, among other things, the appropriateness of 
discharges to that provider, whether other alternatives might be more 
appropriate, and whether there exist certain care interventions that 
could be incorporated post-discharge to lower readmission rates.
    Therefore, for both the baseline period and on a quarterly basis 
during a participant hospital's performance period, we proposed to 
provide participant hospitals with an opportunity to request summary 
claims data that would encompass the total expenditures and claims for 
an LEJR episode, including the procedure,

[[Page 73509]]

inpatient stay, and all related care covered under Medicare Parts A and 
B within the 90 days after discharge, including hospital care, PAC, and 
physician services for the hospital's beneficiaries whose anchor 
diagnosis at discharge was either MS DRG 469 or 470. We proposed that 
these summary claims aggregate data reports would also contain payment 
information, utilizing the categories listed for each episode triggered 
by a beneficiary as follows:
     Inpatient hospital.
     Outpatient hospital.
     Physician.
     Long-term care hospital (LTCH).
     IRF.
     SNF.
     HHA.
     Hospice.
     ASC.
     Part-B drug.
     Durable medical equipment (DME).
     Clinical laboratory.
     Ambulance.
    These reports would likely include the following:
     Information such as admission and discharge date from the 
anchor hospitalization.
     The physician for the primary procedure, Medicare payments 
during the anchor hospitalization.
     Medicare payments during the PAC phase.
     Medicare payments for physician services would likely be 
included in these reports.
    These summary claims data would reflect all Medicare Part A and 
Part B expenditures during the 90-day episodes, except for those claim 
types noted later in this section, as well as excluding expenditures 
related to those MS-DRGs that we proposed to be specifically excluded 
from the episode of care, as set forth in section III.B.2. of the 
proposed rule.
    Alternatively, for hospitals with a capacity to analyze raw claims 
data, we would make more detailed beneficiary-level information 
available in accordance with established privacy and security 
protections. These data would enable hospitals to better coordinate and 
target care strategies for beneficiaries included in CJR episodes. For 
example, in the BPCI initiative, we provide participants with 
beneficiary-level claims data for all Part A and Part B services 
furnished to a beneficiary treated by that BPCI participant for all MS-
DRGs included in an episode that the participant has selected for 
participation (See BPCI: Background on Model 2 for Prospective 
Participants, page 3 at https://innovation.cms.gov/Files/x/BPCI_Model2Background.pdf.)
    These data include services furnished by the participant, as well 
as services furnished by other entities during the 30-, 60- or 90-day 
episode. For example, where the entity participating in BPCI is an 
acute care hospital, we provide beneficiary-level claims data for all 
Medicare Part A and B services and supplies furnished by the hospital 
during the inpatient admission, as well as all PAC services furnished 
to the beneficiary by the hospital or any other providers or suppliers.
    The response from entities participating in BPCI has indicated that 
the availability of these data is necessary to monitor trends and 
pinpoint areas where care practice changes are appropriate, as well as 
assess the cost drivers during the acute and PAC periods of the 
episode. Thus, for the baseline period and on a quarterly basis during 
a hospital's performance period, we proposed to provide participant 
hospitals with an opportunity to request line-level claims data for 
each episode that is included in the relevant performance year, as 
described in section III.C. of the proposed rule.
    For both the proposed summary claims data and the more detailed 
claims data formats, we proposed that the sets of these files would be 
packaged and sent to a portal in a ``flat'' or binary format for the 
individual participant hospitals to retrieve. Furthermore, the files 
would contain information on all claims triggered by a beneficiary in a 
participating CJR hospital.
    Finally, we note that beneficiary information that is subject to 
the regulations governing the confidentiality of alcohol and drug abuse 
patient records (42 CFR part 2) would not be included in any 
beneficiary identifiable claims data shared with a hospital under our 
proposal.
    We requested comments on these proposals as well as the kinds of 
data and frequency of reports that would be most helpful to the 
hospitals' efforts in coordinating care, improving health, and 
producing efficiencies.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters supported CMS's proposal to make both 
historical baseline and updated beneficiary claims information 
available to hospitals participating in CJR both on a detailed line 
level and a summary basis. Commenters noted the importance of these 
data for such purposes as formulating processes and protocols to 
redesign care, developing networks with physicians, physician groups 
and PAC providers, establishing necessary clinical and administrative 
infrastructure during the pre-implementation period, and estimating 
potential savings associated with better care delivery.
    Response: We appreciate and concur with these comments that support 
our proposal.
    Comment: A commenter stated that participants should be provided 
both line-level and summary beneficiary claims information rather than 
just one data type or the other.
    Response: We appreciate this suggestion and wish to clarify that we 
will make both line-level and summary beneficiary claims data available 
to participating hospitals upon request in accordance with established 
privacy and security protections.
    Comment: Commenters opposed the proposal to exclude beneficiary 
information that is subject to the regulations governing the 
confidentiality of alcohol and drug abuse patient records (42 CFR part 
2) from any beneficiary identifiable claims data shared with a 
hospital. Commenters noted that this information was vital for 
hospitals to understand the full risk associated with beneficiaries and 
was needed to identify appropriate care management methods. Some 
commenters expressed the view that hospitals should not be required to 
assume risk for beneficiaries where these data are not made available. 
Other commenters requested that CMS make available de-identified cost 
and claims data or aggregate payment data for these services. Moreover, 
some commenters recommended that CMS apply its waiver authority to make 
beneficiary-specific claims level substance abuse data available to 
hospitals or work with the Congress to create an exception to 42 CFR 
part 2 to provide claims level, identifiable data.
    Response: Section 1115A of the Act does not authorize the waiver of 
the requirements under 42 CFR part 2. Moreover, our proposal to exclude 
this information is consistent with our usual treatment of these data 
with other similar CMS programs and models where providers must take on 
risk in managing the care of their beneficiaries, such as the Shared 
Savings Program and BPCI model. We would note that, based on our 
experience to date, we are unaware of this policy being a significant 
impediment to the operations of these efforts. We also appreciate the 
suggestions to make these data available in a de-identified manner. We 
have considered this option and are not currently aware of a means to 
make de-identified beneficiary-specific data available in a way that 
would provide useful information to participating hospitals without 
potentially making it

[[Page 73510]]

possible to identify beneficiaries. Similarly, we have also not 
identified a way in which to make meaningful aggregate data available 
on a limited basis without potentially compromising beneficiary 
confidentiality. However, we will continue to consider these comments 
and the feasibility of making such data available in a way that is both 
meaningful to participating hospitals and in compliance with 42 CFR 
part 2.
    Comment: Commenters questioned the frequency, mechanisms, and 
content of the information we propose to make available to participant 
hospitals.
    Response: These comments and our responses will be discussed in 
their respective sections, which follow.
    Final Decision: After considering the public comments we received, 
we are finalizing the proposal at Sec.  510.300(d) to make available to 
participant hospitals, through the most appropriate means, data that 
CMS determines may be useful to participant hospitals. We are also 
finalizing our proposal to exclude information that is subject to the 
regulations governing the confidentiality of alcohol and drug abuse 
patient records (42 CFR part 2) from any beneficiary identifiable 
claims data shared with a hospital at this time.
3. Aggregate Regional Data
    Because we proposed to incorporate regional pricing data in the 
creation of prices for CJR, as set forth in section III.C.4. of the 
proposed rule, we noted our belief that it will also be necessary to 
provide comparable aggregate expenditure data available for all claims 
associated with MS-DRGs 469 and 470 for the census region in which the 
participant hospital is located. As noted in section III.C.4.b.(5) of 
the proposed rule, we proposed that a hospital's target price will be 
determined based on a blend of its own historical expenditures as well 
as regional pricing data of all other hospitals in its region. Thus, we 
also proposed to provide CJR hospitals with aggregate data on the total 
expenditures during an acute inpatient stay and 90-day post-discharge 
period for all Medicare FFS beneficiaries whose anchor diagnosis at 
discharge was either MS-DRG 469 or 470 (and would have initiated a CJR 
episode if discharged from a CJR hospital) in their census region. 
These data would not include beneficiary-identifiable claims data, but 
would provide high-level information on the average episode spending 
for MS-DRGs 469 and 470 in the region in which the participant hospital 
is located. We requested comments on these proposals as well as the 
kinds of aggregate data and frequency of data reports that would be 
most helpful to the hospitals' efforts in coordinating care, improving 
health, and producing efficiencies.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters supported the proposal to make expenditure data 
available for claims associated with MS-DRGs 469 and 470 for the census 
region in which the participant hospital is located, for example, that 
these data would be critical to hospitals in tracking their performance 
relative to benchmarks over time or would allow them to anticipate 
future changes in target pricing. A commenter noted that the proposal 
to provide 3 years of historical claim-level data is sufficient for 
purposes of this program and expressed support for CMS' proposal to 
include both Part A and Part B spending data. However, another 
commenter expressed reservations about the usefulness of high-level 
aggregate spending data by spending census region.
    Response: We concur with the comments supporting our proposal to 
make aggregate regional data available to hospitals. We recognize that 
some hospitals might prefer to have more detailed data rather than 
aggregated data. However, we believe the data we will be making 
available should be helpful both as a performance benchmark for 
participating hospitals relative to their peers as well as to better 
understand their financial performance expectations, particularly given 
that regional pricing data will be incorporated for purposes of 
determining their target prices.
    Comment: The comments we received on the frequency with which 
aggregate regional data would be made available to hospitals were often 
requests for us to make these data available more frequently, such as 
on a monthly basis.
    Response: Our response to these comments is discussed later in 
section III.E.5. of this final rule.
    Comment: With respect to data content, we received a suggestion 
that these data contain enough detail to identify potential 
opportunities for improvement. A commenter suggested that CMS use the 
BPCI data extracts as a starting point for CJR, since they were 
satisfactory to BPCI participants. Specific requests included proposals 
that the data reflect a rolling 18-month period, include separate 
subsets for outpatient physical and occupational therapy and for 
comprehensive outpatient rehabilitation facility (CORF) services, and 
that CMS provide a detailed description of the calculations needed to 
derive the regional target prices. Several comments requested that the 
data be broken down by MS-DRG as follows:
     Total normalized episode expenditures.
     Normalized episode expenditures within cost categories 
(anchor inpatient, SNF, HHA, IRF, LTCH readmissions, professional 
services, other).
     Variability metrics related to the total normalized 
episode expenditures (standard deviation, 95th percentile, 99th 
percentile, etc.).
     Episode counts.
     Variability metrics surrounding episode counts (what is 
the mean number of episodes at a hospital in the region, the standard 
deviation, the 95th or 99th percentile, etc.).
     Utilization percentages for key services (what percentage 
of episodes had SNF utilization, IRF, LTCH, HHA, readmissions).
     Percentage of episodes that were non-elective (for 
example, using the quality metric specification exclusions 
methodology).
    Response: We appreciate the comments we received on the kinds of 
data that might be helpful to participating hospitals, and agree with 
the comment that the regional data we provide should contain enough 
detail to identify potential opportunities for improvement.
    Final Decision: We are finalizing our proposal to provide CJR 
hospitals with aggregate data on the total expenditures during an acute 
inpatient stay and 90-day post-discharge period for all Medicare FFS 
beneficiaries whose anchor diagnosis at discharge was either MS-DRG 469 
or 470 (and would have initiated a CJR episode if discharged from a CJR 
hospital) in their census region. We will also consider the range of 
comments we received on the additional kinds of data elements and 
formats that would be most useful to participating hospitals. In the 
event we consider adopting additional elements or formats for these 
data, we will provide further guidance, potentially through rulemaking 
if warranted.
4. Timing and Period of Baseline Data
    As stated in the proposed rule, we considered various options for 
the timing of providing baseline data to CJR participant hospitals. We 
considered provision of data prior to the proposed start date of the 
model as well as providing data to participants at the point of the 
first payment reconciliation (described in section III.C.6. of the 
proposed rule). We proposed to make baseline data available to 
hospitals participating in CJR no sooner than 60 days after the 
proposed start date of the model. We noted our recognition that

[[Page 73511]]

these data are important to the abilities of CJR participant hospitals 
to estimate costs, coordinate care, and identify areas for practice 
transformation, and that early release of this data can facilitate 
their efforts to do so. We also noted our view that hospitals will view 
the CJR effort as one involving continuous improvement. As a result, 
changes initially contemplated by a hospital could be subsequently 
revised based on updated information and experiences. We also indicated 
that while we would like to be able to make data available as soon as 
possible once the model had begun, we did not believe that these 
baseline data must be immediately available upon the start date of the 
model as hospitals can begin considering improvements that would 
enhance their ability to better coordinate care and increase 
efficiencies in the absence of these data. Therefore, we proposed to 
begin making baseline data available to CJR hospitals within 60 days of 
CMS' receipt of the request by the participant hospital for such data, 
in a form, time, and manner of such requests to be determined by CMS 
and announced at a later date. Further requests would not be accepted 
until the model had begun. We sought comments on this proposal.
    In the proposed rule, we also discussed which period of baseline 
data should be shared with hospitals, for example, whether the data 
should represent a single year, or some longer period such as a 3-year 
period or more. We expressed our belief that to be most useful, the 
baseline information should be recent enough to reflect current 
practices yet of a sufficient duration to reflect trends in those 
recent practices. For example, 1 year of data would likely reflect a 
hospital's most current practices, but would not be helpful for 
purposes of identifying trends. In contrast, 3 years of data could both 
reflect a hospital's most recent performance and recent performance 
trends. Moreover, we noted that making data available for a 3-year 
period aligned with our proposal to set a target price based on a 3-
year period of baseline data, which is a factor in assessing CJR 
hospitals' performance (see section III.C. of this final rule). That 
is, if a hospital has access to baseline data for the 3-year period 
used to set its target price, then it would be able to assess its 
practice patterns, identify cost drivers, and ultimately redesign its 
care practices to improve efficiency and quality.
    We alternatively considered making data available for an even 
longer historical period--for example, 4 or 5 years. However, we 
questioned the usefulness of information that is older than 3 years for 
purposes of changes contemplated for current operations. Accordingly, 
in our proposed rule, we proposed to make available baseline data for 
up to a 3-year period. We indicated that we would limit the content of 
this data set to the minimum data necessary for the participant 
hospital to conduct quality assessment and improvement activities and 
effectively coordinate care of its patient population. This period 
would encompass up to the 3 most recent years for which claims data are 
available for the hospital and would align with the baseline period we 
proposed to utilize to establish target prices, as noted previously. We 
sought comments on our proposal and invited comments on alternative 
time periods that could better help hospitals evaluate their practice 
patterns and actively manage care delivery so that care is better 
coordinated, quality and efficiency are improved, and costs are better 
controlled.
    The following is a summary of the comments received and our 
responses.
    Comment: The comments we received supported our proposal to make 3 
years of baseline data available to participating hospitals.
    Response: We appreciate and concur with those comments.
    Comment: Many commenters opposed the proposal to make baseline data 
available to hospitals participating in CJR no sooner than 60 days 
after the proposed start date of the model. Commenters expressed 
concern that this proposal would allow insufficient time to prepare and 
that hospitals should be provided with historical claims data in 
advance of the start data; typically, 3 to 6 months prior to 
implementation with some commenters recommending up to 1 year prior to 
implementation.
    Commenters indicated that data would be needed sooner than was 
proposed for reasons such as participating hospitals would need the 
data and time to analyze claims for purposes of identifying 
opportunities for care redesign, formulate processes and protocols to 
redesign care, assess the performance of potential partners, develop 
networks with physicians and PAC providers, and establish necessary 
clinical and administrative infrastructure. Further, hospitals might 
not have the in-house resources to analyze the data and thus need to 
use consulting resources for these purposes. Commenters noted that 
activities such as these could take several months to complete once the 
data were made available.
    Some commenters also noted that the absence of downside risk does 
not diminish the need for access to data in advance of the CJR 
performance period. Moreover, commenters pointed to other CMS/CMMI 
efforts where data were made available prior to implementation. For 
example, under the BPCI model, participants received historical claims 
data feeds prior to the start of the program, and had approximately 12 
months from receiving the data prior to enrollment in the program.
    Commenters expressed concerns that insufficient time for 
preparation and lack of data for preparatory analysis, prior to start, 
could hinder a hospital's ability to effectively coordinate and ensure 
smooth transitions across the continuum of care for beneficiaries 
undergoing LEJR procedures. As discussed elsewhere in this final rule, 
several commenters recommended that the program be delayed so that data 
could be made available in advance of implementation.
    Response: We appreciate the concerns and reasons expressed by 
commenters for opposing our proposal to make baseline data available to 
hospitals participating in CJR no sooner than 60 days after the 
initially proposed start date of the model, as well as suggestions for 
when these data should be made available. We have carefully considered 
the timeframes for making these data available, and have made other 
modifications to our proposed rule that should assist in mitigating the 
concerns commenters have raised on this issue. First, as discussed in 
section III.C.2.a. of this final rule, we are delaying the start date 
of the model to April 1, 2016, which is, in part, in response to when 
data could be made available. Second, as discussed in III.C.8. of this 
final rule, we are also reducing the potential risk to participating 
hospitals by lowering the stop-loss limit from 10 percent to 5 percent.
    Final Decision: After considering the public comments we received, 
we are finalizing our proposal to make 3 years of baseline data 
available to hospitals and intend to make these data available, upon 
request, before the April 1, 2016 start date.
5. Frequency and Period of Claims Data Updates for Sharing Beneficiary-
Identifiable Claims Data During the Performance Period
    As indicated in our proposed rule, we believe that the availability 
of periodically updated beneficiary-identifiable claims data will 
assist hospitals participating in CJR to identify areas where they 
might wish to change their care practice patterns, as well as

[[Page 73512]]

monitor the effects of any such changes. With respect to these 
purposes, we have considered what would be the most appropriate period 
for making updated claims information available to hospitals, while 
complying with the HIPAA Privacy Rule's ``minimum necessary'' 
provisions standard. We stated our belief that quarterly claims data 
updates align with a 90-day episode window. Moreover, as a larger 
episode window would be included, the claims data would be more 
representative of total costs and hence more useful to hospitals as 
they consider long-term practice changes. Accordingly, in our proposed 
rule, we proposed to make updated claims data available to hospitals 
upon receipt of a request for such information that meets CMS's 
requirements to ensure the applicable HIPAA conditions for disclosure 
have been met, as frequently as on a quarterly basis. We sought 
comments on this proposal.
    Related to this is the period of claims that would be represented 
in each update. For example, as stated in our proposed rule, we 
considered limiting this period to 3 months of data, which aligns with 
the frequency with which we would make updated claims data available. 
However, other than this alignment, we did not see additional reasons 
for artificially limiting the period to this extent. Alternatively, we 
considered providing an updated dataset as frequently as each quarter 
that would include data from up to the previous 6 quarters. We noted 
our belief that this level of cumulative data would offer more complete 
information and allow better trend comparisons.
    Accordingly, we proposed to make beneficiary-identifiable and 
aggregate claims data available that would represent up to 6 quarters 
of information upon receipt of a request for such information that 
meets the requirements of the HIPAA Privacy Rule. We noted that we 
intended for the data for this model to be consistent with our proposed 
performance year of (January 1 through December 31). To accomplish this 
for the first year of CJR (2016), we proposed to provide, upon request 
and in accordance with the HIPAA Privacy Rule, claims data from January 
1, 2016 to June 30, 2017 on as frequently as a running quarterly basis, 
as claims were available. For each quarter and extending through June 
30, 2017, we proposed that participants during that first year would 
receive data for up to the current quarter and all of the previous 
quarters going back to January 1, 2016. These datasets would contain 
all claims for all potential episodes that were initiated in 2016 and 
capture a sufficient amount of time for relevant claims to have been 
processed. We noted in our proposed rule that we would limit the 
content of this data set to the minimum data necessary for the 
participating hospital to conduct quality assessment and improvement 
activities and effectively coordinate care of its patient population. 
We sought comment on our proposal.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters noted the importance of hospitals being 
provided timely data. Some commenters requested real time data to 
enable hospitals to quickly identify and appropriately intervene to 
manage cost and quality or to achieve the goals of the program. Another 
commenter noted that having data from the most recent quarters would 
enable them to understand their current performance.
    While some commenters supported the proposal to make data available 
on a quarterly basis, most of the comments we received on this topic 
indicated that data would be needed on a more frequent basis--
specifically, on a monthly basis. Commenters suggested that monthly 
data would be needed for hospitals to react more quickly and to make 
course changes in response to changes in cost, quality, and 
utilization. A commenter noted that monthly updates would be needed for 
tracking patients whose highest utilization is in the first 30 days 
after their surgery. Another commenter suggested that in addition to 
facilitating hospitals' ability to implement the model, having more 
frequent data updates would encourage provider engagement in the 
program. Several comments also noted and requested that we make data 
available on a monthly basis as is done with the BPCI model.
    Response: We appreciate and concur with comments on the importance 
of being provided timely data, such as claims data during the most 
recent quarters, and the usefulness of these data to hospitals' ability 
to understand, monitor, and adjust their performance. We also 
appreciate commenter's requests for more frequent data updates, but are 
not persuaded that access to real-time data is needed for hospitals to 
monitor and understand trends in their practice patterns. We would also 
note that making these data available on a real-time basis would not be 
feasible for CMS. Accordingly, we are modifying our proposal from 
making these data available on a quarterly basis to making these data 
available ``no less frequently'' than on a quarterly basis with the 
goal of making these data available on as frequently as a monthly basis 
if practicable. Thus, we are revising Sec.  510.300 (d) to state ``The 
minimum data necessary to achieve the goals of the CJR model, as 
determined by CMS, may be provided under this section for a participant 
hospital's baseline period and no less frequently than on a quarterly 
basis throughout the hospital's participation in the CJR model.'' We 
would note that this modification would apply to both beneficiary-
identifiable claims data (line- and summary-level) and aggregate 
regional data that was discussed earlier in section III.C.4. of this 
final rule. We would also note that, because we are delaying our start 
date from January 1 to April 1, 2016, we will be providing upon request 
and in accordance with the HIPAA Privacy Rule, claims data for episodes 
that began on or after April 1, 2016 (rather than January 1, 2016) and 
ended on or before December 31. In subsequent years, data for each 
performance year would reflect episodes that began on or after January 
1 of that year and ended on or before December 31 of that year. 
Further, in our proposed rule, we had proposed to make up to six 
quarters of data available to participating hospital. We wish to 
clarify that, in order to make these data most meaningful to 
participating hospitals, we plan to synchronize the availability of 
these data with the annual payment reconciliation process, which will 
occur in the second quarter of the year following the performance year. 
For example, these data could then represent four quarters for the 
first year and five quarters thereafter.
    Comment: Commenters requested that data be made available 
automatically without a specific request for the data. These commenters 
typically pointed to the potential for additional administrative burden 
associated with requesting the data. As an alternative, commenters 
suggested that hospitals receive data upon acceptance or subscribe to 
receive data for the duration of the model. A commenter suggested that 
CMS establish a data delivery sign-up process under which hospitals can 
elect to receive beneficiary claims data only, summary data only, or 
both beneficiary claims and summary data on an ongoing basis. Under 
this system, hospitals could change their election at any point during 
the model as they develop data handling and analytical capability. 
Another commenter suggested that CMS make data available through secure 
portals for providers (or their designees) to access.
    Response: We wish to limit administrative burden for hospitals 
participating in the model and wish to clarify that while we will make 
data

[[Page 73513]]

available to hospitals only upon request, hospitals would be able to 
make a single request for these data at the start of the model that 
would make data available to them for the duration of their 
participation or until they notify CMS that they no longer wish to 
receive these data. To be consistent with the HIPAA Privacy Rule's 
``minimum necessary'' standard, we will continue to make data available 
only in response to a request.
    Final Decision: After consideration of the public comments we 
received, we are modifying our proposal at Sec.  510.300 (d) to no 
longer limit the availability of updated data to a frequency ``no more 
often than once a quarter'' to instead ``no less frequently than on a 
quarterly basis'' with the goal of making these data available as 
frequently as on a monthly basis if practicable. We also clarify that 
in order to receive data during their participation in the model, a 
hospital need only make a single initial request rather than multiple 
periodic requests.
6. Legal Permission To Share Beneficiary-Identifiable Data
    As stated in our proposed rule, we recognize that there are a 
number of issues and sensitivities surrounding the disclosure of 
beneficiary-identifiable health information, and note that a number of 
laws place constraints on sharing individually identifiable health 
information. For example, section 1106 of the Act bars the disclosure 
of information collected under the Act without consent unless a law 
(statute or regulation) permits for the disclosure. In this instance, 
the HIPAA Privacy Rule permits this proposed disclosure of individually 
identifiable health information by us.
    We proposed to make participant hospitals financially responsible 
for services that may have occurred outside of the hospital during the 
90-day post-discharge period. Although we expect hospitals to be 
actively engaged in post-discharge planning and other care during the 
90-day post-discharge period for beneficiaries receiving LEJRs, as 
discussed in section III.A. of the proposed rule, we stated our belief 
that it was necessary for the purposes of the CJR model to provide 
participant hospitals with beneficiary-level claims data, either in 
summary or line-level claim formats for a 3-year historical period as 
well as on a quarterly basis during the performance period. We believe 
that these data constitute the minimum information necessary to enable 
the participant hospital to understand spending patterns during the 
episode, appropriately coordinate care, and target care strategies 
toward individual beneficiaries furnished care by the participant 
hospital and other providers and suppliers.
    Under the HIPAA Privacy Rule, covered entities (defined as health 
care plans, providers that conduct covered transactions, including 
hospitals, and health care clearinghouses) are barred from using or 
disclosing individually identifiable health information (called 
``protected health information'' or PHI) in a manner that is not 
explicitly permitted or required under the HIPAA Privacy Rule. The 
Medicare FFS program, a ``health plan'' function of the Department, is 
subject to the HIPAA Privacy Rule limitations on the disclosure of PHI. 
The hospitals and other Medicare providers and suppliers are also 
covered entities, provided they are health care providers as defined by 
45 CFR 160.103 and they conduct (or someone on their behalf conducts) 
one or more HIPAA standard transactions electronically, such as for 
claims transactions. In light of these relationships, we believe that 
the proposed disclosure of the beneficiary claims data for an acute 
inpatient stay plus 90-day post-discharge episode where the anchor 
diagnosis at discharge was MS-DRG 469 or 470 would be permitted by the 
HIPAA Privacy Rule under the provisions that permit disclosures of PHI 
for ``health care operations'' purposes. Under those provisions, a 
covered entity is permitted to disclose PHI to another covered entity 
for the recipient's health care operations purposes if both covered 
entities have or had a relationship with the subject of the PHI to be 
disclosed, the PHI pertains to that relationship, and the recipient 
will use the PHI for a ``health care operations'' function that falls 
within the first two paragraphs of the definition of ``health care 
operations'' in the HIPAA Privacy Rule (45 CFR 164.506(c)(4)).
    The first paragraph of the definition of health care operations 
includes ``conducting quality assessment and improvement activities, 
including outcomes evaluation and development of clinical guidelines,'' 
and ``population-based activities relating to improving health or 
reducing health costs, protocol development, case management and care 
coordination'' (45 CFR 164.501).
    Under our proposal, hospitals would be using the data on their 
patients to evaluate the performance of the hospital and other 
providers and suppliers that furnished services to the patient, conduct 
quality assessment and improvement activities, and conduct population-
based activities relating to improved health for their patients. When 
done by or on behalf of a covered entity, these are covered functions 
and activities that would qualify as ``health care operations'' under 
the first and second paragraphs of the definition of health care 
operations at 45 CFR 164.501. Hence, as previously discussed, we 
believe that this provision is extensive enough to cover the uses we 
would expect a participant hospital to make of the beneficiary-
identifiable data and would be permissible under the HIPAA Privacy 
Rule. Moreover, our proposed disclosures would be made only to HIPAA 
covered entities that have (or had) a relationship with the subject of 
the information, the information we would disclose would pertain to 
such relationship, and those disclosures would be for purposes listed 
in the first two paragraphs of the definition of ``health care 
operations.''
    When using or disclosing PHI, or when requesting this information 
from another covered entity, covered entities must make ``reasonable 
efforts to limit'' the information that is used, disclosed or requested 
the ``minimum necessary'' to accomplish the intended purpose of the 
use, disclosure or request (45 CFR 164.502(b)). We believe that the 
provision of the proposed data elements listed previously would 
constitute the minimum data necessary to accomplish the CJR model goals 
of the participant hospital.
    The Privacy Act of 1974 also places limits on agency data 
disclosures. The Privacy Act applies when the federal government 
maintains a system of records by which information about individuals is 
retrieved by use of the individual's personal identifiers (names, 
Social Security numbers, or any other codes or identifiers that are 
assigned to the individual). The Privacy Act prohibits disclosure of 
information from a system of records to any third party without the 
prior written consent of the individual to whom the records apply (5 
U.S.C. 552a(b)).
    ``Routine uses'' are an exception to this general principle. A 
routine use is a disclosure outside of the agency that is compatible 
with the purpose for which the data was collected. Routine uses are 
established by means of a publication in the Federal Register about the 
applicable system of records describing to whom the disclosure will be 
made and the purpose for the disclosure. We believe that the proposed 
data disclosures are consistent with the purpose for which the data 
discussed in the proposed rule was collected and may be disclosed in 
accordance with the routine uses applicable to those records.
    Notwithstanding these exceptions, in the proposed rule, we stated 
our belief

[[Page 73514]]

that it would be appropriate to provide some form of notice to Medicare 
beneficiaries about sharing these data. Based on our experiences with 
data sharing in other CMS programs and models, we proposed a strategy 
for notifying beneficiaries of claims data sharing in the proposed 
rule, and in order to provide meaningful beneficiary choice over claims 
data sharing with the participant hospitals in CJR. We considered both 
``opt-in'' and ``opt-out'' options for beneficiaries with respect to 
data sharing in CJR. In our proposed rule, we noted that an advantage 
of an opt-in method was that consumers have consistently expressed a 
desire that their consent should be sought before their health 
information may be shared (Schneider, S. et al. ``Consumer Engagement 
in Developing Electronic Health Information System.'' Prepared for: 
Agency for Healthcare Research and Quality, July 2009, at 16. Available 
at: https://healthit.ahrq.gov/ahrq-funded-projects/consumer-engagement-developing-electronic-health-information-systems).
    In the proposed rule, we also noted that an opt-out method has been 
used successfully in most systems of electronic exchange of information 
because it is significantly less burdensome on patients and providers 
while still providing an opportunity for patients to exercise control 
over their data. Thus, in our proposed rule, we proposed to use an 
``opt-out'' approach to provide beneficiaries with the opportunity to 
decline claims data sharing directly through 1-800-Medicare, rather 
than through the participant hospital. We also proposed to provide 
advance notification to all Medicare beneficiaries about the 
opportunity to decline claims data sharing with entities participating 
in CMS programs and models through CMS materials such as the Medicare & 
You Handbook. The Handbook would include information about the purpose 
of the model, describe the opportunity for participants to request 
beneficiary identifiable claims data for health care operations 
purposes, and provide instructions on how beneficiaries may decline 
claims data sharing by contacting CMS directly through 1-800-MEDICARE. 
The Handbook would also contain instructions on how a beneficiary may 
reverse his or her preference to decline claims data sharing by 
contacting 1-800-MEDICARE.
    In the proposed rule, we noted one advantage of these strategies 
was that 1-800-MEDICARE is a communication method to which 
beneficiaries have familiarity and broad exposure. It also has the 
capability for beneficiaries to use accessible alternative or 
appropriate assistive technology, if needed. Also, while many 
procedures in MS-DRGs 469 and 470 are planned in advance, some are 
emergent or unplanned procedures. Thus, asking the participant hospital 
to provide advance notification to the beneficiary, prior to the 
provision of services, may be inappropriate or impossible in certain 
circumstances. We indicated that we would continue to maintain a list 
of beneficiaries who have declined data sharing and ensure that their 
claims information is not included in the claims files shared with 
participants. Further, hospitals with patient portals or Blue 
Button[supreg] may have capability to garner patient input prior to 
discharge through a hospital intervention specific to patient and 
caregiver education, while also aiding the hospital to meet reporting 
requirements for other CMS programs, such as Meaningful Use under the 
EHR Incentive Program for Medicare Hospitals.
    Finally, we proposed that participant hospitals in CJR would only 
be allowed to request beneficiary-identifiable claims data for 
beneficiaries who: (1) Have been furnished a billable service by the 
participant hospital corresponding to the episode definitions for CJR; 
and (2) have not chosen to opt-out of claims data sharing. A 
beneficiary that chose to opt-out of claims data sharing would only be 
opting out of the data sharing portion of the model. The decision to 
opt-out would not otherwise limit CMS' use of the beneficiaries' data, 
whether the beneficiary can initiate an episode, inclusion in quality 
measures, or inclusion in reconciliation calculations. Where a 
beneficiary chose to opt-out of claims data sharing, our data 
contractor would maintain a list of all HICNs that choose to opt-out of 
data sharing. We would monitor whether participant hospitals continue 
to request data on beneficiaries who have opted out of having their 
data shared and do not intend to make such data available in response 
to CJR such a hospital's request.
    We requested comments on our proposals related to the provision of 
both aggregate and beneficiary-identifiable data to participant 
hospitals in CJR. We indicated that we were particularly interested in 
comments on the kinds and frequency of data that would be useful to 
hospitals, potential privacy and security issues, the implications for 
sharing protected health information with hospitals, and the use of a 
beneficiary opt-out, as opposed to an opt-in, to obtain beneficiary 
consent to the sharing of their information. We also requested comments 
on whether it would be helpful to provide any such system of notices, 
since Medicare claims information and other electronic information is 
already routinely shared for many other purposes among health care 
providers and insurers, and generally is subject to HIPAA protections. 
We also proposed where available, the exchange of CMS beneficiary data 
with the local electronic health information exchange, a system that 
allows doctors, nurses, pharmacists, other health care providers and 
patients to appropriately access and securely share a patient's vital 
medical information electronically in order to facilitate the hospitals 
ability to share timely patient data supporting improved patient 
referral, access, and care coordination across varied service settings.
    The following is a summary of the comments received and our 
responses.
    Comment: Several commenters requested that the range of providers 
with whom CMS shares data be expanded beyond participating hospitals, 
for example, to all CJR collaborators including physicians and PAC 
providers. A commenter suggested that hospitals should receive data, 
even if they were not in a participating MSA, in order to begin making 
improvements. Another commenter requested that researchers, 
entrepreneurs and/or health care consumers be provided data or a subset 
of these data. A commenter requested that a state be provided with the 
data provided to participating hospitals. This commenter noted that 
making these data available would assist the state in determining how 
such a payment model would work under their state Model. This commenter 
noted that the data would facilitate data-driven conversations with 
stakeholders around the state and assist in determining opportunities 
for improvement in their health care environment.
    Commenters expressed views that expanding the availability of data 
would enable collaborators to be in a better position to improve their 
performance and management of patient care as well as ensure that care 
decisions are driven by patient needs rather than the potential 
financial risk of the hospital.
    Response: We understand commenters' desire for us to expand the 
scope of entities that would receive beneficiary-identifiable claims 
data. However, we believe it is neither appropriate nor do we have the 
authority to expand the availability of these data beyond what we 
proposed. As indicated earlier, there are significant sensitivities and 
constraints

