Medicare Program; Advancing Care Coordination Through Episode Payment Models (EPMs); Cardiac Rehabilitation Incentive Payment Model; and Changes to the Comprehensive Care for Joint Replacement Model (CJR), 50793-51040 [2016-17733]

Agencies

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

[Federal Register Volume 81, Number 148 (Tuesday, August 2, 2016)]
[Proposed Rules]
[Pages 50793-51040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17733]



[[Page 50793]]

Vol. 81

Tuesday,

No. 148

August 2, 2016

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 510 and 512





Medicare Program; Advancing Care Coordination Through Episode Payment 
Models (EPMs); Cardiac Rehabilitation Incentive Payment Model; and 
Changes to the Comprehensive Care for Joint Replacement Model (CJR); 
Proposed Rule

Federal Register / Vol. 81 , No. 148 / Tuesday, August 2, 2016 / 
Proposed Rules

[[Page 50794]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 510 and 512

[CMS-5519-P]
RIN 0938-AS90


Medicare Program; Advancing Care Coordination Through Episode 
Payment Models (EPMs); Cardiac Rehabilitation Incentive Payment Model; 
and Changes to the Comprehensive Care for Joint Replacement Model (CJR)

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule proposes to implement three new Medicare 
Parts A and B episode payment models under section 1115A of the Social 
Security Act. Acute care hospitals in certain selected geographic areas 
will participate in retrospective episode payment models targeting care 
for Medicare fee-for-service beneficiaries receiving services during 
acute myocardial infarction, coronary artery bypass graft, and surgical 
hip/femur fracture treatment episodes. All related care within 90 days 
of hospital discharge 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 receiving care for these 
common clinical conditions and procedures. This proposed rule also 
includes several proposed modifications to the Comprehensive Care for 
Joint Replacement model.

DATES: Comment period: To be assured consideration, comments on this 
proposed rule must be received at one of the addresses provided in the 
ADDRESSES section no later than 5 p.m. EDT on October 3, 2016.

ADDRESSES: In commenting, please refer to file code CMS-5519-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-5519-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-5519-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:

a. For delivery in Washington, DC-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
b. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    For questions related to the proposed EPMs: NEPMRULE@cms.hhs.gov.
    For questions related to the CJR model: CJR@cms.hhs.gov.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

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 proposed rule, we are listing the 
acronyms, abbreviations and short forms used and their corresponding 
terms in alphabetical order.
ACE Acute-care episode
ACO Accountable Care Organization
ALOS Average length of stay
AMA American Medical Association
AMI Acute Myocardial Infarction
APM Alternative Payment Model
ASC QRP Ambulatory Surgical Center Quality Reporting Program
ASC Ambulatory Surgical Center
ASPE Assistant Secretary for Planning and Evaluation
BPCI Bundled Payments for Care Improvement
CABG Coronary Artery Bypass Graft
CAD Coronary artery disease
CAH Critical access hospital
CBSA Core-Based Statistical Area
CC Complication or comorbidity
CCDA Consolidated clinical document architecture
CCDE Core clinical data elements
CCN CMS Certification Number
CEC Comprehensive ESRD Care Initiative
CEHRT Certified Electronic Health Record Technology
CFR Code of Federal Regulations
CJR Comprehensive Care for Joint Replacement
CMHC Community Mental Health Center

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CMI Case Mix Index
CMMI Center for Medicare and Medicaid Innovation
CMP Civil monetary penalty
CMS Centers for Medicare & Medicaid Services
CoP Condition of Participation
CPC Comprehensive Primary Care Initiative
CPT Current Procedural Terminology
CR Cardiac rehabilitation
CSA Combined Statistical Area
CVICU Cardiovascular intensive care units
CY Calendar year
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies
DSH Disproportionate Share Hospital
ECQM Electronic Clinical Quality Measures
EFT Electronic funds transfer
EHR Electronic health record
E/M Evaluation and management
EPM Episode payment model
ESCO ESRD Seamless Care Organization
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
HHS U.S. Department of Health and Human Services
HH QRP Home Health Quality Reporting Program
HICN Health Insurance Claim Number
HIPPA Health Insurance Portability and Accountability Act
HIQR Hospital Inpatient Quality Reporting
Health IT Health Information Technology
HLMR HCAHPS Linear Mean Roll Up
HOOS Hip Dysfunction and Osteoarthritis Outcome Score
HOPD Hospital outpatient department
HRRP Hospital Readmissions Reductions Program
HRR Hospital Referral Region
HVBP Hospital Value-Based Purchasing Program
HIV Human Immunodeficiency Virus
ICD-9-CM International Classification of Diseases, 9th Revision, 
Clinical Modification
IRFQRICD-10-CM International Classification of Diseases, 10th Revision, 
Clinical Modification
ICR Intensive Cardiac Rehabilitation
IME Indirect medical education
IPPS Inpatient Prospective Payment System
IPF Inpatient psychiatric facility
IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program
IPF QRP Inpatient Psychiatric Facility Quality Reporting Program
IRF Inpatient rehabilitation facility
KOOS Knee Injury and Osteoarthritis Outcome Score
LEJR Lower-extremity joint replacement
LIP Low-income percentage
LOS Length-of-stay
LTCH QRP Long-Term Care Hospital Quality Reporting Program
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
MAT Measure Authoring Tool
MCC Major complications or comorbidities
MCCM Medicare Care Choices Model
MDC Major diagnostic category
MDH Medicare-Dependent Hospital
MedPAC Medicare Payment Advisory Commission
MIPS Merit-based Incentive Payment System
MP Malpractice
MSA Metropolitan Statistical Area
MS-DRG Medical Severity Diagnosis-Related Group
NPI National Provider Identifier
NPRA Net Payment Reconciliation Amount
NQF National Quality Forum
OCM Oncology Care Model
OIG Department of Health and Human Services' Office of the Inspector 
General
OPPS Outpatient Prospective Payment System
OQR Outpatient Quality Reporting
PBPM Per-beneficiary per-month
PCI Percutaneous Coronary Intervention
PCMH Primary Care Medical Homes
PE Practice Expense
PFS Physician Fee Schedule
PGP Physician group practice
PQRS Physician Quality Reporting System
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
PTCA Percutaneous transluminal coronary angioplasty
PY Performance year
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
RRC Rural Referral Center
RSCR Risk-Standardized Complication Rate
RSRR Risk-Standardized Readmission Rate
RSMR Risk-Standardized Mortality Rate
RVU Relative Value Unit
SCH Sole Community Hospital
SHFFT Surgical hip/femur fracture treatment
SILS2 Single Item Health Literacy Screening
SNF QRP Skilled Nursing Facility Quality Reporting Program
SNF Skilled nursing facility
THA Total hip arthroplasty
TIN Taxpayer identification number
TKA Total knee arthroplasty
TP Target price
UHDDS Uniform Hospital Discharge Data Set
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--EPM 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. Beneficiary Protections
    8. Financial Arrangements
    9. Data Sharing
    10. Program Waivers
    C. Summary of Economic Effects
II. Background
III. Provisions of the Proposed Regulations
    A. Selection of Episodes for Episode Payment Models in this 
Rulemaking and Potential Future Directions
    1. Selection of Episodes for Episode Payment Models in this 
Rulemaking
    a. Overview
    b. SHFFT Model
    c. AMI and CABG Models
    2. Advanced Alternative Payment Model Considerations
    a. Overview for the EPMs
    b. EPM Participant Tracks
    c. Clinician Financial Arrangements Lists under the EPMs
    d. Documentation Requirements
    3. Future Directions for Episode Payment Models
    a. Refinements to the BPCI Initiative Models
    b. Potential Future Condition-Specific Episode Payment Models

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    c. Potential Future Event-Based Episode Payment Models for 
Procedures and Medical Conditions
    d. Health Information Technology Readiness for Potential Future 
Episode Payment Models
    B. Proposed Definition of the Episode Initiator and Selected 
Geographic Areas
    1. Background
    2. Proposed definition of episode initiator
    3. Financial responsibility for episode of care
    4. Proposed Geographic Unit of Selection and Exclusion of 
Selected Hospitals
    5. Overview and Options for Geographic Area Selection for AMI 
and CABG Episodes
    a. Exclusion of Certain MSAs
    b. Proposed Selection Approach
    (1) Factors Considered but Not Used
    (2) Sample Size Calculations and the Number of Selected MSAs
    (3) Method of Selecting MSAs
    C. Episode Definition for EPMs
    1. Background
    2. Overview of Proposed Three New Episode Payment Models
    3. Clinical Dimensions of AMI, CABG, and SHFFT Model Episodes
    a. Definition of the Clinical Conditions Included in AMI, CABG, 
and SHFFT Model Episodes
    (1) AMI (Medical Management and PCI) Model
    (2) CABG Model
    (3) SHFFT (Excludes Lower Extremity Joint Replacement) Model
    b. Definition of the Related Services Included in EPM Episodes
    4. EPM Episodes
    a. Beneficiary Care Inclusion Criteria and Beginning of EPM 
Episodes
    (1) General Beneficiary Care Inclusion Criteria
    (2) Beginning AMI Model Episodes
    (3) Beginning CABG Model Episodes
    (4) Beginning SHFFT Episodes
    (5) Special Policies for Hospital Transfers of Beneficiaries 
with AMI
    b. Middle of EPM Episodes
    c. End of EPM Episodes
    (1) AMI and CABG Models
    (2) SHFFT Model
    D. Methodology for Setting EPM Episode Prices and Paying EPM 
Participants in the AMI, CABG, and SHFFT Models
    1. Background
    a. Overview
    b. Key Terms for EPM Episode Pricing and Payment
    2. Performance Years, Retrospective Episode Payments, and Two-
Sided Risk EPMs
    a. Performance Period
    b. Retrospective Payment Methodology
    c. Two-Sided Risk EPMs
    3. Adjustments to Actual EPM Episode Payments and to Historical 
Episode Payments used to Set Episode Prices
    a. Overview
    b. Special Payment Provisions
    c. Services that Straddle Episodes
    d. High-Payment EPM Episodes
    e. Treatment of Reconciliation Payments and Medicare Repayments 
when Calculating Historical EPM-Episode Payments to Update EPM 
Benchmark and Quality-Adjusted Target Prices
    4. EPM-Episode Price-Setting Methodologies
    a. Overview
    (1) AMI model
    (2) CABG model
    (3) SHFFT model
    b. EPM-Episode Benchmark and Quality-Adjusted Target Price 
Features
    (1) Risk-Stratifying EPM-Episode Benchmark Prices based on MS-
DRG and Diagnosis
    (2) Adjustments to Account for EPM-Episode Price Variation
    (a) Adjustments for Certain AMI Model Episodes with Chained 
Anchor Hospitalizations
    (b) Adjustments for CABG Model Episodes
    (c) Adjustments for Certain AMI Model Episodes with CABG 
Readmissions
    (d) Potential Future Approaches to setting Target Prices for AMI 
and Hip Fracture Episodes
    (e) Summary of Pricing Methodologies for AMI, CABG, and SHFFT 
Model Episode Scenarios
    (3) 3 Years of Historical Data
    (4) Trending Historical Data to the Most Recent Year
    (5) Update Historical EPM-Episode Payments for Ongoing Payment 
System Updates
    (6) Blend Hospital-Specific and Regional Historical Data
    (7) Define Regions as U.S. Census Divisions
    (8) Normalize for Provider-Specific Wage Adjustment Variations
    (9) Combining Episodes to Set Stable Benchmark and Quality-
Adjusted Target Prices
    (10) Effective Discount Factors
    c. Approach to Combine Pricing Features for all SHFFT Model 
Episodes and AMI Model Episodes without CABG readmissions
    d. Approach to Combine Pricing Features for CABG Model Episodes
    (1) Anchor Hospitalization Portion of CABG Model Episodes
    (2) Approach to Combine Pricing Features for Post-Anchor 
Hospitalization Portion of CABG Model Episodes
    (3) Combine CABG Anchor Hospitalization Benchmark Price and CABG 
Post-Anchor Hospitalization Benchmark Price
    e. Approach to Combine Pricing Features for AMI Model episodes 
with CABG Readmissions
    5. Process for Reconciliation
    a. Net Payment Reconciliation Amount (NPRA)
    b. Payment Reconciliation
    c. Reconciliation Report
    6. Adjustments for Overlaps with Other Innovation Center Models 
and CMS Programs
    a. Overview
    b. Provider Overlap
    (1) BPCI Participant Hospitals in Geographic Areas Selected for 
EPMs
    (2) BPCI Physician Group Practice (PGP) Episode Initiators in 
Hospitals Participating in EPMs
    c. Beneficiary Overlap
    (1) Beneficiary Overlap with BPCI
    (2) Beneficiary Overlap with the CJR Model and other EPMs
    (3) Beneficiary Overlap with Shared Savings Models and Programs
    d. Payment Reconciliation of Overlap with non-ACO CMS Models and 
Programs
    7. Limits or Adjustments to EPM Participants' Financial 
Responsibility
    a. Overview
    b. Limit on Actual EPM-Episode Payment Contribution to Repayment 
Amounts and Reconciliation Payments
    (1) Limit on Actual EPM-Episode Payment Contribution to 
Repayment Amounts
    (2) Limitation on Reconciliation Payments
    c. Additional Protections for Certain EPM Participants
    (1) Proposed Policies for Certain EPM Participants to Further 
Limit Repayment Responsibility
    (2) Considerations for Hospitals Serving a High Percentage of 
Potentially Vulnerable Populations
    d. Application of Stop-Gain and Stop-Loss Limits
    e. EPM Participant Responsibility for Increased Post-Episode 
Payments
    8. Appeals Process
    a. Overview
    b. Notice of calculation error (first level appeal)
    c. Dispute Resolution Process (second level of appeal)
    d. Exception to the Notice of Calculation Error Process and 
Notice of Termination
    e. Limitations on review
    E. EPM quality measures, public display, and use of quality 
measures in the EPM payment methodology
    1. Background
    2. Selection of Proposed Quality Measures for the EPMs
    a. Overview of Quality Measure Selection
    b. AMI Model Quality Measures
    c. CABG Model Quality Measures
    d. SHFFT Model Quality Measures
    3. Proposed Use of Quality Measures in the EPM Payment 
Methodologies
    a. Overview of EPM Composite Quality Score Methodology
    b. Determining Quality Measure Performance
    c. Determining Quality Measure Improvement
    d. Determining Successful Submission of Voluntary Data for AMI 
and SHFFT Models
    (1) Hybrid AMI Mortality (NQF #2473) Voluntary Data
    (2) Patient-Reported Outcomes and Limited Risk Variable 
Voluntary Data Following Elective Primary THA/TKA
    e. Calculation of the EPM-Specific Composite Quality Score
    (1) AMI Model Composite Quality Score
    (2) CABG Model Composite Quality Score
    (3) SHFFT Model Composite Quality Score
    f. EPM Pay-for-Performance Methodologies to Link Quality and 
Payment
    (1) Overview of Pay-for-Performance Proposals Applicable to the 
EPMs
    (2) AMI and CABG Model Pay-for-Performance Methodology
    (a) AMI Model Pay-for-Performance Methodology
    (b) CABG Model Pay-for-Performance Methodology