[[Page 73515]]

on our ability to make beneficiary-identifiable data available. We 
proposed to make these data available to hospitals participating in the 
model in recognition of and in compliance with these sensitivities and 
constraints. For example, we proposed to make these data available to 
hospitals as ``covered entities'' that had a relationship with a 
beneficiary under the HIPAA Privacy Rule provision that permits the 
disclosure of this information for ``health care operations'' purposes. 
Accordingly, requests for data from entities that are not participating 
in the model would not meet the required standards to receive these 
data. Thus, we do not believe that we can make data available under the 
model to outside entities such as researchers or states that might wish 
access to these data.
    In the case of providers and suppliers (for example, physicians, 
PAC providers, etc.) that are collaborators with hospitals 
participating in the model, those providers and suppliers might be 
eligible to receive data under HIPAA provided that they had a 
relationship with the beneficiary. However, we do not believe it is 
appropriate for CMS to provide collaborators these data because 
hospitals are the entities designated under the model to assume risk 
and responsibility for a beneficiary's episode of care under the model. 
Accordingly, as the responsible entity (and as a covered entity under 
HIPAA), we believe that hospitals should decide what data they need to 
manage care and care processes with their collaborators and what data 
they may or may not wish to make available to those collaborators 
provided they are in compliance with the HIPAA Privacy Rule.
    Comment: Commenters opposed our proposal to allow beneficiaries to 
opt out of having their data shared. Commenters pointed to difficulty 
in effectively managing care and improving outcomes for these 
beneficiaries in the absence of data. A commenter noted that when a 
hospital's episode volume is small, the impact of a single episode can 
have more significant financial consequences. Further, they expressed 
the view that access to complete data is important during the 
reconciliation process in order to validate changes in savings and 
gainsharing payments. A commenter noted that while beneficiaries can 
decline to have their data shared under the Shared Savings Program, few 
have elected this option. (We would note that in our December 2014 
proposed rule for the Shared Savings Program (79 FR 72788), we 
indicated that approximately two percent of beneficiaries had declined 
to have their data shared.) The commenter also expressed the view that 
CMS was under no legal obligation to offer a data sharing opt out to 
beneficiaries and that the conditions for receiving data and potential 
criminal penalties should suffice to discourage misuse of the data. 
Some commenters pointed to other CMS programs and models where 
beneficiaries cannot opt out of having their data shared, for example, 
BPCI and the Hospital Readmissions Reduction Program (HRRP).
    Some commenters suggested that CMS exclude from the model those 
beneficiaries who elect not to have their data shared. Another 
commenter recommended that CMS monitor the frequency with which 
beneficiaries opt out of sharing data and, if it reaches a certain 
threshold for a CJR participant, exclude those beneficiaries from 
payment calculations. Further, they requested that CMS seek stakeholder 
input on how to prevent providers from being disadvantaged by lack of 
data as well as the appropriate thresholds for excluding beneficiaries 
when data opt out has reached a certain level.
    Response: We appreciate the desire among hospitals and other 
providers to have complete information on their assigned beneficiaries 
included in the CJR model. While in our proposed rule (80 FR41198), we 
stated our belief that it would be appropriate to provide some form of 
notice to Medicare beneficiaries about sharing their data, we agree 
with comments noting that we are not required by law to offer 
beneficiaries the choice to opt out of having their personal 
information shared with hospitals participating in the CJR model. 
Rather, the HIPAA Privacy Rule provides beneficiaries a right to 
request restrictions on the use of their data, but a covered entity, 
which includes the Medicare FFS program or a hospital participating in 
the model, may or may not choose to grant the requested restriction. We 
also concur with the comment that CMS does not offer beneficiaries the 
choice to opt out of having their data shared under either BPCI (see 
https://innovation.cms.gov/Files/x/BPCI_Model2Background.pdf, or 
https://innovation.cms.gov/Files/slides/BPCI-Overview2-4.pdf) or HRRP 
(see Sec.  412.154(f)).
    In consideration of the comments we received and our experience 
with programs and models such as BPCI, we have decided to provide 
participating hospitals with as complete data on their beneficiaries as 
is possible under the law. We believe that making these data available 
will enhance hospitals' ability to identify existing care patterns that 
need to be changed or strengthened as well as the kinds of strategies 
needed to improve their care practices so that they can be most 
successful under the model. Thus, we have decided to not finalize our 
initial proposal to allow beneficiaries the choice to opt out of having 
their data shared at this time. We would note, however, that this does 
not preclude beneficiaries from exercising their right to request 
restrictions on the use of their data either with the participant 
hospital or with CMS, which administers the Medicare FFS program, by 
contacting 1-800-Medicare, through which they can speak with a customer 
service representative who can address their concern.
    Final Decision: We are not finalizing our proposal permitting 
beneficiaries the choice to opt out of having their beneficiary-
identifiable data shared. We will make these data available to 
participant hospitals, upon request and in accordance with the HIPAA 
Privacy Rule. We will not, however, be providing beneficiary-
identifiable data under this model to collaborators within the model or 
entities that are not participating in the model.
    Comment: Commenters encouraged CMS to ensure its contractors that 
are responsible for making data available to participants provide 
accurate and complete data within acceptable timeframes. A commenter 
suggested the creation of an ombudsman to serve as a conduit for 
complaints and determining whether a contractor should be subject to a 
penalty. Another commenter suggested that if data were not delivered to 
a participant within a given period (for example, 90 days after the end 
of a calendar quarter), then payments to the participant should be 
increased by some percentage (for example, 5 percent) during the 
following quarter. Similarly, we also received a number of comments 
related to data sharing but not with respect to the CJR model. For 
example, some commenters expressed concerns with the quality and 
challenges of using data provided under the BPCI model.
    Response: We appreciate the need for accurate, complete, and timely 
data and will work with our contractors to ensure they are achieving 
these goals according to the terms of their contracts. Likewise, 
consistent with the terms of their contracts, we will take appropriate 
corrective actions with contractors where performance falls short of 
expectations. While the model has not yet been implemented, we have no 
reason to expect that contractor performance should fall short of 
expectations and thus do not anticipate a need for a special ombudsman 
to address data complaints and assess

[[Page 73516]]

penalties. Moreover, given that the model is intended to encourage and 
reward participants for improving the efficiency and quality of care 
provided to beneficiaries undergoing LEJR procedures, we do not believe 
that it would be appropriate to increase payments to participants in 
response to less than satisfactory performance by administrative 
contractors, should it occur. Comments on data sharing under BPCI or 
other models or programs are outside the scope of this rule and we will 
not be addressing them.
    Final Decision: In summary, we are finalizing our proposal at Sec.  
510.300(d) to make available to participant hospitals, through the most 
appropriate means, data that CMS determines may be useful to 
participant hospitals. We are finalizing our proposal to exclude 
information that is subject to the regulations governing the 
confidentiality of alcohol and drug abuse patient records (42 CFR part 
2) from any beneficiary identifiable claims data shared with a 
hospital. We are finalizing our proposal to make 3 years of baseline 
data available to hospitals and note our intent to make these data 
available prior to the April 1, 2016 start date. We are modifying our 
proposal at Sec.  510.300 (d) to no longer limit the availability of 
updated data to a frequency no more often than once a quarter to ``no 
less frequently than on a quarterly basis''. We also clarify that in 
order to receive data during their participation in the model, a 
hospital need only make a single rather than multiple periodic 
requests. We are not finalizing our proposal permitting beneficiaries 
the opportunity to decline having their beneficiary-identifiable data 
shared. We will make these data available to participant hospitals, 
upon request and in accordance with the HIPAA Privacy Rule. However, 
under the CJR model, we will not be providing these data to 
collaborators within the model or entities that are not participating 
in the model.

F. Monitoring and Beneficiary Protection

1. Introduction and Summary
    We proposed the CJR model as we believe it is an opportunity to 
improve the quality of care and that the policies of the model support 
making care more easily accessible to consumers when and where they 
need it, increasing consumer engagement and thereby informing consumer 
choices. For example, under this model we proposed certain waivers that 
would offer participant hospitals or their collaborators additional 
flexibilities with respect to furnishing telehealth services, post-
discharge home visits, and care in SNFs, as discussed in section 
III.C.11. of this final rule. We believe that this model will improve 
beneficiary access and outcomes. Conversely, we do note that these same 
opportunities could be used to try to steer beneficiaries into lower 
cost services without an appropriate emphasis on maintaining or 
increasing quality. We direct readers to sections III.C.5. and III.D. 
of this final rule for discussion of the methodology for incorporating 
quality into the payment structure and the measures utilized for this 
model.
    We believe that existing Medicare provisions can be effective in 
protecting beneficiary freedom of choice and access to appropriate care 
under the CJR model. However, because the CJR model is designed to 
promote efficiencies in the delivery of all care associated with LEJR 
procedures, providers may seek greater control over the continuum of 
care and, in some cases, could attempt to direct beneficiaries into 
care pathways that save money at the expense of beneficiary choice or 
even beneficiary outcomes. As such, we acknowledge that some additional 
safeguards may be necessary under the CJR model as providers and 
suppliers are simultaneously seeking opportunities to decrease costs 
and utilization. We believe that it is important to consider any 
possibility of adverse consequences to patients and to ensure that 
sufficient controls are in place to protect Medicare beneficiaries 
receiving LEJR related services under the CJR model.
2. Beneficiary Choice and Beneficiary Notification
    We have proposed that hospitals in selected geographic areas will 
be required to participate in the model, and that individual 
beneficiaries will not be able to opt out of the CJR model when they 
receive care from a participant hospital in the model. We stated our 
belief that it is not appropriate or consistent with other Medicare 
programs to allow patients to opt out of a payment system that is 
unique to a particular geographic area. For example, the state of 
Maryland has a unique payment system under Medicare, but that payment 
system does not create an alternative care delivery system, nor does it 
in any way impact beneficiary decisions. We also stated our belief that 
an inability to opt out of a payment system does not limit beneficiary 
choice as all covered Medicare services remain available under the 
model. We stated that we did not believe that an ability to opt out of 
the payment system was germane to beneficiary decisions because this 
model does not change beneficiary cost-sharing. We also stated our 
belief that full notification and disclosure of the payment model and 
its possible implications is critical for beneficiary understanding and 
protection, given that under all payment systems it is important to 
create safeguards for beneficiaries to ensure that care recommendations 
are based on clinical needs and not inappropriate cost savings. It is 
also important for beneficiaries to know that they can raise any 
concerns with their physicians, with 1-800-MEDICARE, or with their 
local QIOs.
    This model does not limit the ability to choose among Medicare 
providers or the range of services available to the beneficiary. 
Beneficiaries may continue to choose any Medicare participating 
provider, or any physician or practitioner who has opted out of 
Medicare, with the same costs, copayments and responsibilities as they 
have with other Medicare services regardless of whether the provider or 
supplier is a participant hospital or has entered into a sharing 
arrangement with a participant hospital. Physicians and hospitals may 
identify and recommend ``preferred providers,'' a term used to include 
both providers and suppliers, which may include but are not limited to 
CJR collaborators with sharing arrangements with the participating 
hospital, as long as such recommendations do not result in violations 
of current laws or regulations. However, participant hospitals may not 
restrict beneficiaries to any such list of preferred or recommended 
providers/suppliers and must clearly advise beneficiaries that their 
choices are not constrained. Moreover, hospitals may not charge any CJR 
collaborator a fee to be included on any list of preferred providers or 
suppliers, nor may the hospital accept such payments, which would be 
considered to be outside the realm of risk-sharing agreements. Thus, 
this proposed payment model does not create any restriction of 
beneficiary freedom to choose providers and suppliers, including 
surgeons, hospitals, PAC or any other providers or suppliers.
    As participant hospitals redesign care pathways, it may be 
difficult for providers and suppliers to sort individuals based on 
health care insurance and to treat them differently. We anticipate that 
care pathway redesign occurring in response to the model will increase 
coordination of care, improve the quality of care, and decrease cost 
for all patients, not just for Medicare beneficiaries. This anticipated

[[Page 73517]]

change in the delivery of care to all patients may further promote 
consistent treatment of all beneficiaries.
    We stated our belief that beneficiary notification and engagement 
is essential because there will be a change in the way participating 
hospitals are paid. We stated our belief that appropriate beneficiary 
notification should explain the model, advise patients of both their 
clinical needs and their care delivery choices, and should clearly 
specify that any non-hospital provider or supplier holding a risk-
sharing agreement with the hospital should be identified to the 
beneficiary as a ``financial partner of the hospital for the purposes 
of LEJR services.'' These policies seek to enhance beneficiaries' 
understanding of their care, improve their ability to share in the 
decision making, and ensure that they have the opportunity to consider 
competing benefits even as they are stated with cost-saving 
recommendations. We stated our belief that appropriate beneficiary 
notification should do all of the following:
     Explain the model and how it will or will not impact their 
care.
     Inform patients that they retain freedom of choice to 
choose providers and services.
     Explain how patients can access care records and claims 
data through an available patient portal and through sharing access to 
caregivers to their Blue Button[supreg] electronic health information.
     Advise patients that all standard Medicare beneficiary 
protections remain in place. These include the ability to report 
concerns of substandard care to QIOs and 1-800-MEDICARE.
    After carefully considering the appropriate timing and 
circumstances for the necessary beneficiary notification, we proposed 
in the preamble that participating hospitals must require all providers 
and suppliers who execute a sharing arrangement with a participant 
hospital to share certain notification materials, to be developed or 
approved by CMS, that detail this proposed payment model before they 
order an admission for joint replacement for a Medicare FFS patient who 
would be included under the model. Participant hospitals must require 
this notification as a condition of any sharing arrangement. We also 
proposed in the preamble that where a participant hospital does not 
have sharing arrangements with providers or suppliers that furnish 
services to beneficiaries during a CJR episode of care, or where the 
admission for joint replacement for a Medicare FFS patient who would be 
included under the model was ordered by a physician who does not have a 
sharing arrangement, the beneficiary notification materials must be 
provided to the beneficiary by the participant hospital. However, we 
proposed text regulations that would require this notification by the 
hospital in all instances, a requirement we will keep in this final 
rule. The purpose of this proposed policy is to ensure that all 
beneficiaries that initiate a CJR episode receive the beneficiary 
notification materials, and that they receive such materials as early 
as possible. We stated our belief that this proposal targets 
beneficiaries for whom information is relevant, and increases the 
likelihood that patients will become engaged and seek to understand the 
model and its potential impact on their care.
    We noted that beneficiaries are accustomed to receiving similar 
notices of rights and obligations from healthcare providers prior to 
the start of inpatient care. However, we also considered that this 
information might be best provided by hospitals at the point of 
admission for all beneficiaries, as hospitals provide other information 
concerning patient rights and responsibilities at that time. We invited 
comment on ways in which the timing and source of beneficiary 
notification could best serve the needs of beneficiaries without 
creating unnecessary administrative work for providers. We stated our 
belief that this notification is an important safeguard to help ensure 
that beneficiaries in the model receive all medically necessary 
services, but it is also an important clinical opportunity to better 
engage beneficiaries in defining their goals and preferences as they 
share in the planning of their care.
    The following is a summary of the comments received and our 
responses.
    Comment: Some commenters requested clarification as to the meaning 
of our statement in the proposed rule that beneficiaries could not 
``opt out'' of the model. Others were concerned that this could 
restrict beneficiary choice. Several commenters expressed an opinion 
that beneficiaries should be able to opt out of the CJR model if they 
believed that it might result in a less than optimum outcome.
    Response: In proposing that beneficiaries are not able to ``opt 
out'' of the CJR model, we meant that beneficiaries are not able to 
``opt out'' of having their care--when furnished in a CJR episode--paid 
for under the bundled payment methodology. This does not mean that 
their right to choose or decline otherwise covered Medicare items and 
services is limited. CJR is a test of a new payment methodology, and as 
such, it is similar in many respects to other payment methodologies 
that already exist in Medicare, such as the hospital IPPS. For example, 
payment under the IPPS is a bundled payment but does not create new 
coverage limits for services contained within the bundle. This model 
will test changes to how we pay for care, but like Medicare payment 
systems, it neither defines nor limits coverage, nor limits beneficiary 
choices to any specific covered services. Providers may be influenced 
by the CJR payment model, but in our view this would be similar to how 
they may be influenced by other payment methodologies in Medicare. In 
both cases, providers are expected not to treat Medicare beneficiaries 
differently from other patients based on differences in Medicare 
payment. Moreover, the safeguards discussed in this final rule exist to 
ensure that the payment structure does not disadvantage Medicare 
beneficiaries. We note that within traditional FFS Medicare we do not 
allow beneficiaries to opt out of any Medicare payment systems as 
payment systems exist to ensure appropriate payments for similar 
services across beneficiaries and across providers. Furthermore, 
because beneficiary cost sharing will be unchanged under this model, it 
will not have a direct financial effect on beneficiaries and therefore 
minimizes any impacts on beneficiary freedom of choice.
    Comment: Commenters questioned whether hospitals should be allowed 
to maintain lists of preferred providers and suppliers. They expressed 
many concerns about the tradeoffs between beneficiary choice and the 
ability of the participant hospital to steer, direct, or compel 
beneficiaries into certain paths or to certain providers and suppliers. 
The more common sentiment was that CMS should allow hospitals to 
clearly identify their clinically integrated, preferred partners and 
promote these relationships to patients as a way of promoting their 
care redesign efforts. Commenters expressing this view stated that CMS 
should allow hospitals to differentiate between preferred and non-
preferred PAC providers and suppliers, with hospitals determining the 
providers and suppliers who were in each category. This situation was 
described as a ``network'' of preferred providers.
    Other commenters believed that hospitals should be required to 
define criteria for inclusion in a ``preferred network'' based in whole 
or in part on non-financial criteria such as quality metrics, or that 
hospitals should define and publish the criteria that they use. Other 
commenters believed that hospitals should be required to offer the same 
gainsharing contracts to all willing providers or suppliers. Other

[[Page 73518]]

commenters pointed to section 1861(ee)(2)(H) of the Act, which states 
that hospitals must ``not specify or otherwise limit the qualified 
provider which may provide post-hospital home health services, and 
identify any entity to whom the individual is referred in which the 
hospital has a disclosable financial interest or which has such an 
interest in the hospital.'' These commenters believe that the Act 
precludes hospitals from establishing and promoting networks under any 
circumstances.
    Commenters recommended that the Secretary establish minimum 
criteria such as quality of care, health outcomes, price, 
accessibility, willingness to work together on evidence-based 
protocols, and patient experience of care, and that CMS should exercise 
caution if it permits the recommendation of specific providers, given 
concerns that the hospital may not have an adequate understanding of 
the difference between providers or provider types or that the hospital 
may drive patients to ``low cost'' providers in order to retain a 
greater share of the savings while putting beneficiaries at clinical 
risk by potentially stinting on care. However, commenters noted that 
hospitals must be able to limit the options stated to patients because 
the hospital will be financially responsible for costs in the episode.
    Response: We agree that hospitals should be allowed to identify 
preferred providers and suppliers. We believe, as we stated in our 
proposed rule, that there are ways to balance beneficiary freedom of 
choice with the ability of hospitals to leverage efficiencies and cost 
savings that may occur through the use of certain providers/suppliers. 
On the one hand, we proposed that hospitals could recommend certain 
providers/suppliers, including providers/suppliers who are CJR 
collaborators. On the other hand, we proposed that hospitals could not 
limit beneficiary choice, must inform beneficiaries of all available 
providers/suppliers, must inform beneficiaries that their choices are 
not limited to preferred providers/suppliers, and must inform 
beneficiaries of the mechanisms by which they may file concerns, 
complaints or grievances. We do not believe that it is necessary to 
require hospitals to publicize or standardize their preferred provider/
supplier selection criteria or release details of their sharing 
arrangements, as we believe that our proposal, which we are finalizing 
in this final rule, sufficiently protects beneficiary access while 
providing the necessary flexibility to hospitals to leverage their 
relationships with efficient providers and suppliers.
    We believe that allowing hospitals to disclose those providers and 
suppliers who best contribute to improved efficiency and better 
outcomes does not limit beneficiary choice, provided that beneficiaries 
are fully informed of any financial dealings that could create a 
conflict of interest. We therefore believe that identifying these 
preferred providers/suppliers is consistent with section 1861(ee)(2)(H) 
of the Act, as it does not specify or limit qualified providers/
suppliers that may provide PAC, and we believe that our requirement 
that beneficiaries must be notified of financial arrangements is both 
consistent with and required by that section. We further believe that 
the proposed requirement to notify beneficiaries of all preferred and 
non-preferred PAC providers/suppliers, coupled with the requirement to 
identify CJR collaborators that we are finalizing in this rule, 
provides beneficiaries with sufficient information to allow them to 
avoid improper steering or referral.
    Comment: Commenters expressed concern that if hospitals were 
allowed to maintain and promote a network of preferred providers/
suppliers, additional steps were needed to ensure that beneficiaries 
had access to the entire spectrum of PAC providers. Some commenters 
suggested that hospitals should be required to ensure that they have an 
adequate network of PAC providers and have partnerships with a full 
range of PAC providers. Some commenters also believed that hospitals 
should be required to document that the full range of PAC providers was 
offered, documenting conversations with patients about all treatment 
options, and requiring that discussions between the patient and 
unbiased care team members should all be on record.
    Response: We do not agree with these recommendations from 
commenters. With respect to the extent of the network, we note that 
different communities have different assortments of PAC providers/
suppliers that meet the unique needs of that community. Requiring a 
full range of PAC providers/suppliers in a network could disrupt 
established patterns of care in a manner that we do not intend and is 
not necessary for success under the model, and thus we decline to adopt 
such a requirement. With respect to specific documentation requirements 
suggested by commenters, although we agree with the intent of ensuring 
that hospitals provide full disclosures to beneficiaries, we do not 
believe that additional regulatory requirements are necessary as 
hospitals are best positioned to determine the ways in which they can 
use their existing medical records and discharge planning to document 
compliance with all applicable Medicare beneficiary notification 
requirements, including the requirements we are finalizing in this 
rule, without creating a new administrative burden, which could be 
extensive if specific conversations were required to be documented.
    Comment: Many commenters commented on the timing, content and form 
of the initial beneficiary notification of the model. Most commenters 
believed that notification at the point of admission was too late and 
was not occurring at a time when beneficiaries could process and act on 
the information. They recommended that notification should be provided 
at least a week prior to admission or during the individual's 
consultation with their physician, prior to surgery. A commenter 
suggested that basic fact sheets should be made available to 
beneficiaries in physician offices. Another commenter believed that we 
should require CJR hospitals to meet with prospective beneficiaries 
prior to admission so that this notification could be delivered and 
discussed.
    With respect to content, some commenters believed that the 
notification should be highly standardized, based on a standard or 
model notice created by CMS, or even that CMS should create and provide 
a single notice to all beneficiaries. Other commenters believed that 
the notice should reflect specifics of the PAC specific network or of 
the patient, informing beneficiaries of differences in capacity and 
patient incurred costs among the various settings or explaining the 
patient's ability to choose their own PAC provider/supplier, even if 
the hospital is not satisfied with the quality of the provider/supplier 
that is chosen. Finally, a commenter believed that the model should be 
considered to be human experimentation and should follow human subject 
notice requirements.
    With respect to form, several commenters opined that beneficiary 
notification should be permitted on an electronic basis, with proof of 
receipt by the beneficiary rather than a paper process that requires a 
beneficiary's signature.
    Response: We believed that we had identified the essential elements 
in our proposed rule, and that any notice that was compliant with those 
elements would provide sufficient notice to the beneficiary. We 
acknowledge that this model will be collecting information

[[Page 73519]]

about humans as we monitor the impact of this payment model on the 
quality and efficiency of the delivery of patient care, but we further 
note that, under the public benefit exemption at 45 CFR 46.101(b)(5), 
this would qualify for exemption from the HHS human subjects regulatory 
requirements, and is therefore not required to comply with those 
requirements. However, we agree with commenters that additional 
specific details regarding the notice requirements and a model notice 
will improve the consistency of the notification. We discuss those 
additional requirements in the following paragraphs and we will 
incorporate them in a model notice or model notices which we will 
produce. We will produce a model notice or model notices, or versions 
of a model notice, that will satisfy our notice requirements for 
physicians who are CJR collaborators, for PAC providers and suppliers 
who are involved in a sharing arrangement, and for participant 
hospitals, who are required to provide beneficiaries with general 
notice of the CJR model.
    With respect to timing, we proposed that beneficiaries should be 
notified at the point of admission because it is hospitals that are 
participants in the model, not physicians. We do not agree that the 
point of admission is too late, noting that the point of admission is 
when notice of other patient rights regarding the hospital stay are 
required by Medicare. However, we acknowledge that earlier notification 
of the beneficiary is desirable. We concur that a beneficiary fact 
sheet and/or a standard notification form for voluntary distribution in 
the physician's office would be helpful, and that physicians should be 
encouraged to explain the model to prospective patients as early as 
possible. In addition to the model notification forms for hospitals, 
physicians, and PAC providers/suppliers that we will develop and 
publish prior to the start of the model, we will consider developing a 
model fact sheet as we develop educational materials, and we note that 
participant hospitals are not precluded from developing such fact 
sheets for the use of their medical staff. Furthermore, we agree that, 
in the limited case of physicians who have sharing arrangements with 
hospitals, we are modifying the regulations text from what we proposed 
to specify that hospitals must include in any physician sharing 
arrangement a condition under which the collaborating physician--(1) 
Agrees to notify the patient of the structure of the CJR model; (2) 
agrees to inform the patient that the physician is participating in a 
sharing arrangement; and (3) agrees to deliver that information at the 
time that a decision for surgery is made. We also will modify our 
proposal in response to concerns that more PAC-specific notice is 
necessary. In addition to this physician notification requirement, we 
will require notification of involvement in a sharing arrangement from 
any other providers and suppliers engaged in a sharing arrangement with 
a participant hospital, with that notice of involvement to be delivered 
before the first time a service related to the joint replacement, such 
as a PAC SNF stay, is furnished to the beneficiary by that entity. 
However, in response to comments to preserve participant hospitals' 
flexibility, as we previously discussed we are not finalizing our 
proposal that these notices would be approved by CMS, but we will 
instead develop one or more model notices that participant hospitals 
and others can use.
    With respect to form, we agree with commenters that written 
communication is not limited to paper, and we note that we did not 
propose a written signature requirement in regulation. We agree that 
electronic health records may be used to maintain documentary evidence 
of written communications, and we have not specified a specific 
mechanism by which proof of beneficiary notification must be 
maintained.
    Comment: Commenters were varied in their opinions regarding the 
requirements for the hospital to identify PAC providers/suppliers at 
the point of admission and/or the point of discharge planning. Many 
commenters believed that the hospital should be required to provide a 
list of all PAC providers. There was a concern that the CJR model may 
function like ACO networks, where it will be mandatory to tell 
beneficiaries which providers are in network, but it will not be 
mandatory to disclose out-of-network options. It was common, but not 
universal, for commenters to believe that the list could distinguish 
the providers included within a CJR participant hospital's provider 
network (preferred) from those not participating in the CJR model (not 
preferred), that is, which PAC providers are ``collaborators.'' Some 
commenters believed that financial arrangements should be disclosed, 
while others believed that non-financial arrangements should also be 
disclosed. Focusing on the list of collaborators, commenters suggested 
that the hospital identify all CJR collaborators and should further 
identify differences between CJR collaborators that may be important to 
beneficiaries, including such things as their geographic proximity.
    Response: Noting the wide range of comments, we believe that our 
proposed rule represents a middle position that adequately balances 
transparency and beneficiaries' need to know their full range of 
options with hospitals' desire to inform beneficiaries to which PAC 
providers/suppliers are most efficient and provide the highest quality 
care. We believe this is best accomplished by requiring hospitals to 
provide beneficiaries with a complete list of all PAC providers/
suppliers in the area but allowing them to identify ``preferred 
providers,'' that is, high-quality, efficient providers whom a 
participant hospital would prefer patients choose, on the basis of 
internal assessments of quality and cost. Because we recognize that 
there may be many high quality and efficient PAC providers/suppliers 
who do not enter into sharing arrangements, we do not believe that a 
hospital's list of preferred providers/suppliers must include only CJR 
Collaborators, nor do we believe that all CJR Collaborators must be 
considered to be preferred providers/suppliers. We do not believe that 
the details of sharing arrangements need to be disclosed, as those 
arrangements may be business-sensitive, but we do believe that the 
existence of any CJR gainsharing or other financial relationship with 
any physician or PAC provider must be disclosed. We recommend that 
hospitals be transparent in how preferred providers/suppliers are 
generally selected, and we note that policies that define the 
relationships between the participant hospital and the physicians and 
PAC providers/suppliers in its region must be consistent with 
applicable law, but we do not believe that the details of hospitals' 
internal business processes must be disclosed. However we do agree that 
additional notification as part of discharge planning is important. We 
will also modify our proposal in response to comments to add a patient-
specific financial notification at the point of discharge planning. We 
will require that a supplementary notification should be made available 
to beneficiaries, requiring that hospitals must, at the point of 
discussing PAC options, provide written notification to beneficiaries 
if the hospital makes any referrals for non-covered services during 
discharge planning. Specifically, hospitals shall be required to notify 
beneficiaries of any transfers to a SNF under circumstances in which 
the SNF stay will not be covered, and also notify the beneficiary of 
any other referral for PAC that the hospital knows or should

[[Page 73520]]

have known will not be covered by Medicare.
    Comment: Commenters requested that CMS provide additional 
information about what details must be included in the beneficiary 
notices, and stated that significant education of hospitals will be 
required. To promote facility compliance and avoid improper 
interpretations or incorrect assessments at audit, some commenters 
urged CMS to completely waive hospital discharge planning requirements 
that prohibit hospitals from specifying or otherwise limiting the 
information provided on post-hospital services. Other commenters 
recommended that we provide specific guidance on how to facilitate and 
operate within partnerships with PAC collaborators (whether a financial 
or simply a clinical partnership exists) while also complying with 
existing patient choice requirements. A commenter suggested that 
hospitals could continue to be required to--(1) Inform the patient or 
the patient's family of their freedom to choose among participating 
Medicare providers of post-hospital care services; (2) respect patient 
and family preferences when they are expressed; (3) present a complete 
list of qualified providers that are available to the patient; and (4) 
recommend high quality PAC providers with whom they have relationships 
(either financial and/or clinical) for the purpose of improving 
quality, efficiency or continuity of care.
    Response: We agree that additional guidance may be helpful and 
believe that, in addition to the discussions we have included in this 
preamble to our final rule, such information may best be provided as 
additional detail in the regulation text governing beneficiary 
notification and supplemented by published guidance and educational 
materials. We agree with commenters' suggestions of additional details 
that they believe should be specified in order to promote 
understanding, consistency and compliance. Therefore, we will modify 
the beneficiary notice requirements as recommended in comments, to 
require participant hospitals to--(1) Inform the patient or the 
patient's family of their freedom to choose among participating 
Medicare providers/suppliers of post-hospital care services; (2) 
respect patient and family preferences when they are expressed; and (3) 
present a complete list of qualified providers/suppliers that are 
available to the patient. We believe that these requirements were 
inherent in our proposal to require notice of all qualified providers/
suppliers but we acknowledge that the additional details may be 
helpful.
    We do not agree that a waiver of existing discharge planning 
requirements is necessary, and we discuss the specification of 
allowable and non-allowable financial arrangements in section III.C.10. 
of this proposed rule. However, we will also add additional details 
concerning financial arrangements to our notice requirements in order 
to protect beneficiaries while ensuring that hospitals, if desired, may 
recommend ``preferred providers,'' that is, high quality PAC providers/
suppliers with whom they have relationships (either financial and/or 
clinical) for the purpose of improving quality, efficiency, or 
continuity of care. Specifically, in order to address financial 
concerns deriving from potential conflicts of interest, we will specify 
that hospitals and collaborators must disclose the existence of sharing 
arrangements. In order to protect against situations which might expose 
beneficiaries to unexpected liability, we will also specify that 
hospitals must provide written notification of any non-covered services 
which are recommended or considered as part of discharge planning 
whenever a hospital knows or should have known that such services are 
non-covered.
    Comment: Commenters were concerned that it could be confusing to 
inform beneficiaries that any participating SNF could provide covered 
services if the 3-day stay rule was met, but that SNFs meriting 2 stars 
or less would not be covered under the 3-day waiver provisions. This 
was believed to be particularly problematic because individual star 
ratings can change frequently, making it difficult for hospitals to 
keep up with all current ratings. Commenters inquired whether they 
could limit the list of PAC providers stated to beneficiaries.
    Response: We do not agree that this is overly confusing as 
beneficiaries already understand that there are statutes and 
regulations that define the circumstances under which SNF stays are 
covered, for example, following a 3-day hospital stay. Moreover, we 
have stated that it is essential for beneficiary choice to ensure that 
beneficiaries are informed of all covered opportunities available to 
them, including PAC providers/suppliers considered by the hospital to 
be preferred as well as non-preferred. Since stays in SNFs that do not 
meet the conditions of the 3-day waiver would be covered by Medicare if 
they met the existing conditions for coverage (that is, the beneficiary 
has a qualifying 3-day hospital stay), these SNFs still must be 
included in any complete list of PAC providers. Providing the complete 
list is necessary to meet the requirements of section 1861(ee)(2)(H) of 
the Act, a requirement which we believe promotes beneficiary choice. 
However we do note that the star rating may be critical for the 
beneficiary to determine liability in the event that a beneficiary is 
discharged with less than a 3-day stay. We had proposed that cost-
sharing and quality information must be provided to beneficiaries where 
applicable and we agree with commenters who recommended that additional 
information about beneficiary liability could be provided. Therefore, 
we are modifying our requirement to notify the beneficiary of all 
covered PAC options by adding that this list of PAC options stated as 
part of discharge planning must be accompanied by a written statement 
that identifies any non-covered services to which the beneficiary may 
be referred. Specifically, in the event that the patient is discharged 
prior to completing a 3-day stay, the hospital will be required to 
clearly identify, in writing, any 1 or 2 star SNFs on the complete list 
of PAC providers provided to the beneficiary. In the event of a 
discharge prior to a 3-day stay, the list must also include a statement 
that the named beneficiary, having not completed a 3-day stay in the 
acute care hospital, would be entirely financially responsible for a 
stay at any of those 1 or 2 star SNFs.
    Final Decision: After consideration of the public comments 
received, we are finalizing our proposal to require that hospitals in 
the CJR model notify beneficiaries of the requirements surrounding the 
model at the point of admission to the hospital and we are modifying 
our proposal to add additional detail to the content, timing and form 
of our notification requirements in response to comments, as specified 
in this paragraph. We will continue to require participant hospitals to 
provide beneficiaries on admission with a general notice of the 
existence of the model and of certain beneficiary rights. We are 
requiring that, as discussed in the preamble to the proposed rule, 
participant hospitals must require as a condition of any sharing 
arrangement that the collaborators must notify beneficiaries of the 
existence of a sharing arrangement. We are modifying our regulations to 
specify that, in the case of physicians, this notification must occur 
at the point of the decision to proceed to surgery, or, in the case of 
other collaborators, prior to the furnishing of the first service 
provided by the

[[Page 73521]]

collaborator that is related to the joint replacement. We additionally 
are finalizing with modification our PAC notification requirements, 
specifying that participant hospitals as part of discharge planning 
must inform beneficiaries of all Medicare participating PAC providers/
suppliers in an area but may identify those providers/suppliers that 
the hospital considers to be preferred. To increase beneficiary 
awareness we are specifying that the participant hospital must also as 
part of this specific second notice inform the beneficiary of 
providers/suppliers with whom a sharing arrangement exists. We are 
further modifying the notification requirements to require participant 
hospitals to reference the most recently published CMS list of SNFs 
which qualify for the waiver of the 3-day rule. This modification is to 
specifically notify beneficiaries of their liability should they be 
discharged upon a less-than-3-day stay to a SNF that does not qualify 
for the waiver that we are finalizing for this model, and to notify the 
beneficiary of possible beneficiary liability if the hospital 
recommends or refers the beneficiary to any other services, which it 
knows or should have known to be non-covered services under Medicare. 
This latter notice is in addition to any ABN or other hospital notice 
of noncoverage that may be required under existing regulations.
3. Monitoring for Access to Care
    Given that participant hospitals would receive a reconciliation 
payment when they are able to reduce average costs per case and meet 
quality thresholds, they could have an incentive to avoid complex, high 
cost cases by referring them to nearby facilities or specialty referral 
centers. We intend to monitor the claims data from participant 
hospitals--for example, to compare a hospital's case mix relative to a 
pre-model historical baseline to determine whether complex patients are 
being systematically excluded. We will publish these data as part of 
the model evaluation to promote transparency and an understanding of 
the model's effects. We also proposed to continue to review and audit 
hospitals if we had reason to believe that they are compromising 
beneficiary access to care. For example, where claims analysis 
indicates an unusual pattern of referral to regional hospitals located 
outside of the model catchment area or a clinically unexplained 
increase or decrease in joint replacement surgery rates.
    The following is a summary of the comments received on monitoring 
for access to care, and our responses.
    Comment: Many commenters reported concerns related to ways in which 
the payment structure might adversely impact the services that were 
available to beneficiaries. Commenters also suggested a number of 
approaches to mitigate those general risks, such as increased risk 
adjustment, and increased quality measures in order to improve 
beneficiary protections. These comments are addressed in the preamble 
sections most closely concerned with the individual topics.
    Commenters raised a number of questions about determinations of 
medical necessity and their effect on access to care. A commenter, 
quoting our proposed rule in which we stated that gainsharing payments 
and alignment of payments must not induce collaborators to limit 
medically necessary services, requested that we articulate who will 
decide what is medically necessary and how this determination would be 
made. That commenter recommended that we encourage the use of treatment 
protocols based on objective criteria. Other commenters urged us to 
require CJR participant hospitals to demonstrate that they have 
appropriateness criteria in place to assess beneficiary need for joint 
replacement.
    Commenters had two competing concerns. First, they were concerned 
that the bundled payment created a risk of patient ``dumping,'' or 
inappropriately referring patients to other providers based on 
financial considerations. They were concerned that surgeons/hospitals 
will avoid complex/sicker patients not only to avoid the losses 
associated with expensive cases but also to avoid cases at risk for 
readmission. Similarly, they stated that hospitals will avoid lower 
socioeconomic patients unless there is a socioeconomic risk adjustment. 
Commenters suggested that these risks could be mitigated by adding 
specific, separate penalties for withholding care or steering patients 
inappropriately or rejecting patients entirely. These penalties should 
progress up to and include termination from Medicare.
    Second, commenters identified a risk of overutilization. These 
commenters believed that some physicians and hospitals will provide 
services to healthier patients who could benefit from less invasive 
treatments in order to improve their metrics, or increase volume to 
account for lost revenue, or treat healthier patients, which will 
result in adjustments to a hospital's patient mix. A commenter asserted 
that both influences are already in effect, with considerable 
overutilization of LEJR (based on regional variation) and also with 
some studies suggesting that ``only 1 in 10 patients needing LEJR are 
getting it.''
    Commenters also recommended other steps in addition to a general 
recommendation for an appropriateness (medical necessity) measure to 
gauge the appropriateness of care at the beginning of the episode. It 
was for this reason that commenters urged us to require CJR participant 
hospitals to demonstrate that they have appropriateness criteria in 
place to assess beneficiary need for joint replacement. Commenters 
urged CMS to monitor changes in utilization patterns and case mix as 
part of the evaluation, and to generally monitor whether barriers to 
patient access develop in MSAs participating in the CJR program, and to 
make necessary alterations to the model if complicated hip/knee 
replacement cases are found to be underserved.
    Response: We acknowledge that overutilization and underutilization 
are both potential issues related to access. We note that the usual 
tools employed by CMS to monitor and prevent overutilization all apply 
to the services delivered within the CJR model. These tools include 
data analysis, the process of tracking patterns of utilization and 
trends in the delivery of care, and medical review, a clinical audit 
process by which we verify that services paid by Medicare were 
reasonable and necessary in accordance with section 1862(a)(1)(A) of 
the Act. We believe that these tools as employed by the MACs and by the 
QIOs will be sufficient to check for the medical necessity of CJR 
services. We do not believe that it is necessary to impose a 
requirement that hospitals maintain specific appropriateness criteria. 
We note that there are a wide variety of criteria developed by national 
healthcare organizations, including providers and payers, and that a 
process that is appropriate for a large facility with many community 
physicians might not be workable in a smaller facility with a single 
LEJR surgeon. With respect to underutilization, we agree that it is 
important for us to monitor changes in utilization patterns and case 
mix, and to generally monitor whether barriers to patient access 
develop in MSAs participating in the CJR model. We note that this is 
encompassed by the evaluation process for the model, so we will be able 
to make necessary alterations to the model if complicated cases are 
found to be underserved. However, we do not at this time believe that 
specific requirements for medical necessity or utilization review are 
necessary, beyond those broad requirements which are set by the CoPs,

[[Page 73522]]

such as those at Sec.  482.30. We believe that the existing influences 
of reputation, care guidelines, QIO review, Joint Commission review, 
quality metrics, and our retrospective model evaluation are sufficient 
to ensure that beneficiary access to care is not impeded.
    We also agree with commenters that additional specific regulatory 
detail should be added to address the consequences of systemic 
underutilization. We proposed that participant hospitals would not be 
eligible for reconciliation payments if those payments are associated 
with actions that threaten beneficiary health, and we note that 
systemic instances of under-delivery of care threaten that health and 
therefore constitute a reason to withhold reconciliation payments. We 
also note that we have the authority to revoke provider enrollment in 
the Medicare program for cause, such as providing substandard care that 
places beneficiaries at risk that, is, by under-delivering care. As an 
intermediate step, we further note that we have additional options, 
such as requiring additional actions under a corrective action plan in 
order to avoid revocation. However, we reiterate that we do not believe 
such aggressive measures are necessary, as we believe that such 
concerns as reputation and patient outcomes provide sufficient 
motivation for most providers/suppliers.
    Comment: Commenters also identified concerns about inappropriate 
limitations of access to certain services due to network restrictions 
for beneficiaries who are appropriately undergoing a joint replacement. 
Some commenters believed that the current CJR proposal has the 
potential consequence of encouraging hospitals to select only the most 
``efficient'' or ``cost effective'' orthopedic surgeon to enter into 
sharing arrangements or to continue having admitting privileges. 
Hospitals might de-credential or restrict surgeons who treat expensive 
patients. Similar concerns exist for PAC providers; the model might 
encourage hospitals to limit access to small providers/suppliers, or 
encourage hospitals to buy small PAC providers and even physician 
practices. While integrated systems may lead to more coordinated care, 
consolidation may also lead to price increases and diminished quality 
as competition is reduced. Commenters believed that CMS should 
introduce a prohibition of any practice of excluding ``less efficient'' 
or ``less cost effective'' surgeons or PACs. Other commenters suggested 
that we should monitor activities involving distribution of payments to 
guard against unfair business practices and to promote a fair and 
equitable distribution of savings for all providers who are involved as 
collaborators.
    Response: While we recognize the concerns that higher quality is 
sometimes at odds with lower cost, we note that the purpose of this 
model is to encourage more efficient delivery of high quality care, 
that is, to reduce cost while maintaining or increasing quality. We 
believe that such factors as reputation and peer-reviewed practice 
guidelines work to ensure that hospitals and physicians will continue 
to provide quality services. We also believe that the antitrust laws 
help to prevent anti-competitive practices in the maintenance of 
hospital networks, allowing competition between network providers to 
promote high quality outcomes. While we believe that antitrust laws, 
anti-kickback provisions and other existing laws and regulations may 
help deter the business practices which concerned commenters, we agree 
that additional monitoring is prudent and will therefore monitor 
sharing arrangements and beneficiary and provider/supplier comments for 
any evidence of anticompetitive behavior.
    Comment: In addition to the previous commenters' concerns about 
opportunities for participant hospitals to restrict beneficiary access 
to specific providers, commenters were also concerned about 
opportunities for the under-delivery of care by providers the 
beneficiary did access, that is, underdelivery of care by the 
participant hospitals and their collaborators. This practice is often 
referred to as ``stinting.'' Commenters were concerned that the CJR 
model does not represent a balanced approach to improve quality while 
reducing cost. Overall, they believed that the use of Medicare spending 
per beneficiary scores as a key indicator will drive hospitals to low 
cost care at the expense of quality. Specific concerns were that 
patients may be directed away from more expensive PAC options (IRFs or 
SNFs, for example), it will discourage extensive therapy in the PAC 
environment even when warranted, less attention will be paid to such 
positive factors as prevention (for example, falls), pain management 
and overall outcomes, and readmissions may be avoided even when 
necessary. A commenter was also concerned that beneficiaries may be 
forced to attend in-network facilities rather than out-of-network 
facilities near their homes. To mitigate these concerns, commenters 
recommended that controls be put in place to ensure that sicker 
patients receive LEJR and appropriate higher intensity PAC, to ensure 
that collaborators do not reduce or limit medically necessary services 
to any beneficiary, and to ensure that physicians continue to select 
the devices, supplies and treatments that are in the best interest of 
the patients. They recommended a pre-model hospital review, that 
hospitals have the ability to deliver, or contract for, evidence-based 
care for the entire bundle of services, including the capacity to 
provide all levels of rehabilitation services, including people with 
disabilities or who may need intensive rehabilitation services and/or 
community supports. Finally, several commenters recommended that 
alternative payment options should be considered for otherwise 
expensive environments such as the IRF, SNF, and, in the case of 
outpatient surgery, the outpatient hospital or ambulatory surgical 
center.
    Response: We agree that commenters have accurately described 
possible risks, and we note that similar risks are inherent in all 
bundled payment models and systems. For example, commenters expressed 
similar concerns when DRGs were introduced in 1985, yet DRGs are now 
used in the established IPPS. After 30 years of use, we have not 
reported any evaluations establishing that the economic pressures to 
create efficiencies have compromised beneficiary care, so we do not 
expect different results with this model. Nonetheless, we agree that 
monitoring is necessary in order to further reduce these potential 
risks. However, we have consistently found that those traditional 
authorities available to the Secretary, previously discussed in their 
role to prevent the use of limited networks to avoid the delivery of 
necessary services, are adequate to provide a counterbalance to the 
economic incentives that could drive underdelivery of care. Therefore, 
we believe that we must use our existing oversight authority to monitor 
the risks of this payment model, just as we monitor the various risks 
inherent in all payment models and systems, but we do not believe that 
new controls are necessary which require specific incorporation into 
regulation, other than those which we proposed and we have now modified 
in response to comments.
    We do not believe that the additional controls are necessary 
because we have a number of established mechanisms by which we will 
monitor for evidence of the underdelivery of care, and by which we can 
react to and mitigate any identified problems. We will be monitoring 
data in the process of calculating quality metrics, and we have several 
reporting mechanisms, such as

[[Page 73523]]

1-800-MEDICARE. We monitor the quality of hospitals stays and surgical 
procedures through the QIO, we routinely review medical records in our 
claims audits, and we specifically investigate outcomes as part of our 
evaluations of demonstrations and payment and service delivery models. 
All of these processes create opportunities to identify potentially 
non-compliant providers/suppliers. Providers/suppliers who are 
investigated and found to be inappropriately denying care or diverting 
patients may be sanctioned using our existing authority, with penalties 
that may include participant hospital ineligibility for reconciliation 
payments, revocation from the Medicare program if patients are placed 
at risk by substandard care, or other applicable administrative 
actions.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to apply our existing 
authority to monitor for overutilization and underutilization of care 
under the CJR model. We are modifying our proposed policies for 
reconciliation payments at Sec.  510.410 to allow us to determine that 
a participant hospital is ineligible to receive or retain a 
reconciliation payment if the payment is found to be based in part on 
savings resulting from an inappropriate and systemic underdelivery of 
care.
4. Monitoring for Quality of Care
    Monitoring General Quality of Care: As we noted previously, in any 
payment system that promotes efficiencies of care delivery there may be 
opportunities to direct patients away from more expensive services at 
the expense of outcomes and quality. We believed that professionalism, 
the quality measures in the model, and clinical standards can be 
effective in preventing beneficiaries from being denied medically 
necessary care in the inpatient setting and in PAC settings during the 
90 days post-discharge. Accordingly, the potential for the denial of 
medically necessary care within the CJR model will not be greater than 
that which currently exists under IPPS. However, we also believe that 
we have the authority and responsibility to audit the medical records 
and claims of participating hospitals and their CJR collaborators in 
order to ensure that beneficiaries receive medically necessary 
services. We may also monitor agreements between participant hospitals 
and their CJR collaborators to ensure that such agreements do not 
result in the denial of medically necessary care or other program or 
patient abuse. We invited public comment on whether there are elements 
of the CJR model that would require additional beneficiary protection 
for the appropriate delivery of inpatient care, and if so, what types 
of monitoring or safeguards would be most appropriate.
    The following is a summary of the comments received on monitoring 
for quality of care, and our responses.
    Comment: Several commenters stated that CMS should ensure the 
safety and cost effectiveness of surgical implants used in the CJR 
model and that CMS should require that evidence-based purchasing be 
required in the CJR model. As these commenters were concerned that 
hospitals will avoid high cost devices, they urged CMS to put controls 
in place that protect patients against wholesale changes in device 
offerings of providers. A commenter suggested that we should consider 
prohibiting gainsharing altogether when tied to the use of less 
expensive and lower-utility devices but in any event that participating 
hospitals should be carefully monitored for the appropriateness of 
device choice for individual patients and surgeons.
    Response: We note that the CJR model is built around an inpatient 
admission. Under the IPPS, the cost of the device is already bundled 
into the payment for the hospital admission. Therefore, hospitals have 
long had incentives to use less expensive and lower utility devices as 
a way of maximizing their profit under IPPS. However, we have not 
identified any problems with the inappropriate use of inexpensive 
devices, so we believe that existing considerations, such as hospital 
and physician reputation, clinical standards, and incentives to 
maintain high quality outcomes, have been successful in driving the 
appropriate selection of devices. We do not believe that there are any 
significant new incentives to inappropriately use lower quality devices 
as the device remains packaged in the IPPS payment bundle. We believe 
that ongoing monitoring of the quality of devices and the selection of 
specific devices for specific beneficiaries is appropriate, but, given 
the success of our over 30 year experience with IPPS, we do not believe 
that additional programs need to be defined in regulation. However, we 
do expect that the focus on shared decision making and physician 
leadership, described in the following discussions, will further reduce 
any beneficiary risk.
    Comment: Commenters provided their views about the role of quality 
metrics in ensuring the quality of care as a counter to economic 
pressures. They expressed concerns about the design of the metrics, 
concerns that are discussed in the quality section of this rule, but 
they also expressed concerns that the quality metrics were not adequate 
protection against the delivery of poor quality care. Commenters were 
concerned that the proposed model does not include enough safeguards to 
substantially improve the care experience, and that reference to 
quality and outcomes were inadequately defined. Some commenters were 
also concerned that measurements were hospital-centric, with inadequate 
consideration of tools that assess such measures as patient functional 
status, a component that they believed tied closely to protections that 
promote improved beneficiary care. Commenters proposed that quality 
metrics should include functional requirements, pain management and 
patient experience, patient reported outcomes and other measures of the 
outcomes of the post[hyphen]acute care treatment. They also opined that 
the public reporting of quality measures would help empower consumers 
to make informed decisions.
    Response: We agree that there are opportunities to better employ 
quality metrics. However, we note that obstacles exist not only in 
defining new measures but in implementing mechanisms to report and 
asses those metrics without creating undue administrative burdens or 
provider technological challenges. For example, we note that it will 
take time to collect and validate data required under the IMPACT Act 
but once that has occurred it will create opportunities for potentially 
better metrics. Therefore, we thank commenters for their suggestions 
and note that while we are finalizing a set of quality metrics for this 
year, the methodology by which this model is being phased in, with 
gradually increasing economic incentives, gives us an opportunity to 
continue to evaluate the use of quality metrics and modify them through 
future rulemaking if better metrics emerge.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the proposal to use our existing authority 
to audit claims and services, to use the QIO to assess for quality 
issues, to use our authority to investigate allegations of patient 
harm, and to monitor the impact of the quality metrics that we are 
finalizing.
    Monitoring PAC Quality of Care. With respect to PAC, we believed 
that requiring participating hospitals to engage patients in shared 
decision making is the most important safeguard to prevent 
inappropriate recommendations of lower cost care, and we stated in the 
preamble that such a requirement can be best effected by requiring 
hospitals to make this a

[[Page 73524]]

condition of any sharing arrangements with practitioners who perform 
these procedures, although we did not propose any regulations text. 
Additional deterrents are created by the financial accountability of 
the 90-day bundle, which is sufficiently long that it encourages the 
provision of high-quality care to avoid the risk of complications and 
readmissions, which would typically occur within that time period. 
Physician patterns of practice are also constrained by clinical 
standards of care, and we believe that the risk associated with 
deviations from those standards provides further deterrence to 
compromising care.
    We believe that these safeguards are all enhanced by beneficiary 
knowledge and engagement. As we discussed in the section on beneficiary 
notification, we proposed to require that participant hospitals must, 
as part of discharge planning, account for potential financial bias by 
providing patients with a complete list of all available PAC options in 
the service area consistent with medical need, including beneficiary 
cost-sharing and quality information (where available and when 
applicable). We expect that the treating surgeons or other treating 
practitioners, such as physiatrists, will continue to identify and 
discuss all medically appropriate options with the beneficiary and that 
hospitals will discuss the various facilities and providers who are 
available to meet the clinically identified needs. These proposed 
requirements for CJR participant hospitals would supplement the 
existing discharge planning requirements under the hospital CoPs. We 
also specifically note that neither the CoPs nor this proposed 
transparency requirement preclude hospitals from recommending preferred 
providers within the constraints created by current law, as 
coordination of care and optimization of care are important factors for 
successful participation in this model. We invited comment on this 
proposal, including additional opportunities to ensure high quality 
care.
    The following is a summary of the comments received regarding 
provisions to ensure quality during the delivery of PAC services, and 
our accompanying responses.
    Comment: Commenters strongly advocated for the need to encourage 
shared decision making as a methodology for ensuring that beneficiaries 
are provided PAC options of the highest quality. The comments 
consistently followed several themes. Numerous commenters were 
concerned about the role of the physician/surgeon in the CJR. Some 
commenters were concerned that physicians are marginalized by placing 
all economic power with the hospital, and that this will disrupt the 
physician-patient relationship. These commenters were also concerned 
that the model fails to recognize the vital importance of the 
physician's role in healthcare, that the episode is in fact generated 
because of the orthopedic physician's care for the beneficiary months 
and sometimes years prior to the LEJR surgical event. These commenters 
believe that it is the physician/surgeon who drives the care and that 
this should be incorporated into the model. Conversely, commenters were 
concerned that hospitals should not be allowed to coordinate and manage 
care as that represents a conflict of interest since they are the 
entity that is financially responsible for excess spending during the 
episode.
    Response: We agree that the physician/surgeon is critical to the 
CJR model and that this is incorporated into the concept of shared 
decision making. As a practical matter, patients place considerable 
trust in the advice of their physicians, such that almost all medical 
care is physician-directed even when it is delivered by many 
coordinated entities. This physician direction is fundamental to the 
design of most Medicare programs and models, including the CJR model. 
Although the economic effects of the CJR model are borne by the 
hospital, considerable economic power resides with the beneficiary and 
the physician due to the strength of the established doctor-patient 
relationship. In our proposed rule we repeatedly emphasized the 
principle of beneficiary freedom of choice, the right to choose any 
care options and for the fact that Medicare continues to covers all 
medically necessary Medicare benefits. It is the beneficiary's 
selection of specific medically necessary options that determines the 
composition of the episode, because the episode is composed only of 
services the beneficiary consents to receive and is not impacted by the 
services that the beneficiary declines. Under the concept of shared 
decision making, the beneficiary retains that ultimate right to accept 
or request desired services and refuse services that are not desired. 
This is a significant economic power. Meanwhile, the physician is 
responsible for advising the beneficiary as to whether a particular 
choice is medically necessary and, as a corollary, for advising the 
patient as to the most medically appropriate and medically beneficial 
options. This also gives the physician considerable economic power and 
places him or her in the position, together with the beneficiary, of 
driving the actual care. The hospital, although it is the participant 
in the CJR model that is directly tied to the economic incentives, is 
therefore limited by the additional economic power held by the 
beneficiary, who holds the final choice with respect to all care, and 
the economic power held by the physician, who is the primary driver of 
care through his recommendations to the beneficiary in accordance with 
the special doctor-patient relationship. These checks and balances are 
a major mechanism to mitigate against any potential hospital conflict 
of interest created by the payment bundle.
    Comment: Commenters proposed numerous and diverse requirements that 
they wanted us to consider imposing on the CJR decision making process 
that steers patients into specific PAC settings and services. On the 
one hand there were some requests for general guidance of what is and 
is not acceptable in discussions with the beneficiary. A commenter 
stated that our current proposal does not address the role of the 
patient in the process, and does not propose methods to empower 
patients to seek out the highest quality joint care. On the other hand 
there were numerous recommendations to require certain specific 
elements in the decision making process. A commenter suggested that we 
require shared care planning, a concept that includes collaborative 
provider-patient goal-setting, decision making, and monitoring through 
the use of documented, completed individualized care plans. Another 
commenter suggested the inclusion of advance care planning, an 
opportunity for thorough discussion of patients' desires relative to 
care options if, following the procedure, they are unable to convey 
those desires. A commenter recommended a requirement that hospitals 
create patient family advisory councils or other similar organizations 
in order to promote the patient perspective in discussions of episode 
design and care coordination, and suggested that this should include 
family members if desired by the patient. Commenters advised CMS to 
ensure that planning is initiated with the primary care physician or 
surgeon before admission and is coordinated with the pre-admission 
process conducted by the hospital, and that appropriate standards of 
care should be a key characteristic of these processes.
    Response: We recognize that the concept of shared decision making 
is a complex process, with many permutations based on the needs of the

[[Page 73525]]

patient, the availability of resources, and the nature of the 
individual doctor-patient relationship for each specific case. 
Therefore, we recognize the importance of shared decision making as 
previously described, but we defer from specifying other elements that 
must be included as components of the decision making process. We 
believe there are many acceptable ways to engage the beneficiary and 
that, just as different commenters offered different techniques that 
they have found to be helpful, different hospitals with their unique 
characteristics will similarly identify and implement the programs that 
best serve to engage their patient population.
    Comment: Commenters proposed modifications to the decision making 
process, as well as recommending different technical systems that they 
believed should be required by participant hospitals. Some commenters 
recommended that the hospital should document the use of evidence-based 
clinical practice guidelines and evidence-based decision aids for 
shared decision making, and that hospitals should be required to have 
specific systems in place to coordinate all providers involved in the 
episode of care, track quality measures, manage medical complications, 
coordinate with community services to foster the patient's independence 
and implement evidence-based shared decision making with patients. 
However, other commenters emphasized the need for technical 
inclusiveness. A commenter encouraged us to enable providers to 
participate in these models as collaborators without requiring major 
investments in infrastructure and electronic health records. Another 
commenter proposed that patients should not select providers but should 
select physician-led teams in which a pre-organized slate of providers 
would collaborate to deliver the necessary portfolio of care.
    Response: We do not believe that pre-formed teams of PAC providers 
linked to a single physician would be consistent with beneficiary free 
choice if beneficiaries were restricted to providers in that specific 
team. Beyond that, we note that there are many modes of decision making 
and that different modes may be preferred by different provider groups 
under different circumstances. We do not believe that a single approach 
or a single technical solution will meet the needs of the diversity of 
participant hospitals and patient and provider populations who will be 
engaged in providing services under this model. For this reason we do 
not elect to further define mandatory approaches to decision making.
    Comment: Similar to commenters' concerns regarding additional 
monitoring to ensure that providers did not limit access to PAC 
services (``stinting''), commenters also expressed concerns that 
specific monitoring would be necessary to ensure that those PAC 
services provided to beneficiaries were not subject to restrictions 
that adversely impacted their quality. Some commenters recommended that 
we establish basic requirements for care coordination and competencies 
that must be met, independent of payment and measurement. Their 
rationale was that certain functions, such as discharge planning, are 
so integral to care coordination that requiring them should be routine 
for entities that aspire to coordinate care well. Specifically, 
participating hospitals should be required to have clearly documented 
clinical care models, care and transition plans including shared 
decision making tools and coordination with community supports, and 
protocols for documenting discharge planning and PAC coordination and 
supports.
    Other recommended controls included a requirement that any and all 
documents used by the hospital during discharge planning must be 
submitted to (not approved by) CMS, a requirement that any agreement 
between hospitals and PAC providers should be submitted to (not 
approved by) CMS, and that CMS should do a random sample audit of these 
agreements to ensure they comply with current regulations. A commenter 
recommended that CMS make available to the public the amount hospitals 
earn from reconciliation payments for a performance year, while another 
recommended that we should do random face to face interviews post 
discharge to determine if the patient was steered to a particular 
provider if such interviews warranted based on changes in utilization 
rates or if we identify inappropriate or concerning sharing 
arrangements between a hospital and a PAC provider.
    Other commenters wanted us to underscore in the final rule that 
hospital utilization review committees and physicians who sign 
discharge orders remain fully accountable to make the determination 
that a patient discharge is medically appropriate. A commenter believed 
that part of the discharge process should include an independent 
determination that medical resources and care required by each 
beneficiary are available in an available PAC setting.
    Response: We agree with commenters that monitoring is essential to 
protect against practices that might reduce the quality of PAC 
services. We believe that monitoring for quality is accomplished at the 
population level through the monitoring for access to the appropriate 
level and quantity of PAC services, a process that we discussed earlier 
with respect to underutilization of services. We also believe that the 
practice of shared decision making, the reliance on the medical 
direction of the physician, the monitoring of quality metrics, the 
complaint and oversight opportunities through 1-800-MEDICARE and the 
QIO, and the use of care coordination all cooperate to ensure the 
quality of individual services delivered to individual beneficiaries.
    With respect to comments that we establish basic requirements for 
care coordination or require specific documentation of care 
coordination procedures, we agree with commenters that activities such 
as discharge planning are integral to care coordination. However, we 
note that it is one function of state agencies and accrediting 
organizations to ensure that discharge planning is effectively 
addressed, and that their applications of the CoPs are updated as 
necessary to establish appropriate standards. We note that CMS has 
recently proposed updated discharge planning requirements for hospitals 
through proposed changes to the hospital CoPs.
    We do not believe that new requirements, such as CMS receipt of 
discharge planning documents or public posting of amounts involved in 
gainsharing, are necessary to ensure appropriate post discharge care. 
We note that, with the exception of waivers discussed in section 
III.C.11. of this final rule, all other Medicare rules for coverage and 
payment continue to apply. However, as discussed elsewhere in this 
section of this final rule, we have modified proposed Sec.  510.500 to 
require additional disclosure of CJR sharing arrangements with PAC 
providers to CMS. Therefore, we believe that sufficient controls are in 
place to allow us to ensure the quality of the PAC services without 
requiring additional public disclosure or CMS approval.
    We also note that whereas both utilization review activities and 
discharge planning are required by the hospital CoPs, a review of the 
appropriateness of post-discharge services is not an activity currently 
undertaken by hospitals. We agree that the ultimate direction for the 
care of the patient lies with the physician and patient, and claims for 
services are subject to appropriate validation and