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    (c) Interface Considerations for the AMI and CABG Model 
Methodologies
    (3) SHFFT Model Pay-for-Performance Methodology
    4. Details on Quality Measures for the EPMs
    a. AMI Model-Specific Measures
    (1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
Following Acute Myocardial Infarction (AMI) Hospitalization (NQF 
#0230) (MORT-30-AMI)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk-Adjustment
    (f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    (2) Excess Days in Acute Care after Hospitalization for Acute 
Myocardial Infarction (AMI Excess Days)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk-Adjustment
    (f) Calculating the Rate and Performance Period
    (3) Hybrid Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate Following Acute Myocardial Infarction (AMI) 
Hospitalization (NQF# 2473)(Hybrid AMI Mortality)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk-Adjustment
    (f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    (g) Requirements for Successful Submission of AMI Voluntary Data
    b. CABG Model-Specific Measure
    (1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 
2558)(MORT-30-CABG)
    (a) Background
    (b) Data Source
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk-Adjustment
    (f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    c. SHFFT Model-Specific Measures
    (1) Hospital Level Risk Standardized Complication Rate (RSCR) 
Following Elective Primary Total Hip Arthroplasty (THA) and/or Total 
Knee Arthroplasty (TKA) (NQF #1550) (Hip/Knee Complications)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Risk Adjustment
    (f) Calculating the Risk Standardized Complication Rate and 
Performance Period
    (2) Hospital-Level Performance Measure(s) of Patient-Reported 
Outcomes Following Elective Primary Total Hip and/or Total Knee 
Arthroplasty
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Outcome
    (f) Risk Adjustment (if applicable)
    (g) Calculating the Risk Standardized Rate
    (h) Requirements for Successful Submission of THA/TKA Patient-
Reported Outcome-Based Voluntary Data
    d. Measure Used for All EPMs
    (1) Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAHPS) Survey (NQF #0166)
    (a) Background
    (b) Data Sources
    (c) Cohort
    (d) Inclusion and Exclusion Criteria
    (e) Case-Mix Adjustment
    (f) HCAHPS Scoring
    (g) Calculating the Rate and Performance Period
    e. Potential Future Measures
    5. Form, Manner, and Timing of Quality Measure Data Submission
    6. Display of Quality Measures and Availability of Information 
for the Public from the AMI, CABG, and SHFFT Models
    F. Compliance Enforcement and Termination of an Episode Payment 
Model
    1. Overview and Background
    2. Proposed Compliance Enforcement for EPMs
    3. Proposed Termination of an Episode Payment Model
    G. Monitoring and Beneficiary Protection
    1. Introduction and Summary
    2. Beneficiary Choice
    3. Beneficiary Notification
    4. Monitoring for Access to Care
    5. Monitoring for Quality of Care
    6. Monitoring for Delayed Care
    H. Access to Records and Record Retention
    I. Financial Arrangements under EPM
    1. Background
    2. Overview of the EPM Financial Arrangements
    3. EPM Collaborators
    4. Sharing Arrangements under EPM
    a. General
    b. Requirements
    c. Gainsharing Payment, Alignment Payment, and Internal Cost 
Savings Conditions and Restrictions
    d. Documentation Requirements
    5. Distribution Arrangements under the EPM
    a. General
    b. Requirements
    6. Downstream Distribution Arrangements under the EPM
    a. General
    b. Requirements
    7. Summary of Proposals for Sharing, Distribution, and 
Downstream Distribution Arrangements under the EPM
    8. Enforcement Authority
    9. Beneficiary Engagement Incentives under the EPM
    a. General
    b. Technology Provided to an EPM Beneficiary
    c. Clinical Goals of the EPM
    d. Documentation of Beneficiary Incentives
    10. Compliance with Fraud and Abuse Laws
    J. Proposed Waivers of Medicare Program Requirements
    1. Overview
    2. Summary of Waivers Adopted Under the CJR Model
    3. Analysis of Current Model Data
    a. Analysis of Waiver Usage
    b. Analysis of Discharge Destination--Post-Acute Care Usage
    c. Analysis of Hospital Mean Length of Stay Data
    4. Post-Discharge Home Visits
    a. AMI Model
    b. CABG Model
    c. SHFFT Model
    5. Billing and Payment for Telehealth Services
    6. SNF 3-Day Rule
    a. Waiver of SNF 3-Day Rule
    b. Additional Beneficiary Protections under the SNF 3-Day Stay 
Rule Waiver
    7. Waivers of Medicare Program Rules to Allow Reconciliation 
Payment or Repayment Actions Resulting from the Net Payment 
Reconciliation Amount
    8. New Waiver for Providers and Suppliers of Cardiac 
Rehabilitation and Intensive Cardiac Rehabilitation Services 
Furnished to EPM Beneficiaries During an AMI or CABG Episode
    K. 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
    7. Data Considerations with Respect to EPM and CJR Collaborators
    L. 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. Comprehensive Care for Joint Replacement Model
    A. Participant Hospitals in the CJR Model
    B. Inclusion of Reconciliation and Repayment Amounts when 
Updating Data for Target Prices
    C. Quality-Adjusted Target Price
    D. Reconciliation
    1. Hospital Responsibility for Increased Post-Episode Payments
    2. ACO Overlap and Subsequent Reconciliation Calculation
    3. Stop-Loss and Stop-Gain Limits
    4. Proposed Modifications to Reconciliation Process
    E. Use of Quality Measures and the Composite Quality Score
    1. Hospitals Included in Quality Performance Distribution
    2. Quality Improvement Points
    3 Relationship of composite quality score to quality categories

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    4. Maximum Composite Quality Score
    5e. Acknowledgement of Voluntary Data Submission
    6. Calculation of the HCAHPS Linear Mean Roll-up (HLMR) Score
    F. Accounting for Overlap with CMS ACO Models and the Medicare 
Shared Savings Program
    G. Appeals Process
    H. Beneficiary Notification
    1. Physician and PGP Provision of Notice
    2. Other CJR collaborators provision of notice
    3. Beneficiary Notification Compliance and Records
    4. Compliance with Sec.  510.110
    I. Compliance Enforcement
    1. Failure to comply.
    J. Financial Arrangements under the CJR model
    1. Definitions related to Financial Arrangements
    a. Addition to the definition of CJR collaborators
    b. Deleting the term collaborator agreements
    c. Addition of CJR activities
    2. Sharing arrangements
    a. General
    b. Requirements
    c. Gainsharing Payment, Alignment Payment, and Internal Cost 
Savings Conditions and Restrictions.
    d. Documentation
    3. Distribution arrangements
    a. General
    b. Requirements
    4. Downstream Distribution Arrangements under the CJR model
    a. General
    b. Requirements
    5. Summary of Proposals for Sharing, Distribution, and 
Downstream Distribution
    K. Beneficiary Incentives under the CJR model
    L. Access to Records and Record Retention
    M. Waivers of Medicare Program Rules to Allow Reconciliation 
Payment or Repayment Actions Resulting From the Net Payment 
Reconciliation Amount
    N. SNF 3-day Waiver Beneficiary Protections
    O. Advanced Alternative Payment Model Requirements
    1. Overview for CJR
    2. CJR Participant Hospital Track
    3. Clinician Financial Arrangements Lists under the CJR Model
    4. Documentation Requirements
VI. Cardiac Rehabilitation Incentive Payment Model
    A. Background
    B. Overview of the CR Incentive Payment Model
    1. Rationale for the CR Incentive Payment Model
    2. General Design of the CR Incentive Payment Model
    C. CR Incentive Payment Model Participants
    D. CR/ICR Services that Count Towards CR Incentive Payments
    E. Determination of CR Incentive Payments
    1. Determination of CR Amounts that Sum to Determine a CR 
Incentive Payment
    2. Relation of CR Incentive Payments to EPM Pricing and Payment 
Policies and Sharing Arrangements for EPM-CR participants
    3. CR Incentive Payment Report
    4. Proposed Timing for Making CR Incentive Payments
    F. Provisions for FFS-CR Participants
    1. Access to Records and Retention for FFS-CR participants
    2. Appeals Process for FFS-CR Participants
    a. Overview
    b. Notice of Calculation Error (first level appeal).
    c. Dispute Resolution Process (second level of appeal)
    d. Exception to the Notice of Calculation Error Process and 
Notice of Termination.
    e. Limitations on review.
    3. Data Sharing for FFS-CR Participants
    a. Overview
    b. Data Sharing with CR participants
    4. Compliance Enforcement for FFS-CR Participants and 
Termination of the CR Incentive Payment Model
    5. Enforcement Authority for FFS-CR Participants
    6. Beneficiary Engagement Incentives for FFS-CR Participants
    7. Waiver of Physician Definition for Providers and Suppliers of 
CR/ICR Services Furnished to FFS-CR Beneficiaries During an AMI Care 
Period or CABG Care Period
    a. Overview of Program Rule Waivers Under an EPM
    b. General Physician Requirements for Furnishing CR/ICR Services
    c. Proposed Waiver of Physician Definition For Providers and 
Suppliers of CR/ICR Services Furnished to EPM Beneficiaries During 
AMI or CABG Model Episodes
    d. Proposed Waiver of Physician Definition For Providers or 
Suppliers of CR/ICR Services Furnished to FFS-CR Beneficiaries 
During AMI Care Periods or CABG Care Periods
    G. Considerations Regarding Financial Arrangements Under the CR 
Incentive Payment Model
VII. Collection of Information Requirements
VIII. Response to Comments
IX. Regulatory Impact Analysis
    A. Statement of Need
    1. Need for EPM Proposed Rule
    2. Need for CJR Modifications
    3. Need for CR Incentive Payment Model
    4. Aggregate Impact of EPMs, CJR, and CR Incentive Payment Model
    B. Overall Impact
    C. Anticipated Effects
    1. Overall Magnitude of the Model and its Effects on the Market
    a. EPMs
    b. CJR
    c. CR Incentive Payment Model
    d. Aggregate Effects on the Market
    2. Effects on the Medicare Program
    a. EPMs
    (1) Assumptions
    (2) Analyses
    (3) Uncertainties
    b. CJR
    (1) Assumptions and Uncertainties
    (2) Analyses
    c. CR Incentive Payment Model
    (1) Assumptions and Uncertainties
    (2) Analysis
    3. Effects on Beneficiaries
    4. Effects on Small Rural Hospitals
    5. Effects on Small Entities
    6. Effects on Collection of Information
    7. Unfunded Mandates
    D. Alternatives Considered
    E. Accounting Statement and Table
    F. Conclusion
    Regulations Text