[[Page 73526]]

review for coverage and medical necessity. We do not believe that at 
this time it is necessary or appropriate to require a medical necessity 
review of every PAC decision under the model. First, we note that such 
a requirement would create a significant administrative burden that 
would need to be balanced against the potential benefits. Second, we 
believe that the hospital and its PAC providers must already comply 
with existing federal and state requirements to respect beneficiary 
wishes and follow physician direction. Third, we have noted the 
opportunities available to the beneficiary, such as the 1-800-MEDICARE 
line, to raise quality concerns associated with the episode of care.
    Comment: Commenters offered other suggestions and observations on 
opportunities to improve beneficiary protections that ensure the 
delivery of quality care. Several commenters suggested that CMS should 
require a ``second opinion'' process whereby a concerned consumer can 
seek an independent medical opinion concerning a PAC plan. Other 
commenters opined that we should provide appeal rights to any Medicare 
beneficiary subject to the CJR model, comparable to those appeal rights 
available to Medicare Advantage enrollees, in order to protect against 
``adverse care'' decisions. Still other commenters encouraged us to 
inform beneficiaries of the hotlines available to convey grievances on 
care at each level of service during the episode, to develop training 
for 1-800-MEDICARE call center staff to identify and flag potential 
care reductions or inappropriate steering in this model, to ensure that 
the State Health Insurance Assistance Programs (SHIPs) are 
appropriately trained and engaged as the final model is implemented, 
and to highly publicize outlets where consumers can provide positive or 
negative feedback, such as 1-800-MEDICARE and the contact information 
for the local QIO. A commenter proposed that we consider establishing 
an independent ombudsman program.
    Response: We do not believe that a second opinion program or 
special appeal rights are necessary. First, as we have previously 
discussed, there are numerous processes in place to protect beneficiary 
choice. The beneficiary retains all rights to choose the provider/
supplier for medically necessary covered services. The beneficiary 
retains the benefits of the doctor-patient relationship, with 
additional notification of any sharing arrangement that could create a 
potential conflict of interest. In the event that the beneficiary is 
stated with a notice of non-coverage for continuing services, such as a 
continued stay in a participant hospital or a SNF, the beneficiary has 
access to the existing expedited review process. The beneficiary may 
also voice concerns or grievances, such as to the QIO or through 1-800-
MEDICARE. We also do not agree with the need to establish a dedicated 
ombudsman, given the existence not only of the appeal process but also 
of the existing office of the Ombudsman. However, we agree that it 
would be beneficial to distribute educational materials to ensure that 
beneficiaries can take advantage of the support available at 1-800-
MEDICARE, at the SHIP, and especially at the QIO, and we will consider 
developing such materials in the future.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our regulations as proposed and are not 
creating additional requirements for discharge planning or care 
coordination specific to the CJR model, beyond the previously 
identified requirements that hospitals must provide a complete list of 
PAC providers and that CJR collaborators must provide notice that they 
are participating in a CJR sharing arrangement with the hospital.
5. Monitoring for Delayed Care
    This model is based in part on an incentive for hospitals to create 
efficiencies in the delivery of care within a 90-day episode following 
the joint replacement surgery. Theoretically this could create 
incentives for hospitals and other CJR collaborators involved in any 
CJR sharing arrangements to delay services until after that window has 
closed.
    We believe that existing Medicare safeguards are sufficient to 
protect beneficiaries. First, our experience with other bundled 
payments such as the BPCI initiative has shown that providers focus on 
appropriate care first and efficiencies only when those efficiencies 
can be obtained in the setting of appropriate care. We believe that a 
90-day post-discharge episode will sufficiently minimize the risk that 
services furnished in relation to the beneficiary's LEJR procedure will 
be necessary beyond the end of the episode duration. To ensure that the 
length of the episode duration sufficiently minimizes the risk that any 
LEJR related care will not exceed the time established for the episode, 
we proposed to establish a 90-day post-discharge duration. We believe 
that participant hospitals would be unlikely to postpone services 
beyond a 90-day period because the consequences of delaying care beyond 
this long episode duration would be contrary to usual standards of 
care.
    However, we also note that additional monitoring would occur as a 
function of the payment model. We have proposed as part of the payment 
definition (see section III.C. of the proposed rule) that certain post-
episode payments occurring in the 30-day window subsequent to the end 
of the 90-day episode would be counted as an adjustment against 
savings. We believe that the inclusion of this payment adjustment would 
create an additional deterrent to delaying care beyond the episode 
duration. In addition, the data collection and calculations used to 
determine this adjustment provide a mechanism to check if providers are 
inappropriately delaying care. Finally, we note that the proposed 
quality measures create additional safeguards as they are used to 
monitor and influence hospital clinical care at the institutional 
level. We invited public comment on our proposed requirements for 
notification of beneficiaries and our proposed methods for monitoring 
participants' actions and ensuring compliance as well as- on other 
methods to ensure that beneficiaries receive high quality, clinically 
appropriate care.
    The following is a summary of the comments received and our 
responses.
    Comment: Commenters provided numerous suggestions and observations 
on the processes by which we will monitor the model in order to ensure 
that the beneficiary is fully protected against unintended 
consequences. Commenters were in agreement with our intent to monitor 
for unexpected changes in the delivery of care, but several commenters 
believed that additional explanation would be helpful. A commenter 
believes that it was not clear what would constitute an inappropriate 
change in delivered services, particularly in light of the fact that 
the intent of this model is to promote change. Other commenters believe 
that, just as more definition was needed around the concept of 
inappropriate change, more definition was needed to define the 
contractors who would audit for those changes. A commenter requested 
that CMS build into the CJR model checks and balances to assess the CJR 
patient's care throughout the duration of the episode and extending for 
four months beyond the end of the episode. Another commenter suggested 
that a similarly structured auditing system should be established to 
monitor CJR participants' care management processes and compliance with 
the patient-centered

[[Page 73527]]

care planning expected in the model, with audits conducted by an 
outside party in the early stages of the new model and periodically 
thereafter.
    Response: We understand that commenters would like additional 
definition surrounding inappropriate changes. We consider changes in 
patterns of care to be inappropriate when they do not improve the 
quality and efficiency of care delivered to Medicare beneficiaries, or 
when they occur in violation of statute, regulation, or guidance. This 
would include, for example, practices that prevent potentially higher-
cost patients from receiving services, reduce the delivery of medically 
necessary services, limit beneficiary choices between equally valued 
options, increase or fail to reduce waste, or maximize reimbursement at 
the expense of the beneficiary. However we do not believe that specific 
examples must be identified in regulation. Rather we believe that the 
regulation should define the general principles under which the 
beneficiary must be protected and the authorities under which 
monitoring will take place, and we have so defined these principles in 
Sec.  510.410. For example, we stated that action that threatens the 
health or safety of patients and actions to avoid at risk Medicare 
beneficiaries are prohibited actions, so we would consider changes that 
result from ``stinting'' (threatening the health of patients) and 
``patient dumping'' (avoiding at risk beneficiaries) to represent 
inappropriate change. We also expect to interact with both providers 
and our contractors over the course of this model, to refine and 
clarify our educational materials and, when necessary, our regulations 
or guidance. We note that although we defined the types of 
inappropriate changes in Sec.  510.410, we do not believe that it is 
necessary to define through regulation the specific contractors who 
will be responsible for monitoring this aspect of the program. We have 
numerous contractors who have the authority and scope to perform this 
work, and we will use our usual contracting authorities to assign any 
necessary tasks during the life of the model. We also note that we 
previously discussed that we did not believe that additional auditing 
of providers' discharge planning and care coordination activities was 
necessary. Given that we do not believe that special audits are 
necessary to ensure the quality of PAC services to a specific 
beneficiary, we similarly do not believe that audits of care 
coordination are necessary to monitor the quality of care delivered to 
the population as a whole. We believe that the financial incentives of 
the model promote increased care coordination, a process that will 
increase the timeliness of interventions and reduce opportunities for 
delays in care.
    Comment: Commenters had specific comments about the extent of post-
episode monitoring and about monitoring in general, which is necessary 
to track for the occurrence of instances of delays in the delivery of 
care.
    Commenters suggested that post-episode monitoring should be 
extended for at least 3 to 6 months after the end of the bundle period 
or even 5 or more years in order to include the late effects of 
suboptimal implant selection. As part of PAC monitoring, commenters 
acknowledged that CMS proposed to look at changes in referral patterns 
as a result of the model, but also believed that we should evaluate the 
impact that the model may have on the availability of services in a 
market.
    With respect to monitoring in general, commenters requested that we 
should be more transparent about monitoring. Specific recommendations 
were that we should track readmission rates, complication rates, ER 
visits, observation stays, length-of-stay, changes in patient function, 
and patient experience, gap between discharge and first PAC use and 
between discharge and physician follow-up visit, days lapsed between 
discharge from the hospital to the first PAC use, and days lapsed 
between hospital discharge and the first physician visit. Some 
providers also requested that we should incorporate information from/
related to reporting requirements of the IMPACT Act into functional 
monitoring. Commenters also believed that we should perform some 
baseline monitoring, looking at case mix before and after CJR 
implementation as well as the rates of joint replacement in MSAs 
included in the CJR model and MSAs excluded from the model.
    Response: We acknowledge the validity of these recommendations and 
thank commenters for their suggestions. With respect to prolonged 
monitoring for long-term consequences related to device selection, we 
agree that monitoring of this sort is of interest in optimizing long-
term outcomes. However, we note that devices have long been included in 
IPPS inpatient bundles. Thus any risks associated with low cost device 
selection are not specific to the CJR. We also do not believe that the 
policy changes necessary to respond to any findings based on sub-
optimal device selection would be limited to this model. Furthermore, 
we note that we would not expect on a clinical basis for any effects of 
low-cost low-quality devices to become apparent for many years. 
Therefore monitoring for this impact would require (1) additional years 
that are at least equally as long as the model duration itself in order 
to detect quality and cost effects; and (2) similar analysis of the 
impact of devices provided under IPPS but outside the model. This 
further underscores the difficulty of including this analysis as a 
component of the model and suggests that, if such a study is 
undertaken, it should be a separate study of the impact of device 
selection both within and outside of the CJR model. On the other hand, 
we believe that the other measures suggested are all reasonable metrics 
by which program effects can be monitored. We will consider whether we 
should incorporate some of all of these approaches in our arrangements 
with our monitoring and evaluation contractors.
    Comment: Some commenters questioned the manner in which existing or 
potential medical review and audit programs would interact with the 
CJR, given that such programs are necessary to ensure access and 
quality in all services but are particularly important and potentially 
burdensome when used to monitor both the entire episode of care as well 
as the post-episode period in which delayed care would appear. 
Commenters believe that CMS should implement those evaluation processes 
that are least disruptive to participants. Several commenters opined 
that any cases reimbursed under a ``shared accountability payment'' 
methodology such as CJR should not be subjected to claim denials as 
part of Medicare contractors' medical review activities. Other 
commenters requested that we explain the relative roles of RACs, QIOs, 
and other review contractors.
    Other commenters believe that special controls and audits should be 
implemented to further protect beneficiaries. A commenter believes that 
CMS should require providers to submit annual reports that detail 
original care redesign objectives they agreed to implement, the 
progress they made in achieving those objectives and how achieving 
those objectives has been linked to gainsharing rewards. Another 
believed that we should institute a structured monitoring program to 
ensure compliance with the patient notice requirements, using a 
contractor such as a state survey agency, a QIO, or a hospital private 
accrediting body. Recommended elements of monitoring and control 
included the submission of any model notice in advance of its use,

[[Page 73528]]

certification of assurances of compliance by the hospital/physician 
auditing of compliance within the first 30 to 60 days of implementation 
of CJR and annual auditing of compliance thereafter.
CJR
    Response: With respect to existing auditing programs, we agree that 
it is important to minimize the disruption of provider activity and to 
minimize the cost and burden of audits to the extent possible. We do 
not agree that services furnished to beneficiaries included in the CJR 
model should be excluded from MAC, RAC, ZPIC or other medical review or 
audit activity because CJR does not contain a substitute for these 
existing program integrity measures. Considerable financial risk is 
still retained by Medicare in that the direct payments to the hospital 
and PAC providers are still borne by Medicare. For example, if the 
participant hospital provided joint replacements on relatively healthy 
beneficiaries for whom the replacements were considered to be not 
medically necessary in accordance with a coverage decision or clinical 
guidelines, that overpayment could not be identified and corrected 
except through audit. Conversely, those lower cost procedures would 
reduce average cost and increase a participant hospital's 
reconciliation payment, benefitting the hospital while increasing costs 
borne by Medicare. Moreover, under the model the beneficiary remains 
responsible for the deductible for the hospital admission covered under 
Part A as well as copayments for many PAC services. We believe that 
ensuring that beneficiaries pay the correct deductibles and copayments 
is a function that is consistent with commenters' concerns for 
beneficiary protection as well as our obligation to enforce the 
statutory provisions that define Medicare benefits and beneficiary and 
provider obligations pursuant to those benefits.
    We agree that contractors conducting audits or medical review to 
assess for delays in care or for other purposes may find and deny 
claims that were incorrectly billed. We also agree that there is a 
complex interaction between the denial of a service on a claim and its 
impact on the reconciliation process for the performance year under the 
CJR model, depending on the provider whose claim is denied, the timing 
of the adjustment relative to the model reconciliation, the limits of 
upside and downside risk, and other factors. For example, if a PAC 
claim is denied after final reconciliation, the hospital will still 
have incurred a cost approximately equal to the amount that was denied 
to the PAC provider because those costs would still be included in the 
calculation of the positive or negative NPRA as calculated in 
accordance with Sec.  510.305. On the other hand, if the denial occurs 
prior to reconciliation, the hospital will have lower costs attributed 
to it as the cost of the service would be removed from the claims 
history. This will affect the NPRA as if the denied service had never 
been delivered and benefit the hospital by an amount that is 
approximately equal to the amount that was denied to the PAC provider. 
Given this complex interaction that can create diverse and opposing 
impacts but only in the setting of inappropriate (denied) claims, we do 
not believe that it is necessary or desirable to exclude services from 
medical review because they are delivered under the CJR model.

G. Coordination With Other Agencies

    Impacts created by payment changes under this model are entirely 
internal to HHS operations; coordination with other agencies is not 
required outside of the usual coordination involved in the publication 
of all HHS regulatory changes.

IV. Evaluation Approach

A. Background

    The CJR model is intended to enable CMS to better understand the 
effects of bundled payments models on a broader range of Medicare 
providers than what is currently being tested under BPCI. Obtaining 
information that is representative of a wide and diverse group of 
hospitals will best inform us on how such a payment model might 
function were it to be more fully integrated within the Medicare 
program. All CMS models, which would include the CJR model, are 
rigorously evaluated on their ability to improve quality and reduce 
costs. In addition, we routinely monitor CMS models for potential 
unintended consequences of the model that run counter to the stated 
objective of lowering costs without adversely affecting quality of 
care. We outlined the proposed design and evaluation methods, data 
collection methods, key evaluation research questions, and the 
evaluation period and anticipated reports for the CJR model in the 2016 
Comprehensive Care for Joint Replacement proposed rule (80 FR 4198).

B. Design and Evaluation Methods

    Our evaluation approach for the CJR model will have elements in 
common with the standard Innovation Center evaluation approaches we 
have taken in other projects such as the BPCI initiative, ACE 
Demonstration, Pioneer ACO model, and other Innovation Center models. 
Specifically, the evaluation design and methodology for the CJR model 
would be designed to compare patterns of care among the CJR providers 
to patterns of care among non-CJR providers, potentially contrasted 
with historical differences in care between these two groups of 
providers.
    Our evaluation methodology for this model builds upon the fact that 
MSAs were selected for participation in the model based on a stratified 
random assignment. In this approach, researchers evaluate the effects 
of the model on outcomes of interest by directly comparing MSAs that 
are randomly selected to participate in the model to a comparison group 
of MSAs that were not randomly selected for the model (but could have 
been). Randomized evaluation designs of this kind are widely considered 
the ``gold standard'' for social science and medical research because 
they ensure that the systematic differences are reduced between units 
that do and do not experience an intervention, which ensures that (on 
average) differences in outcomes between participating and non-
participating units reflect the effect of the intervention.
    The removal of the 8 MSAs that were previously selected but are now 
considered not eligible due the revision to the MSA exclusion rules 
does not compromise our proposed evaluation approach. The relative 
ranking of MSAs with respect to episode payments is unchanged by the 
new exclusions. The selected MSAs remain randomly selected and also 
remain distributed throughout the payment and population size 
dimensions. As with other evaluation issues, the methodological 
approach to examining and drawing conclusions about the impact of the 
model will be finalized in the Evaluation Contract.
    We plan to use a range of analytic methods, including regression 
and other multivariate methods appropriate to the analysis of 
stratified randomized experiments to examine each of our measures of 
interest. Measures of interest could include, for example, quality of 
and access to care, utilization patterns, expenditures, and beneficiary 
experience. The evaluation would also include rigorous qualitative 
analyses in order to capture the evolving nature of the care model 
interventions.
    In our design, we plan to take into account the impact of the CJR 
model at the geographic unit level, the hospital level, and the patient 
level. We are also considering various statistical methods

[[Page 73529]]

to address factors that could confound or bias our results. For 
example, we anticipate using statistical techniques to account for 
clustering of patients within hospitals and markets. Clustering allows 
our evaluation to compensate for commonalities in beneficiary outcomes 
by hospitals and by markets. Accounting for clustering ensures that we 
do not overstate our effective sample size by failing to account for 
the fact that performance of hospitals in a given market may not be 
fully independent of one another. Alternatively, accounting for 
clustering may improve statistical precision or allow us to better 
examine how patterns of performance vary across hospitals. For example, 
in cases where a large hospital consistently has poor performance, 
clustering would allow us to still be able to detect improved 
performance in the other, smaller hospitals in a market rather than 
place too much weight on the results of one hospital and potentially 
lead to mistaken inferences. Finally, we plan to use various 
statistical techniques to examine the effects of the CJR model while 
also taking into account the effects of other ongoing interventions 
such as BPCI, Pioneer ACOs, and Medicare Shared Savings Program. For 
example, we will consider additional regression techniques to help 
identify and evaluate the incremental effects of adding the CJR model 
in areas where patients and market areas are already subject to these 
other interventions as well as potential interactions among these 
efforts.

C. Data Collection Methods

    We are considering multiple sources of data to evaluate the effects 
of the CJR model. We expect to base much of our analysis on secondary 
data sources such as Medicare FFS claims and required patient 
assessment instruments such as the Minimum Data Set (MDS) collected for 
SNF stays, the Patient Assessment Instrument for Inpatient 
Rehabilitation Facility (IRF-PAI) collected for IRF stays, and the 
Outcome and Assessment Information Set (OASIS) collected for home 
health episodes of care. The beneficiary claims data would provide 
information such as expenditures in total and by type of provider and 
service as well as whether or not there was an inpatient hospital 
readmission. The assessment tools would provide information on a 
beneficiary's functioning (for example, physical, psychological and 
psychosocial functioning).
    In conjunction with the previously stated secondary data sources, 
we are considering a CMS-administered survey of beneficiaries who 
received an LEJR during the performance period. This survey would be 
administered to beneficiaries who either had received an LEJR under the 
CJR model or were selected as part of a control group. The primary 
focus of this survey would be to obtain information on the 
beneficiary's perception of their functional status before and after 
the LEJR as well as information on their pain and LE joint symptoms, 
and perceptions on access to care. The administration of this 
beneficiary survey would be coordinated with administration of the 
HCAHPS Survey so as to not conflict with or compromise the HCAHPS 
efforts. Likewise, we are considering a survey administered by CMS and 
guided interviews conducted by CMS with providers and suppliers 
including, but not limited to, orthopedic surgeons, initiating 
hospitals, and PAC providers participating furnishing services to 
beneficiaries included in the CJR model. These surveys would provide 
insight on beneficiaries' experience under the model and additional 
information on the care redesign strategies undertaken by health care 
providers.
    In addition, we are considering CMS evaluation contractor-
administered site visits with selected hospitals and PAC providers as 
well as focus groups with a range of populations such as PAC providers 
and orthopedic surgeons. We believe that these qualitative methods 
would provide contextual information that would help us better 
understand the dynamics and interactions occurring among CJR providers 
furnishing services included within a CJR episode. For example, these 
data could help us better understand hospitals' intervention plans as 
well as how they were implemented and what they achieved. Moreover, in 
contrast to relying on quantitative methods alone, qualitative 
approaches would enable us to view model nuances as well as identify 
factors that are associated with successful interventions and 
distinguish the effects of multiple interventions that may be occurring 
within participating providers, such as simultaneous ACO and bundled 
payment participation.

D. Key Evaluation Research Questions

    Our evaluation would assess the impact of the CJR model on the aims 
of improved care quality and efficiency as well as reduced health care 
costs. This would include assessments of patient experience of care, 
utilization, outcomes, Medicare expenditures, provider costs, quality, 
and access. Our key evaluation questions would include, but are not 
limited to, the following:
     Payment. Is there a reduction in total Medicare 
expenditures in absolute terms or for subcategories of providers (for 
example, acute versus PAC providers, providers in certain geographic 
areas, providers within concentrated vs non-concentrated market areas 
or in urban vs rural areas)? Do the participants reduce or eliminate 
variations in utilization and expenditures or both that are not 
attributable to differences in health status? If so, how have they 
accomplished these changes?
     Utilization. Are there changes in Medicare utilization 
patterns overall or for specific types of providers or services? How do 
these patterns compare to historic patterns, regional variations, and 
national patterns of care? How are these patterns of changing 
utilization associated with Medicare payments, patient outcomes and 
general clinical judgment of appropriate care?
     Outcomes/Quality. Is there either a negative or positive 
impact on quality of care and patient experiences of care or both? Did 
the incidence of complications remain constant or decrease? Was there a 
change in beneficiaries' level of pain reduction, functional outcomes 
or return to independence under the model than relative to appropriate 
comparison groups? If so, how and for which beneficiaries?
     Referral Patterns and Market Impact. How, if at all, has 
the behavior in the selected geographic areas changed under the model? 
How have the referral patterns changed and for which type(s) of 
providers? Similarly, does the model have an impact on the number of 
patients with LEJR procedures and what types of patients are undergoing 
the procedure? To what extent, if any, is this related to gainsharing 
activities?
     Unintended Consequences. Did the CJR model result in any 
unintended consequences, including adverse selection of patients, 
access problems, cost shifting beyond the agreed upon episode, evidence 
of stinting on appropriate care, anti-competitive effects on local 
health care markets, evidence of inappropriate referrals practices? If 
so, how, to what extent, and for which beneficiaries or providers?
     Potential for Extrapolation of Results. What was the 
typical patient case mix in the participating practices and how did 
this compare to regional and national patient populations? What were 
the characteristics of participating practices and to what extent were 
they representative of practices treating Medicare FFS beneficiaries? 
Was the model more successful in certain types

[[Page 73530]]

of markets? To what extent would the results be able to be extrapolated 
to similar markets and nationally or both?
     Explanations for Variations in Impact. What factors are 
associated with the patterns of results? Specifically, are the results 
related to the following?
    ++ Characteristics of the models including variations by year and 
factors such as presence of downside risk?
    ++ The participating hospital's specific features and ability to 
carry out their proposed intervention?
    ++ Characteristics and nature of interaction with partner providers 
and suppliers including orthopedic surgeons and PAC provider community?
    ++ Characteristics of the geographic area, such as market 
concentration or size of city and availability of PAC providers?
    ++ Characteristics associated with the patient populations served?

E. Evaluation Period and Anticipated Reports

    As discussed in section III.C.2.a. of this final rule, each of the 
selected participants in the CJR model would have 5 performance years. 
The evaluation period would encompass all 5 performance years and up to 
2 years after. We plan to evaluate the CJR model on an annual basis. 
However, we recognize that interim results are subject to issues such 
as sample size and random fluctuations in practice patterns. Hence, 
while we intend to have internal periodic summaries to offer useful 
insight during the course of the effort, a final analysis after the end 
of the 5 performance years will be important for ultimately 
synthesizing and validating results.
    We sought comments on our design, evaluation, data collection 
methods, and research questions.
    The following is a summary of the comments received and our 
responses.
    Comment: A variety of commenters detailed evaluation topics in 
which they were particularly interested as follows:
     In the category of ``utilization,'' the following topics 
were highlighted as of interest to commenters: (1) An examination of 
utilization shifts between sites of care as well as an examination of 
the types of patients for which this occurs and if there was an impact 
on quality, health outcomes, and total spending; and (2) an examination 
of changes in types of devices being used in total joint replacement 
procedures compared to historical trends and other markets.
     In the category of ``outcomes and quality,'' the following 
topics were highlighted: an examination of the impact of the model on 
certain vulnerable subpopulations, including low-income individuals, 
individuals residing in low-access areas, and racial and ethnic 
minorities.
     In the category of ``market impact,'' the following topics 
were highlighted: an assessment of whether hospitals redesign or 
eliminate service lines; an assessment on the impact of the 
availability of services in a market; an assessment of the impact, if 
any, on the financial viability of PAC providers in impacted markets; 
the shifting of increased costs to other payers; and an exploration of 
the use of the gainsharing waiver, including the criteria hospitals use 
to identify preferred partner relationships and an examination of to 
whom gains are distributed.
     In the area of ``patient access,'' the following topics 
were mentioned: an examination of the extent to which beneficiary 
choice is preserved and whether or not hospitals steer patients towards 
certain providers; an assessment on the impact of the model on patient 
access to services including patient travel time; an assessment of the 
extent to which use of lower cost alternatives or lack of other 
enhancements to the patient experience led to changes in patient 
outcomes and satisfaction; and an evaluation of device offerings and 
patient access to various technologies for joint replacement.
     Within the category of exploring which factors are 
associated with ``variations'' in success, the following topics were 
mentioned: examining whether higher risk candidates for surgery are 
avoided or lower risk patients are inappropriately targeted for 
inclusion; an assessment of the impact of simultaneous incentives and 
participation in other models and programs that may impact the same 
patients or providers; an assessment of the variation in implementation 
by hospitals and the extent to which hospitals make a financial 
commitment to prepare staff and to undertake other activities to 
improve coordination; and an assessment of the use and impact of 
telehealth services and related efforts.
    Response: The commenters' list of topics are in alignment with our 
stated areas of interest and will be considered in the development of 
the final evaluation plan in coordination with the contractor chosen to 
develop and carry out the model evaluation.
    Comment: A variety of commenters, including MedPAC, presented 
measures and metrics that they believed would be important to include 
in the evaluation. In addition, a commenter suggested CMS make 
participation in a data registry a requirement for all participants in 
the model. Other suggested measures include the following:
     Readmission rates, complication rates, use of emergency 
room visits and observation stays, length of stay, changes in patient 
function, and patient experience in the assessment of the stinting of 
care.
     Number of days between discharge from the hospital to 
first PAC use, and number of days between hospital discharge and first 
physician visit to assess timely care coordination.
     Comparison of utilization rates for joint replacement 
procedures in markets included and excluded to monitor any increase.
     The development and implementation of true longitudinal 
outcome metrics.
    Response: Commenters' measurement suggestions will be considered 
for inclusion in the development of the final evaluation plan. At this 
time, we do not plan to mandate participation in data registries for 
this model, given the significant implementation and administrative 
requirements this would require of providers.
    Comment: A commenter suggested a particular methodological 
consideration relevant to the evaluation. Specifically, this commenter 
noted that the approach of excluding BPCI participating hospitals in an 
MSA has its own form of selection bias in that the new model will only 
include hospitals that have chosen not to participate in the BPCI 
initiative, and therefore is not necessarily a representative sample.
    Response: We recognize the importance of this issue and agree that 
the model evaluation must account for any limitations on our ability to 
extrapolate the results achieved under this model. We will take this 
into consideration during the development of the final evaluation plan 
in coordination with the Evaluation Contractor.
    Comment: While many commenters expressed support for a vigorous 
evaluation, commenters brought up specific concerns related to the 
anticipated burden associated with the evaluation. The commenters 
requested that CMS should implement an evaluation process that is least 
disruptive to participants (providers and beneficiaries) and 
incorporate lessons learned from BPCI participants into the development 
process. One area of concern was the patient survey. A commenter noted 
that for the BPCI evaluation, participants were requested to refrain 
from non-patient care-related survey efforts while the CMS BPCI survey 
was in the field. The commenter wrote that this hampered the bundlers'

[[Page 73531]]

ability to seek real-time feedback to improve care. Another commenter 
recommended minimizing as much as possible the use of site visits and 
noted a desire for CMS to consider compensating hospitals for the time 
associated with this effort. In addition, the commenter noted concern 
that CMS is requiring collaborators to participate in site visits.
    Response: We acknowledge the concern related to the administrative 
burden associated with the evaluation and will endeavor to minimize it 
to the extent possible, while still ensuring a thorough assessment of 
the model and its impacts. With regard to the specific concerns, the 
survey of patients is considered to be a key component of the 
evaluation intended to address the issues of patient functional 
performance, pain reduction, and reductions in access. It is likely 
that we will continue the practice of asking for non-mandated and non-
patient care-related surveys to be suspended for brief periods of time 
so as to not overburden patients. Hospitals' survey efforts are 
otherwise unaffected. We believe that the temporary disruption in 
provider efforts is worth gaining the detailed information on patient 
function, pain, and access that the surveys provide. With regards to 
site visits, we intend to use this data collection approach judiciously 
and will be mindful of the impact on providers.
    Regarding collaborator agreements, we are requiring that 
participant hospitals include provisions that require all CJR 
collaborators to comply with any evaluation, monitoring, compliance, 
and enforcement activities performed by HHS or its designees for the 
purposes of operating the CJR model. We intend to be prudent in 
exercising this requirement but we believe that it is necessary to 
include, particularly related to the need to assess compliance with 
model requirements and patient quality of care. We do not anticipate 
that this will be a significant barrier to CJR collaborators signing 
agreements.
    Final Decision: After consideration of the public comments 
received, we are finalizing the proposed approach to the evaluation 
without modification.

V. Collection of Information Requirements

    As stated in section1115A(d)(3) of the Act, Chapter 35 of title 44, 
United States Code, shall not apply to the testing and evaluation of 
models under section 1115A of the Act. As a result, the information 
collection requirements contained in this final rule need not be 
reviewed by the Office of Management and Budget.

VI. Regulatory Impact Analysis

    We have examined the impact of this rule as required by Executive 
Order 12866 and other laws and Executive Orders requiring economic 
analysis of the effects of final rules.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). We estimate that this rulemaking is ``economically significant'' 
as measured by the $100 million threshold, and hence also a major rule 
under the Congressional Review Act. Accordingly, we have prepared a RIA 
that, to the best of our ability, presents the costs and benefits of 
the rulemaking.

A. Statement of Need

    This final rule is necessary in order to implement and test a new 
payment and service delivery model under the authority of section 1115A 
of the Act, which allows the Innovation Center to test innovative 
payment and service delivery models in order to reduce program 
expenditures while preserving or enhancing the quality of care 
furnished to individuals. The underlying issue addressed by the CJR 
model is that under FFS, Medicare makes separate payments to providers 
and suppliers for items and services furnished to a beneficiary over 
the course of a treatment (an episode of care). Because the amount of 
payment is dependent on the volume of services delivered, this creates 
incentives for care that is fragmented, unnecessary or duplicative, 
while impeding the investment in quality improvement or care 
coordination that will maximize patient benefit. We anticipate the CJR 
model may reduce costs while maintaining or improving quality where the 
provision of ``bundled services'' in which all the services needed for 
a given episode of care are included in a single payment arrangement 
that provides incentives to promote high quality and efficient care.
    This final rule will create and test the first bundled payment 
model under the Innovation Center authority in which providers will be 
required to participate, building on the experience of the current 
voluntary BPCI and previous ACE efforts. Testing the model in this 
manner will also allow us to learn more about patterns of inefficient 
utilization of health care services and how to incentivize improvement 
in quality for common LEJR procedure episodes. This learning could 
inform future Medicare payment policy.
    Under the CJR model, acute care hospitals in certain selected 
locations will receive retrospective bundled payments for episodes of 
care for LEJR or reattachment of a lower extremity. The proposed rule 
was developed based on the experiences we gained from the 
implementation of the Bundled Payments and Care Improvement Initiative 
and the ACE Demonstration to test bundled payments. We believe the 
model may benefit Medicare beneficiaries through improving the 
coordination and transition of care, improving the coordination of 
items and services paid for through Medicare FFS payments, encouraging 
provider investment in infrastructure and redesigned care processes for 
high quality and efficient service delivery, and incentivizing higher 
value care across the inpatient and PAC spectrum spanning the episode 
of care. It will also provide an opportunity to evaluate the nature and 
extent of reductions in the cost of treatment by providing financial 
incentives for providers to coordinate their efforts to provide 
services to meet patient needs and prevent future costs.
    As detailed in Table 33, we estimate a total aggregate impact of 
$343 million in net Medicare savings over the duration of the model, 
CYs 2016 through 2020, from the implementation of the CJR model. This 
reflects the policies finalized in this rule, as well as updates to the 
data used for the impact analysis. We note that in the impact estimate 
in the proposed rule we had identified participant hospitals in the 
proposed selected 75 MSAs, though we inadvertently excluded some of 
those hospitals in our estimates presented in the proposed rule. For 
the impact analysis provided in this final rule, we revised our list of 
participant hospitals to include hospitals in the 67 MSAs selected for 
CJR and made the identification of hospitals consistent with how we 
identify hospitals in the selected MSAs in section III.A.3. of this 
final rule.
    We note that we are posting the list of the participant hospitals 
in the selected MSAs on the CJR final rule Web site at https://
innovation.cms.gov/initiatives/CJR/ which generally reflects the 
hospitals used to estimate the impacts presented in this rule. 
Additionally, we note that this list will be updated throughout the 
model, to account for circumstances such as hospital mergers, BPCI 
termination, and new hospitals in the selected MSAs.
    We note that we are finalizing the start date of this model to 
begin April 1, 2016 where the first performance year is 9 months and 
all other performance years begin January 1 and last 12 months. The 
estimates presented in this final rule reflect the changed start date

[[Page 73532]]

and the 9 month period for the first year of the model. These estimated 
impacts represent the estimated net effect of federal transfers under 
this model. Furthermore, the CJR model may benefit beneficiaries since 
the model requires participant hospitals to be accountable for 90-day 
episodes of care for Medicare beneficiaries with a LEJR, which may 
incentivize providers to improve the coordination of FFS items and 
services, and encourage investment in infrastructure and redesigned 
care processes for high quality and efficient service delivery.
    Our analysis of the model's effects shows that this final rule will 
trigger the threshold of ``an annual effect on the economy of $100 
million or more'' under E.O. 12866. Accordingly it will also be a major 
rule under the Congressional Review Act, and we are required to prepare 
an analysis that presents the costs and benefits of this final rule. We 
have prepared an analysis that address benefits and costs that applies 
to ``economically significant'' or ``major'' rules. We solicited 
comment on the assumptions and analysis presented throughout this 
regulatory impact section.
    The following is a summary of the comments received and our 
responses.
    Comment: A commenter found our savings estimates to be overly 
optimistic where our assumptions were based on other models launched by 
CMMI. The commenter found that because those models were voluntary and 
participants would withdraw from those models at any time based on 
their performance under the model that we could not apply those 
assumptions for this model where we have selected participants and 
those participants are not able to withdraw from this model. As a 
result, the commenter found our savings estimates to be overly 
optimistic and aggressive. Another commenter found the savings estimate 
to be surprisingly small given the scope of the proposed model 
affecting providers in 75 MSAs. The commenter requested additional 
information regarding how much savings has been estimated for reduced 
complications and for reduced use of SNF, IRF, imaging studies, and 
other specific components.
    Response: We acknowledge that many of our assumptions used for 
these estimates are based on our experience with other voluntary 
bundled payment models and demonstrations as that is the most recent 
information that we have regarding how we expect hospitals to perform 
under a bundled payment model. For this model, we have not assumed any 
changes in utilization, which is, in part, informed by on our 
experience in other bundled payment models. However, we expect 
significant variation among hospitals and among metropolitan areas, but 
we are unable to predict these. Additionally, we believe the CJR model 
has been designed to provide additional safeguards considering that we 
have selected the hospitals to participate in the model. Those 
safeguards for hospitals to be able to manage risk include a transition 
to regional pricing, delaying the start date from January 1, 2016 to 
April 1, 2016 and providing for more incremental stop-loss limits where 
hospitals are subject to a maximum 20 percent stop-loss limit for 
performance years 4 and 5. As described earlier, for this final rule, 
we are updating the data used for the impact analysis to participant 
hospitals in the now 67 MSAs for the final rule and we are including 
participant hospitals identified in the proposed rule but that had been 
inadvertently excluded from the estimates presented in the proposed 
rule. As a result, the estimates have changed for this final rule, not 
only to reflect the policy changes finalized in this rule, but also to 
reflect the additional hospitals included in the estimates. As 
previously noted, we are posting the list of the participant hospitals 
in the selected MSAs on the CJR model Web site at https://
innovation.cms.gov/initiatives/CJR/.

B. Overall Impact

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism 
(August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order. As previously stated, 
this final rule triggers these criteria.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, pre-empts state law, or otherwise has federalism 
implications. We do not believe that there is anything in this final 
rule that either explicitly or implicitly pre-empts any state law, and 
furthermore we do not believe that this final rule will have a 
substantial direct effect on state or local governments, preempt states 
law, or otherwise have a federalism implication.

C. Anticipated Effects

1. Overall Magnitude of the Model and Its Effects on the Market
    According to Medicare FFS claims data in 2014, there were 
approximately 478,000 discharges for MS-DRGs 469 and 470 nationally. 
Based on the same data for 2014, we estimate that the participant 
hospitals had approximately 86,000 LEJR episodes (as defined in this 
model). The number of such procedures has grown in recent years, due 
both to the aging of the American population and to advances in medical 
technology and care that have made these operations less physically 
burdensome on patients and led to faster recovery times.
    More uncertain are the total costs of these procedures. The mean 
estimated 90-day episode payment for LEJR procedures (defined as 
discharges for MS-DRG 469 and MS-DRG 470) is about $26,000 based on 
Medicare claims data for FY 2014 where approximately 55 percent of the 
spending is attributed to hospital inpatient services, 25 percent of 
spending is attributed to PAC services such as physical therapy (either 
ambulatory and in a facility) and 20 percent to physician, outpatient 
hospital and other spending.

[[Page 73533]]

    We are testing the model in 67 MSAs out of the 196 MSAs initially 
deemed eligible for selection, as described previously in this final 
rule. We note that this is a change from the proposed rule where we had 
selected a proposed 75 MSAs but in this final rule, we are removing 8 
MSAs from selection because they did not meet the updated eligibility 
criteria. Based on the selection methodology finalized in this rule, we 
estimate that the model will include about 23 percent of all LEJR 
episodes nationally. We estimate the model will apply to about $1.247 
billion in episode spending in 2016 and $2.980 billion in episode 
spending in 2020 as displayed in Table 33 later in this section. As 
discussed subsequently in this analysis, this is likely to generate 
approximately a net amount of $343 million in savings to Medicare over 
the entire duration of the model. Annual reconciliation payments for 
each performance year may be greater than or less than the net change 
as detailed in Table 33 later in this section. In years 2019 and 2020 
of the CJR model, we estimate a net change that is greater than the 
$100 million dollar threshold for economic significance.
    There may also be spillover effects in the non-Medicare market, or 
even in the Medicare market in other areas as a result of this model. 
Recent research suggests that permanent changes in Medicare payment 
policy often have substantial effects on non-Medicare payers.\106\ 
Because it is unclear whether and how this evidence applies to a test 
of a new payment model (as opposed to a change in permanent policy), 
our analyses assume that spillovers effects on non-Medicare payers will 
not occur, although this assumption is subject to considerable 
uncertainty. We welcomed comments on our assumptions and calculations.
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    \106\ See, for example, Jeffrey Clemens and Joshua D. Gottlieb. 
Forthcoming. ``In the Shadow of a Giant: Medicare'sMedicare's 
Influence on Private Physician Payments.'' Journal of Political 
Economy.
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2. Effects on the Medicare Program
    The CJR model is a model involving an innovative mix of financial 
incentives for quality of care and efficiency gains within FFS Medicare 
for LEJR episodes. This model represents a new approach for the 
Medicare FFS program because it applies bundled payments to hospitals 
that might not otherwise participate in Innovation Center models or 
Medicare demonstrations and tests bundled payment models for episodes 
of care for LEJR procedures in multiple geographic areas. As such, we 
are interested in testing and evaluating the impact of a bundled 
payment approach for LEJR procedures in a variety of circumstances, 
especially among those providers that may not have decided to engage in 
programs or models in which Medicare makes payments differently than 
Medicare FFS.
    As described earlier in this final rule in section III.B. of this 
final rule, episodes will begin with admission to an acute care 
hospital for an LEJR procedure that is paid under the IPPS through MS-
DRG 469 or 470 and extend 90 days following discharge from the acute 
care hospital. The episode will include the LEJR procedure, inpatient 
stay, and all related care covered under Medicare Parts A and B within 
the 90 days after discharge, including hospital care, PAC, and 
physician services. Furthermore, we have designated participant 
hospitals as the episode initiators and to be financially responsible 
for episode cost under the CJR model. We will require all hospitals 
paid under the IPPS and physically located in selected geographic areas 
to participate in the CJR model, with limited exceptions. Eligible 
beneficiaries who receive care at these hospitals will automatically be 
included in the model. Geographic areas, based on MSAs, were selected 
for the model through a stratified random sampling methodology based on 
the following criteria: historical episode wage-adjusted payment 
quartiles and population size halves. We anticipate the CJR model may 
have financial and quality of care effects on non-hospital providers 
and suppliers that are involved in the care of Medicare beneficiaries 
with an LEJR episode, improving the coordination of items and services 
paid for through Medicare FFS, encouraging more provider investment in 
infrastructure and redesigned care processes for higher quality and 
more efficient service delivery, and incentivizing higher value care 
across the inpatient and PAC spectrum spanning the episode of care. 
However, the CJR model attributes episode spending and makes the 
retrospective reconciliation payment to or repayment from the 
participant hospital. Accordingly, our analysis examines the effects on 
participant hospitals, as they are the providers accountable for the 
episode payment under this model. Additionally, we will test the CJR 
model for a performance period beginning April 1, 2016 and ending 
December 31, 2020 and our estimates cover the duration of the model. We 
note that in this final rule, we are changing the start date of the 
model such that the first year of the model will begin April 1, 2016 
and have a performance period of 9 months. All other performance years 
of the model will begin January 1 and have a performance period of 12 
months.
    As described earlier in this final rule, we will continue paying 
hospitals and other providers and suppliers according to the usual 
Medicare FFS payment systems during all performance years. After the 
completion of a performance year, the Medicare claims payments for 
services furnished to the beneficiary during the episode, based on 
claims data, will be combined to calculate an actual episode payment. 
The actual episode payment is the sum of Medicare Part A and B claims 
payments for all related items and services furnished to a beneficiary 
during a CJR episode. The actual episode payment will then be 
reconciled against an established CJR target price, with consideration 
of additional payment adjustments based on quality performance and post 
episode spending. The amount of this calculation, if positive, will be 
paid to the participant hospital if the hospital has met the quality 
thresholds finalized in this rule. This payment is the reconciliation 
payment. If negative, the participant hospital will be required to make 
repayment to Medicare. We are phasing in the requirement that hospitals 
whose actual episode payments exceed their CJR target price to pay the 
difference back to Medicare beginning in performance year 2. Under this 
requirement, Medicare will not require repayment from hospitals for CJR 
episode spending above their target price in performance year 1. 
Lastly, we finalized to limit how much a hospital can gain or lose 
based on its reconciliation calculation with additional policies to 
further limit the risk of high payment cases for all participant 
hospitals and for special categories of hospitals.
    Based on the mix of financial and quality incentives, the CJR model 
could result in a range of possible outcomes for participant hospitals. 
The effects on hospitals of potential savings and liabilities will have 
varying degrees.
    Table 33 summarizes the estimated impact for the CJR model. Our 
model estimates that the Medicare program will save $343 million 
dollars over the 5 performance years (2016 through 2020). Savings to 
the Medicare program may be greater if providers are able to improve 
the coordination of care, invest in infrastructure, and redesign care 
processes to promote high quality and efficient service delivery. Costs 
to the Medicare program may increase if providers are able to use 
waivers provided under the model to increase

[[Page 73534]]

episode volume among beneficiaries that are expected to be less costly 
than the hospitals target price without the need for improving the 
coordination of care, or if there are declines in utilization 
independent of the model that are not incorporated in the prospective 
target prices. Our analysis to the best of our ability presents the 
cost and transfer payment effects of this final rule. We solicited 
comment on the assumptions and analysis presented.
a. Assumptions and Uncertainties
    We used final action Medicare claims data from January 1, 2012 
through March 31, 2015 as of October 2015 to simulate the impact that 
this model will have on Medicare spending for joint replacement 
episodes. This time period is consistent with the historical period 
that we are finalizing to use to calculate target prices for 
performance years 1 and 2 of the model as described in section III.C of 
this final rule (we note that for performance years 3 and 4, target 
prices will be calculated based on episodes that start between the 
period of January 1, 2014 to December 31, 2016. And for performance 
year 5, target prices will be calculated based on episodes that begin 
between the period of January 1, 2016 to December 31, 2018.) We applied 
the methodology provided in this final rule for calculating target 
prices for all hospitals that will be required to participate in the 
model, as discussed in section III.A. of this final rule, based on 
their performance from calendar years 2012 through 2014. Specifically, 
the estimates in this impact analysis reflect all IPPS hospitals in the 
selected MSAs and not participating in Model 1 or Phase II of BPCI 
Models 2 or 4 for the LEJR clinical episode as of October 2015. We 
identified the anchor hospitalizations based on claims with MS-DRG 469 
and MS-DRG 470 and included the related spending that occurred 90 days 
after discharge. Also as finalized in this rule, we are risk 
stratifying for episodes with hip fractures for MS-DRG 469 and MS-DRG 
470. For the purpose of the risk stratification, we identified anchor 
hospitalizations for MS-DRG 469 and MS-DRG 470 with hip fractures based 
on ICD-9-CM diagnosis codes reported on the anchor inpatient 
hospitalization claim. We removed payments excluded from the episode as 
not being associated with joint replacement care, as well as removing 
the IPPS add-on payments including disproportionate share hospital and 
indirect medical educational payments, new technology payments, 
uncompensated care payments, hospital value based purchasing payments, 
and hospital readmission reduction payments associated with the anchor 
hospitalization. We note that we have other payment exclusions in the 
calculation of the episode target price, in comparing actual episode 
payments with target prices, and in determining whether a 
reconciliation payment should be made to the hospital or repayment from 
the hospital should be made as described in section III.C. of this 
final rule. For the purpose of this impact analysis, we have only 
limited our calculations to remove the IPPS add-on payments reported on 
the IPPS claims including disproportionate share hospital and indirect 
medical educational payments, new technology payments, uncompensated 
care payments, hospital value based purchasing payments, and hospital 
readmissions reduction payments in calculating estimated target prices 
and in comparing the target price to actual episode payments. We then 
excluded episodes where the anchor hospitalization occurred in 
hospitals that are not paid under the IPPS. As finalized in this rule, 
we excluded episodes where the patient died during the 90 day episode. 
With the remaining episodes, we standardized episode payments to remove 
the variation in spending due to differences in the hospital's wage 
index. We trended utilization and prices in 2012 and 2013 to match 2014 
national performance, and we incorporated the outlier policy to cap 
spending for high cost outlier episodes such that payments are capped 
at the MS-DRG anchor value that is two standard deviations above the 
mean as described in section III.C. of this final rule. After we pooled 
episodes for MS-DRGs 469 and 470 with and without hip fractures, we 
calculated average risk-stratified episode prices for each hospital and 
census region, as well as a hospital-specific weight representing a 
case mix value for each hospital that is dependent only on episode 
volume for MS-DRGs 469 and 470 with and without hip fractures, and the 
national anchor factor. We then calculated blended prices for each 
hospital, with prices set at two-thirds of the hospital's experience 
and one-third of the region's average experience for performance years 
1 and 2 of the model, as one-third of the hospital's experience and 
two-thirds of the region's experience as used for performance year 3 of 
the model, and as the region's average experience for performance years 
4 and 5 of the model. We made an exception for hospitals with low 
historical CJR episode volume defined in this final rule as those with 
fewer than 20 CJR episodes in total across the 3 historical years, by 
setting their target price as the region's experience. These average 
prices were then disaggregated based on the national anchor factor of 
average episode spending for MS-DRG 470 relative to MS-DRG 469, the 
computed hospital-specific weight, the hospital's wage index was then 
applied back to the price, and a Medicare discount was applied.
    After calculating risk stratified target prices for MS-DRG 469 and 
470 for each hospital appropriate for each performance year, we 
compared these target prices against actual performance in the 2014 
calendar year. We capped actual spending for individual episodes based 
on the methodology in this final rule for high cost episodes. After 
incorporating the final policy for high cost episodes, total Medicare 
FFS spending in the 2014 calendar year for each hospital was reconciled 
against the target price and total number of episodes for the hospital. 
The aggregate impacts were then determined by multiplying by the total 
episodes for each MS-DRG.
    As described earlier in this rule, we are finalizing our proposal 
to rebase the target prices in performance years 3 and 4 based on 
episodes that start between the period of January 1, 2014 to December 
31, 2016 and rebase target prices for performance year 5 based on 
episodes that start between the period of January 1, 2016 to December 
31, 2018.
    The difference between each CJR episode's actual payment and the 
relevant target price (calculated as target price subtracted by CJR 
episode actual episode payment) will be aggregated for all episodes for 
a participant hospital within the performance year, creating the NPRA. 
As finalized in this rule, any positive NPRA amount greater than the 
stop-gain limit will be capped at the stop-gain limit of 5 percent for 
performance years 1 and 2 of the model, 10 percent in performance year 
3 and 20 percent in performance years 4 and 5. We note this is a change 
from the proposed rule where we had proposed a stop-gain limit to be 
capped at 20 percent for each performance year of the model. In 
addition, any negative NPRA amount exceeding the stop-loss limit will 
be capped at the stop-loss limit as described in section III.C.8.b. of 
this final rule. To limit a hospital's overall repayment responsibility 
under this model, a 5 percent repayment limit in performance year 2, 10 
percent repayment limit in performance year 3 and a 20 percent 
repayment limit in performance years 4 and 5. We note that this is a 
change from our proposed rule where we had proposed to set a 10

[[Page 73535]]

percent repayment limit in performance year 2 and 20 percent repayment 
limit in performance years 3 and subsequent years. For rural hospitals, 
MDHS, SCHs and RRCs, we are requiring a 3 percent repayment limit in 
performance year 2 and a 5 percent repayment limit in performance year 
3 and subsequent years. Furthermore, as described earlier in this final 
rule, we are not finalizing our proposal that in order for a 
participant hospital to qualify for a reconciliation payment, a 
hospital must meet or exceed the 30th percentile benchmark for each of 
the following three quality measures in performance years 1 through 3 
and 40th percentile in performance years 4-5:
     Hospital-level risk-standardized complication rate 
following elective primary total hip arthroplasty (THA) and/or total 
knee arthroplasty (TKA) (NQF #1550).
     Hospital-level 30-day, all-cause risk-standardized 
readmission rate following elective primary total hip arthroplasty 
(THA) and/or total knee arthroplasty (TKA) (NQF #1551).
     HCAHPS survey (NQF #0166).
    Additionally, as described earlier in this final rule in section 
III.C.5., we are not finalizing our proposal that hospitals could 
qualify for a lower discount from 2 percent to 1.7 percent applied to 
their target episode price if they voluntarily submit patient-reported 
outcome measures data. Rather, we are finalizing the use of a composite 
quality score based on achievement and improvement on the THA/TKA 
Complications measure (NQF #1550) and the HCAHPS Survey measure (NQF 
#0116), as well as submission of THA/TKA voluntary PRO data, that will 
assign hospitals to be below acceptable, acceptable, good, and 
excellent. Hospitals assigned as `below acceptable' would not be 
eligible for a reconciliation payment and would be subject to a 3 
percent discount. Hospitals assigned as `acceptable' would be eligible 
for a reconciliation payment and would be subject to a 3 percent 
discount. Hospitals assigned as `good' would be eligible for a 
reconciliation payment and would be subject to a 2 percent discount. 
Lastly, hospitals assigned as `excellent' would be eligible for a 
reconciliation payment and would be subject to a 1.5 percent discount. 
We note that in performance year 2 and 3, the discount for repayment 
would be 1 percentage point less than the discount applied for a 
reconciliation payment. We have used the following data to model the 
impact of this policy:
     Hospital-level risk-standardized complication rate 
following elective primary total hip arthroplasty (THA) and/or total 
knee arthroplasty (TKA) measure results reported on Hospital Compare in 
July 2015 based on the performance period of April 1, 2011 through 
March 31, 2014.
     HCAHPS survey (NQF #0166) reported on Hospital Compare in 
October 2015 based on the performance period of January 1, 2014 through 
December 31, 2014. To calculate improvement included in the composite 
quality score, we used the following data:
     Hospital-level risk-standardized complication rate 
following elective primary total hip arthroplasty (THA) and/or total 
knee arthroplasty (TKA) measure results reported on Hospital Compare in 
July 2014 based on the performance period of April 1, 2010 through 
March 31, 2013.
     HCAHPS survey (NQF #0166) reported on Hospital Compare in 
December 2014 based on the performance period of January 1, 2013 
through December 31, 2013.
    For the purpose of this analysis, we assumed that no hospitals 
voluntarily submitted patient reported outcome measures because we do 
not have the data to determine which hospitals in the model would 
submit this data. However, if we assumed that all hospitals in the 
model voluntarily submitted patient reported outcome measures, we would 
estimate that over the 5 performance years of the model, we would save 
$329 million (or 2.7% of total episode spend), as opposed to the 
projected estimates of $343 million (or 2.8% of total episode spend) in 
this final rule.. Hospitals located in selected MSAs were assigned to a 
performance percentile and assigned the corresponding quality 
performance score points listed in Table 16 of this final rule, based 
on their performance in the historical performance data described 
earlier. Hospitals that did not have a reported measure result were 
assigned to the 50th performance percentile. Hospitals assigned a 
quality measure performance percentile for the most recent year that 
improved by at least three deciles from the prior years' time period 
were quality improvement points. We used HCAHPS survey (NQF #0166) 
reported on Hospital Compare in October 2015 based on the performance 
period of January 1, 2014 through December 31, 2014 and Hospital-level 
(RSCR) following elective primary total hip arthroplasty (THA) and/or 
total knee arthroplasty (TKA) measure results reported on Hospital 
Compare in July 2015 based on the performance period of April 1, 2011 
through March 31, 2014 to model the hospital's performance in the most 
recent year. We used HCAHPS survey (NQF #0166) reported on Hospital 
Compare in December 2014 based on the performance period of January 1, 
2013 through December 31,(RSCR)following elective primary total hip 
arthroplasty (THA) and/or total knee arthroplasty (TKA) measure results 
reported on Hospital Compare in July 2014 based on the performance 
period of April 1, 2010 through March 31, 2013 to calculate the 
hospital's performance in the prior year for the purpose of modeling a 
hospital's quality improvement. Composite quality scores, including 
quality improvement points on the two measures, were calculated for 
hospitals in selected MSAs, and hospitals were assigned to a quality 
category of ``below acceptable'', ``acceptable'', ``good'' or 
``excellent'' based on their composite quality scores. As discussed in 
section III.C.5. of this final rule, composite quality scores will 
affect hospitals' eligibility for reconciliation payments and determine 
the amount of quality incentive payment a given hospital earns, which 
will affect hospitals' effective discount percentages at 
reconciliation.
    In order to model payments in this impacts analysis, hospitals 
assigned as `below acceptable' would not be eligible for a 
reconciliation payment and would be subject to a 3 percent effective 
discount percentage; hospitals assigned as `acceptable' would be 
eligible for a reconciliation payment and would be subject to a 3 
percent effective discount percentage; hospitals assigned as `good' 
would be eligible for a reconciliation payment and would be subject to 
a 2 percent effective discount percentage, and hospitals assigned as 
`excellent' would be eligible for a reconciliation payment and would be 
subject to a 1.5 percent effective discount percentage. We note that 
for performance years 2 and 3 of the model, for the purpose of 
repayment, the discount percentage is one percentage point lower than 
the effective discount percentage assigned for reconciliation payment. 
Due to limited data, for the purpose of modeling these estimates, we 
assumed that hospitals in the selected MSAs would have the same 
composite quality score throughout the 5 year performance period of the 
model.
    To simulate the impact for performance year 1 or April 1 2016 
through December 31, 2016, we calculated the NPRA assuming no downside 
risk to hospitals, and using the target price calculated for 
performance year 1, that is two-thirds hospital experience and one-
third region experience. If the estimated NPRA is negative (that is, in 
the aggregate, the actual episode payments

[[Page 73536]]

for all episodes is greater than the target price multiplied by the 
number of episodes) for performance year 1, Medicare will not require 
repayment of the NPRA from the hospital because we have finalized no 
hospital responsibility for repayment for the first performance year. 
Additionally, as part of this estimate, we accounted for whether a 
hospital met the minimum composite quality score to be eligible for a 
reconciliation payment and to meet the quality incentive payment that 
adjusts the effective discount percentage to 2 percent or 1.5 percent. 
Lastly, we have applied the 5 percent stop-gain limit on the estimated 
reconciliation payments made to participant hospitals total 
reconciliation payments reflect what we will expect Medicare to pay 
hospitals due to normal claims variation, and due to a blended target 
price which rewards hospitals that already perform better than their 
regional average.
    To simulate the impact in performance year 2, we calculated the 
NPRA with the 5 percent stop-loss and stop-gain limits applied, but 
only requiring repayments from hospitals for total spending that is 
above a 1 percent discount. Additionally, we accounted for whether 
hospitals would meet the quality payment incentives based on their 
performance for the THA/TKA complications rate and HCAHPs survey 
including eligibility for a reconciliation payment and the quality 
incentive discount at 2 percent or 1.5 percent. For the simulation in 
performance year 2, we used the target price calculated for performance 
year 2 that is two-thirds hospital experience and one-third regional 
experience. A 5 percent stop-loss limit was applied to repayments, and 
3 percent stop-loss limit was applied for rural hospitals, sole 
community hospitals, Medicare dependent hospitals, and rural referral 
centers, and a 5 percent stop-gain limit was applied. We note that this 
is a change from the proposed rule where we proposed to apply a 10 
percent stop-loss limit for all hospitals except for rural hospitals, 
sole community hospitals, Medicare dependent hospitals and rural 
referral centers.
    To simulate the impact in performance year 3, we calculated the 
NPRA assuming 10 percent stop-gain and stop-loss limit and met the 
quality incentive scores for a reduced discount and for reconciliation 
payments, and requiring repayments from hospitals for total spending 
that is above the 2 percent discount. For the simulation in year 3, we 
used the target price calculated as one-third of the hospital's 
experience and two-thirds of the regional experience. We included a 10 
percent stop-loss limit on repayments from acute care hospitals 
included in this analysis, but used a 5 percent stop-loss limit on 
reconciliation repayments from rural hospitals, sole community 
hospitals, Medicare dependent hospitals, and rural referral centers. We 
note that this is a change from the proposed rule where we included a 
20 percent stop-gain limit and 20 percent stop-loss limit on repayments 
for all hospitals with the exception of rural hospitals, sole community 
hospitals, Medicare dependent hospitals, and rural referral centers
    For performance years 4 and 5, the impact estimates were calculated 
in the same way except that the episode target prices are based on 100 
percent of the regional experience and the stop-loss and stop-gain 
limits are set to 20 percent.
    In the CJR model, we have finalized to include a total of 67 MSAs 
from 8 MSA groupings. IPPS hospitals located within the selected MSAs 
will be required to participate in this model unless they participate 
in BPCI as discussed earlier in this final rule in section III.A.
    Additionally, we note for these estimates, we did not assume that 
participation in this model would result in in efficiency or 
utilization over the course of the model. Since the model provides 
hospitals with strong incentives to improve efficiency, however, it is 
plausible that improvement in efficiency (and corresponding reductions 
in utilization) could occur. If such improvements occurred, however, it 
would have a limited effect on the net savings generated by the model 
since the resulting reduction in episode savings would be offset 
approximately one-for-one by higher net reconciliation payments up to 
the stop-gain limits. Over the 5 performance years of the model, we 
estimate $343 million dollars in savings to the Medicare program, out 
of $12.299 billion in total episode spending.

                                                    Table 33--Estimates of Reconciliation Payments *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Performance year of the model                           Across all 5
                                                         --------------------------------------------------------------------------------  years of the
                                                               2016            2017            2018            2019            2020            model
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total episode spending..................................          $1,247          $2,562          $2,688          $2,821          $2,980         $12,299
Net reconciliation payments\**\.........................              11            (36)            (71)           (120)           (127)           (343)
Reconciliation amounts..................................              11              23              30              52              55             170
Repayment amounts.......................................               -            (58)           (101)           (172)           (182)           (513)
Net reconciliation as a percentage of total episode                 0.8%           -1.4%           -2.6%           -4.2%           -4.2%           -2.8%
 spend..................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ Impact for 67 selected MSAs. All numbers rounded to closest million.
\**\ Sum of reconciliation amount and repayment amount may not add to net reconciliation payment due to rounding.

    These estimates contain a significant amount of uncertainty. As a 
result, this model could produce more significant Medicare savings or 
could result in additional costs to the Medicare program. The primary 
source of uncertainty stems from the normal variation in claim cost 
trends each year coupled with the cap on the repayment made at 
reconciliation. In addition, this analysis assumes no change in 
utilization both for the use of services within the bundled episode, as 
well as no change in total episodes among hospitals. The prospective 
prices for the CJR model incorporate price updates from the FFS payment 
systems, but assume no change in utilization for the performance years. 
If there is a national increase in utilization within each bundle that 
is independent of this model, then savings to the Medicare program may 
increase due to greater repayments paid back to Medicare. If there is a 
national decrease in utilization within each bundle that is independent 
of this model, then costs to the Medicare program may increase due to 
greater reconciliation payments paid by Medicare to hospitals. The 
results will also depend on the cumulative effects over time and across 
providers on whether and how the model changes either actual medical 
procedures or the allocations of payments among service providers. We 
will expect significant

[[Page 73537]]

variation among hospitals and among metropolitan areas, but are unable 
to predict these.
    Additionally, although we project savings to Medicare under this 
model, as stated earlier, we note that under section 1115A(b)(3)(B) of 
the Act, the Secretary is required to terminate or modify a model 
unless certain findings can be made with respect to savings and quality 
after the model has begun. If during the course of testing the model it 
is determined that termination or modification is necessary, such 
actions will be undertaken through rulemaking as necessary.
b. Analyses
    The first performance year of the model is expected to cost the 
Medicare program $11 million in reconciliation payments made by CMS to 
hospitals. No repayments from hospitals will be assessed because 
hospitals are not subject to downside risk in performance year 1. 
Hospitals that will receive reconciliation payments are the hospitals 
that provide lower cost care relative to their regional average. As 
stated earlier, we are finalizing that the first performance year will 
be 9 months beginning April 1, 2016 through December 31, 2016. The 
estimate reflects reconciliation payments made for a 9 month 
performance period.
    In the second performance year of the model, participant hospitals 
on net are expected to pay $36 million to CMS. We are stipulating a 5 
percent stop-loss and stop-gain limit for acute care hospitals, with 
exception for rural hospitals, sole community hospitals, Medicare 
dependent hospitals, and rural referral center hospitals which will be 
subject to a 3 percent stop-loss limit. These limits will cap the total 
amount of repayments paid by hospitals to CMS.
    In the third performance year of the model, net reconciliation 
payments are expected to be $71 million in savings to the Medicare 
program. The additional savings in performance year 3 compared to 
performance year 2 can be attributed to the increase in the stop-loss 
and stop-gain limits to 10 percent for acute care hospitals, with 
exception for rural hospitals, sole community hospitals, Medicare 
dependent hospitals, and rural referral center hospitals which will be 
subject to a 5 percent stop-loss limit.
    For performance years 4 and 5 of the model, the episode target 
price will be based on full regional pricing. This creates great 
variation between the target price and hospitals own experience. 
Therefore, the stop-gain and stop-loss limits of 20 percent on 
reconciliation payments are estimated to have a larger impact. As a 
result, net payments are expected to be $120 million dollars from 
hospitals to the Medicare program in the fourth year and $127 million 
in the fifth year. These estimated savings in years 4 and 5 represent 
4.2 percent of total episode spending in those years.
    The total savings to the Medicare program after 5 years of the 
model are expected to be $343 million dollars out of $12.299 billion 
dollars or 2.8 percent in total episode spending. Due to the 
uncertainty of estimating this model, actual results could be 
significantly higher or lower than this estimate.
c. Further Consideration
    We can use our experience in previous implementation of bundled 
payment models to help inform our impact analyses. We have previously 
used our statutory authority to create payment models such as the BPCI 
initiative and the ACE Demonstration to test bundled payments. Under 
the authority of section 1866C of the Act, CMS funded a 3-year 
demonstration, the ACE Demonstration. The demonstration used a 
prospective global payment for a single episode of care as an 
alternative approach to payment for service delivery under traditional 
Medicare FFS. The episode of care was defined as a combination of Parts 
A and B services furnished to Medicare FFS beneficiaries during an 
inpatient hospital stay for any one of a specified set of cardiac and 
orthopedic MS DRGs. The MS DRGs tested included 469 and 470, which are 
included in the CJR model. The discounted bundled payments generated an 
average gross savings to Medicare of $585 per episode for a total of 
$7.3 million across all episodes (12,501 episodes) or 3.1 percent of 
the total expected costs for these episodes. After netting out the 
savings produced by the Medicare Parts A and B discounted payments and 
some increased PAC costs that were observed at two sites, Medicare 
saved approximately $4 million, or 1.72 percent of the total expected 
Medicare spending.
    Additionally, we are currently testing the BPCI initiative. Under 
the initiative, entities enter into payment arrangements with CMS that 
include financial and performance accountability for episodes of care. 
Episodes of care under the BPCI initiative begin with either an--(1) 
Inpatient hospital stay; or (2) PAC services following a qualifying 
inpatient hospital stay and include tests of LEJR episodes. The BPCI 
initiative is evaluating the effects of episode based payment 
approaches on patient experience of care, outcomes, and cost of care 
for Medicare FFS beneficiaries. Although there is some evidence from 
BPCI and ACE suggesting that providers may improve their performance, 
both of these initiatives were voluntary, and the participants that 
volunteered to participate may be in a better position to reduce 
episode spending relative to the average provider. We believe that our 
experiences with BPCI support the design of the CJR Model.
3. Effects on Beneficiaries
    In 2014, approximately 430,000 Medicare beneficiaries had 
discharges for LEJRs (MS-DRG 469 and MS-DRG 470) nationally. We 
anticipate that the CJR model may benefit beneficiaries receiving LEJRs 
because the intent of the model is to test whether providers under this 
bundled payment system are able to improve the coordination and 
transition of care, invest in infrastructure and redesigned care 
processes for high quality and efficient service delivery, and 
incentivize higher value care across the inpatient and PAC spectrum 
spanning the episode of care.
    We have finalized several quality of care and patient experience 
measures to evaluate participant hospitals in the CJR model with the 
intent that it will encourage the provider community to focus on and 
deliver improved quality care for the Medicare beneficiary. We are 
finalizing to adopt and publicly report two hospital level quality of 
care measures for the CJR model. Those measures include a complication 
measure and a patient experience survey measure. In addition, we are 
finalizing to voluntarily collect data to develop a hospital-level 
measure of patient reported outcomes following an elective primary 
total hip or total knee arthroplasty to be used in future years of the 
model. We finalized to use these measures to assess the success of the 
model and to monitor for beneficiary safety. The accountability of 
participant hospitals for both quality and cost of care provided for 
Medicare beneficiaries with an LEJR episode provides the hospitals with 
new incentives to improve the health and well-being of the Medicare 
beneficiaries they treat.
    Additionally, the model does not affect the beneficiary's freedom 
of choice to obtain health services from any individual or organization 
qualified to participate in the Medicare program. Under the CJR model, 
eligible beneficiaries who choose to receive services from a 
participant hospital will not have the option to opt out of inclusion 
in the model. Although the CJR model allows hospitals to enter into 
risk-sharing arrangements with certain other providers and these 
hospitals may recommended those providers to the