I. Executive Summary

A. Purpose

    The purpose of this proposed rule--Advancing Care Coordination 
through Episode Payment Models, is to propose the creation and testing 
of three new episode payment models (EPMs) and a Cardiac Rehabilitation 
(CR) incentive payment model under the authority of the Center for 
Medicare and Medicaid Innovation (CMMI or ``the Innovation Center''). 
Section 1115A of the Social Security Act (``the Act'') authorizes the 
Innovation Center to test innovative payment and service-delivery 
models to reduce Medicare, Medicaid, and Children's Health Insurance 
Program expenditures while preserving or enhancing the quality of care 
furnished to such programs' beneficiaries. Under the fee-for-service 
(FFS) program, 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. The goal for the proposed EPMs is to 
improve the quality of care provided to beneficiaries in an applicable 
episode while reducing episode spending through financial 
accountability.\1\ The proposed EPMs would include models for episodes 
of care surrounding an acute myocardial infarction (AMI), coronary 
artery bypass graft (CABG), and surgical hip/femur fracture treatment 
excluding lower extremity joint replacement (SHFFT). Under the proposed 
rule, the Centers for Medicare & Medicaid Services (CMS) will test 
whether an EPM for AMI, CABG, and SHFFT episodes of care will reduce 
Medicare expenditures while preserving or enhancing the quality of care 
for Medicare beneficiaries. We anticipate the proposed models would 
benefit Medicare beneficiaries by improving the

[[Page 50799]]

coordination and transition of care, improving the coordination of 
items and services paid for through FFS Medicare, 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 spectrum. We 
propose to test the proposed EPMs for 5 performance years, beginning 
July 1, 2017, and ending December 31, 2021.
---------------------------------------------------------------------------

    \1\ In this proposed rule, we use the terms ``AMI episode,'' 
``CABG episode,'' and ``SHFFT episode'' to refer to episodes of care 
as described in section III.C. of this proposed rule.
---------------------------------------------------------------------------

    Within this proposed rule, we propose three distinct EPMs focused 
on episodes of care for AMI, CABG, and SHFFT episodes. We chose these 
episodes for the proposed models because, as discussed in depth in 
section III.A. of this proposed rule, we believe hospitals would have 
significant opportunity to redesign care and improve quality of care 
furnished during the applicable episode. In addition, significant 
variation in spending occurs during these high-expenditure, common 
episodes. The proposed EPMs would enable hospitals to consider the most 
appropriate strategies for care redesign, including: (1) increasing 
post-hospitalization follow-up and medical management for patients; (2) 
coordinating across the inpatient and post-acute care spectrum; (3) 
conducting appropriate discharge planning; (4) improving adherence to 
treatment or drug regimens; (5) reducing readmissions and complications 
during the post-discharge period; (6) managing chronic diseases and 
conditions that may be related to the proposed EPMs' episodes; (7) 
choosing the most appropriate post-acute care setting; and (8) 
coordinating between providers and suppliers such as hospitals, 
physicians, and post-acute care providers. The proposed EPMs would 
offer hospitals the opportunity to examine and better understand their 
own care processes and patterns with regard to patients in AMI, CABG, 
and SHFFT episodes, as well as the processes of post-acute care 
providers and physicians.
    We previously have used our statutory authority under section 1115A 
of the Act to test other episode payment models such as the Bundled 
Payments for Care Improvement (BPCI) initiative and Comprehensive Care 
for Joint Replacement (CJR) model. Bundled payments for multiple 
services in an episode of care hold participating organizations 
financially accountable for that episode of care. Such models also 
allow participants to receive payments based in part on the reduction 
in Medicare expenditures that arise from such participants' care 
redesign efforts. This payment can be used for investments in care 
redesign strategies and infrastructure, as well as to incentivize 
collaboration with other providers and suppliers furnishing services to 
beneficiaries included in the models.
    We believe the proposed EPMs would further the Innovation Center's 
mission and the Administration's goal of increasingly paying for value 
and outcomes, rather than for volume alone,\2\ by promoting the 
alignment of financial and other incentives for all health care 
providers caring for beneficiaries during SHFFT, CABG, or AMI episodes. 
The acute care hospital where an eligible beneficiary has an initial 
hospitalization for one of the procedures or clinical conditions 
included in these proposed EPMs would be held accountable for spending 
during the episode of care. EPM participants could earn reconciliation 
payments by appropriately reducing expenditures and meeting certain 
quality metrics. EPM participants also would gain access to data and 
educational resources to better understand care patterns during the 
inpatient hospitalization and post-acute periods, as well as associated 
spending. Payment approaches that reward providers for assuming 
financial and performance accountability for a particular episode of 
care create incentives for the implementation and coordination of care 
redesign between participants and other providers and suppliers such as 
physicians and post-acute care providers.
---------------------------------------------------------------------------

    \2\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated by 
all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in this 
rule that end in CY 2014.
---------------------------------------------------------------------------

    The proposal for the AMI, CABG, and SHFFT models would require the 
participation of hospitals in multiple geographic areas that might not 
otherwise participate in testing episode payment for the proposed 
episodes of care. CMS is testing other episode payment models with the 
BPCI initiative and the CJR model. The BPCI initiative is voluntary; 
providers applied to participate and chose from 48 clinical episodes. 
BPCI participants entered the at-risk phase between 2013 and 2015 and 
have the option to continue participating in the initiative through FY 
2018. In the CJR model, acute care hospitals in selected geographic 
areas are required to participate in the CJR model for all eligible 
lower-extremity joint replacement (LEJR) episodes that initiate at a 
CJR participant hospital. The CJR model began its first of 5 
performance years on April 1, 2016. Realizing the full potential of new 
EPMs will require the engagement of an even broader set of providers 
than have participated to date in our episode payment models such as 
the BPCI initiative and the CJR model. As such, we are interested in 
testing and evaluating the impact of episode payment for the three 
proposed EPMs in a variety of circumstances, including those hospitals 
that may not otherwise participate in such a test.
    While we note that testing of the CJR model that began in April 
2016 will allow CMS to gain experience with requiring hospitals to 
participate in an episode payment model, the clinical circumstances of 
the episodes we are proposing (AMI, CABG, and SHFFT) differ in 
important ways from the LEJR episodes included in the CJR model. LEJR 
procedures are common among the Medicare population, and the majority 
of such procedures are elective. In contrast, under the three proposed 
EPMs, CMS would test episode payment for certain cardiac conditions and 
procedures, as well as SHFFT. We expect the patient population included 
in these episodes would be substantially different from the patient 
population in CJR episodes, due to the clinical nature of the cardiac 
and SHFFT episodes. Beneficiaries in these episodes commonly have 
chronic conditions that contribute to the initiation of the episodes, 
and need both planned and unplanned care throughout the EPM episode 
following discharge from the initial hospitalization that begins the 
episode. Both AMI and CABG model episodes primarily include 
beneficiaries with cardiovascular disease, a chronic condition which 
likely contributed to the acute events or procedures that initiate the 
episodes. About half the average AMI model historical episode spending 
was for the initial hospitalization, with the majority of spending 
following discharge from the initial hospitalization due to hospital 
readmissions, while there was relatively less spending on SNF services, 
Part B professional services, and hospital outpatient services. In CABG 
model historical episodes, about three-quarters of episode spending was 
for the initial hospitalization, with the remaining episode spending 
relatively evenly divided between Part B professional services and 
hospital readmissions, and a lesser percentage on SNF services. Similar 
to AMI episodes, post-acute care provider use was relatively uncommon 
in CABG model historical episodes, while hospital readmissions during 
CABG model historical episodes were relatively common. SHFFT model 
historical episodes also were accompanied by substantial spending

[[Page 50800]]

for hospital readmissions, and post-acute care provider use in these 
episodes also was high. The number of affected beneficiaries and 
potential impact of the models on quality and Medicare spending present 
an important opportunity to further the Administration's goal of 
shifting health care payments to support the quality of care over the 
quantity of services by promoting better coordination among health care 
providers and suppliers and greater efficiency in the care of 
beneficiaries in these models, while reducing Medicare expenditures.\3\ 
Pay-for-performance episode payment models such as the three EPMs 
proposed in this rulemaking financially incentivize improved quality of 
care and reduced cost by aligning the financial incentives of all 
providers and suppliers caring for model beneficiaries with these 
goals. This alignment leads to a heightened focus on care coordination 
and management throughout the episode that prioritizes the provision of 
those items and services which improve beneficiary outcomes and 
experience at the lowest cost. A more detailed discussion of the 
evidence supporting the episode selection for these models can be found 
in section III.A.1. of the proposed rule.
---------------------------------------------------------------------------

    \3\ 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-msarter-spending-healthier-people.html (January 26, 2015).
---------------------------------------------------------------------------

    The proposed models would also allow CMS to gain additional 
experience with episode-payment approaches for hospitals with variance 
in (1) historic care and utilization patterns; (2) patient populations 
and care patterns; (3) roles within their local markets; (4) volumes of 
services; (5) levels of access to financial, community, or other 
resources; and (6) levels of population and health-care-provider 
density, including local variations in the availability and use of 
different categories of post-acute care providers. We believe that 
participation in the proposed EPMs by a large number of hospitals with 
diverse characteristics would result in a robust data set for 
evaluating this payment approach and would stimulate the rapid 
development of new evidence-based knowledge. Testing the proposed EPMs 
in this manner would also allow us to learn more about patterns of 
inefficient utilization of health care services and how to incentivize 
quality improvement for beneficiaries receiving services in AMI, CABG, 
and SHFFT episodes. This knowledge potentially could inform future 
Medicare payment policies.
    We propose the CR incentive payment model to test the effects on 
quality of care and Medicare expenditures of providing financial 
incentives to hospitals for beneficiaries hospitalized for treatment of 
AMI or CABG to encourage care coordination and greater utilization of 
medically necessary CR and intensive cardiac rehabilitation (ICR) 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program. 
Despite the evidence from multiple studies that CR services improve 
health outcomes, the literature also indicates that these services are 
underutilized, estimating that only about 35 percent of AMI patients 
older than 50 receive this indicated treatment.4 5 6 Recent 
analysis confirms a similar pattern of underutilization for Medicare 
beneficiaries who are eligible for and could benefit from CR.
---------------------------------------------------------------------------

    \5\ Anderson L et al. Exercise-based cardiac rehabilitation for 
coronary heart disease. Cochrane Database Syst Rev. 2016 Jan 
5;1:CD001800.
    \6\ Receipt of outpatient cardiac rehabilitation among heart 
attack survivors--United States, 2005. MMWR Morbidity and mortality 
weekly report. 2008 Feb 1:57(4):89-94.
---------------------------------------------------------------------------

    Considering the evidence demonstrating that CR/ICR services improve 
long-term patient outcomes, the room for improvement in CR/ICR service 
utilization for beneficiaries eligible for this benefit, and the need 
for ongoing, chronic treatment for underlying coronary artery disease 
(CAD) among beneficiaries that have had an AMI or a CABG, we believe 
that there is a need for improved long-term care management and care 
coordination for beneficiaries that have had an AMI or a CABG and that 
incentivizing the use of CR/ICR services is an important component of 
meeting this need. We want to reduce barriers to high-value care by 
testing a financial incentive for hospitals that encourages the 
management of beneficiaries that have had an AMI or a CABG in ways that 
may contribute to long-term improvements in quality and reductions in 
Medicare spending. We seek public comment on the proposals contained in 
this proposed rule, and also on any alternatives considered.

B. Summary of the Major Provisions

1. Model Overview--EPM Episodes of Care
    Under the proposed EPMs, as described further in section III.B.2. 
of this proposed rule, an AMI, CABG, or SHFFT model episode would begin 
with an inpatient admission to an anchor hospital assigned to one of 
the following MS-DRGs upon beneficiary discharge. Acute care hospital 
services furnished to beneficiaries in AMI, CABG, and SHFFT episodes 
currently are paid under the Inpatient Prospective Payment System 
(IPPS) through several Medicare Severity-Diagnosis Related Groups (MS-
DRGs): for AMI episodes, AMI MS-DRGs (280-282) and those Percutaneous 
Coronary Intervention (PCI) MS-DRGs (246-251) representing IPPS 
admissions for AMI that are treated with PCIs; CABG MS-DRGs (231-236); 
and SHFFT MS-DRGs (480-482). Episodes would end 90 days after the date 
of discharge from the anchor hospital, as defined under Sec.  512.2. 
Defining EPMs' episodes of care in such a manner offers operational 
simplicity for both providers and CMS. The proposed EPMs' episodes 
would include the inpatient stays and all related care covered under 
Medicare Parts A and B within the 90 days after discharge, including 
hospital care, post-acute care, and physician services.
2. Model Scope
    Consistent with the CJR model, we propose that acute care hospitals 
would be the episode initiators and bear financial risk under the 
proposed AMI, CABG and SHFFT models. In comparison to other health care 
facilities, hospitals are more likely to have resources that would 
allow them to appropriately coordinate and manage care throughout an 
episode, and hospital staff members already are involved in hospital-
discharge planning and post-acute care recommendations for recovery, 
key dimensions of high-quality and efficient care. We propose to 
require all hospitals that are paid under the IPPS, have a CMS 
Certification Number (CCN), and have an address located in selected 
geographic areas to participate in the EPMs, with limited exceptions. 
An eligible beneficiary who receives care at such a hospital will 
automatically be included in the applicable EPM. We propose to select 
geographic areas through a random sampling methodology.
    Under the CR incentive payment model, we propose to provide a CR 
incentive payment specifically to selected hospitals with financial 
responsibility for AMI or CABG model episodes (hereinafter EPM-CR 
participants) because they are already engaged in managing the AMI or 
CABG model beneficiary's overall care for a period of time following 
hospital discharge. Similarly, we believe there are opportunities to 
test the same financial incentives for hospitals where the 
beneficiary's overall care is paid under the Medicare FFS program. 
Thus,