[[Page 73538]]

beneficiary, hospitals may not prevent or restrict beneficiaries to any 
list of preferred or recommended providers.
    Many controls exist under Medicare to ensure beneficiary access and 
quality and we will use our existing authority, if necessary, to audit 
participant hospitals if claims analysis indicates an inappropriate 
change in delivered services. As described earlier in this final rule, 
given that participant hospitals will receive a reconciliation payment 
when they are able to reduce average costs per case and meet quality 
thresholds, they could have an incentive to avoid complex, high cost 
cases by referring them to nearby facilities or specialty referral 
centers. We intend to monitor the claims data from participant 
hospitals--for example, to compare a hospital's case mix relative to a 
pre-model historical baseline to determine whether complex patients are 
being systematically excluded. Furthermore, we also will require 
providers to supply beneficiaries with written information regarding 
the design and implications of this model as well as their rights under 
Medicare, including their right to use their provider of choice.
    We are implementing several safeguards to ensure that Medicare 
beneficiaries do not experience a delay in services. We believe that 
the longer the episode duration, the lower the risk of delaying care 
beyond the episode duration, and we believe that a 90 day episode is 
sufficiently long to minimize the risk that any LEJR related care will 
be delayed beyond the end of the episode. Moreover, we have finalized 
as part of the payment definition (see section III.C. of this final 
rule) that certain post-episode payments occurring in the 30 day window 
subsequent to the end of the 90-day episode will be counted as an 
adjustment against savings. Importantly, approaches to saving costs 
will include taking steps that facilitate patient recovery, that 
shorten recovery duration, and that minimize post-operative problems 
that might lead to readmissions. Thus, the model itself rewards better 
patient care.
    Lastly, we note that Medicare payments for services will continue 
to be made for each Medicare FFS payment system under this model, and 
will include normal beneficiary copayments, deductibles, and 
coinsurance. We expect and assume that beneficiary payments will not be 
affected, as only the hospital will be subject to the reconciliation 
process. Beneficiaries may benefit if providers are able to 
systematically improve the quality of care while reducing costs. We 
welcomed public comments on our estimates of the impact of our 
proposals on Medicare beneficiaries. We did not receive any comments on 
our estimates of the impact of our policies on Medicare beneficiaries.
4. Effects on Small Entities
    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities, either by virtue of 
their nonprofit status or by qualifying as small businesses under the 
Small Business Administration's size standards (revenues of less than 
$7.5 to $38.5 million in any 1 year; NAIC Sector-62 series). States and 
individuals are not included in the definition of a small entity. For 
details, see the Small Business Administration's Web site at https://www.sba.gov/content/small-business-size-standards.
    For purposes of the RFA, we generally consider all hospitals and 
other providers and suppliers to be small entities. We believe that the 
provisions of this final rule relating to acute care hospitals will 
have some effects on a substantial number of other providers involved 
in these episodes of care including surgeons and other physicians, 
SNFs, physical therapists, and other providers.
    Although we acknowledge that many of the affected entities are 
small entities, and the analysis discussed throughout this final rule 
discusses aspects of the model that may or will affect them, we have no 
reason to assume that these effects will reach the threshold level of 5 
percent of revenues used by HHS to identify what are likely to be 
``significant'' impacts. Although LEJR procedures (MS-DRGs 469 and 470) 
are among the most common surgical procedures undergone by Medicare 
beneficiaries, they are only about 5 percent of all acute hospital 
discharges.\107\ We assume that all or almost all of these entities 
will continue to serve these patients, and to receive payments 
commensurate with their cost of care. Such changes occur frequently 
already (for example, as both hospital affiliations and preferred 
provider networks change), and we have no reason to assume that this 
will change significantly under the model.
---------------------------------------------------------------------------

    \107\ Medicare Inpatient Claims data from January-December 2014, 
Chronic Conditions Warehouse.
---------------------------------------------------------------------------

    Accordingly, we have determined that this final rule will not have 
a significant impact on a substantial number of small entities. We 
solicited public comments on our estimates and analysis of the impact 
of our proposals on those small entities.
    Comment: We received a comment regarding our determination that 
this rule would not have a significant impact on a substantial number 
of small entities. The commenter stated that because LEJRs are among 
the most common surgical procedures for Medicare beneficiaries, a 
significant number of Medicare patients are receiving their 
rehabilitation treatment outside the hospital at independent physical 
therapy practices. Thus, the commenter stated that the analysis 
erroneously focused on hospitals and neglected to address the impact 
that this model would have on small independent physical therapy 
practices.
    Response: We acknowledge that many providers, besides hospitals, 
are involved in the continuum of care for Medicare beneficiaries in the 
90-day post discharge LEJR episodes and will be impacted by this model. 
However, we have focused this impact analysis on the providers that are 
directly financially responsible for the episode of care for LEJRs, the 
IPPS hospitals in the selected MSAs. Many of the policies finalized in 
this rule are directed towards the IPPS hospitals because they are 
financially at risk under this model. Accordingly, the estimates in 
this impact analysis are for the hospitals participating in this model 
and we are unable to estimate the impacts on non-hospital providers and 
suppliers that are involved in the care for beneficiaries with LEJR 
episodes.
5. Effects on Small Rural Hospitals
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis if a proposed rule or final rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Act, a 
small rural hospital is defined as a hospital that is located outside 
of an MSA and has fewer than 100 beds. We note that, according to this 
definition, the CJR model will not include any rural hospitals given 
that the CJR model will only include hospitals located in MSAs, as 
discussed in section III.A of this final rule. However, we also note 
that as discussed in section III.C.8. of this final rule, for purposes 
of our policy finalized in this rule to include a more protective stop-
loss policy for certain hospitals, we are finalizing to define a rural 
hospital as an IPPS hospital that is either located

[[Page 73539]]

in a rural area in accordance with Sec.  412.64(b) or in a rural census 
tract within an MSA defined at Sec.  412.103(a)(1) or has reclassified 
to rural in accordance with Sec.  412.103. Thus, the CJR model will 
affect some rural hospitals, as discussed previously in section 
III.C.8. of this final rule.
    Because of our concerns that rural hospitals may have lower risk 
tolerance and less infrastructure and support to achieve efficiencies 
for high payment episodes, we are implementing additional financial 
protections for certain categories of hospitals, including rural 
hospitals. In performance year 2, a hospital could owe Medicare no more 
than 5 percent of the target price multiplied by the number of the 
hospital's LEJR episodes in CJR as we phase in repayment responsibility 
under the model and in performance year 3, a hospital could owe 
Medicare no more than 10 percent. In performance year 4 and 5 when full 
repayment responsibility is in place, no more than 20 percent of the 
target price multiplied by the number of the hospital's LEJR episodes 
in CJR could be owed by a hospital to Medicare. However, for rural 
hospitals, Medicare Dependent Hospitals, RRCs and Sole Community 
Hospitals, we are implementing a lower stop loss limit policy of 3 
percent of episode payments for these categories of hospitals. More 
specifically, in performance year 2, a rural hospital, MDH, RRC, or SCH 
could owe Medicare no more than 3 percent of the target price 
multiplied by the number of the hospital's episodes in CJR. In 
performance years 3 through 5, such a hospital could owe Medicare no 
more than 5 percent of the target price multiplied by the number of the 
hospital's episodes. We are finalizing these additional protections, 
and we estimate that approximately 9 percent of participant hospitals 
are rural hospitals, MDHs, RRCs and SCHs that will be subject to these 
protections.
    Because LEJR procedures (MS-DRGs 469 and 470) account for only 
about 5 percent of all discharges, because relatively few of these 
procedures are performed at small rural hospitals, and because our 
model is designed to minimize adverse effects on rural hospitals, we do 
not believe that rural hospitals will experience significant adverse 
economic impacts. Accordingly, we conclude that this final rule will 
not have a significant impact on the operations of a substantial number 
of small rural hospitals.
    We solicited public comments on our estimates and analysis of the 
impact of our proposals on those small rural hospitals.
    Comment: A commenter questioned our determination that this rule 
will not have a significant impact on small rural hospitals. The 
commenter was concerned that the proposed rule could cause significant 
harm to rural hospitals, particularly rural hospitals paid under cost 
reimbursement like CAHs. The commenter believed that because swing beds 
offered in CAHs are reimbursed at a higher cost based rate than SNFs, 
hospitals would divert their patients from the CAH to a SNF. This would 
result in a significant financial impact on the CAHs who would lose 
their swing bed patients.
    Response: We appreciate the comment regarding the impact of this 
model on rural providers, particularly CAHs. CAHs have been excluded as 
episode initiators in this model as IPPS hospitals are the selected 
participants that are financially responsible for the 90-day LEJR 
episode. However, we anticipate that rural providers such as CAHs, RHCs 
and FQHCs would be involved in the care provided to Medicare 
beneficiaries with a 90-day LEJR episode. It is possible that as 
participant hospitals implement changes to improve efficiencies in 
episode spending that they may change their care coordination patterns 
with consideration to costs and quality, and it would affect other 
provider types involved in the care continuum for LEJR patients. As 
described earlier in this final rule, we recognize that rural IPPS 
hospitals, SCHs, MDH and RRCs often serve as the only access of care 
for beneficiaries living in rural areas and may have fewer resources to 
contain costs under this model and may have more limited options on 
providers to coordinate care with, such as CAHs that are reimbursed at 
a higher cost based rate. As a result, we have provided for more 
protective stop-loss limits for these groups of IPPS hospitals in order 
to be able to include them in the model while alleviating some 
financial risk and we believe that this model will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals. Because IPPS hospitals are financially at risk in this 
model, the estimates in this impact analysis are for the hospitals 
selected to be in this model and we are unable to estimate the impacts 
on non-hospital rural providers that are involved in the care for 
beneficiaries with LEJR episodes.
6. Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2015, that 
is approximately $144 million. This final rule does not include any 
mandate that would result in spending by state, local or tribal 
governments, in the aggregate, or by the private sector in the amount 
of $144 million in any 1 year.

D. Alternatives

    Throughout this final rule, we have identified our policies and 
alternatives that we have considered, and provided information as to 
the effects of these alternatives and the rationale for each of the 
policies. In the proposed rule we solicited and welcomed comments on 
our proposals, on the alternatives we identified, and on other 
alternatives that we should consider, as well as on the costs, 
benefits, or other effects of these. We note that our estimates are 
limited to the IPPS hospitals that are selected to participate in this 
model. This final rule will not directly affect hospitals that are not 
participating in the model. However, it may encourage innovations in 
health care delivery in other areas or in care reimbursed through other 
payers. For example, a hospital and affiliated providers may choose to 
extend their arrangements to all joint replacement procedures they 
provide, not just those reimbursed by Medicare. Alternatively, a 
hospital and affiliated providers in one city may decide to hold 
themselves forth as ``centers of excellence'' for patients from other 
cities, both those included and not included in the model. In the 
proposed rule we welcomed comments that address these or other 
possibilities. We did not receive any comments on the alternatives 
considered.

E. Accounting Statement

    As required by OMB Circular A-4 under Executive Order 12866 
(available at https://www.whitehouse.gov/omb/circulars_a004_a-4) in 
Table 34, we have prepared an accounting statement showing the 
classification of transfers, benefits, and costs associated with the 
provisions in this final rule. The accounting statement is based on 
estimates provided in this regulatory impact analysis. As described in 
Table 33, we estimate this final model will result in savings to the 
federal government of $343 million over the 5 performance years of the 
model from 2016 to 2020. The following Table 34 shows the annualized 
change in (A) net federal monetary transfers, and (B) potential 
reconciliation payments to participating hospitals net of repayments 
from participant hospitals

[[Page 73540]]

that is associated with the provisions of this final rule as compared 
to baseline. In Table 34, the annualized change in payments based on a 
7 percent and 3 percent discount rate, results in net federal monetary 
transfer from the participant IPPS hospitals to the federal government 
of $63 million and $65 million respectively.

            Table 34--Accounting Statement Estimated Impacts
------------------------------------------------------------------------
                                                        Source citation
            Category               Primary estimate     (RIA, preamble,
                                                             etc.)
------------------------------------------------------------------------
                                BENEFITS
------------------------------------------------------------------------
Annualized monetized transfers:   $63 million.......  Change from
 Discount rate: 7%.                                    baseline to final
                                                       changes (Table
                                                       18).
Annualized monetized transfers:   65 million........
 Discount rate: 3%.
------------------------------------------------------------------------
From whom to whom?..............  From Participant IPPS Hospitals to
                                   Federal Government.
------------------------------------------------------------------------

F. Conclusion

    The preceding analysis, together with the remainder of this 
preamble, provides the Regulatory Impact Analysis of a rule with a 
significant economic effect. As a result of this final rule, we 
estimate of the financial impact of the CJR model for CYs 2016 through 
2020 will be net federal savings of $343 million over a 5 year period. 
The annualized change in payments based on a 7 percent and 3 percent 
discount rate, results in net federal monetary transfer from the 
participant IPPS hospitals to the federal government of $63 million and 
$65 million respectively.
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the Office of Management and Budget.

List of Subjects for 42 CFR Part 510

    Administrative practice and procedure, Health facilities, Medicare, 
Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, under the authority at 
section 1115A of the Social Security Act, the Centers for Medicare & 
Medicaid Services amends 42 CFR Chapter IV as follows:

SUBCHAPTER H--HEALTH CARE INFRASTRUCTURE AND MODEL PROGRAMS

0
1. Revise the heading of subchapter H to read as set forth above.

0
2. Part 510 is added to subchapter H to read as follows:

PART 510--COMPREHENSIVE CARE FOR JOINT REPLACEMENT MODEL

Sec.
Subpart A--General Provisions
510.1 Basis and scope.
510.2 Definitions.
Subpart B--Comprehensive Care for Joint Replacement Model Participants
510.100 Episodes being tested.
510.105 Geographic areas.
Subpart C--Scope of Episodes
510.200 Time periods, included and excluded services, and 
attribution.
510.205 Beneficiary inclusion criteria.
510.210 Determination of the episode.
Subpart D--Pricing and Payment
510.300 Determination of episode target prices.
510.305 Determination of the NPRA and reconciliation process.
510.310 Appeals process.
510.315 Composite quality scores for determining reconciliation 
payment eligibility and quality incentive payments.
510.320 Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.
510.325 Allocation of payments for services that straddle the 
episode.
Subpart E--Quality Measures, Beneficiary Protections, and Compliance 
Enforcement
510.400 Quality measures and reporting.
510.405 Beneficiary choice and beneficiary notification.
510.410 Compliance enforcement.
Subpart F--Financial Arrangements and Beneficiary Incentives
510.500 Financial arrangements under the CJR model.
510.505 Distribution arrangements.
510.510 Enforcement authority.
510.515 Beneficiary incentives under the CJR model.
Subpart G--Waivers
510.600 Waiver of direct supervision requirement for certain post-
discharge home visits.
510.605 Waiver of certain telehealth requirements.
510.610 Waiver of SNF 3-day rule.
510.615 Waiver of certain post-operative billing restrictions.
510.620 Waiver of deductible and coinsurance that otherwise apply to 
reconciliation payments or repayments.
Subparts H--J [Reserved]
Subpart K--Model Termination
510.900 Termination of the CJR model.

    Authority: Secs. 1102, 1115A, and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1315(a), and 1395hh).

Subpart A--General Provisions


Sec.  510.1  Basis and scope.

    (a) Basis. This part implements the test of the Comprehensive Care 
for Joint Replacement model under section 1115A of the Act. Except as 
specifically noted in this part, the regulations under this part must 
not be construed to affect the payment, coverage, program integrity, or 
other requirements (such as those in parts 412 and 482 of this chapter) 
that apply to providers and suppliers under this chapter.
    (b) Scope. This part sets forth the following:
    (1) The participants in the Comprehensive Care for Joint 
Replacement model.
    (2) The episodes being tested in the model.
    (3) The methodology for pricing and payment under the model.
    (4) Quality performance standards and quality reporting 
requirements.
    (5) Safeguards to ensure preservation of beneficiary choice and 
beneficiary notification.


Sec.  510.2  Definitions.

    For the purposes of this part, the following definitions are 
applicable unless otherwise stated:
    ACO stands for accountable care organization.
    Actual episode payment means the sum of Medicare claims payments 
for items and services that are included in the episode in accordance 
with Sec.  510.200(b), excluding the items and services described in 
Sec.  510.200(d).
    Alignment payment means a payment from a CJR collaborator to a 
participant hospital under a sharing arrangement, for only the purpose 
of sharing the

[[Page 73541]]

participant hospital's responsibility for repayments to Medicare.
    Anchor hospitalization means the initial hospital stay upon 
admission for a lower extremity joint replacement.
    BPCI stands for the Bundled Payment for Care Improvement 
initiative.
    CEC stands for Comprehensive ESRD Care Initiative.
    CCN stands for CMS certification number.
    CJR collaborator means one of the following Medicare-enrolled 
persons or entities that enters into a sharing arrangement:
    (1) Skilled nursing facility (SNF).
    (2) Home health agency (HHA).
    (3) Long-term care hospital (LTCH).
    (4) Inpatient rehabilitation facility (IRF).
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Provider or supplier of outpatient therapy services.
    (8) Physician group practice (PGP).
    CJR reconciliation report means the report prepared after each 
reconciliation that CMS provides to each participant hospital notifying 
the participant hospital of the outcome of the reconciliation.
    Collaborator agreement means a written, signed agreement between a 
CJR collaborator and a participant hospital that meets the requirements 
of Sec.  510.500(c).
    Composite quality score means a score computed for each participant 
hospital to summarize the hospital's level of quality performance and 
improvement on specified quality measures as described in Sec.  
510.315.
    Core-based statistical area (CBSA) means a statistical geographic 
entity consisting of the county or counties associated with at least 
one core (urbanized area or urban cluster) of at least 10,000 
population, plus adjacent counties having a high degree of social and 
economic integration with the core as measured through commuting ties 
with the counties containing the core.
    Critical access hospital (CAH) means a hospital designated under 
subpart F of part 485 of this chapter.
    Distribution arrangement means a financial arrangement between a 
PGP that is a CJR collaborator and a practice collaboration agent in 
which the PGP distributes some or all of a gainsharing payment that it 
received from a participant hospital.
    Distribution payment means a payment made by a PGP that is a CJR 
collaborator to a practice collaboration agent under a distribution 
arrangement.
    DME stands for durable medical equipment.
    EFT stands for electronic funds transfer.
    Episode of care (or Episode) means all Medicare Part A and B items 
and services described in Sec.  510.200(b) (and excluding the items and 
services described in Sec.  510.200(d)) that are furnished to a 
beneficiary described in Sec.  510.205 during the time period that 
begins with the beneficiary's admission to an anchor hospitalization 
and ends on the 90th day after the date of discharge from the anchor 
hospitalization, with the day of discharge itself being counted as the 
first day of the 90-day post-discharge period.
    Episode target price means the amount determined in accordance with 
Sec.  510.300 and applied to an episode in determining a net payment 
reconciliation amount.
    ESRD stands for end stage renal disease.
    Gainsharing payment means a payment from a participant hospital to 
a CJR collaborator, under a sharing arrangement, composed of only 
reconciliation payments or internal cost savings or both.
    HHA stands for home health agency.
    HCAHPS stands for Hospital Consumer Assessment of Healthcare 
Providers and Systems.
    HCPCS stands for CMS Common Procedure Coding System.
    Historical episode payment means the most recent 3 years of 
expenditures for an episode in a given participant hospital.
    ICD-CM stands for International Classification of Diseases, 
Clinical Modification.
    Inpatient prospective payment systems (IPPS) means the payment 
systems for subsection (d) hospitals as defined in section 
1886(d)(1)(B) of the Act.
    Internal cost savings means the measurable, actual, and verifiable 
cost savings realized by the participant hospital resulting from care 
redesign undertaken by the participant hospital in connection with 
providing items and services to beneficiaries within specific CJR 
episodes of care. Internal cost savings does not include savings 
realized by any individual or entity that is not the participant 
hospital.
    IPF stands for inpatient psychiatric facility.
    IPPS hospital (or hospital) means a provider subject to the 
prospective payment system specified in Sec.  412.1(a)(1) of this 
chapter.
    IRF stands for inpatient rehabilitation facility.
    Lower-extremity joint replacement (LEJR) means any procedure that 
is within MS-DRG 469 or 470, including lower-extremity joint 
replacement procedures or reattachment of a lower extremity.
    LTCH stands for long-term care hospital.
    Medicare severity diagnosis-related group (MS-DRG) means, for the 
purposes of this model, the classification of inpatient hospital 
discharges updated in accordance with Sec.  412.10 of this chapter.
    Medicare-dependent, small rural hospital (MDH) means a specific 
type of hospital that meets the classification criteria specified under 
Sec.  412.108 of this chapter.
    Member of the PGP or PGP member means a physician, nonphysician 
practitioner, or therapist who is an owner or employee of the PGP and 
who has reassigned to the PGP his or her right to receive Medicare 
payment.
    Metropolitan Statistical Area (MSA) means a core-based statistical 
area associated with at least one urbanized area that has a population 
of at least 50,000.
    Net payment reconciliation amount (NPRA) means the amount 
determined in accordance with Sec.  510.305(e).
    Nonphysician practitioner means (except for purposes of subpart G 
of this part) one of the following:
    (1) A physician assistant who satisfies the qualifications set 
forth at Sec.  410.74(a)(2)(i) and (ii) of this chapter.
    (2) A nurse practitioner who satisfies the qualifications set forth 
at Sec.  410.75(b) of this chapter.
    (3) A clinical nurse specialist who satisfies the qualifications 
set forth at Sec.  410.76(b) of this chapter.
    (4) A certified registered nurse anesthetist (as defined at Sec.  
410.69(b)).
    (5) A clinical social worker (as defined at Sec.  410.73(a)).
    (6) A registered dietician or nutrition professional (as defined at 
Sec.  410.134).
    NPI stands for National Provider Identifier.
    OIG stands for the Department of Health and Human Services Office 
of the Inspector General.
    PAC stands for post-acute care.
    Participant hospital means an IPPS hospital (other than those 
hospitals specifically excepted under Sec.  510.100(b)) with a CCN 
primary address in one of the geographic areas selected for 
participation in the CJR model in accordance with Sec.  510.105, as of 
the date of selection or any time thereafter during any performance 
period.
    PBPM stands for per-beneficiary-per-month.
    Performance year means one of the years in which the CJR model is 
being tested. Performance years for the model correlate to calendar 
years with the

[[Page 73542]]

exception of performance year 1, which is April 1, 2016 through 
December 31, 2016.
    PGP stands for physician group practice.
    Physician has the meaning set forth in section 1861(r) of the Act.
    Post-episode spending amount means the sum of Medicare Parts A and 
B payments for items and services that are furnished to a beneficiary 
within 30 days after the end of the beneficiary's episode.
    Practice collaboration agent means a PGP member who has entered 
into a distribution arrangement with the same PGP of which he or she is 
a member and who has not entered into a collaborator agreement with a 
participant hospital.
    Provider of outpatient therapy services means a provider or 
supplier furnishing one or more of the following:
    (1) Outpatient physical therapy services as defined in Sec.  410.60 
of this chapter.
    (2) Outpatient occupational therapy services as defined in Sec.  
410.59 of this chapter.
    (3) Outpatient speech-language pathology services as defined in 
Sec.  410.62 of this chapter.
    Quality improvement points are points that CMS adds to a 
participant hospital's composite quality score for a measure if the 
hospital's performance percentile on an individual quality measure 
increases from the previous performance year by at least 3 deciles on 
the performance percentile scale.
    Quality performance points are points that CMS adds to a 
participant hospital's composite quality score for a measure based on 
the performance percentile scale and for successful data submission of 
patient-reported outcomes.
    Reconciliation payment means a payment made by CMS to a CJR 
participant hospital as determined in accordance with Sec.  510.305(f).
    Region means one of the nine U.S. census divisions, as defined by 
the U.S. Census Bureau.
    Repayment amount means the amount owed by a participant hospital to 
CMS, as reflected on a reconciliation report.
    Rural hospital means an IPPS hospital that meets one of the 
following definitions:
    (1) Is located in a rural area as defined under Sec.  412.64 of 
this chapter.
    (2) Is located in a rural census tract defined under Sec.  
412.103(a)(1) of this chapter.
    (3) Has reclassified as a rural hospital under Sec.  412.103 of 
this chapter.
    Rural referral center (RRC) has the same meaning given this term 
under Sec.  412.96 of this chapter.
    Sharing arrangement means a financial arrangement between a 
participant hospital and a CJR collaborator for the sole purpose of 
making gainsharing payments or alignment payments under the CJR model.
    Sole community hospital (SCH) means a hospital that meets the 
classification criteria specified in Sec.  412.92 of this chapter.
    SNF stands for skilled nursing facility.
    Therapist means one of the following as defined at Sec.  484.4:
    (1) Physical therapist.
    (2) Occupational therapist.
    (3) Speech-language pathologist.
    TKA/THA stands for total knee arthroplasty/total hip arthroplasty.
    TIN stands for taxpayer identification number.

Subpart B--Comprehensive Care for Joint Replacement Program 
Participants


Sec.  510.100  Episodes being tested.

    (a) Initiation of an episode. An episode is initiated when a 
participant hospital admits a Medicare beneficiary described in Sec.  
510.205 for an anchor hospitalization.
    (b) Exclusions. A hospital is excluded from being a participant 
hospital, but only so long as any of the following conditions apply:
    (1) The hospital is an episode initiator for an LEJR episode in the 
risk-bearing period of Models 2 or 4 of BPCI.
    (2) The hospital is participating in Model 1 of BPCI.
    (3) These exclusions cease to apply as of the date that the 
hospital no longer meets any of the conditions specified in this 
paragraph.


Sec.  510.105  Geographic areas.

    (a) General. The geographic areas for inclusion in the CJR model 
are obtained based on a stratified random sampling of certain MSAs in 
the United States. All counties within each of the selected MSAs are 
selected for inclusion in the CJR model.
    (b) Stratification criteria. Geographic areas in the United States 
are stratified according to the characteristics that CMS determines are 
necessary to ensure that the model is tested on a broad range of 
different types of hospitals that may face different obstacles and 
incentives for improving quality and controlling costs.
    (c) Exclusions. CMS excludes from the selection of geographic areas 
MSAs that met the following criteria:
    (1) Had fewer than 400 episodes between July 1, 2013 and June 30, 
2014.
    (2) Had fewer than 400 non-Model 1, 2, or 4 BPCI episodes as of 
October 1, 2015.
    (3) Failed either or both of the following rules regarding 
participation in BPCI:
    (i) More than 50 percent of eligible episodes initiated in a BPCI 
Model 2 or 4 initiating hospital.
    (ii) More than 50 percent of eligible episodes that included SNF or 
HHA services, where the SNF or HHA services were furnished by a BPCI 
Model 3 initiating HHA or SNF.
    (4) For MSAs including both Maryland and non-Maryland counties, 
more than 50 percent of eligible episodes were initiated at a Maryland 
hospital.

Subpart C--Scope of Episodes


Sec.  510.200  Time periods, included and excluded services, and 
attribution.

    (a) Time periods. All episodes must begin on or after April 1, 2016 
and end on or before December 31, 2020.
    (b) Included services. All Medicare Parts A and B items and 
services are included in the episode, except as specified in paragraph 
(d) of this section. These services include, but are not limited to, 
the following:
    (1) Physicians' services.
    (2) Inpatient hospital services (including hospital readmissions).
    (3) IPF services.
    (4) LTCH services.
    (5) IRF services.
    (6) SNF services.
    (7) HHA services.
    (8) Hospital outpatient services.
    (9) Outpatient therapy services.
    (10) Clinical laboratory services.
    (11) DME.
    (12) Part B drugs and biologicals.
    (13) Hospice services.
    (14) PBPM payments under models tested under section 1115A of the 
Act.
    (c) Episode attribution. All items and services included in the 
episode are attributed to the participant hospital at which the anchor 
hospitalization occurs.
    (d) Excluded services. The following items, services, and payments 
are excluded from the episode:
    (1) Hemophilia clotting factors provided in accordance with Sec.  
412.115 of this chapter.
    (2) New technology add-on payments, as defined in part 412, subpart 
F of this chapter.
    (3) Transitional pass-through payments for medical devices as 
defined in Sec.  419.66 of this chapter.
    (4) Items and services unrelated to the anchor hospitalization, as 
determined by CMS. Excluded services include, but are not limited to, 
the following:

[[Page 73543]]

    (i) Inpatient hospital admissions for MS-DRGs that group to the 
following categories of diagnoses:
    (A) Oncology.
    (B) Trauma medical.
    (C) Chronic disease surgical, such as prostatectomy.
    (D) Acute disease surgical, such as appendectomy.
    (ii) Medicare Part B services, as identified by the principal ICD-
CM diagnosis code on the claim (based on the ICD-CM version in use 
during the performance year) that group to the following categories of 
diagnoses:
    (A) Acute disease diagnoses, such as severe head injury.
    (B) Certain chronic disease diagnoses, as specified by CMS on a 
diagnosis-by-diagnosis basis depending on whether the condition was 
likely to have been affected by the LEJR procedure and recovery period 
or whether substantial services were likely to be provided for the 
chronic condition during the episode. Such chronic disease diagnoses 
are posted on the CMS Web site and may be revised in accordance with 
paragraph (e) of this section.
    (iii) Certain PBPM payments under models tested under section 1115A 
of the Act. PBPM model payments that CMS determines to be primarily 
used for care coordination or care management services for clinical 
conditions in excluded categories of diagnoses, as described in this 
paragraph.
    (A) The list of excluded PBPM payments is posted on the CMS Web 
site and are revised in accordance with paragraph (e) of this section.
    (B) Notwithstanding the foregoing, all PBPM model payments funded 
from CMS' Innovation Center appropriation are excluded from the 
episode.
    (5) Certain incentive programs and add on payments under existing 
Medicare payment systems in accordance with Sec.  510.300(b)(6) of this 
chapter.
    (6) Payments for otherwise included items and services in excess of 
2 standard deviations above the mean regional episode payment in 
accordance with Sec.  510.300(b)(5) of this chapter.
    (e) Updating the lists of excluded services. (1) The list of 
excluded MS-DRGs, ICD-CM diagnosis codes, and CMS model PBPM payments 
are posted on the CMS Web site.
    (2) On an annual basis, or more frequently as needed, CMS updates 
the list of excluded services to reflect annual coding changes or other 
issues brought to CMS's attention.
    (3) CMS applies the following standards when revising the list of 
excluded services for reasons other than to reflect annual coding 
changes:
    (i) Items or services that are directly related to the LEJR 
procedure or the quality or safety of LEJR care would be included in 
the episode.
    (ii) Items or services for chronic conditions that may be affected 
by the LEJR procedure or post-surgical care would be related and 
included in the episode.
    (iii) Items and services for chronic conditions that are generally 
not affected by the LEJR procedure or post-surgical care would be 
excluded from the episode.
    (iv) Items and services for acute clinical conditions not arising 
from existing, episode-related chronic clinical conditions or 
complications of LEJR surgery would be excluded from the episode.
    (v) PBPM payments under CMS models determined to be primarily used 
for care coordination or care management services for clinical 
conditions in excluded categories of diagnoses, as described in Sec.  
510.200(d), would be excluded from the episode.
    (4) CMS posts the following to the CMS Web site:
    (i) Potential revisions to the exclusion to allow for public 
comment; and
    (ii) An updated exclusions list after consideration of public 
comment.


Sec.  510.205  Beneficiary inclusion criteria.

    (a) Episodes tested in the CJR model include only those in which 
care is furnished to beneficiaries who meet all of the following 
criteria upon admission to the anchor hospitalization:
    (1) Are enrolled in Medicare Parts A and Part B.
    (2) Eligibility for Medicare is not on the basis of end stage renal 
disease, as described in Sec.  406.13 of this chapter.
    (3) Are not enrolled in any managed care plan (for example, 
Medicare Advantage, health care prepayment plans, or cost-based health 
maintenance organizations).
    (4) Are not covered under a United Mine Workers of America health 
care plan.
    (5) Have Medicare as their primary payer.
    (b) If at any time during the episode a beneficiary no longer meets 
all of the criteria in this section, the episode is canceled in 
accordance with Sec.  510.210(b).


Sec.  510.210  Determination of the episode.

    (a) General. The episode begins with the admission of a Medicare 
beneficiary described in Sec.  510.205 to a participant hospital for an 
anchor hospitalization and ends on the 90th day after the date of 
discharge, with the day of discharge itself being counted as the first 
day in the 90-day post-discharge period.
    (b) Cancellation of an episode. The episode is canceled and is not 
included in the determination of NPRA as specified in Sec.  510.305 if 
the beneficiary does any of the following during the episode:
    (1) Ceases to meet any criterion listed in Sec.  510.205.
    (2) Is readmitted to any participant hospital for another anchor 
hospitalization.
    (3) Initiates an LEJR episode under BPCI.
    (4) Dies.

Subpart D--Pricing and Payment


Sec.  510.300  Determination of episode target prices.

    (a) General. CMS establishes episode target prices for participant 
hospitals for each performance year of the model as specified in this 
section. Episode target prices are established according to the 
following:
    (1) MS-DRG assigned at discharge for anchor hospitalization and 
presence of hip fracture diagnosis for anchor hospitalization--
    (i) MS-DRG 469 with hip fracture;
    (ii) MS-DRG 469 without hip fracture;
    (iii) MS-DRG 470 with hip fracture; or
    (iv) MS-DRG 470 without hip fracture.
    (2) Applicable time period for performance year episode target 
prices. Episode target prices are updated to account for Medicare 
payment updates no less than 2 times per year, for updated episode 
target prices effective October 1 and January 1, and at other intervals 
if necessary.
    (3) Episodes that straddle performance years or payment updates. 
The episode target price that applies to the type of episode as of the 
date of admission for the anchor hospitalization is the episode target 
price that applies to the episode.
    (4) Adjustments for quality performance, as specified in Sec.  
510.305(g).
    (5) Identifying episodes with hip fracture. CMS develops a list of 
ICD-CM hip fracture diagnosis codes that, when reported in the 
principal diagnosis code files on the claim for the anchor 
hospitalization, represent a bone fracture for which a hip replacement 
procedure, either a partial hip arthroplasty or a total hip 
arthroplasty, could be the primary surgical treatment. The list of ICD-
CM hip fracture diagnosis codes used to identify hip fracture episodes 
is posted on the CMS Web site.

[[Page 73544]]

    (i) On an annual basis, or more frequently as needed, CMS updates 
the list of ICD-CM hip fracture diagnosis codes to reflect coding 
changes or other issues brought to CMS' attention.
    (ii) CMS applies the following standards when revising the list of 
ICD-CM hip fracture diagnosis codes.
    (A) The ICD-CM diagnosis code is sufficiently specific that it 
represents a bone fracture for which a physician could determine that a 
hip replacement procedure, either a PHA or a THA, could be the primary 
surgical treatment.
    (B) The ICD-CM diagnosis code is the primary reason (that is, 
principal diagnosis code) for the anchor hospitalization.
    (iii) CMS posts the following to the CMS Web site:
    (A) Potential ICD-CM hip fracture diagnosis codes for public 
comment; and
    (B) A final ICD-CM hip fracture diagnosis code list after 
consideration of public comment.
    (b) Episode target price. (1) CMS calculates episode target prices 
based on a blend of each participant hospital's hospital-specific and 
regional episode expenditures. The region corresponds to the U.S. 
Census Division associated with the primary address of the CCN of the 
participant hospital and the regional component is based on all 
hospitals in said region, except as follows. In cases where an MSA 
selected for participation in CJR spans more than one U.S. Census 
Division, the entire MSA will be grouped into the U.S. Census Division 
where the largest city by population in the MSA is located for target 
price and reconciliation calculations. The calendar years used for 
historical expenditure calculations are as follows:
    (i) Episodes beginning in 2012 through 2014 for performance years 1 
and 2.
    (ii) Episodes beginning in 2014 through 2016 for performance years 
3 and 4.
    (iii) Episodes beginning in 2016 through 2018 for performance year 
5.
    (2) Specifically, the blend consists of the following:
    (i) Two-thirds of the participant hospital's own historical episode 
payments and one-third of the regional historical episode payments for 
performance years 1 and 2.
    (ii) One-third of the hospital's own historical episode payments 
and two-thirds of the regional historical episode payments for 
performance year 3.
    (iii) Regional historical episode payments for performance years 4 
and 5.
    (3) Exception for low-volume hospitals. Episode target prices for 
participant hospitals with fewer than 20 CJR episodes in total across 
the 3 historical years of data used to calculate the episode target 
price are based on 100 percent regional historical episode payments.
    (4) Exception for recently merged or split hospitals. Hospital-
specific historical episode payments for participant hospitals that 
have undergone a merger, consolidation, spin off or other 
reorganization that results in a new hospital entity without 3 full 
years of historical claims data are determined using the historical 
episode payments attributed to their predecessor(s).
    (5) Exception for high episode spending. Episode payments are 
capped at 2 standard deviations above the mean regional episode payment 
for both the hospital-specific and regional components of the target 
price.
    (6) Exclusion of incentive programs and add-on payments under 
existing Medicare payment systems. Certain incentive programs and add-
on payments are excluded from historical episode payments by using the 
CMS Price (Payment) Standardization Detailed Methodology used for the 
Medicare spending per beneficiary measure in the Hospital Value-Based 
Purchasing Program.
    (7) Communication of episode target prices. CMS communicates 
episode target prices to participant hospitals before the performance 
period in which they apply.
    (c) Discount factor. A participant hospital's episode target prices 
incorporate applicable discount factors to reflect Medicare's portion 
of reduced expenditures from the CJR model as described in this 
section.
    (1) Discount factor for reconciliation payments. The applicable 
discount factor for reconciliation payments in all performance years is 
3.0 percent.
    (2) Discount factors for repayment amounts. The applicable discount 
factor for repayment amounts are--
    (i) Not applicable in performance year 1, as the requirement for 
hospital repayment under the CJR model is waived in performance year 1;
    (ii) In performance years 2 and 3, 2.0 percent; and
    (3) Discount factors affected by the quality incentive payment and 
composite performance years. In all performance years, the discount 
factor may be affected by the quality incentive payment and composite 
quality score as provided in Sec.  510.315 to create a different 
effective discount factor used for calculating reconciliation payments 
and repayment amounts.
    (d) Data sharing. (1) CMS makes available to participant hospitals, 
through the most appropriate means, data that CMS determines may be 
useful to participant hospitals to do the following:
    (i) Determine appropriate ways to increase the coordination of 
care.
    (ii) Improve quality.
    (iii) Enhance efficiencies in the delivery of care.
    (iv) Otherwise achieve the goals of the CJR model described in this 
section.
    (2) Beneficiary-identifiable data. (i) CMS makes beneficiary-
identifiable data available to a participant hospital in accordance 
with applicable privacy laws and only in response to the hospital's 
request for such data for a beneficiary who has been furnished a 
billable service by the participant hospital corresponding to the 
episode definitions for CJR.
    (ii) The minimum data necessary to achieve the goals of the CJR 
model, as determined by CMS, may be provided under this section for a 
participant hospital's baseline period and no less frequently than on a 
quarterly basis throughout the hospital's participation in the CJR 
model.


Sec.  510.305  Determination of the NPRA and reconciliation process.

    (a) General. Providers and suppliers furnishing items and services 
included in the episode bill for such items and services in accordance 
with existing rules and as if this part were not in effect.
    (b) Reconciliation. CMS uses a series of reconciliation processes, 
which CMS performs as described in paragraphs (d) and (f) of this 
section after the end of each performance year, to establish final 
payment amounts to participant hospitals for CJR episodes for a given 
performance year. Following the end of each performance year, CMS 
determines actual episode payments for each episode for the performance 
year (other than episodes that have been canceled in accordance with 
Sec.  510.210(b)) and determines the amount of a reconciliation payment 
or repayment amount.
    (c) Data used. CMS uses the most recent claims data available to 
perform each reconciliation calculation.
    (d) Annual reconciliation. (1) Beginning 2 months after the end of 
each performance year, CMS performs a reconciliation calculation to 
establish an NPRA for each participant hospital.
    (2) CMS--
    (i) Calculates the NPRA for each participant hospital in accordance 
with paragraph (e) of this section including the adjustments provided 
for in paragraph (e)(1)(iv) of this section; and

[[Page 73545]]

    (ii) Assesses whether hospitals meet specified quality requirements 
under Sec.  510.315.
    (e) Calculation of the NPRA. By comparing the episode target prices 
described in Sec.  510.300 and the participant hospital's actual 
episode spending for the performance year and applying the adjustments 
in paragraph (e)(1)(v) of this section, CMS establishes an NPRA for 
each participant hospital for each performance year.
    (1) Initial calculation. In calculating the NPRA for each 
participant hospital for each performance year, CMS does the following:
    (i) Determines actual episode payments for each episode included in 
the performance year (other than episodes that have been canceled in 
accordance with Sec.  510.210(b)) using claims data that is available 2 
months after the end of the performance year. Actual episode payments 
are capped at the amount determined in accordance with Sec.  
510.300(b)(5) for the performance year.
    (ii) Multiplies each episode target price, after applying any 
reduction to the discount percentage as provided in Sec.  510.315(f) by 
the number of episodes included in the performance year (other than 
episodes that have been canceled in accordance with Sec.  510.210(b)) 
to which that episode target price applies.
    (iii) Aggregates the amounts computed in paragraph (e)(1)(ii) of 
this section for all episodes included in the performance year (other 
than episodes that have been canceled in accordance with Sec.  
510.210(b)).
    (iv) Subtracts the amount determined under paragraph (e)(1)(i) of 
this section from the amount determined under paragraph (e)(1)(iii) of 
this section.
    (v) Makes the following adjustments:
    (A) Increases in post-episode spending. If the average post-episode 
Medicare Parts A and B spending for a participant hospital in any given 
performance year is greater than 3 standard deviations above the 
regional average post-episode spending for the same performance year, 
then the spending amount exceeding three standard deviations above the 
regional average post-episode spending for the same performance year is 
applied to the NPRA.
    (B) Limitation on loss. Except as provided in paragraph 
(e)(1)(v)(D) of this section, the total amount any participant hospital 
is responsible for repaying to Medicare for a performance year cannot 
exceed the following:
    (1) For performance year 2 only, 5 percent of the amount calculated 
in paragraph (e)(1)(iii) of this section for the performance year.
    (2) For performance year 3, 10 percent of the amount calculated in 
paragraph (e)(1)(iii) of this section for the performance year.
    (3) For performance years 4, and 5, 20 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section for the performance 
year.
    (4) As provided in paragraph (h)(6)(i) of this section, the 
subsequent reconciliation calculation reassesses the limitation on loss 
for a given performance year by applying the limitations on loss to the 
aggregate of the 2 reconciliation calculations.
    (C) Limitation on gain. The total amount of any reconciliation 
payment made to a participant hospital for a performance year cannot 
exceed the following:
    (1) For performance years 1 and 2, 5 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section for the performance 
year.
    (2) For performance year 3, 10 percent of the amount calculated in 
paragraph (e)(1)(iii) of this section for the performance year.
    (3) For performance years 4, and 5, 20 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section for the performance 
year.
    (4) As provided in paragraph (h)(6)(i) of this section, the 
subsequent reconciliation calculation reassesses the limitation on gain 
for a given performance year by applying the limitation on gain limits 
to the aggregate of the two reconciliation calculations.
    (D) Financial loss limits for rural hospitals, SCHs, MDHs, and 
RRCs. If a participant hospital is a rural hospital, SCH, MDH or RRC, 
then for performance year 2, the total repayment amount for which the 
participant hospital is responsible cannot exceed 3 percent of the 
amount calculated in paragraph (e)(1)(iii) of this section. For 
performance years 3 through 5, the total repayment amount cannot exceed 
5 percent of the amount calculated in paragraph (e)(1)(iii) of this 
section.
    (f) Determination of reconciliation or repayment amount-- (1) 
Determination of the reconciliation or repayment amount. (i) Subject to 
paragraph (f)(1)(iii) of this section, for performance year 1, the 
reconciliation payment (if any) is equal to the NPRA.
    (ii) Subject to paragraph (f)(1)(iii) of this section, for 
performance years 2 through 5, results from the subsequent 
reconciliation calculation for a prior year's reconciliation, as 
described in paragraph (h)(6)(i) of this section, are applied to the 
current year's NPRA in order to determine the reconciliation or 
repayment amount.
    (iii) The reconciliation or repayment amount may be adjusted as 
provided in Sec.  510.410(b)(5).
    (2) Reconciliation payment. If the amount described in paragraph 
(f)(1) of this section is positive and the composite quality score 
described in Sec.  510.315 is acceptable (defined as greater than or 
equal to 4.00), good (defined as greater than or equal to 6.0 and less 
than or equal to 13.2), or excellent (defined as greater than 13.2), 
Medicare pays the participant hospital a reconciliation payment in an 
amount equal to the amount described in paragraph (f)(1) of this 
section.
    (3) Repayment amount. If the amount described in paragraph (f)(1) 
of this section is negative, the participant hospital pays to Medicare 
an amount equal to the amount described in paragraph (f)(1) of this 
section, in accordance with Sec.  405.371 of this chapter. CMS waives 
this requirement for performance year 1.
    (g) Determination of eligibility for reconciliation based on 
quality. (1) CMS assesses each participant hospital's performance on 
quality metrics, as described in Sec.  510.315, to determine whether 
the participant hospital is eligible to receive a reconciliation 
payment for a performance year.
    (2) If the hospital's composite quality score described in Sec.  
510.315 is acceptable (defined as greater than or equal to 4.00), good 
(defined as greater than or equal to 6.0 and less than or equal to 
13.2), or excellent (defined as greater than 13.2), and the hospital is 
determined to have a positive NPRA under Sec.  510.305(e)), the 
hospital is eligible for a reconciliation payment.
    (3) If the hospital's composite quality score described in Sec.  
510.315 is below acceptable, defined as less than 4.00 for a 
performance year, the hospital is not eligible for a reconciliation 
payment.
    (4) If the hospital is found to be engaged in an inappropriate and 
systemic under delivery of care, the quality of the care provided must 
be considered to be seriously compromised and the hospital must be 
ineligible to receive or retain a reconciliation payment for any period 
in which such under delivery of care was found to occur.
    (h) Reconciliation report. CMS issues each participant hospital a 
CJR reconciliation report for the performance year. Each CJR 
reconciliation report contains the following:
    (1) Information on the participant hospital's composite quality 
score described in Sec.  510.315.
    (2) The total actual episode payments for the participant hospital.

[[Page 73546]]

    (3) The NPRA.
    (4) Whether the participant hospital is eligible for a 
reconciliation payment or must make a repayment to Medicare.
    (5) The NPRA and subsequent reconciliation calculation amount for 
the previous performance year, as applicable.
    (6) The reconciliation payment or repayment amount.
    (i) Subsequent reconciliation calculation. (A) Fourteen months 
after the end of each performance year, CMS performs an additional 
calculation, using claims data available at that time, to account for 
final claims run-out and any additional overlap between the CJR model 
and other CMS models and programs as described in paragraph 
(h)(6)(i)(B) of this section.
    (B) The subsequent reconciliation calculation accounts for cases in 
which a portion of the CJR discount percentage is paid out to an ACO as 
shared savings by reducing the reconciliation payment amount for a CJR 
hospital, if available, by the amount of the discount percentage paid 
out to the ACO as shared savings. This adjustment is only made when the 
participant hospital is a participant or provider/supplier in the ACO 
and the beneficiary in the CJR episode is assigned to one of the 
following ACO models or program:
    (1) The Pioneer ACO model.
    (2) The Medicare Shared Savings Program.
    (3) The Next Generation ACO model.
    (4) The Comprehensive ESRD Care Initiative.
    (C) The additional calculation occurs concurrently with the 
reconciliation process for the most recent performance year. If the 
result of the subsequent calculation is different than zero, CMS 
applies the stop-loss and stop-gain limits in paragraph (e) of this 
section to the calculations in aggregate for that performance year (the 
initial reconciliation and the subsequent calculation) to ensure the 
amount does not exceed the stop-loss or stop-gain limits. CMS then 
applies the subsequent calculation amount to the NPRA for the most 
recent performance year in order to determine the reconciliation amount 
or repayment amount for the most recent performance year. Because 
hospitals will not have financial repayment responsibility for 
performance year 1, for the performance year 2 reconciliation report 
only, the subsequent calculation amount (for performance year 1) is 
applied to the performance year 1 NPRA to ensure that the combined 
amount is not less than 0. If the combined performance year 1 NPRA and 
subsequent calculation for performance year 1 is less than 0, the 
subsequent calculation amount would be capped at the value that would 
result in a net amount of 0 for the combined performance year 1 NPRA 
and subsequent calculation.


Sec.  510.310  Appeals process.

    (a) Notice of calculation error (first level of appeal). Subject to 
the limitations on review in subpart d of this part, if a participant 
hospital wishes to dispute the calculation that involves a matter 
related to payment, reconciliation amounts, repayment amounts, or 
determinations associated with quality measures affecting payment, the 
hospital is required to provide written notice of the error, in a form 
and manner specified by CMS.
    (1) Unless the participant hospital provides such notice, the CJR 
reconciliation report is deemed final 45 calendar days after it is 
issued.
    (2) If CMS receives a timely notice of a calculation error, CMS 
responds in writing within 30 calendar days to either confirm that 
there was an error in the calculation or verify that the calculation is 
correct, although CMS reserves the right to an extension upon written 
notice to the participant hospital.
    (3) If a participant hospital does not submit timely notice of a 
calculation error in accordance with the timelines and processes 
specified by CMS, then CMS deems final the CJR reconciliation report 
and proceeds with the payment or repayment processes, as applicable.
    (4) Only participant hospitals may use the dispute resolution 
process described in this part.
    (b) Dispute resolution process (second level of appeal). (1) If the 
participant hospital is dissatisfied with CMS's response to the notice 
of a calculation error, the participant hospital may request a 
reconsideration review in a form and manner as specified by CMS.
    (2) The reconsideration review request must provide a detailed 
explanation of the basis for the dispute and include supporting 
documentation for the participant hospital's assertion that CMS or its 
representatives did not accurately calculate the NPRA, the 
reconciliation payment, or the repayment amount in accordance with 
Sec.  510.305.
    (3) If CMS does not receive a request for reconsideration from the 
participant hospital within 10 calendar days of the issue date of CMS's 
response to the participant hospital's notice of calculation error, 
then CMS's response to the calculation error is deemed final and CMS 
proceeds with reconciliation payment or repayment processes, as 
applicable, as described in Sec.  510.305.
    (4) A CMS reconsideration official notifies the participant 
hospital in writing within 15 calendar days of receiving the 
participant hospital's review request of the following:
    (i) The date, time, and location of the review.
    (ii) The issues in dispute.
    (iii) The review procedures.
    (iv) The procedures (including format and deadlines) for submission 
of evidence.
    (5) The CMS reconsideration official takes all reasonable efforts 
to schedule the review to occur no later than 30 days after the date of 
receipt of the notification.
    (6) The provisions at Sec.  425.804(b), (c), and (e) of this 
chapter are applicable to reviews conducted in accordance with the 
reconsideration review process for CJR.
    (7) The CMS reconsideration official issues a written determination 
within 30 days of the review. The determination is final and binding.
    (c) Exception to the process. If the participant hospital contests 
a matter that does not involve an issue contained in, or a calculation 
which contributes to, a CJR reconciliation report, a notice of 
calculation error is not required. An example of such a matter is 
termination of the participant hospital from the model. In those 
instances, if CMS does not receive a request for reconsideration from 
the participant hospital within 10 calendar days of the notice of the 
initial determination, the initial determination is deemed final and 
CMS proceeds with action indicated in the initial determination.
    (d) Limitations on review. In accordance with section 1115A(d)(2) 
of the Act, there is no administrative or judicial review under 
sections 1869 or 1878 of the Act or otherwise for the following:
    (1) The selection of models for testing or expansion under section 
1115A of the Act.
    (2) The selection of organizations, sites, or participants to test 
those models selected.
    (3) The elements, parameters, scope, and duration of such models 
for testing or dissemination.
    (4) Determinations regarding budget neutrality under section 
1115A(b)(3) of Act.
    (5) The termination or modification of the design and 
implementation of a model under section 1115A(b)(3)(B) of Act.
    (6) Decisions about expansion of the duration and scope of a model 
under section 1115A(c) of the Act, including the determination that a 
model is not

[[Page 73547]]

expected to meet criteria described in paragraph (d)(1) or (2) of this 
section.


Sec.  510.315  Composite quality scores for determining reconciliation 
payment eligibility and quality incentive payments.

    (a) General. A participant hospital's eligibility for a 
reconciliation payment under Sec.  510.305(g), and the determination of 
quality incentive payments under paragraph (f) of this section, for a 
performance year depend on the hospital's composite quality score 
(including any quality performance points and quality improvement 
points earned) for that performance year.
    (b) Composite quality score. CMS calculates a composite quality 
score for each participant hospital for each performance year, which 
equals the sum of the following:
    (1) The hospital's quality performance points for the hospital-
level risk-standardized complication rate following elective primary 
total hip arthroplasty and/or total knee arthroplasty measure (NQF 
#1550) described in Sec.  510.400(a)(1). This measure is weighted at 50 
percent of the composite quality score.
    (2) The hospital's quality performance points for the Hospital 
Consumer Assessment of Healthcare Providers and Systems Survey measure 
(NQF #0166) described in Sec.  510.400(a)(2). This measure is weighted 
at 40 percent of the composite quality score.
    (3) Any additional quality improvement points the hospital may earn 
as a result of demonstrating improvement on either or both of the 
quality measures in paragraphs (b)(1) and (2) of this section, as 
described in paragraph (d) of this section.
    (4) If applicable, 2 additional points for successful THA/TKA 
voluntary data submission of patient-reported outcomes and limited risk 
variable data, as described in Sec.  510.400(b). Successful submission 
is weighted at 10 percent of the composite quality score.
    (c) Quality performance points. CMS computes quality performance 
points for each quality measure based on the participant hospital's 
performance percentile relative to the national distribution of all 
hospitals' performance on that measure.
    (1) For the hospital-level risk-standardized complication rate 
following elective primary total hip arthroplasty and/or total knee 
arthroplasty measure (NQF #1550) described in Sec.  510.400(a)(1), CMS 
assigns the participant hospital measure value to a performance 
percentile and then quality performance points are assigned based on 
the following performance percentile scale:
    (i) 10.00 points for >=90th.
    (ii) 9.25 points for >=80th and <90th.
    (iii) 8.50 points for >=70th and <80th;
    (iv) 7.75 points for >=60th and <70th.
    (v) 7.00 points for >=50th and <60th.
    (vi) 6.25 points for >=40th and <50th.
    (vii) 5.50 points for >=30th and <40th.
    (ix) 0.0 points for <30th.
    (2) For the Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey measure (NQF #0166) described in Sec.  
510.400(a)(2), CMS assigns the participant hospital measure value to a 
performance percentile and quality performance points are assigned 
based on the following performance percentile scale:
    (i) 8.00 points for >=90th.
    (ii) 7.40 points for >=80th and <90th.
    (iii) 6.80 points for >=70th and <80th.
    (iv) 6.20 points for >=60th and <70th.
    (v) 5.60 points for >=50th and <60th.
    (vi) 5.00 points for >=40th and <50th.
    (vii) 4.40 points for >=30th and <40th.
    (ix) 0.0 points for <30th.
    (d) Quality improvement points. If a participant hospital's quality 
performance percentile on an individual measure described in Sec.  
510.400(a) increases from the previous performance year by at least 3 
deciles on the performance percentile scale, then the hospital is 
eligible to receive quality improvement points equal to 10 percent of 
the total available points for that individual measure.
    (e) Exception for hospitals without a measure value. In the case of 
a participant hospital without a measure value that would allow CMS to 
assign quality performance points for that quality measure, CMS assigns 
the 50th percentile quality performance points to the hospital for the 
individual measure.
    (1) A participant hospital will not have a measure value for the--
    (i) Hospital-level risk-standardized complication rate following 
elective primary total hip arthroplasty and/or total knee arthroplasty 
measure (NQF #1550) described in Sec.  510.400(a)(1) if the hospital 
does not meet the minimum 25 case count; or
    (ii) Hospital Consumer Assessment of Healthcare Providers and 
Systems Survey measure (NQF #0166) described in Sec.  510.400(a)(2) if 
the hospital does not meet the minimum of 100 completed survey and does 
not have 4 consecutive quarters of HCAHPS data.
    (ii) For either of the measures described in paragraphs (e)(1) or 
(2) of this section, if CMS identifies an error in the data used to 
calculate the measure and suppresses the measure value.
    (f) Quality incentive payments. CMS provides incentive payments to 
participant hospitals that demonstrate good or excellent quality 
performance on the composite quality scores described in paragraph (b) 
of this section. These incentive payments are implemented in the form 
of the following reductions to the applicable discount factors 
described in Sec.  510.300(c):
    (1) A 1.0 percentage point reduction to the applicable discount 
factor for participant hospitals with good quality performance, defined 
as composite quality scores that are greater than or equal to 6.0 and 
less than or equal to 13.2.
    (2) A 1.5 percentage point reduction to the applicable discount 
factor for participant hospitals with excellent quality performance, 
defined as composite quality scores that are greater than 13.2.


Sec.  510.320  Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.

    The CJR model does not replace any existing Medicare incentive 
programs or add-on payments. The target price and NPRA for a 
participant hospital are independent of, and do not affect, any 
incentive programs or add-on payments under existing Medicare payment 
systems.


Sec.  510.325  Allocation of payments for services that straddle the 
episode.

    (a) General. Services included in the episode that straddle the 
episode are prorated so that only the portion attributable to care 
furnished during the episode are included in the calculation of actual 
episode payments.
    (b) Proration of services. Payments for services that straddle the 
episode are prorated using the following methodology:
    (1) Non-IPPS inpatient services and other inpatient services. Non-
IPPS inpatient services, and services furnished by other inpatient 
providers that extend beyond the end of the episode are prorated 
according to the percentage of the actual length of stay (in days) that 
falls within the episode.
    (2) Home health agency services. Home health services paid under 
the prospective payment system in part 484, subpart E of this chapter 
are prorated according to the percentage of days, starting with the 
first billable service date (``start of care date'') and through and 
including the last billable service date, that occur during the 
episode. This methodology is applied in the same way if the home health 
services begin (the start of care date) prior to the start of the 
episode.
    (3) IPPS services. IPPS claim amounts that extend beyond the end of 
the

[[Page 73548]]

episode are prorated according to the geometric mean length of stay, 
using the following methodology:
    (i) The first day of the IPPS stay is counted as 2 days.
    (ii) If the actual length of stay that occurred during the episode 
is equal to or greater than the MS-DRG geometric mean, the normal MS-
DRG payment is fully allocated to the episode.
    (iii) If the actual length of stay that occurred during the episode 
is less than the geometric mean, the normal MS-DRG payment amount is 
allocated to the episode based on the number of inpatient days that 
fall within the episode.
    (iv) If the full amount is not allocated to the episode, any 
remainder amount is allocated to the post-episode spending calculation 
(defined in Sec.  510.2).

Subpart E--Quality Measures, Beneficiary Protections, and 
Compliance Enforcement


Sec.  510.400  Quality measures and reporting.

    (a) Reporting of quality measures. The following quality measures 
are used for public reporting, for determining whether a participant 
hospital is eligible for reconciliation payments under Sec.  
510.305(g), and whether a participant hospital is eligible for quality 
incentive payments under Sec.  510.315(f) in the performance year:
    (1) Hospital-level risk-standardized complication rate following 
elective primary total hip arthroplasty and/or total knee arthroplasty.
    (2) Hospital Consumer Assessment of Healthcare Providers and 
Systems Survey.
    (b) Requirements for successful voluntary data submission of 
patient-reported outcomes and limited risk variable data. To be 
eligible to receive the additional points added to the composite 
quality score for successful voluntary data submission of patient-
reported outcomes and limited risk variable data, as described in Sec.  
510.315(b)(4), participant hospitals must submit the THA/TKA patient-
reported outcome and limited risk variable data requested by CMS 
related to the pre- and post-operative periods for elective primary 
total hip and/or total knee arthroplasty procedures. The data must be 
submitted within 60 days of the end of the most recent performance 
period and be accompanied by the patient-reported outcomes and limited 
risk variable data (eleven elements finalized) as outlined in Sec.  
510.315(b)(4).
    (1) For each eligible procedure all eleven risk variable data 
elements are required to be submitted. The eleven risk variables are as 
follows:
    (i) Date of birth.
    (ii) Race.
    (iii) Ethnicity.
    (iv) Date of admission to anchor hospitalization.
    (v) Date of eligible THA/TKA procedure.
    (vi) Medicare Health Insurance Claim Number.
    (vii) Body mass index.
    (viii) Use of chronic (>=90 day) narcotics.
    (ix) Total painful joint count.
    (x) Quantified spinal pain.
    (xi) Single Item Health Literacy Screening (SILS2) questionnaire.
    (2) Hospitals must also submit the amount of requested THA/TKA 
patient-reported outcomes data required for each year of the model in 
order to be considered successful in submitting voluntary data.
    (i) The amount of requested THA/TKA patient-reported outcomes data 
to submit, in order to be considered successful will increase each 
subsequent year of the model over the 5 years of the model.
    (ii) A phase-in approach that determines the amount of requested 
THA/TKA patient-reported outcomes data to submit over the 5 years of 
the program will be applied so that in year 1 successful submission of 
data would mean CMS received all requested THA/TKA patient-reported 
outcomes and limited risk variable data on both of the following:
    (A) Greater than or equal to 50 percent of eligible procedures or 
greater than or equal to 50 eligible patients during the data 
collection period.
    (B) Submission of requested THA/TKA PRO and limited risk variable 
data is completed within 60 days of the most recent performance period.
    (3) For years 1 through 5 of the model an increasing amount of data 
is requested by CMS for each performance period as follows:
    (i) Year 1 (2016). Submit pre-operative data on primary elective 
THA/TKA procedures for >=50% or >=50 eligible procedures performed 
between July 1, 2016 and August 31, 2016, unless CMS requests a more 
limited data set, in which case, submit all requested data elements.
    (ii) Year 2 (2017). Submit--
    (A) Post-operative data on primary elective THA/TKA procedures for 
>=50% or >=50 eligible procedures performed between July 1, 2016 
through August 31, 2016; and
    (B) Pre-operative data on primary elective THA/TKA procedures for 
>=60% or >=75 procedures performed between September 1, 2016 through 
June 30, 2017, unless CMS requests a more limited data set, in which 
case, submit all requested data elements.
    (iii) Year 3 (2018). Submit--
    (A) POST-operative data on primary elective THA/TKA procedures for 
>=60% or >=75 procedures performed between September 1, 2016 and June 
30, 2017; and
    (B) Pre-operative data on primary elective THA/TKA procedures for 
>=70% or >=100 procedures performed between July 1, 2017 and June 30, 
2018, unless CMS requests a more limited data set, in which case, 
submit all requested data elements.
    (iv) Year 4 (2019). Submit--
    (A) Post-operative data on primary elective THA/TKA procedures for 
>=70% or >=100 procedures performed between July 1, 2017 and June 30, 
2018; and
    (B) Pre-operative data on primary elective THA/TKA procedures for 
>=80% or >=200 procedures performed between July 1, 2018 and June 30, 
2019, unless CMS requests a more limited data set, in which case, 
submit all requested data elements.
    (v) Year 5 (2020). Submit--
    (A) Post-operative data on primary elective THA/TKA procedures for 
>=80% or >=200 procedures performed between July 1, 2018 and June 30, 
2019 and
    (B) Pre-operative data on primary elective THA/TKA procedures for 
>=80% or >=200 procedures performed between July 1, 2019 and June 30, 
2020, unless CMS requests a more limited data set, in which case, 
submit all requested data elements.
    (c) Public reporting. CMS--
    (1) Makes the quality measurement results calculated for the 
complication and patient survey quality measures described in paragraph 
(a) of this section for each participant hospital in each performance 
year publicly available on the CMS Web site in a form and manner as 
determined by CMS;
    (2) Shares each participant hospital's quality metrics with the 
hospital prior to display on the Web site; and
    (3) Does not publicly report the voluntary patient-reported 
outcomes and limited risk variable data during this model, but does 
indicate whether a hospital has voluntarily submitted such data.


Sec.  510.405  Beneficiary choice and beneficiary notification.

    (a) Beneficiary choice. The CJR model does not restrict Medicare 
beneficiaries' ability to choose any Medicare enrolled provider or 
supplier, or any physician or practitioner who has opted out of 
Medicare.