[[Page 50801]]

we also propose to provide a CR incentive payment specifically to 
selected hospitals that are not AMI or CABG model participants 
(hereinafter FFS-CR participants).
    Our proposed geographic-area selection process is detailed further 
in section III.B.4. of this proposed rule.
3. Payment
    We propose to test the AMI, CABG, and SHFFT EPMs for 5 performance 
years. The first performance year will begin July 1, 2017. During these 
performance years we propose to 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, would be combined to 
calculate an actual episode payment. The actual episode payment would 
then be reconciled against an established EPM quality-adjusted target 
price. The amount of this calculation, if positive, would be paid to 
the participant. This would be called a reconciliation payment. If 
negative, we would require repayment from the participant hospital 
beginning with episodes ending in the second quarter of performance 
year 2 of the EPMs. EPM participants' quality performance also would be 
assessed at reconciliation; each participant would receive a composite 
quality score and a corresponding quality category. EPM participants 
that achieve a quality category of ``acceptable'' or higher would be 
eligible for a reconciliation payment. We also propose to phase in the 
requirement that participants whose actual episode payments exceed the 
quality-adjusted target price pay the difference back to Medicare 
beginning for performance year 2. Under this proposal, Medicare would 
not require repayment from hospitals for performance year 1 for actual 
episode payments that exceed their target price in performance year 1, 
and an applicable discount factor would be used for calculating 
repayment amounts for performance years 2 and 3, consistent with our 
final policies for the CJR model. In contrast to the CJR model, due to 
the clinical characteristics and common patterns of care in AMI 
episodes, we propose payment adjustments in the cases of certain 
transfers and readmissions of beneficiaries to inpatient hospitals for 
these episodes. These payment adjustments are discussed in detail in 
section III.D.4.b.(1). of this proposed rule. We also propose to limit 
how much a hospital can gain or lose based on its actual episode 
payments relative to quality-adjusted target prices. Finally, we 
propose additional policies to further limit the risk of high payment 
cases for all participants and for special categories of participants 
as described in section III.D. of this proposed rule.
    In addition to the EPMs, we propose to test a CR incentive payment 
model to encourage the utilization of CR/ICR services for beneficiaries 
hospitalized for treatment of AMI or CABG. To determine the CR 
incentive payment, we propose to count the number of CR/ICR services 
for the relevant time periods under the Outpatient Prospective Payment 
System (OPPS) and PFS on the basis of the presence of paid claims of 
the HCPCS codes that report CR/ICR services and the units of service 
billed. The initial level of the per-service CR incentive amount would 
be $25 per CR/ICR service for each of the first 11 CR/ICR services paid 
for by Medicare during an AMI or CABG model episode or AMI or CABG care 
period. After 11 CR/ICR services are paid for by Medicare for a 
beneficiary, the level of the per-service CR incentive amount would 
increase to $175 per CR/ICR service for each additional CR/ICR service 
paid for by Medicare during the AMI or CABG model episode or AMI care 
period or CABG care period. A more detailed discussion of the CR 
incentive payment is located in section VI.E.1 of this proposed rule. 
The CR performance years would be the same as the performance years 
proposed for the EPMs in section III.D.2.a. of this proposed rule. 
Further details about the payment structure and design of the CR 
incentive payment model can be found in section VI. of this proposed 
rule.
4. Similar, Previous, and Concurrent Models
    The proposed EPMs are informed by other models and demonstrations 
currently and previously conducted by CMS, and would explore additional 
ways to use episode payment to enhance coordination of care and improve 
the quality of care.
    We recently announced practices that will participate in the 
Oncology Care Model (OCM), an episode payment model for physician 
practices administering chemotherapy. Under OCM, practices will enter 
into payment arrangements that include both financial and performance 
accountability for episodes of care surrounding chemotherapy 
administration to cancer patients. We will coordinate with other payers 
to align with OCM in order to facilitate enhanced services and care at 
participating practices.\7\
---------------------------------------------------------------------------

    \7\ More information on the OCM can be found on the Innovation 
Center's Web site at https://innovation.cms.gov/initiatives/Oncology-Care/.
---------------------------------------------------------------------------

    CMMI previously tested innovative episode payment approaches in the 
Medicare Acute Care Episode (ACE) demonstration,\8\ and, as described 
in this proposed rule, currently is testing additional approaches under 
the BPCI initiative and the CJR model. The ACE demonstration tested a 
bundled payment approach for cardiac and orthopedic inpatient surgical 
services and procedures. All Medicare Part A and Part B services 
pertaining to the inpatient stay were included in the ACE demonstration 
episodes of care. Evaluations of the ACE demonstration found that while 
there was not strong quantitative evidence indicating improvements in 
quality, there was qualitative evidence that hospitals worked to 
improve processes and outcomes as a result of their participation in 
the demonstration.
---------------------------------------------------------------------------

    \8\ Information on the ACE Demonstration can be found on the 
Innovation Center's Web site at https://innovation.cms.gov/initiatives/ACE/.
---------------------------------------------------------------------------

    We currently are testing the BPCI initiative, which is composed of 
four related payment models that link payments for multiple services 
that a Medicare beneficiary receives 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) 
post-acute care 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. Participating organizations chose 
from 48 clinical episodes, including hip and femur procedures except 
major joint, acute myocardial infarction, percutaneous coronary 
intervention, and coronary artery bypass graft surgery. BPCI Model 2 is 
an episode payment model in which a qualifying acute care 
hospitalization initiates a 30-, 60-, or 90-day episode of care. The 
episode includes the inpatient stay in an acute care hospital and all 
related services covered under Medicare Parts A and B during the 
episode, including post-acute care services.\9\ Our experience testing 
BPCI Model 2 informed the design of the three

[[Page 50802]]

proposed EPMs. Although some interim evaluation results from the BPCI 
models are available, final evaluation results for the models within 
the BPCI initiative are not yet available. However, we believe that 
CMS' experiences with BPCI support the design of the proposed EPMs. 
Stakeholders both directly and indirectly involved in testing BPCI 
models have conveyed that they perceive the initiative to be an 
effective mechanism for advancing better, more accountable care and 
aligning providers along the care continuum. This message has been 
reinforced through CMS site visits to participating entities, the 
Bundled Payments summit in Washington, in-person meetings with Awardees 
at CMS, and Awardee-led Affinity Group discussions. The BPCI initiative 
incorporates 48 clinical episodes, including cardiac and orthopedic 
episodes similar to those proposed for the AMI, CABG, and SHFFT models. 
These clinical episodes are being tested by over 1200 Medicare 
providers, including acute care hospitals, physician group practices, 
skilled nursing facilities, and home health agencies. Cardiac and 
orthopedic clinical episodes are among the most popular episodes in 
BPCI, indicating that BPCI awardees participating in BPCI believe they 
can reduce cost and improve quality for beneficiaries in these episodes 
of care.
---------------------------------------------------------------------------

    \9\ More information on BPCI Model 2 can be found on the 
Innovation Center's Web site at https://innovation.cms.gov/initiatives/BPCI-Model-2/.
---------------------------------------------------------------------------

    Our design and implementation of the CJR model, which is an episode 
payment model for LEJR episodes, also informed the design of the 
proposed AMI, CABG, and SHFFT EPMs. After releasing a proposed rule in 
July 2015 and receiving nearly 400 comments from the public, in 
November 2015 we released final regulations implementing the CJR model. 
Approximately 800 acute care hospitals (approximately 23 percent of all 
IPPS hospitals) now participate in the CJR model. The first CJR 
performance year began on April 1, 2016. The CJR model will continue 
for 5 performance years, ending on December 31, 2020. The proposed AMI, 
CABG, and SHFFT models build upon our experience designing and 
implementing the CJR model, including feedback from providers and other 
public stakeholders during the CJR model's rulemaking and 
implementation processes.
    Further information of why specific elements of the models and 
initiatives were incorporated into the EPMs' designs is discussed later 
in this proposed rule.
5. Overlap With Ongoing CMS Efforts
    We propose to exclude from participation in the AMI, CABG, and 
SHFFT models certain acute care hospitals participating in BPCI Models 
2 and 4 for the hip and femur procedures except major joint or for all 
three of the BPCI cardiac episodes (AMI, PCI, and CABG). We propose to 
exclude beneficiaries in the proposed EPMs' episodes from being 
included in certain Innovation Center ACO models, the Next Generation 
ACO Model and Comprehensive ESRD Care. Other CMS programs, such as the 
Medicare Shared Savings Program and other accountable care organization 
(ACO) or total cost of care initiatives will remain eligible for EPM 
episode initiation. We propose to account for overlap, that is, where 
EPM beneficiaries also are included in other models and programs to 
ensure the financial policies of the models are maintained and results 
and spending reductions are attributed to one model or program. More 
detail on our proposed policies for accounting for provider- and 
beneficiary-level overlap is discussed in section III.D.6. of this 
proposed rule.
    The amendments made by the Medicare Access and CHIP Reauthorization 
Act of 2015 (MACRA) (Pub. L. 114-10, April 16, 2015) created two paths 
for eligible clinicians to link quality to payments: The Merit-Based 
Incentive Payment System (MIPS) and Advanced Alternative Payment Models 
(APMs). These two paths create a flexible payment system called the 
Quality Payment Program as proposed by CMS in the Quality Payment 
Program proposed rule (81 FR 28161 through 28586). The MIPS streamlines 
and improves on three current programs--the Physician Quality Reporting 
System (PQRS), the Physician Value-based Payment Modifier (VM), and the 
Medicare Electronic Health Record (EHR) Incentive Program--and 
continues the focus on quality and value in one cohesive program. 
Through participation in Advanced APMs, eligible clinicians can become 
Qualifying APM Participants (QPs) for a year beginning with CY 2019 and 
receive an APM Incentive Payment (or, in later years, a more favorable 
payment update under the PFS) for the year.
    So that the EPMs may be able to meet the criteria to be Advanced 
APMs based on the requirements proposed in the Quality Payment Program 
proposed rule, we propose to require EPM participants to use Certified 
Electronic Health Record Technology (CEHRT) (as defined in section 
1848(o)(4) of the Act) in Track 1 of each EPM. We propose that EPM 
participants in these tracks must use certified health information 
technology (IT) functions, in accordance with the definition of CEHRT 
under our regulation at 42 CFR 414.1305, to document and communicate 
clinical care with patients and other health care professionals as 
described in the Quality Payment Program proposed rule (81 FR 28161 and 
28299). We also make similar proposals with respect to CJR.
    We propose to implement two different tracks within the EPMs 
whereby EPM participants that meet proposed requirements for use of 
CEHRT and financial risk would be in Track 1 (an Advanced APM track) 
and EPM participants that do not meet these requirements would be in 
Track 2 (a non-Advanced APM track). The different tracks would not 
change how EPM participants operate within the EPM itself, beyond the 
requirements associated with selecting to meet CEHRT use requirements. 
The only distinction between the two tracks is that only Track 1 EPMs 
could be considered an Advanced APM for purposes of the Quality Payment 
Program based on the proposed criteria in the Quality Payment Program 
proposed rule. We make similar proposals with respect to CJR. We would 
consider modifying requirements proposed in this rule as necessary to 
reconcile them with policies adopted in the Quality Payment Program 
final rule. A more detailed discussion of the proposals for how EPMs 
and CJR could qualify as Advanced APMs, and how eligible clinicians 
participating in the EPMs and CJR would be identified and affected, can 
be found in sections III.A.2 and V.O. of this proposed rule.
6. Quality Measures and Reporting Requirements
    Similar to the quality measures selected for the CJR model, we 
propose to use established measures used in other CMS quality-reporting 
programs for the proposed EPMs' episodes. We propose to use these 
measures to test EPMs' success in achieving its goals under section 
1115A of the Act and to monitor for beneficiary safety. For the SHFFT 
model, we propose applying the same quality measures selected for the 
CJR model.
    The following proposed quality measures for SHFFT episodes are:

 THA/TKA Complications: Hospital-Level Risk-Standardized 
Complication Rate (RSCR) Following Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (National 
Quality Forum [NQF] #1550)
 Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAPHS) Survey (NQF #0166)
 Successful Voluntary Reporting of Patient-Reported Outcomes


[[Page 50803]]


    We propose the following measures for the AMI model:

 MORT-30-AMI: Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Acute Myocardial Infarction (AMI) 
Hospitalization (NQF #0230).
 AMI Excess Days: Excess Days in Acute Care after 
Hospitalization for Acute Myocardial Infarction (acute care days 
include emergency department, observation, and inpatient readmission 
days)
 HCAPHS Survey (NQF #0166), linear mean roll-up (HLMR) scores 
like CJR

    We propose the following measures for the CABG model:

 MORT-30-CABG: Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Coronary Artery Bypass Graft Surgery 
(NQF #2558)
 HCAPHS Survey (NQF #0166), HLMR scores like CJR
    Finally, we are proposing and requesting public feedback on options 
for including successful implementation testing of the Hybrid AMI 
measure as a quality measure for the AMI episode. The Hybrid AMI 
measure will assess a hospital's 30-day risk-standardized acute 
myocardial infarction mortality rate and will incorporate a combination 
of claims data and EHR data submitted by hospitals.
    Additionally, similar to the CJR model, we propose to adopt a pay-
for-performance methodology for EPMs that relies upon a composite 
quality score to assign respective EPM participants to four quality 
categories. These quality categories will determine an EPM 
participant's eligibility for a reconciliation payment should such EPM 
participant achieve spending below the quality-adjusted target price, 
as well as the effective discount percentage at reconciliation. Points 
for quality performance and improvement (as applicable) will be awarded 
for each episode measure and then summed to develop a composite quality 
score that will determine the EPM participant's quality category for 
the episode. Quality performance will make up the majority of available 
points in the composite quality score, with improvement points 
available as ``bonus'' points for the measure. This approach resembles 
the CJR model methodology.
7. Beneficiary Protections
    As with the CJR model, Medicare beneficiaries in the proposed 
models will retain the right to obtain health services from any 
individual or organization qualified to participate in the Medicare 
program. Eligible beneficiaries who receive services from model 
participants would not have the option to opt out of inclusion in the 
applicable model. We propose to require participants to supply 
beneficiaries with written information regarding the design and 
implications of these models as well as the beneficiaries' rights under 
Medicare, including their right to use their providers of choice. We 
would make a robust effort to reach out to beneficiaries and their 
advocates to help them understand the models. We also propose to 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.G. of this proposed rule.
8. Financial Arrangements
    We propose to use the same general framework finalized in the CJR 
model to hold participants financially responsible for AMI, CABG and 
SHFFT model episodes as discussed in section III.I. of this proposed 
rule. Specifically, only the EPM participants would be directly subject 
to the requirements of this proposed rule for the proposed EPMs. EPM 
participants would be responsible for ensuring that other providers and 
suppliers collaborating with the EPM participants on care redesign for 
the applicable EPM episodes are in compliance with the applicable EPM's 
terms and conditions.
    We propose adding hospitals to the list of providers and suppliers 
eligible for gainsharing as EPM collaborators due to the expected 
participation of multiple hospitals in the episode care for some 
beneficiaries in AMI and CABG episodes. We further propose adding ACOs 
to be eligible for gainsharing as EPM collaborators due to the interest 
of ACOs in gainsharing during the CJR model rulemaking and the ongoing 
challenges of addressing overlap between episode payment models and 
ACOs. We also propose provisions that allow for certain gainsharing 
within ACOs, detailed further in section III.I. of this proposed rule.
    In contrast, the CR incentive payment model is specifically tied to 
increased utilization of CR/ICR services within AMI and CABG model 
episodes and, therefore, is designed to reward increased referral of 
AMI and CABG model beneficiaries to CR/ICR programs, as well as 
supporting beneficiary adherence to the referral and participation in 
CR/ICR services, rather than the quality and efficiency of EPM episodes 
themselves. Thus, we do not propose to allow CR incentive payments to 
be included in sharing arrangements, and the CR incentive payments may 
be shared with other individual and entities only under circumstances 
which comply with all existing laws and regulations, including fraud 
and abuse laws. Financial arrangements are discussed in further detail 
in section VI.E. of the proposed rule.
9. Data Sharing
    Based on our experience with various Medicare programs and models, 
including the BPCI initiative, the CJR model, the Shared Savings 
Program, and the Pioneer ACO model, we believe that providing certain 
beneficiary claims data to model participants will be essential to 
their success. We propose to share data with participants upon request 
throughout the performance period of the models to the extent permitted 
by the Health Insurance Portability and Accountability Act of 1996 
(HIPAA) Privacy Rule and other applicable law. We propose to share upon 
request both raw claims-level data and claims summary data with 
participants. This approach would allow participants without prior 
experience analyzing claims to use summary data for analysis of care 
and spending patterns, while allowing those participants who prefer raw 
claims-level data the opportunity to analyze claims. We propose to 
provide participants with up to 3 years of retrospective claims data 
upon request that will be used to develop their quality-adjusted target 
price. In accordance with the HIPAA Privacy Rule, we would limit the 
content of this data to the minimum data necessary for the participant 
to conduct quality assessment and improvement activities and 
effectively coordinate care.
10. Program Waivers
    Section 1115A of the Act authorizes the Secretary to waive Medicare 
program requirements as necessary to implement provisions for testing 
models. Under the CJR model, CMS waived certain program rules regarding 
the direct supervision requirement for certain post-discharge home 
visits, telehealth services, and the skilled nursing facility (SNF) 3-
day rule. CMS finalized these waivers to offer providers and suppliers 
more flexibility so that they may increase coordination of care and 
management of beneficiaries in model episodes. Adopting the CJR waivers 
for the proposed EPMs required further examination to determine if such 
adoption would increase financial vulnerability to the Medicare program 
or would create inappropriate incentives to reduce the quality of

[[Page 50804]]

beneficiary care. As discussed in section III.J. of this proposed rule, 
we propose to do the following:
     Adopt waivers of the telehealth originating site and 
geographic site requirement and to allow in-home telehealth visits for 
all three proposed EPMs, as well as the general waiver to allow post-
discharge nursing visits in the home;
     Provide model-specific limits to the number of post-
discharge nursing visits and make model-specific decisions about 
offering the SNF 3-day stay waiver; and
     Adopt a waiver for furnishing cardiac and intensive 
cardiac rehabilitation services to allow a Nurse Practitioner, Clinical 
Nurse Specialist, or Physician Assistant, in addition to a physician, 
to perform specific physician functions.

C. Summary of Economic Effects

    As shown in our impact analysis, we expect the EPMs to result in 
savings to Medicare of $170 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 $12 million, as hospitals will not be 
subject to downside risk in the first year and the first quarter of the 
second performance year of the model. As we introduce downside risk 
beginning in the second quarter of performance year 2 of the model, we 
estimate Medicare savings of approximately $13 million. In performance 
year 3 of the model, we estimate Medicare savings of $30 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, and we estimate Medicare savings 
of $61 million and $79 million, respectively.
    As a result, we estimate the net savings to Medicare to be $170 
million over the 5 performance years of the model. We anticipate there 
will be a broader focus on care coordination and quality improvement 
for EPMs 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.
    Additionally, the CR incentive model estimates that the impact on 
the Medicare program may range from up to $27 million of additional 
spending to $32 million of savings between 2017 and 2024, depending on 
the change in utilization of CR/ICR services based on the proposed 
incentive structure.
    Finally, the change in the estimated net financial impact to the 
Medicare program from the CJR model modifications in this proposed rule 
is $22 million in spending, and the updated assumptions regarding the 
number of hospitals that will report quality data result in an increase 
of $14 million dollars in spending. The total estimated net financial 
impact to the Medicare program from both the modifications in the 
proposed rule and revised assumptions are $35 million in spending.
    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.

II. Background

    This proposed rule proposes the implementation of three new EPMs 
and a CR incentive payment model under the authority of section 1115A 
of the Act. Under the AMI, CABG, and SHFFT EPMs, acute care hospitals 
in certain selected geographic areas will be financially accountable 
for quality performance and spending for applicable episodes of care. 
We propose to retrospectively apply through a reconciliation process 
the episode payment methodology; hospitals and other providers and 
suppliers would continue to submit claims and receive payment via the 
usual Medicare FFS payment systems throughout the proposed EPMs' 
performance years. Hospitals participating in the proposed EPMs would 
receive target prices, which reflect expected spending for care during 
an episode as well as a discount to reflect savings to Medicare, on a 
prospective basis, prior to the beginning of a performance year. All 
related care covered under Medicare Parts A and B and furnished within 
90 days after the date of hospital discharge from the anchor 
hospitalization which initiated the applicable EPM episode would be 
included in the episode of care. We believe the proposed models will 
further our goals of improving the efficiency and quality of care for 
Medicare beneficiaries for these medical conditions and procedures.

III. Provisions of the Proposed Regulations

A. Selection of Episodes, Advanced Alternative Payment Model 
Considerations, and Future Directions

1. Selection of Episodes for Episode Payment Models in This Rulemaking
a. Overview
    CMS has been engaged since 2013 in testing various approaches to 
episode payment for Medicare FFS beneficiaries for 48 clinical episodes 
in the BPCI initiative. As of April 1, 2016, the BPCI initiative has 
1,522 participants in the risk-bearing phase, comprised of 321 Awardees 
and 1,201 Episode Initiators. The breakdown of BPCI participants by 
provider type is as follows: Acute care hospitals (385); skilled 
nursing facilities (681); physician group practices (283); home health 
agencies (99); inpatient rehabilitation facilities (9); and long-term 
care hospitals (1).\10\ In BPCI Models 2 and 3, there is participation 
across all 48 clinical episodes, and in Model 4 there is participation 
in 19 clinical episodes. The 10 clinical episodes with the most 
participation are: major joint replacement of the lower extremity; 
simple pneumonia and respiratory infections; congestive heart failure; 
chronic obstructive pulmonary disease; bronchitis; asthma; hip and 
femur procedures except major joint; sepsis; urinary tract infection; 
acute myocardial infarction (medical management only); medical non-
infectious orthopedic; and other respiratory.\11\
---------------------------------------------------------------------------

    \10\ https://innovation.cms.gov/initiatives/bundled-payments/.
    \11\ https://innovation.cms.gov/Files/x/bpcianalyticfile.xlsx.
---------------------------------------------------------------------------

    In November 2015, CMS released the Final Rule for the Comprehensive 
Care for Joint Replacement (CJR) model (80 FR 73274 through 73554), the 
first test of episode payment for Medicare FFS beneficiaries in which 
providers are required to participate. The CJR model, which began on 
April 1, 2016, focuses on the episode-of-care for lower-extremity joint 
replacement (LEJR) procedures. As discussed in the Final Rule (80 FR 
73277), LEJR episodes were chosen for the CJR model because they 
represent one of the most common high-expenditure, high-utilization 
procedures furnished to Medicare beneficiaries and have significant 
variation in episode spending. We believe this high volume, coupled 
with substantial variation in utilization and spending across 
individual providers and geographic

[[Page 50805]]

regions, created a significant opportunity to test whether an episode 
payment model focused on a defined set of procedures could improve the 
quality and coordination of care, as well as result in savings to 
Medicare. Notably, both BPCI and the CJR model are focused on care that 
is related to an inpatient hospitalization, with CJR and BPCI Model 2 
episodes beginning with an inpatient hospitalization (anchor 
hospitalization) and extending up to 90 days post-hospital discharge.
    In this rulemaking, we propose three new EPMs that, like the CJR 
model, would require provider participation in selected geographic 
areas. Episodes in the new EPMs would begin with admissions for 
hospitalizations in IPPS hospitals, and would extend 90 days post-
hospital discharge. The episodes included in these three EPMs are AMI, 
CABG, and SHFFT excluding lower extremity joint replacement. The 
proposed AMI model includes beneficiaries discharged under AMI MS-DRGs 
(280-282), representing IPPS admissions for AMI that are treated with 
medical management. The proposed AMI model also includes beneficiaries 
discharged under PCI MS-DRGs (246-251) with AMI International 
Classification of Disease, Tenth Edition, Clinical Modification (ICD-
10-CM) diagnosis codes for initial AMI diagnoses in the principal or 
secondary diagnosis code positions, representing IPPS admissions for 
AMI that are treated with PCIs. The proposed CABG model includes 
beneficiaries discharged under CABG MS-DRGs (231-236), representing 
IPPS admissions for this coronary revascularization procedure 
irrespective of AMI diagnosis. The proposed SHFFT model includes 
beneficiaries discharged under hip and femur procedures except major 
joint replacement MS-DRGs (480-482), representing IPPS admissions for 
hip-fixation procedures in the setting of hip fractures.
    Similar to the selection of LEJR episodes for the CJR model (80 FR 
73277), we selected the AMI, CABG, and SHFFT episodes because they 
represent high-expenditure, high-volume episodes-of-care experienced by 
Medicare beneficiaries. Based on analysis of historical episodes 
beginning in CY 2012-2014, the average annual number of historical 
episodes that began with IPPS hospitalizations and extended 90 days 
post-hospital discharge, and therefore would have been included in the 
proposed models, is approximately 168,000 for AMI; 48,000 for CABG; and 
109,000 for SHFFT.\12\ The total annual Medicare spending for these 
historical episodes was approximately $4.1 billion, $2.3 billion, and 
$4.7 billion, respectively.\13\ Each of the episodes provides different 
opportunities in an EPM to improve the coordination and quality of 
care, as well as efficiency of care during the episode, based on 
varying current patterns of utilization and Medicare spending.
---------------------------------------------------------------------------

    \12\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in this 
rule that began in CY 2012-2014.
    \13\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in this 
rule that began in CY 2012-2014.
---------------------------------------------------------------------------

    However, in contrast to LEJR episodes in CJR, which are 
predominantly elective and during which hospital readmissions are rare 
and substantial post-acute care provider utilization is common, the 
proposed AMI, CABG, and SHFFT model episodes have very different 
current patterns of care. Beneficiaries in these episodes commonly have 
chronic conditions that contribute to the initiation of the episodes 
and need both planned and unplanned care throughout the EPM episode 
following discharge from the initial hospitalization that begins the 
episode. Both AMI and CABG model episodes primarily include 
beneficiaries with cardiovascular disease, a chronic condition which 
likely contributed to the acute events or procedures that initiate the 
episodes. About half the average AMI model historical episode spending 
was for the initial hospitalization, with the majority of spending 
following discharge from the initial hospitalization due to hospital 
readmissions, while there was relatively less spending on SNF services, 
Part B professional services, and hospital outpatient services. In CABG 
model historical episodes, about three-quarters of episode spending was 
for the initial hospitalization, with the remaining episode spending 
relatively evenly divided between Part B professional services and 
hospital readmissions, and a lesser percentage on SNF services. Similar 
to AMI episodes, post-acute care provider use was relatively uncommon 
in CABG model historical episodes, while hospital readmissions during 
CABG model historical episodes were relatively common. SHFFT model 
historical episodes also were accompanied by substantial spending for 
hospital readmissions, and post-acute care provider use in these 
episodes also was high.\14\ The number of affected beneficiaries and 
potential impact of the models on quality and Medicare spending present 
an important opportunity to further the Administration's goal of 
shifting health care payments to support the quality of care over the 
quantity of services by promoting better coordination among health care 
providers and suppliers and greater efficiency in the care of 
beneficiaries in these models, while reducing Medicare 
expenditures.\15\ Pay-for-performance episode payment models such as 
the three EPMs proposed in this rulemaking financially incentivize 
improved quality of care and reduced cost by aligning the financial 
incentives of all providers and suppliers caring for model 
beneficiaries with these goals. This alignment leads to a heightened 
focus on care coordination and management throughout the episode that 
prioritizes the provision of those items and services which improve 
beneficiary outcomes and experience at the lowest cost.
---------------------------------------------------------------------------

    \14\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in this 
rule that end in CY 2014.
    \15\ 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-msarter-spending-healthier-people.html (January 26, 2015).
---------------------------------------------------------------------------

    We selected all of the proposed EPM episodes based on their 
clinical homogeneity, site-of-service, and MS-DRG assignment 
considerations. We anticipate these proposed new EPMs, like the CJR 
model, would benefit Medicare beneficiaries by improving the 
coordination and transition of care among various care settings to 
facilitate beneficiaries' return to their communities as their 
recoveries progress, improving the coordination of items and services 
paid 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 post-acute care spectrum spanning the episode-
of-care (80 FR 73276). However, improving value in the EPMs through 
these means requires a cohort of beneficiaries with similar clinical 
features such that coordination and care redesign efforts can be 
targeted. Therefore, we propose EPM episodes built on common pathologic 
and treatment processes; that is, beneficiaries included in both the 
AMI and CABG models have cardiovascular pathologies that drive their 
clinical courses during the

[[Page 50806]]

episodes, and SHFFT model beneficiaries all share similar diagnoses of 
hip fracture and treatment with hip fixation that drive their clinical 
courses during their respective episodes.
b. SHFFT Model
    The SHFFT model was selected to complement the CJR model. The SHFFT 
model is being tested in the same hospitals participating in the CJR 
model as discussed in section III.B.4 of this proposed rule, so that 
all surgical treatment options for Medicare beneficiaries with hip 
fracture (hip arthroplasty and fixation) would be included in episode 
payment models. Hip fracture is a serious and sometimes catastrophic 
event for Medicare beneficiaries. In 2010, 258,000 people aged 65 and 
older were admitted to the hospital for hip fracture, with an estimated 
$20 billion in lifetime cost for all hip fractures in the United States 
in a single year.\16\ In 2013, fracture of the neck of the femur (the 
most common location for hip fracture) was the eighth most common 
principal discharge diagnosis for hospitalized Medicare FFS 
beneficiaries, constituting 2.7 percent of discharges.\17\ Mortality 
associated with hip fracture is 5-10 percent after 1 month and 
approximately 33 percent at 1 year.\18\ Hip arthroplasty and hip 
fixation, or ``hip pinning,'' represent the two broad surgical options 
for treating hip fractures.\19\ The CJR model episodes begin with 
admission to acute care hospitals for LEJR procedures assigned to MS-
DRG 469 (Major joint replacement or reattachment of lower extremity 
with major complications or comorbidities) or MS-DRG 470 (Major joint 
replacement or reattachment of lower extremity without major 
complications or comorbidities) upon beneficiary discharge and paid 
under the IPPS, including total and partial hip replacement in the 
setting of hip fracture (80 FR 73280). Therefore, the SHFFT model, 
which would additionally test an episode payment for hip fixation, 
provides an opportunity to complete the transition to episode payment 
for the surgical treatment and recovery of the significant clinical 
condition of hip fracture.
---------------------------------------------------------------------------

    \16\ Smith et al. Increase in Disability Prevalence Before Hip 
Fracture. J Am Geriatr Soc. 2015 Oct;63(10):2029-35.
    \17\ Krumholz HM, Nuti SV, Downing NS, Normand ST, Wang Y. 
Mortality, Hospitalizations, and Expenditures for the Medicare 
Population Aged 65 Years or Older, 1999-2013. JAMA. 2015; 
314(4):355-365.
    \18\ Parker et al. Hip Fracture. BMJ. 2006 Jul 1;333(7557):27-
30.
    \19\ American Academy of Orthopaedic Surgeons, OrthoInfo: Hip 
Fractures, https://orthoinfo.aaos.org (April 12, 2016).
---------------------------------------------------------------------------

c. AMI and CABG Models
    The AMI and CABG models, which we propose to be tested at a single 
set of hospitals as discussed in section III.B.5 of this proposed rule, 
were selected to include all beneficiaries who have an AMI treated 
medically or with revascularization with PCI, as well as all 
beneficiaries who undergo CABG (whether performed during the care of an 
AMI or performed electively for stable ischemic heart disease or other 
indication). Both cardiac models represent clinical conditions that 
result in a significant burden of morbidity and expenditures in the 
Medicare population. CABG typically is the preferred revascularization 
modality for patients with ST elevation AMI where the coronary anatomy 
is not amenable to PCI or there is a mechanical complication (for 
example, ventricular septal defect, rupture of the free wall of the 
ventricle, or papillary-muscle rupture with severe mitral 
regurgitation); for patients with CAD other than ST elevation AMI where 
there is left main coronary artery disease or multi-vessel disease with 
complex lesions; and for patients with clinically significant CAD in at 
least one vessel and refractory symptoms despite medical therapy and 
PCI.\20\ Despite the greater acute morbidity related to major 
cardiothoracic surgery, CABG is associated with lower longer-term rates 
of major adverse cardiac and cerebrovascular events in comparison to 
PCI for certain groups of patients.\21\ Moreover, a recent study found 
that in a group of patients with ischemic cardiomyopathy, the rates of 
death from any cause, death from cardiovascular causes, and death from 
any cause or hospitalization for cardiovascular causes were 
significantly lower over 10 years among patients who underwent CABG in 
addition to receiving medical therapy than among those who received 
medical therapy alone.\22\ While about 30 percent of CABGs are 
performed during the care of AMIs, we propose to include these 
particular AMI beneficiaries generally in the same episode as CABG for 
other indications, rather than in the AMI episode, since we anticipate 
hospitals will seek to improve the quality and efficiency of care for 
that surgical intervention, regardless of indication.\23\
---------------------------------------------------------------------------

    \20\ Alexander JH, Smith PK. Coronary-Artery Bypass Grafting. N 
Engl J Med. 2016 May 19;374(2):1954-1964.
    \21\ Sepehripour et al. Developments in surgical 
revascularization to achieve improved morbidity and mortality. 
Expert Rev Cardiovasc Ther. 2016 Mar;14(3):367-79. doi: 10.1586/
14779072.2016.1123619. Epub 2015 Dec 17.
    \22\ Velazquez et al. Coronary Artery Bypass Surgery in Patients 
with Ischemic Cardiomyopathy. N Engl J Med. 2016 Apr 3.
    \23\ Episodes for CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule, that 
end in CY 2014.
---------------------------------------------------------------------------

    We propose AMI as the episode for an EPM because we recognize it as 
a significant clinical condition for which evidence-based clinical 
guidelines are available for the most common AMI scenarios that begin 
with a beneficiary's presentation for urgent care, most commonly to a 
hospital emergency department. The hospital phase involves medical 
management for all patients, as well as potential revascularization, 
most commonly with PCI. Secondary prevention and plans for long-term 
management begin early during the hospitalization and extend following 
hospital discharge and are addressed in clinical 
guidelines.24 25 The AMI model is the first Innovation 
Center episode payment model that includes substantially different 
clinical care pathways (medical management and PCI) for a single 
clinical condition in one episode in a model and, as such, represents 
an important next step in testing episode payment models for clinical 
conditions which involve a variety of different approaches to treatment 
and management.
---------------------------------------------------------------------------

    \24\ Amsterdam EA, Wenger NK, Brindis RG, Casey DE Jr, Ganiats 
TG, Holmes DR Jr, Jaffe AS, Jneid H, Kelly RF, Kontos MC, Levine GN, 
Liebson PR, Mukherjee D, Peterson ED, Sabatine MS, Smalling RW, 
Zieman SJ. 2014 ACC/AHA guideline for the management of patients 
with non-ST-elevation acute coronary syndromes: a report of the 
American College of Cardiology/American Heart Association Task Force 
on Practice Guidelines. Circulation. 2014;130:e344-e426.
    \25\ O'Gara PT, Kushner FG, Ascheim DD, Casey DE Jr, Chung MK, 
de Lemos JA, Ettinger SM, Fang JC, Fesmire FM, Franklin BA, Granger 
CB, Krumholz HM, Linderbaum JA, Morrow DA, Newby LK, Ornato JP,Ou N, 
Radford MJ, Tamis-Holland JE, Tommaso CL, Tracy CM, Woo YJ, Zhao DX. 
2013 ACCF/AHA guideline for the management of ST-elevation 
myocardial infarction: a report of the American College of 
Cardiology Foundation/American Heart Association Task Force on 
Practice Guidelines. Circulation. 2013;127:
---------------------------------------------------------------------------

    The American Heart Association estimates that every 42 seconds, 
someone in the United States has a myocardial infarction.\26\ AMI 
remains

[[Page 50807]]

one of the most common hospital diagnoses among Medicare FFS 
beneficiaries, and almost 20 percent of beneficiaries discharged for 
AMI are readmitted within 30 days of hospital 
discharge.27 28 In 2013, AMI was the sixth most common 
principal discharge diagnosis for hospitalized Medicare FFS 
beneficiaries, constituting 2.9 percent of discharges.\29\ Of the 
approximately 395,000 Medicare FFS beneficiaries with short-term acute 
care hospital discharges (excluding Maryland) for AMI in FY 2014, 60 
percent were discharged under MS-DRGs proposed to be included in the 
AMI model, specifically 33 percent under AMI MS-DRGs and 25 percent 
under PCI MS-DRGs.\30\ An additional 3 percent of beneficiaries were in 
MS-DRGs assigned for death from AMI in the hospital. Although 5 percent 
of beneficiaries with hospital discharges for AMI were discharged under 
CABG MS-DRGs, we note that because both PCI and fibrinolysis can 
restore blood flow in an acutely occluded coronary artery more quickly 
than CABG, these interventions are currently preferred to CABG in most 
cases of AMI. Furthermore, over recent years cardiovascular clinical 
practice patterns have generally shifted away from surgical treatment 
of coronary artery occlusion toward percutaneous, catheter-based 
interventions.\31\ The remaining 34 percent of beneficiaries with AMI 
diagnoses were distributed across a heterogeneous group of over 300 
other MS-DRGs, such as septicemia, respiratory system diagnosis with 
ventilator support, and major cardiovascular procedures. For this 
latter group of beneficiaries, the AMI diagnosis appeared in a 
secondary position on the hospital claim in more than 90 percent of the 
cases, therefore most likely representing circumstances where the 
beneficiary hospitalized for another clinical condition experienced an 
AMI during the hospital stay. By focusing the AMI model on AMIs treated 
medically or with revascularization with PCI, we propose to test a 
condition-specific EPM that is discretely defined and includes a 
significant majority of beneficiaries with AMI in the AMI model. In CYs 
2012-2014, the average Medicare spending for an AMI episode that 
extends 90 days post-hospital discharge was approximately $24,200.\32\ 
From the AMI model, we expect to better understand the impact such an 
EPM can have on efficiency and quality of care for beneficiaries across 
the entire spectrum of AMI care, including diagnosis, treatment, and 
recovery, as well as short-term secondary prevention.
---------------------------------------------------------------------------