[[Page 73549]]

    (1) As part of discharge planning and referral, participant 
hospitals must inform beneficiaries of all Medicare participating post-
acute care providers in an area and must identify those post-acute care 
providers with whom they have sharing arrangements. Participant 
hospitals may recommend preferred providers and suppliers, consistent 
with applicable statutes and regulations. Participant hospitals may not 
limit beneficiary choice to any list of providers or suppliers in any 
manner other than that permitted under applicable statutes and 
regulations. Participant hospitals must respect patient and family 
preferences when they are expressed.
    (2) Participant hospitals may not charge any CJR collaborator a fee 
to be included on any list of preferred providers or suppliers, nor may 
the participant hospital accept such payments.
    (b) Required beneficiary notification--(1) Hospital detailed 
notification. Each participant hospital must provide written notice to 
any Medicare beneficiary that meets the criteria in Sec.  510.205 of 
his or her inclusion in the CJR model. The notice must be upon 
admission to the participant hospital or immediately following the 
decision to schedule an LEJR surgery, whichever occurs later. The 
beneficiary notification must contain all of the following:
    (i) A detailed explanation of the model and how it might be 
expected to affect the beneficiary's care.
    (ii) Notification that the beneficiary retains freedom of choice to 
choose providers and services.
    (iii) Explanation of how patients can access care records and 
claims data through an available patient portal, and how they can share 
access to their Blue Button[supreg] electronic health information with 
caregivers.
    (iv) A statement that all existing Medicare beneficiary protections 
continue to be available to the beneficiary. These include the ability 
to report concerns of substandard care to Quality Improvement 
Organizations and 1-800-MEDICARE.
    (v) A list of the providers and suppliers with whom the participant 
hospital has a collaborator agreement.
    (2) Physician provision of notice. A participant hospital must 
require any physician that is a CJR collaborator to provide written 
notice of the structure of the model and the existence of the 
physician's sharing arrangement with the participant hospital to any 
Medicare beneficiary that meets the criteria specified in Sec.  
510.205. The notice must be provided at the time that the decision to 
undergo LEJR surgery is made.
    (3) PAC provider/supplier notification. A participant hospital must 
require any provider or supplier, other than the treating physician 
discussed in paragraph (b)(2) of this section, with whom it has 
executed a collaborator agreement to provide written notice of the 
existence of its sharing arrangement with the participant hospital to 
any Medicare beneficiary that meets the criteria specified in Sec.  
510.205. The notice must be provided no later than the time at which 
the beneficiary first receives services from the provider or supplier 
during the CJR episode.
    (4) Discharge planning notice. A participant hospital must provide 
the beneficiary with a written notice of any potential financial 
liability, associated with non-covered services recommended or 
presented as an option as part of discharge planning, no later than the 
time that the beneficiary discusses a particular PAC option or at the 
time the beneficiary is discharged, whichever occurs earlier.
    (i) If the hospital knows or should have known that the beneficiary 
is considering or has decided to receive a non-covered post-acute 
service or other non-covered associated service or supply, the hospital 
must notify the beneficiary that the service would not be covered by 
Medicare.
    (ii) If the hospital is discharging a beneficiary to a SNF prior to 
the occurrence of a 3 day hospital stay, and the beneficiary is being 
transferred to or is considering a SNF that would not qualify under the 
SNF 3-day waiver in Sec.  510.610, the hospital notify the beneficiary 
in accordance with paragraph (b)(4)(i) of this section that the 
beneficiary will be responsible for costs associated with that stay 
except those which would be covered by Medicare Part B during a non-
covered inpatient SNF stay.


Sec.  510.410  Compliance enforcement.

    (a) General. Participant hospitals must comply with all of the 
requirements outlined in this part. Except as specifically noted in 
this part, the regulations under this part must not be construed to 
affect the payment, coverage, program integrity, or other requirements 
(such as those in parts 412 and 482 of this chapter) that apply to 
providers and suppliers under this chapter.
    (b) Failure to comply. (1) CMS may take one or more of the remedial 
actions set forth in paragraph (b)(2) of this section if a participant 
hospital or any of the participant hospital's CJR collaborators--
    (i) Fails to comply with any applicable requirements of this part 
or is identified as noncompliant through monitoring by HHS (including 
CMS and OIG) of the CJR model, including but not limited to the 
following:
    (A) Avoiding potentially high cost patients.
    (B) Targeting potentially low cost patients.
    (C) Failing to provide medically appropriate services or 
systematically engaging in the over or under delivery of appropriate 
care.
    (D) Failing to provide beneficiaries with complete and accurate 
information, including required notices.
    (E) Failing to allow beneficiary choice of medically necessary 
options, including non-surgical options.
    (F) Failing to follow the requirements related to collaborator 
agreements;
    (ii) Has signed a collaborator agreement with a CJR collaborator if 
the agreement is noncompliant with the requirements of this part;
    (iii) Takes any action that threatens the health or safety of 
patients;
    (iv) Avoids at-risk Medicare beneficiaries, as this term is defined 
in Sec.  425.20;
    (v) Avoids patients on the basis of payer status;
    (vi) Is subject to sanctions or final actions of an accrediting 
organization or federal, state, or local government agency that could 
lead to the inability to comply with the requirements and provisions of 
this part;
    (vii) Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the CJR model, or fails to take 
any action that CMS determines for program integrity reasons should 
have been taken to further the best interests of the CJR model;
    (viii) Is subject to action by HHS (including OIG and CMS) or the 
Department of Justice to redress an allegation of fraud or significant 
misconduct, including intervening in a False Claims Act qui tam matter, 
issuing a pre-demand or demand letter under a civil sanction authority, 
or similar actions; or
    (ix) Is subject to action involving violations of the physician 
self-referral law, civil monetary penalties law, federal anti-kickback 
statute, antitrust laws, or any other applicable Medicare laws, rules, 
or regulations that are relevant to the CJR model.
    (2) Remedial actions include the following:
    (i) Issue a warning letter to the participant hospital.
    (ii) Require the participant hospital to develop a corrective 
action plan, commonly referred to as a CAP.
    (iii) Reduce or eliminate a participant hospital's reconciliation 
payment.

[[Page 73550]]

    (iv) Require a participant hospital to terminate a collaborator 
agreement with a CJR collaborator and prohibit further engagement in 
the CJR model by that CJR collaborator.
    (v) Terminate the participant hospital's participation in the CJR 
model.
    (3) CMS may add 25 percent to a repayment amount on a participant 
hospital's reconciliation report if all of the following criteria are 
satisfied:
    (i) CMS has required a corrective action plan from a participant 
hospital.
    (ii) The participant hospital is not due a positive reconciliation 
payment but instead owes a repayment amount to CMS.
    (iii) The participant hospital fails to timely comply with the 
corrective action plan or is noncompliant with the model's 
requirements.

Subpart F--Financial Arrangements and Beneficiary Incentives


Sec.  510.500  Financial arrangements under the CJR model.

    (a) General. (1) A participant hospital may elect to enter into 
sharing arrangements.
    (2) A participant hospital must not make a gainsharing payment or 
receive an alignment payment except in accordance with a sharing 
arrangement. Any gainsharing payments or alignment payments made in 
accordance with a sharing arrangement must be made only from the 
participant hospital to the CJR collaborator with whom the participant 
hospital has signed a collaborator agreement containing a sharing 
arrangement.
    (3) CMS may review any sharing arrangement for compliance with the 
requirements of this part and to ensure that it does not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care.
    (4) The participant hospital has ultimate responsibility for fully 
complying with all provisions of the CJR model.
    (5) If a participant hospital enters into a sharing arrangement, it 
must update its compliance program to include oversight of sharing 
arrangements and compliance with the requirements of the CJR model.
    (6) The board or other governing body of the participant hospital 
must have responsibility for overseeing the participant hospital's 
participation in the CJR model, its arrangements with CJR 
collaborators, its payment of gainsharing payments and receipt of 
alignment payments, and its use of beneficiary incentives in the CJR 
model.
    (7) Participant hospitals must develop and maintain a written set 
of policies for selecting providers and suppliers for sharing gains and 
risk as CJR collaborators. This set of policies must contain criteria 
for selection of CJR collaborators related to, and inclusive of, the 
quality of care to be delivered by the CJR collaborator to 
beneficiaries during a CJR episode. The selection criteria cannot be 
based directly or indirectly on the volume or value of referrals or 
business otherwise generated by, between or among the participant 
hospital, CJR collaborators, and any individual or entity affiliated 
with a participant hospital or CJR collaborator. All collaborator 
agreements must require the CJR collaborator to have met, or agree to 
meet, the quality criteria for selection.
    (b) Sharing arrangement requirements. Each sharing arrangement must 
comply with the following criteria:
    (1) The sharing arrangement must be set forth in a collaborator 
agreement that complies with the requirements of paragraph (c) of this 
section.
    (2) The sharing arrangement must comply with all relevant laws and 
regulations, including the applicable fraud and abuse laws and all 
applicable payment and coverage requirements.
    (3) An individual or entity's participation in a sharing 
arrangement must be voluntary and without penalty for nonparticipation.
    (4) The parties must enter into a sharing arrangement before care 
is furnished to CJR beneficiaries under the terms of the sharing 
arrangement.
    (5)(i) To be eligible to receive a gainsharing payment, a CJR 
collaborator must meet quality criteria for the calendar year for which 
the gainsharing payment is determined by the participant hospital. The 
quality criteria must be established by the participant hospital and 
directly related to CJR episodes of care.
    (ii) To be eligible to receive a gainsharing payment or make an 
alignment payment, a CJR collaborator other than a PGP must directly 
furnish a billable service to a CJR beneficiary during a CJR episode 
that occurred in the calendar year in which the savings or loss was 
created.
    (iii) To be eligible to receive a gainsharing payment, a PGP that 
is a CJR collaborator must meet the following criteria:
    (A) The PGP must have billed for an item or service that was 
rendered by one or more members of the PGP to a CJR beneficiary during 
a CJR episode that occurred during the calendar year in which the 
participant hospital's internal cost savings was generated, or to which 
the NPRA applied, the latter of which is contained in a reconciliation 
payment.
    (B) The PGP must contribute to a participant hospital's care 
redesign in the CJR model and be clinically involved in the care of CJR 
beneficiaries. The following is a non-exhaustive list of ways in which 
a PGP might be clinically involved in the care of CJR beneficiaries:
    (1) Provide care coordination services to CJR beneficiaries during 
and/or after inpatient admission.
    (2) Engage with a participant hospital in care redesign strategies, 
and actually perform a role in implementing such strategies, that are 
designed to improve the quality of care for LEJR episodes and reduce 
the LEJR episode spending.
    (3) In coordination with other providers and suppliers (such as 
members of the PGP, participant hospitals, post-acute care providers), 
implement strategies designed to address and manage the comorbidities 
of CJR beneficiaries.
    (6) No entity or individual, whether a party to a collaborator 
agreement or not, may condition the opportunity to make or receive 
gainsharing payments or to make or receive alignment payments on the 
volume or value of referrals or business otherwise generated by, 
between or among the participant hospital, CJR collaborators, and any 
individual or entity affiliated with a participant hospital or CJR 
collaborator.
    (7) Gainsharing payments, if any, must be--
    (i) Derived solely from reconciliation payments, or internal cost 
savings, or both;
    (ii) Actually and proportionally related to the care of 
beneficiaries in a CJR episode;
    (iii) Distributed on an annual basis (not more than once per 
calendar year);
    (iv) Not be a loan, advance payments, or payments for referrals or 
other business; and
    (v) Be clearly identified and comply with all provisions in this 
part, as well as all applicable laws, statutes, and rules.
    (8) Alignment payments from a CJR collaborator to a participant 
hospital may be made at any interval that is agreed upon by both 
parties, and must--
    (i) Not be issued, distributed, or paid prior to the calculation by 
CMS of a repayment amount reflected in a reconciliation report; and
    (ii) Not be a loan, advance payments, or payments for referrals or 
other business.
    (9) A participant hospital must not make a gainsharing payment to a 
CJR collaborator that is subject to any action for noncompliance with 
this part or the fraud and abuse laws, or for the

[[Page 73551]]

provision of substandard care in CJR episodes or other integrity 
problems.
    (10) In a calendar year, the aggregate amount of all gainsharing 
payments distributed by a participant hospital that are derived from a 
CJR reconciliation payment may not exceed the amount of the 
reconciliation payment the participant hospital receives from CMS.
    (11) In a calendar year, the aggregate amount of all alignment 
payments received by the participant hospital must not exceed 50 
percent of the participant hospital's repayment amount. No alignment 
payments may be collected by a participant hospital if it does not owe 
a repayment amount.
    (12) The aggregate amount of all alignment payments from any one 
CJR collaborator to a participant hospital must not be greater than 25 
percent of the participant hospital's repayment amount.
    (13) A sharing arrangement must not induce the participant 
hospital, CJR collaborator, or any employees or contractors of the 
participant hospital or CJR collaborator to reduce or limit medically 
necessary services to any Medicare beneficiary.
    (14) A sharing arrangement must not restrict the ability of a CJR 
collaborator to make decisions in the best interests of its patients, 
including the selection of devices, supplies, and treatments.
    (15) The methodology for determining gainsharing payments must be 
based, at least in part, on criteria related to, and inclusive of, the 
quality of care to be delivered to CJR beneficiaries during an episode 
and must not directly account for the volume or value of referrals or 
business otherwise generated by, between or among the participant 
hospital, CJR collaborators, and any individual or entity affiliated 
with a participant hospital or CJR collaborator.
    (16) The methodology for determining alignment payments must not 
directly account for the volume or value of referrals or business 
otherwise generated by, between or among the participant hospital, CJR 
collaborators, and any individual or entity affiliated with a 
participant hospital or CJR collaborator.
    (17) The total amount of a gainsharing payment for a calendar year 
paid to an individual physician or nonphysician practitioner who is a 
CJR collaborator must not exceed 50 percent of the total Medicare 
approved amounts under the Physician Fee Schedule (PFS) for services 
furnished to the participant hospital's CJR beneficiaries during a CJR 
episode by that physician or nonphysician practitioner.
    (18) The total amount of gainsharing payments for a calendar year 
paid to a PGP that is a CJR collaborator must not exceed 50 percent of 
the total Medicare approved amounts under the Physician Fee Schedule 
for services that are billed by the PGP and furnished during a calendar 
year by members of the PGP to the participant hospital's CJR 
beneficiaries during CJR episodes.
    (19) The participant hospital's determination of internal cost 
savings must satisfy the following criteria:
    (i) Internal cost savings are calculated in accordance with 
generally accepted accounting principles and Government Auditing 
Standards (The Yellow Book).
    (ii) All amounts determined to be internal cost savings must 
reflect actual, internal cost savings achieved by the participant 
hospital through implementation of care redesign elements identified 
and documented by the participant hospital. Internal cost savings does 
not include savings realized by any individual or entity that is not 
the participant hospital.
    (iii) Internal cost savings may not reflect ``paper'' savings from 
accounting conventions or past investment in fixed costs.
    (20) All gainsharing payments and any alignment payments must meet 
the requirements set forth in this section and be administered by the 
participant hospital in accordance with generally accepted accounting 
principles. In no event may the participant hospital receive any 
amounts from a CJR collaborator under a sharing arrangement that are 
not alignment payments.
    (21) All gainsharing payments and alignment payments must be made 
through EFT.
    (c) Contents of collaborator agreement. Each collaborator agreement 
must satisfy the following criteria:
    (1) The collaborator agreement must contain a description of the 
sharing arrangement between the participant hospital and the CJR 
collaborator regarding gainsharing payments and alignment payments. 
This description must specify the following:
    (i) The parties to the sharing arrangement.
    (ii) The date of the sharing arrangement.
    (iii) The purpose and scope of the sharing arrangement.
    (iv) The financial or economic terms of the sharing arrangement, 
including the frequency of payment, and the methodology and accounting 
formula for determining the amount of any gainsharing payment or 
alignment payment.
    (v) Safeguards to ensure that alignment payments are made solely 
for purposes related to sharing responsibility for funds needed to 
repay Medicare in the CJR model.
    (vi) Plans regarding care redesign.
    (vii) Changes in care coordination or delivery that is applied to 
the participant hospital or CJR collaborators or both.
    (viii) A description of how success will be measured.
    (ix) Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out changes to care under the CJR model.
    (2) The collaborator agreement must contain a requirement that the 
CJR collaborator and its employees and contractors must comply with the 
applicable provisions of this part (including requirements regarding 
beneficiary notifications, access to records, record retention, and 
participation in any evaluation, monitoring, compliance, and 
enforcement activities performed by CMS or its designees) and all other 
applicable laws and regulations.
    (3) The collaborator agreement must require the CJR collaborator to 
be in compliance with all Medicare provider enrollment requirements at 
Sec.  424.500 of this chapter, including having a valid and active TIN 
or NPI, during the term of the agreement.
    (4) The collaborator agreement must require the CJR collaborator to 
have a compliance program that includes oversight of the collaborator 
agreement and compliance with the requirements of the CJR model.
    (5) The collaborator agreement must set forth a specific 
methodology for accruing, calculating, and verifying the internal cost 
savings generated by the participant hospital based on the care 
redesign elements specifically associated with the particular CJR 
collaborator.
    (i) The methodology must set out the specific care redesign 
elements to be undertaken by the participant hospital or the CJR 
collaborator or both.
    (ii) The methodology must be based, at least in part, on criteria 
related to, and inclusive of, the quality of care to be delivered to 
CJR beneficiaries during an episode and must not directly account for 
the volume or value of referrals or business otherwise generated by, 
between or among the participant hospital, CJR collaborators, and any 
individual or entity affiliated with a participant hospital or CJR 
collaborator.
    (iii) The specific methodologies for accruing and calculating 
internal cost savings must be transparent, measurable, and verifiable 
in accordance with generally accepted

[[Page 73552]]

accounting principles and Government Auditing Standards (The Yellow 
Book).
    (6) The collaborator agreement must set forth the quality criteria 
established by the participant hospital that will be used in 
determining the gainsharing payment.
    (7) The collaborator agreement must require the participant 
hospital to recoup gainsharing payments paid to CJR collaborators if 
gainsharing payments contain funds derived from a CMS overpayment on a 
reconciliation report, or were based on the submission of false or 
fraudulent data.
    (d) Documentation requirements. (1) Documentation of any 
collaborator agreement containing a sharing arrangement must be 
contemporaneous with the establishment of the arrangement.
    (2) A participant hospital must maintain accurate current and 
historical lists of all CJR collaborators, including names and 
addresses of each CJR collaborator. The participant hospital must 
update the lists on at least a quarterly basis and publicly report the 
current and historical lists of CJR collaborators on a public-facing 
Web page on the participant hospital's Web site.
    (3) The participant hospital and CJR collaborator must maintain 
contemporaneous documentation of the payment or receipt of any 
gainsharing payment or alignment payment. The documentation must 
identify at least the following: The nature of the payment (gainsharing 
payment or alignment payment); the identity of the parties making and 
receiving the payment; the date of the payment; the amount of the 
payment; and the date and amount of any recoupment of all or a portion 
of a CJR collaborator's gainsharing payment.
    (4) The participant hospital must keep records of the following:
    (i) Its process for determining and verifying the eligibility of 
CJR collaborators to participate in Medicare.
    (ii) Information confirming the organizational readiness of the 
participant hospital to measure and track internal cost savings.
    (iii) The participant hospital's plan to track internal cost 
savings.
    (iv) Information on the accounting systems used to track internal 
cost savings.
    (v) A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings.
    (vi) The participant hospital's plan to track gainsharing payments 
and alignment payments.
    (vii) Whether the participant hospital recouped any gainsharing 
payments received by a CJR collaborator that contain funds derived from 
a CMS overpayment on a reconciliation report, or were based on the 
submission of false or fraudulent data.
    (e) Access to records and record retention. All participant 
hospitals and CJR collaborators who enter into sharing arrangements 
must:
    (1) Provide to CMS, the OIG, and the Comptroller General or their 
designees scheduled and unscheduled access to all books, contracts, 
records, documents, and other evidence (including data related to 
utilization and payments, quality criteria, billings, lists of CJR 
collaborators, sharing arrangements, and distribution arrangements, and 
the documentation required under paragraph (d) of this section) 
sufficient to enable the audit, evaluation, inspection, or 
investigation of the individual's or entity's compliance with CJR 
requirements, the quality of services furnished, the obligation to 
repay any reconciliation payments owed to CMS, or the calculation, 
distribution, receipt, or recoupment of gainsharing payments, alignment 
payments, or distribution payments.
    (2) Maintain all such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the 
participant hospital's participation in the CJR model or from the date 
of completion of any audit, evaluation, inspection, or investigation, 
whichever is later, unless--
    (i) CMS determines that there is a special need to retain a 
particular record or group of records for a longer period and notifies 
the participant hospital at least 30 calendar days before the normal 
disposition date; or
    (ii) There has been a dispute or allegation of fraud or similar 
fault against the participant hospital or any CJR collaborator, in 
which case the records must be maintained for an additional 6 years 
from the date of any resulting final resolution of the dispute or 
allegation of fraud or similar fault.


Sec.  510.505  Distribution arrangements.

    (a) General. (1) A PGP that has entered into a collaborator 
agreement with a participant hospital may distribute all or a portion 
of any gainsharing payment it receives from the hospital only in 
accordance with a distribution arrangement.
    (2) All distribution arrangements must comply with the provisions 
of paragraph (b) of this section and all applicable laws and 
regulations, including the fraud and abuse laws.
    (b) Requirements. (1) All distribution arrangements must be in 
writing and signed by the PGP and practice collaboration agent.
    (2) Participation in a distribution arrangement must be voluntary 
and without penalty for nonparticipation.
    (3) The distribution arrangement must require the practice 
collaboration agent to comply with the requirements set forth in this 
part.
    (4) The opportunity to receive a distribution payment must not be 
conditioned directly or indirectly on the volume or value of referrals 
or business otherwise generated by, between or among the participant 
hospital, PGP, other CJR collaborators, practice collaboration agents, 
and any individual or entity affiliated with a participant hospital, 
CJR collaborator, or practice collaboration agent.
    (5) Methodologies for determining distribution payments must not 
directly account for volume or value of referrals, or business 
otherwise generated, by, between or among the participant hospital, 
PGP, other CJR collaborators, practice collaboration agents, and any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, or practice collaboration agent.
    (6) A practice collaboration agent is eligible to receive a 
distribution payment only if the PGP billed for an item or service 
furnished by the practice collaboration agent to a CJR beneficiary 
during a CJR episode that occurred during the calendar year in which 
the participating hospital accrued the internal cost savings or earned 
the reconciliation payment that comprise the gainsharing payment made 
to the PGP.
    (7) When a PGP receives a gainsharing payment from a participant 
hospital in accordance with a sharing arrangement, all monies contained 
in such a gainsharing payment must be shared only with the physician or 
nonphysician practitioners that are PGP members that furnished a 
service to a CJR beneficiary during an episode of care in the calendar 
year from which the NPRA, as that term is defined in this part, or 
internal cost savings was generated, either or both of which are the 
only permitted sources of funds for a gainsharing payment.
    (8) The total amount of distribution payments for a calendar year 
paid to a practice collaboration agent must not exceed 50 percent of 
the total Medicare approved amounts under the Physician Fee Schedule 
for services billed by the PGP and furnished by the practice 
collaboration agent to the participant hospital's CJR beneficiaries 
during a CJR episode.
    (9) With respect to the distribution of any gainsharing payment 
received by a

[[Page 73553]]

PGP, the total amount of all distribution payments must not exceed the 
amount of the gainsharing payment.
    (10) All distribution payments must be made through EFT.
    (11) The practice collaboration agents must retain their ability to 
make decisions in the best interests of the patient, including the 
selection of devices, supplies, and treatments.
    (12) The distribution arrangement must not--
    (i) Induce a practice collaboration agent to reduce or limit 
medically necessary services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (13) The PGP must maintain contemporaneous documentation regarding 
distribution arrangements in accordance with Sec.  510.500(e), 
including the relevant written agreements, the date and amount of any 
distribution payment, the identity of each practice collaboration agent 
who received a distribution payment, and a description of the 
methodology and accounting formula for determining the amount of any 
distribution payment.
    (14) The PGP may not enter into a distribution arrangement with any 
member of the PGP that has a collaborator agreement in effect with a 
participant hospital.


Sec.  510.510  Enforcement authority.

    (a) OIG authority. OIG authority is not limited or restricted by 
the provisions of the CJR model, including the authority to audit, 
evaluate, investigate, or inspect the participant hospital, CJR 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.
    (b) Other authorities. None of the provisions of the CJR model 
limits or restricts the authority of any other government agency 
permitted by law to audit, evaluate, investigate, or inspect the 
participant hospital, CJR collaborators, or any other person or entity 
or their records, data, or information, without limitation.


Sec.  510.515  Beneficiary incentives under the CJR model.

    (a) General. Participant hospitals may choose to provide in-kind 
patient engagement incentives to beneficiaries in a CJR episode, 
subject to the following conditions:
    (1) The incentive must be provided directly by the participant 
hospital or by an agent of the hospital under the hospital's direction 
and control to the beneficiary during a CJR episode of care.
    (2) The item or service provided must be reasonably connected to 
medical care provided to a beneficiary during an episode.
    (3) The item or service must be a preventive care item or service 
or an item or service that advances a clinical goal, as listed in 
paragraph (b) of this section, for a beneficiary in a CJR episode by 
engaging the beneficiary in better managing his or her own health.
    (4) The item or service must not be tied to the receipt of items or 
services outside the CJR episode of care.
    (5) The item or service must not be tied to the receipt of items or 
services from a particular provider or supplier.
    (6) The availability of the items or services must not be 
advertised or promoted except that a beneficiary may be made aware of 
the availability of the items or services at the time the beneficiary 
could reasonably benefit from them.
    (7) The cost of the items or services must not be shifted to 
another federal health care program, as defined at section 1128B(f) of 
the Act.
    (b) Goals of the CJR model. The following are the particular 
clinical goals of the CJR model, which may be advanced through 
beneficiary incentives:
    (1) Beneficiary adherence to drug regimens.
    (2) Beneficiary adherence to a care plan.
    (3) Reduction of readmissions and complications resulting from LEJR 
procedures.
    (4) Management of chronic diseases and conditions that may be 
affected by the lower extremity joint replacement procedure.
    (c) Documentation of beneficiary incentives. (1) Participant 
hospitals must maintain documentation of items and services furnished 
as beneficiary incentives that exceed $25 in retail value.
    (2) The documentation must be contemporaneous with the provision of 
the items and services and must include at least the following:
    (i) The date the incentive is provided.
    (ii) The identity of the beneficiary to whom the item or service 
was provided.
    (3) The participant hospital must retain the required documentation 
in accordance with paragraph (e) of this section.
    (d) Technology provided to a beneficiary. (1) Items or services 
involving technology provided to a beneficiary may not exceed $1,000 in 
retail value for any one beneficiary in any one CJR episode.
    (2) Items or services involving technology provided to a 
beneficiary must be the minimum necessary to advance a clinical goal, 
as listed in paragraph (b) of this section, for a beneficiary in a CJR 
episode.
    (3) Items of technology exceeding $100 in retail value must--
    (i) Remain the property of the participant hospital; and
    (ii) Be retrieved from the beneficiary at the end of the CJR 
episode. The participant hospital must document all retrieval attempts, 
including the ultimate date of retrieval. Documented, diligent, good 
faith attempts to retrieve items of technology will be deemed to meet 
the retrieval requirement.
    (e) Documentation and maintenance of records. All participant 
hospitals that provide in-kind patient engagement incentives to 
beneficiaries in CJR episodes must:
    (1) Provide to CMS, the OIG, and the Comptroller General or their 
designee(s) scheduled and unscheduled access to all books, contracts, 
records, documents, and other evidence sufficient to enable the audit, 
evaluation, inspection, or investigation of the participant hospital's 
compliance with CJR requirements for beneficiary incentives.
    (2) Maintain all such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the 
participant hospital's participation in the CJR model or from the date 
of completion of any audit, evaluation, inspection, or investigation, 
whichever is later, unless--
    (i) CMS determines that there is a special need to retain a 
particular record or group of records for a longer period and notifies 
the participant hospital at least 30 calendar days before the normal 
disposition rate; or
    (ii) There has been a dispute or allegation of fraud or similar 
fault against the participant hospital, in which case the records must 
be maintained for an additional 6 years from the date of any resulting 
final resolution of the dispute or allegation of fraud or similar 
fault.

Subpart G--Waivers


Sec.  510.600  Waiver of direct supervision requirement for certain 
post-discharge home visits.

    (a) General. CMS waives the requirement in Sec.  410.26(b)(5) of 
this chapter that services and supplies furnished incident to a 
physician's service must be furnished under the direct supervision of 
the physician (or other practitioner) to permit home visits as 
specified in this section. The services furnished under this waiver are 
not considered to be ``hospital services,'' even when furnished by the 
clinical staff of the hospital.
    (b) General supervision of qualified personnel. The waiver of the 
direct

[[Page 73554]]

supervision requirement in Sec.  410.26(b)(5) of this chapter applies 
only in the following circumstances:
    (1) The home visit is furnished during the episode to a beneficiary 
who has been discharged from an anchor hospitalization.
    (2) The home visit is furnished at the beneficiary's home or place 
of residence.
    (3) The beneficiary does not qualify for home health services under 
sections 1835(a) and 1814(a) of the Act at the time of any such home 
visit.
    (4) The visit is furnished by clinical staff under the general 
supervision of a physician or non-physician practitioner. Clinical 
staff are individuals who work under the supervision of a physician or 
other qualified health care professional, and who are allowed by law, 
regulation, and facility policy to perform or assist in the performance 
of a specific professional service, but do not individually report that 
professional service.
    (5) No more than 9 visits are furnished to the beneficiary during 
the episode.
    (c) Payment. Up to 9 post-discharge home visits per CJR episode may 
be billed under Part B by the physician or nonphysician practitioner or 
by the participant hospital to which the supervising physician has 
reassigned his or her billing rights.
    (d) Other requirements. All other Medicare rules for coverage and 
payment of services incident to a physician's service continue to 
apply.


Sec.  510.605  Waiver of certain telehealth requirements.

    (a) Waiver of the geographic site requirements. Except for the 
geographic site requirements for a face-to-face encounter for home 
health certification, CMS waives the geographic site requirements of 
section 1834(m)(4)(C)(i)(I) through (III) of the Act for episodes being 
tested in the CJR model, but only for services that--
    (1) May be furnished via telehealth under existing requirements; 
and
    (2) Are included in the episode in accordance with Sec.  
510.200(b).
    (b) Waiver of the originating site requirements. Except for the 
originating site requirements for a face-to-face encounter for home 
health certification, CMS waives the originating site requirements 
under section 1834(m)(4)(C)(ii)(I) through (VIII) of the Act for 
episodes being tested in the CJR model to permit a telehealth visit to 
originate in the beneficiary's home or place of residence, but only for 
services that--
    (1) May be furnished via telehealth under existing requirements; 
and
    (2) Are included in the CJR episode in accordance with Sec.  
510.200(b).
    (c) Waiver of selected payment provisions. (1) CMS waives the 
payment requirements under section 1834(m)(2)(A) so that the facility 
fee normally paid by Medicare to an originating site for a telehealth 
service is not paid if the service is originated in the beneficiary's 
home or place of residence.
    (2) CMS waives the payment requirements under section 1834(m)(2)(B) 
to allow the distant site payment for telehealth home visit HCPCS codes 
unique to this model to more accurately reflect the resources involved 
in furnishing these services in the home by basing payment upon the 
comparable office visit relative value units for work and malpractice 
under the Physician Fee Schedule.
    (d) Other requirements. All other requirements for Medicare 
coverage and payment of telehealth services continue to apply, 
including the list of specific services approved to be furnished by 
telehealth.


Sec.  510.610  Waiver of SNF 3-day rule.

    (a) Waiver of the SNF 3-day rule. For episodes being tested in the 
CJR model in performance years 2 through 5, CMS waives the SNF 3-day 
rule for coverage of a SNF stay for a CJR beneficiary following the 
anchor hospitalization, but only if the SNF is identified on the 
applicable calendar quarter list of qualified SNFs at the time of CJR 
beneficiary admission to the SNF.
    (1) CMS determines the qualified SNFs for each calendar quarter 
based on a review of the most recent rolling 12 months of overall star 
ratings on the Five-Star Quality Rating System for SNFs on the Nursing 
Home Compare Web site. Qualified SNFs are rated an overall of 3 stars 
or better for at least 7 of the 12 months.
    (2) CMS posts to the CMS Web site the list of qualified SNFs in 
advance of the calendar quarter and the waiver only applies for a 
beneficiary who has been discharged from an anchor hospitalization if 
the SNF is included on the applicable calendar quarter list for the 
date of the beneficiary's admission to the SNF.
    (b) Other requirements. All other Medicare rules for coverage and 
payment of Part A-covered SNF services continue to apply.


Sec.  510.615  Waiver of certain post-operative billing restrictions.

    (a) Waiver to permit certain services to be billed separately 
during the 90-day post-operative global surgical period. CMS waives the 
billing requirements for global surgeries to allow the separate billing 
of certain post-discharge home visits described under Sec.  510.600, 
including those related to recovery from the surgery, as described in 
paragraph (b) of this section, for episodes being tested in the CJR 
model.
    (b) Services to which the waiver applies. Up to 9 post-discharge 
home visits, including those related to recovery from the surgery, per 
CJR episode may be billed separately under Part B by the physician or 
nonphysician practitioner, or by the participant hospital to which the 
physician or nonphysician practitioner has reassigned his or her 
billing rights.
    (c) Other requirements. All other Medicare rules for global surgery 
billing during the 90-day post-operative period continue to apply.


Sec.  510.620  Waiver of deductible and coinsurance that otherwise 
apply to reconciliation payments or repayments.

    (a) Waiver of deductible and coinsurance. CMS waives the 
requirements of sections 1813 and 1822(a) of the Act for Medicare Part 
A and Part B payment systems only to the extent necessary to make 
reconciliation payments or receive repayments based on the NPRA that 
reflect the episode payment methodology under the final payment model 
for CJR participant hospitals.
    (b) Reconciliation payments or repayments. Reconciliation payments 
or repayments do not affect the beneficiary cost-sharing amounts for 
the Part A and Part B services provided under the CJR model.

Subparts H-J [Reserved]

Subpart K--Model Termination


Sec.  510.900.  Termination of the CJR model.

    CMS may terminate the CJR model for reasons including but not 
limited to the following:
    (a) CMS determines that it no longer has the funds to support the 
CJR model.
    (b) CMS terminates the model in accordance with section 
1115A(b)(3)(B) of the Act. As provided by section 1115A(d)(2) of the 
Act, termination of the model is not subject to administrative or 
judicial review.

    Dated: November 2, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 9, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-29438 Filed 11-16-15; 4:15 pm]
 BILLING CODE 4120-01-P