    \26\ Mozaffarian D, Benjamin EJ, Go AS, Arnett DK, Blaha MJ, 
Cushman M, Das SR, de Ferranti S, Despr[eacute]s J-P, Fullerton HJ, 
Howard VJ, Huffman MD, Isasi CR, Jim[eacute]nez MC, Judd SE, Kissela 
BM, Lichtman JH, Lisabeth LD, Liu S, Mackey RH, Magid DJ, McGuire 
DK, Mohler ER III, Moy CS, Muntner P, Mussolino ME, Nasir K, Neumar 
RW, Nichol G, Palaniappan L, Pandey DK, Reeves MJ, Rodriguez CJ, 
Rosamond W, Sorlie PD, Stein J, Towfighi A, Turan TN, Virani SS, Woo 
D, Yeh RW, Turner MB; on behalf of the American Heart Association 
Statistics Committee and Stroke Statistics Subcommittee. Heart 
disease and stroke statistics--2016 update: A report from the 
American Heart Association. Circulation. 2016 Jan 26; 133(4):447-54.
    \27\ Krumholz HM, Nuti SV, Downing NS, Normand ST, Wang Y. 
Mortality, Hospitalizations, and Expenditures for the Medicare 
Population Aged 65 Years or Older, 1999-2013. JAMA. 2015; 
314(4):355-365.
    \28\ Dharmarajan K, Hsieh AF, Lin Z et al. Diagnoses and Timing 
of 30-Day Readmissions After Hospitalization for Heart Failure, 
Acute Myocardial Infarction, or Pneumonia. JAMA. 2013; 309(4):355-
363.
    \29\ Krumholz HM, Nuti SV, Downing NS, Normand ST, Wang Y. 
Mortality, Hospitalizations, and Expenditures for the Medicare 
Population Aged 65 Years or Older, 1999-2013. JAMA. 2015; 
314(4):355-365.
    \30\ Inpatient claims from all U.S. IPPS hospitals not in 
Maryland were derived from the October 2013-September 2014 Inpatient 
Claims File located in the Chronic Conditions Warehouse.
    \31\ Epstein et al. JAMA. 2011 May 4; 305(17): 1769-1776.
    \32\ Episodes for beneficiaries with AMI diagnosis initiated by 
all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in this 
rule that began in CYs 2012-2014.
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    Beneficiaries in the proposed AMI and CABG models would all have 
CAD. In 2010 in the U.S, the prevalence of CAD in the population 65 
years and older was about 20 percent.\33\ Patients with CAD also often 
experience other conditions with significant health-related 
implications, including diabetes. To improve care for patients with 
CAD, most approaches in the private and public sectors focus on 
improving the efficiency and quality of care around procedures such as 
PCI and CABG. The BPCI models are an example of such an approach. As 
discussed previously in this section, our proposal for the AMI model 
extends beyond a procedure-based EPM to include beneficiaries 
hospitalized for medical management or PCI for AMI in a single EPM, and 
we propose to test the CABG model, which also would include 
beneficiaries with AMI, at the same participant hospitals. We believe 
that hospitalization for AMI, whether accompanied solely by medical 
management or including revascularization during the initial 
hospitalization or in a planned CABG readmission, is a sentinel event 
indicating the need for an increased focus on condition-specific 
management, as well as on care coordination and active management to 
prevent future acute events, both during the AMI and CABG model 
episodes and beyond. We also believe that improving the quality and 
efficiency of CAD care over a long period of time is important given 
the chronic nature of this condition that has serious implications for 
beneficiary health.
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    \33\ National Center for Chronic Disease Prevention and Health 
Promotion, Division for Heart Disease and Stroke Prevention, August 
10, 2015.
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    The AMI and CABG models provide an opportunity for us to 
incentivize CAD-specific care management and care coordination for AMI 
and CABG model beneficiaries that lay the groundwork for longer-term 
improvements in quality and efficiency of care for beneficiaries with 
CAD. We note that the quality measures proposed for use in the pay-for-
performance methodologies of the AMI and CABG models do not currently 
include longer-term outcomes or patient experience outside of the AMI 
or CABG model episode itself, as discussed in sections III.E.2.b. and 
c. of this proposed rule, although we are interested in comments about 
potential future measures that could incorporate longer-term outcomes. 
Moreover, as discussed in section VI. of this proposed rule, we also 
propose to test a cardiac rehabilitation (CR)/intensive cardiac 
rehabilitation (ICR) incentive payment, hereinafter CR incentive 
payment, in AMI and CABG model participants located in some of the MSAs 
selected for AMI and CABG model participation, as well as in hospitals 
located in some of the MSAs that are not selected for AMI or CABG model 
participation. We would evaluate the effects of the CR incentive 
payment in the context of an episode payment model and Medicare FFS on 
utilization of CR/ICR, as well as short-term (within the period of time 
extending 90 days following hospital discharge from an AMI or CABG 
hospitalization) and longer-term outcomes. We believe this test may 
result in valuable findings about effective strategies to increase 
utilization of CR/ICR services that have a strong evidence-base for 
their effectiveness but a long history of underutilization.
2. Advanced Alternative Payment Model Considerations
a. Overview for the EPMs
    The MACRA created two paths for eligible clinicians to link quality 
to payments: The MIPS and Advanced APMs. These two paths create a 
flexible payment system called the Quality Payment Program as proposed 
by CMS in the Quality Payment Program proposed rule (81 FR 28161 
through 28586).
    As proposed in the Quality Payment Program proposed rule, an APM 
must meet three criteria to be considered an Advanced APM (81 FR 
28298). First, the APM must provide for payment for covered 
professional services based on quality measures comparable to measures 
described under the

[[Page 50808]]

performance category described in section 1848(q)(2)(B)(i) of the Act, 
which is the MIPS quality performance category. Under the Quality 
Payment Program proposed rule, we proposed that the quality measures on 
which the Advanced APM bases payment for covered professional services 
(as that term is defined in section 1848(k)(3)(A) of the Act) must 
include at least one of the following types of measures, provided that 
they have an evidence-based focus and are reliable and valid (81 FR 
28302):
     Any of the quality measures included on the proposed 
annual list of MIPS quality measures.
     Quality measures that are endorsed by a consensus-based 
entity.
     Quality measures developed under section 1848(s) of the 
Act.
     Quality measures submitted in response to the MIPS Call 
for Quality Measures under section 1848(q)(2)(D)(ii) of the Act.
     Any other quality measures that CMS determines to have an 
evidence-based focus and be reliable and valid.
    As we discussed in the Quality Payment Program proposed rule, 
because the statute identifies outcome measures as a priority measure 
type and we wanted to encourage the use of outcome measures for quality 
performance assessment in APMs, we further proposed in that rule that, 
in addition to the general quality measure requirements, an Advanced 
APM must include at least one outcome measure if an appropriate measure 
is available on the MIPS list of measures for that specific QP 
Performance Period, determined at the time when the APM is first 
established (81 FR 28302 through 28303).
    Second, the APM must either require that participating APM Entities 
bear risk for monetary losses of a more than nominal amount under the 
APM or be a Medical Home Model expanded under section 1115A(c) of the 
Act. Except for Medical Home Models, we proposed in the Quality Payment 
Program proposed rule that, for an APM to meet the nominal amount 
standard, the specific level of marginal risk must be at least 30 
percent of losses in excess of expected expenditures; a minimum loss 
rate, to the extent applicable, must be no greater than 4 percent of 
expected expenditures; and total potential risk must be at least 4 
percent of expected expenditures (81 FR 28306).
    Third, the APM must require participants to use CEHRT (as defined 
in section 1848(o)(4) of the Act), as specified in section 
1833(z)(3)(D)(i)(I) of the Act, to document and communicate clinical 
care with patients and other health care professionals. Specifically, 
where the APM participants are hospitals, the APM must require each 
hospital to use CEHRT (81 FR 28298 through 28299).
    In this proposed rule, we propose to adopt two different tracks for 
the EPMs--Track 1 in which EPMs and EPM participants would meet the 
criteria for Advanced APMs as proposed in the Quality Payment Program 
proposed rule, and Track 2 in which the EPMs and EPM participants would 
not meet those proposed criteria. For the proposed AMI, CABG, and SHFFT 
models, we propose pay-for-performance methodologies that use quality 
measures that we believe would meet the proposed Advanced APM quality 
measure requirements in the Quality Payment Program proposed rule. As 
discussed in sections III.E.2. and 3. of this proposed rule, all but 
one of the AMI, CABG, and SHFFT model measures used in the EPM pay-for-
performance methodologies are NQF-endorsed and have an evidence-based 
focus and are reliable and valid. Therefore, we believe they would meet 
the proposed Advanced APM general quality measure requirements. The 
Excess Days in Acute Care after Hospitalization for AMI (AMI Excess 
Days) measure, which is proposed for the AMI model, is not currently 
NQF-endorsed, but we believe it meets the measure requirements by 
having an evidence-based focus and being reliable and valid because 
this measure has been proposed and adopted through rulemaking for use 
in the Hospital Inpatient Quality Reporting (HIQR) Program.
    Each of the proposed EPM pay-for-performance methodologies includes 
one outcome measure that is NQF-endorsed, has an evidence-based focus, 
and is reliable and valid. The EPM quality measures are discussed in 
detail in section III.E. of this proposed rule, where we assign the 
quality measures to quality domains. For the AMI model, we propose to 
use the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Acute Myocardial Infarction (NQF #0230) (MORT-30-AMI) 
outcome measure. For the CABG model, we propose to use the Hospital 30-
Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following 
Coronary Artery Bypass Graft (CABG) Surgery (NQF# 2558) (MORT-30-CABG) 
outcome measure. Finally, for the SHFFT model, we propose to use the 
Hospital-level RSCR following elective primary THA and/or TKA (NQF 
#1550) (Hip/Knee Complications) outcome measure. Thus, based on the 
proposed use of these three outcomes measures in the EPMs, we believe 
the proposed AMI, CABG, and SHFFT models would meet the requirement 
proposed for Advanced APMs in the Quality Payment Program proposed rule 
for use of an outcome measure that also meets the general quality 
measure requirements.
    In terms of the proposed nominal risk criteria for Advanced APMs, 
beginning in performance year 2 for episodes ending between April 1, 
2018 and December 31, 2018, EPM participants would begin to bear 
downside risk for excess actual EPM-episode spending above the quality-
adjusted target price as discussed in section III.D.2.c. of this 
proposed rule. The marginal risk for excess actual EPM-episode spending 
above the quality-adjusted target price would be 100 percent over the 
range of spending up to the stop-loss limit, which would exceed 30 
percent marginal risk, and there would be no minimum loss rate. As a 
result, we believe the EPMs would meet the marginal risk and minimum 
loss rate elements of the nominal risk criteria for Advanced APMs 
proposed in the Quality Payment Program proposed rule. Total potential 
risk for most EPM participants would be 5 percent of expected 
expenditures beginning in the second quarter of performance year 2, and 
increasing in subsequent performance years as discussed in section 
III.D.7.b. of this proposed rule. Therefore, we believe the total 
potential risk applicable to most EPM participants, with the lowest 
total potential risk being 5 percent for EPM episodes ending on or 
after April 1, 2018 in performance year 2, would meet the total 
potential risk element of the nominal risk amount standard for Advanced 
APMs proposed in the Quality Payment Program proposed rule because it 
is greater than the value of at least 4 percent of expected 
expenditures.
    We note that we propose that EPM participants that are rural 
hospitals, sole community hospitals (SCHs), Medicare Dependent 
Hospitals (MDHs) and Rural Referral Centers (RRCs) would have a stop-
loss limit of 3 percent beginning in the second quarter of performance 
year 2 as discussed in section III.D.7.c. of this proposed rule. 
Because 3 percent is less than the proposed threshold of at least 4 
percent of expected expenditures for total potential risk proposed for 
Advanced APMs in the Quality Payment Program proposed rule, those rural 
hospitals, SCHs, MDHs, and RRCs that are EPM participants subject to 
special protections would be in Track 2 EPMs that would not meet the 
proposed nominal risk standard for Advanced

[[Page 50809]]

APMs for performance year 2. We recognize that this proposal might 
initially limit the ability of rural hospitals, SCHs, MDHs, and RRCs to 
be in Track 1 EPMs that are Advanced APMs. We believe this potential 
limitation on rural hospitals, SCHs, MDHs, and RRCs is appropriate for 
the following reasons: (1) Greater risk protections for these hospitals 
proposed for the EPMs beginning in the second quarter of performance 
year 2 and subsequent performance years compared to other EPM 
participants are necessary, regardless of their implications regarding 
Advanced APMs based on the nominal risk standard proposed in the 
Quality Payment Program proposed rule, because these hospitals have 
unique challenges that do not exist for most other hospitals, such as 
being the only source of health care services for beneficiaries or 
certain beneficiaries living in rural areas or being located in areas 
with fewer providers, including fewer physicians and post-acute care 
facilities; and (2) under the risk arrangements proposed for the EPMs, 
these hospitals would not bear an amount of risk in performance year 2 
that we determined to be more than nominal in the Quality Payment 
Program proposed rule. However, we seek comment on whether we should 
allow EPM participants that are rural hospitals, SCHs, MDHs, or RRCs to 
elect a higher stop-loss limit for the part of performance year 2 where 
downside risk applies in order to permit these hospitals to be in Track 
1 EPMs for that part of performance year 2. We note that by performance 
year 3, the stop-loss limit for these hospitals with special 
protections under the EPMs would increase to 5 percent under our 
proposal, so these hospitals could be in Track 1 EPMs based on the 
nominal risk standard proposed in the Quality Payment Program proposed 
rule.
    As addressed in the Quality Payment Program proposed rule, it is 
necessary for an APM to require the use of CEHRT in order to meet the 
criteria to be considered to be an Advanced APM. Therefore, according 
to the requirements proposed in the Quality Payment Program proposed 
rule, so that the EPMs may meet the proposed criteria to be Advanced 
APMs, we propose to require EPM participants to use CEHRT (as defined 
in section 1848(o)(4) of the Act) to participate in Track 1 of the 
EPMs. We propose that Track 1 EPM participants must use certified 
health IT functions, in accordance with the definition of CEHRT under 
our regulation at 42 CFR 414.1305, to document and communicate clinical 
care with patients and other health care professionals as proposed in 
the Quality Payment Program proposed rule (81 FR 28299). We believe 
this proposal would allow Track 1 EPMs to be able to meet the proposed 
criteria to be Advanced APMs.
    Without the collection of identifying information on eligible 
clinicians (physicians, nonphysician practitioners, physical and 
occupational therapists, and qualified speech-language pathologists) 
who would be considered Affiliated Practitioners as proposed in the 
Quality Payment program proposed rule under the EPMs, CMS would not be 
able to consider participation in the EPMs in making determinations as 
to whom could be considered a QP (81 FR 28320). As detailed in the 
Quality Payment Proposed rule, these determinations are based on 
whether the eligible clinician meets the QP threshold under either the 
Medicare Option starting in payment year 2019 or the All-Payer 
Combination Option, which is available starting in payment year 2021 
(81 FR 28165). Thus, we make proposals in the following sections to 
specifically address these issues that might otherwise preclude the 
EPMs from being considered Advanced APMs, or prevent us from 
operationalizing them as Advanced APMs. Based on the proposals for 
Advanced APM criteria in the Quality Payment Program proposed rule, we 
seek to align the design of the proposed EPMs with the proposed 
Advanced APM criteria and enable CMS to have the necessary information 
on eligible clinicians to make the requisite QP determinations.
b. EPM Participant Tracks
    To be considered an Advanced APM, the APM must require participants 
to use CEHRT (as defined in section 1848(o)(4) of the Act), as 
specified in section 1833(z)(3)(D)(i)(I) of the Act. We propose that 
all EPM participants must choose whether to meet the CEHRT use 
requirement. EPM participants that do not choose to meet and attest to 
the CEHRT use requirement would be in Track 2 of the EPMs. EPM 
participants selecting to meet the CEHRT use requirement would be in 
Track 1 of the EPMs and would be required to attest in a form and 
manner specified by CMS to their use of CEHRT that meets the definition 
in our regulation at Sec.  414.1305 to document and communicate 
clinical care with patients and other health professionals, consistent 
with the proposal in the Quality Payment Program proposed rule for the 
CEHRT requirement for Advanced APMs (81 FR 28299). EPM participants 
choosing not to meet and attest to the CEHRT use requirement would not 
be required to submit an attestation.
    We believe that the selection by EPM participants to meet and 
attest to the CEHRT use requirement would create no significant 
additional administrative burden on EPM participants. Moreover, the 
choice of whether to meet and attest to the CEHRT use requirement would 
not otherwise change any EPM participant's requirements or opportunity 
under the EPM. However, to the extent that eligible clinicians who 
enter into financial arrangements related to Track 1 EPM participants 
are considered to furnish services through an Advanced APM, those 
services could be considered for purposes of determining whether the 
eligible clinicians are QPs.
    The proposals for CEHRT use and attestation for EPM participants 
are included in Sec.  512.120(a). We seek comment on our proposals for 
EPM participant CEHRT use requirements.
c. Clinician Financial Arrangements Lists Under the EPMs
    In order for CMS to make determinations as to eligible clinicians 
who could be considered QPs based on services furnished under the EPMs 
(to the extent the models are determined to be Advanced APMs), we 
require accurate information about eligible clinicians who enter into 
financial arrangements under the Track 1 EPMs under which the 
Affiliated Practitioners support the participants' cost or quality 
goals as discussed in section III.I. of this proposed rule. We note 
that eligible clinicians could be EPM collaborators engaged in sharing 
arrangements with an EPM participant; PGP members who are collaboration 
agents engaged in distribution arrangements with a PGP that is an EPM 
collaborator; or PGP members who are downstream collaboration agents 
engaged in downstream distribution arrangements with a PGP that is also 
an ACO participant in an ACO that is an EPM collaborator. These terms 
as they apply to individuals and entities with financial arrangements 
under the EPMs are discussed in section III.I. of this proposed rule. A 
list of physicians and nonphysician practitioners in one of these three 
types of arrangements could be considered an Affiliated Practitioner 
List of eligible clinicians who are affiliated with and support the 
Advanced APM Entity in its participation in the Advanced APM as 
proposed in the Quality Payment Program proposed rule. Therefore, this 
list could be used to make determinations of who would be

[[Page 50810]]

considered for a QP determination based on services furnished under the 
EPMs (81 FR 28320).
    Thus, we propose that each EPM participant that chooses to meet and 
attest to the CEHRT use requirement must submit to CMS a clinician 
financial arrangements list in a form and manner specified by CMS on a 
no more than quarterly basis. The list must include the following 
information for the period of the EPM performance year specified by 
CMS:
     For each EPM collaborator who is a physician, nonphysician 
practitioner, or provider of outpatient therapy services during the 
period of the EPM performance year specified by CMS:
    ++ The name, tax identification number (TIN), and national provider 
identifier (NPI) of the EPM collaborator.
    ++ The start date and, if applicable, end date, for the sharing 
arrangement between the EPM participant and the EPM collaborator.
     For each collaboration agent who is a physician or 
nonphysician practitioner of a PGP that is an EPM collaborator during 
the period of the EPM performance year specified by CMS:
    ++ The TIN of the PGP that is the EPM collaborator, and the name 
and NPI of the physician or nonphysician practitioner.
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the EPM collaborator that is a PGP and 
the physician or nonphysician practitioner who is a PGP member.
     For each downstream collaboration agent who is a physician 
or nonphysician practitioner member of a PGP that is also an ACO 
participant in an ACO that is an EPM collaborator during the period of 
the EPM performance year specified by CMS:
    ++ The TIN of the PGP that is the ACO participant, and the name and 
NPI of the physician or nonphysician practitioner.
    ++ The start date and, if applicable, end date, for the downstream 
distribution arrangement between the collaboration agent that is both 
PGP and an ACO participant and the physician or nonphysician 
practitioner who is a PGP member.
     If there are no individuals that meet the requirements to 
be reported as EPM collaborators, collaboration agents, or downstream 
collaboration agents, the EPM participant must attest in a form and 
manner required by CMS that there are no individuals to report on the 
clinician financial arrangements list.
    As discussed in the Quality Payment program proposed rule, those 
physicians or nonphysician practitioners who are included on the 
Affiliated Practitioner List as of December 31 of a performance period 
would be assessed to determine whether they qualify for APM Incentive 
Payments (81 FR 28320).
    While the required submission of this information may create some 
additional administrative requirements for certain EPM participants, we 
expect that Track 1 EPM participants could modify their contractual 
relationships with their EPM collaborators and, correspondingly, 
require those EPM collaborators to include similar requirements in 
their contracts with collaboration agents and in the contracts of 
collaboration agents with downstream collaboration agents.
    The proposal for the submission of a clinician financial 
arrangements list by EPM participants that meet and attest to the CEHRT 
use requirement for the EPMs is included in Sec.  512.120(b). We seek 
comments on the proposal for submission of this information. We are 
especially interested in comments about approaches to information 
submission, including the periodicity and method of submission to CMS 
that would minimize the reporting burden on EPM participants while 
providing CMS with sufficient information about eligible clinicians in 
order to facilitate QP determinations to the extent EPMs are considered 
Advanced APMs.
d. Documentation Requirements
    For each EPM participant that chooses to meet and attest to CEHRT 
use, we propose that the EPM participant must maintain documentation of 
their attestation to CEHRT use and clinician financial arrangements 
lists submitted to CMS. These documents would be necessary to assess 
the completeness and accuracy of materials submitted by an EPM 
participant in the Track 1 EPM and to facilitate monitoring and audits. 
For the same reason, we further propose that the EPM participant must 
retain and provide access to the required documentation in accordance 
with Sec.  512.110.
    The proposal for documentation of attestation to CEHRT use and 
clinician financial arrangements lists submitted to CMS is included in 
Sec.  512.120(c). We seek comment on this proposal for required 
documentation.
3. Future Directions for Episode Payment Models
a. Refinements to the BPCI Initiative Models
    The BPCI initiative Models 2, 3, and 4 would not currently qualify 
as Advanced APMs based on the two of the Advanced APM criteria in the 
Quality Payment Program proposed rule, payment based on quality 
measures and CEHRT use (81 FR 28298). Specifically, BPCI participants 
are not currently required to use CEHRT, and although CMS examines the 
quality of episode care in the BPCI evaluation, BPCI episode payments 
are not specifically tied to quality performance. Instead, BPCI episode 
payments are based solely on episode spending performance, although we 
expect that reductions in spending would generally be linked to 
improved quality through reductions in hospital readmissions and 
complications. However, building on the BPCI initiative, the Innovation 
Center intends to implement a new voluntary bundled payment model for 
CY 2018 where the model(s) would be designed to meet the criteria to be 
an Advanced APM.
b. Potential Future Condition-Specific Episode Payment Models
    In the context of our proposal for the AMI and CABG models that 
include beneficiaries with CAD who experience an acute event or a major 
surgical procedure, we seek comment on model design features for 
potential future condition-specific episode payment models that could 
focus on an acute event or procedure or longer-term care management, 
including other models for beneficiaries with CAD that may differ from 
the design of the EPMs proposed in this rulemaking. We believe such 
future models may have the potential to be Advanced APMs that emphasize 
outpatient care and, like the proposed AMI and CABG models, could 
incentivize the alignment of physicians and other eligible 
professionals participating in the Advanced APM through accountability 
for the costs and quality of care. Such condition-specific episode 
payment models may provide for a transition from hospital-led EPMs to 
physician-led accountability for episode quality and costs, especially 
given the importance of care management over long periods of time for 
beneficiaries with many chronic conditions.
    We request that commenters provide specific information regarding 
all relevant issues for potential future condition-specific episode 
payment models, including identifying beneficiaries for the model; 
including services in the episode definition; beginning and ending 
episodes; pricing episodes, including risk-adjustment; designating the 
accountable entity for the quality and cost of the episode, including 
the role of physician-led

[[Page 50811]]

opportunities; sharing of responsibility for quality and spending 
between primary care providers, specialty physicians, and other health 
care professionals; incentivizing the engagement of physicians and 
other providers and suppliers in episode care; measuring quality and 
including quality performance and improvement in the payment 
methodology; interfacing with other CMS models and programs responsible 
for population health and costs, such as ACOs and Primary Care Medical 
Homes (PCMHs); and other considerations specific to identifying future 
models as Advanced APMs; and any other issues of importance for the 
design of such an EPM.
c. Potential Future Event-Based Episode Payment Models for Procedures 
and Medical Conditions
    Given the proposed EPM methodology discussed in section III.C.4.a. 
of this proposed rule for the three models that would begin the 
episodes with initial hospitalizations, the proposed AMI, CABG, and 
SHFFT episodes are similar to the LEJR episodes in the CJR model 
because they reflect clinical conditions for which care is almost 
always begun during an inpatient hospitalization, either on an 
emergency or elective basis. In addition, the clinical conditions 
represented by these EPM episodes generally result in straightforward 
assignment to MS-DRGs at discharge that are specific to clinical 
conditions included in the episodes. This contrasts with procedure-
related clinical conditions for which the site-of-service can be 
inpatient or outpatient (for example, elective PCI for non-AMI 
beneficiaries) or hospitalization for medical conditions for which the 
ultimate MS-DRG assigned is less clear at the beginning of an episode 
(for example, hospitalization for respiratory symptoms which may lead 
to discharge from heart failure, pneumonia, or other MS-DRGs based on 
reporting of ICD-CM diagnosis codes on hospital claims).
    To address the issues related to the development of future episode 
payment models for a broader range of clinical conditions, we seek 
comment on model design features that would be important for episode 
payment models targeting procedures that may be performed in both the 
inpatient and outpatient setting, as well as models focused on 
hospitalization for acute medical conditions which may overlap or 
interact (for example, sepsis related to pneumonia or acute kidney 
injury related to congestive heart failure exacerbation). In 
particular, episode payment models must clearly define the beginning of 
the episode as well as set an episode price that is appropriate for 
beneficiaries included in the episode, which has commonly been based on 
historical spending for such beneficiaries in both existing CMS models 
and the three proposed EPMs. These parameters pose specific challenges 
as the variety of clinical conditions targeted for episode payments 
expands beyond lower extremity orthopedic procedures and acute cardiac 
conditions, and we expect that such potential future models would need 
to be designed differently than the CJR model or the EPMs proposed in 
this rulemaking.
    For example, because procedures such as PCI for non-AMI 
beneficiaries or cardioverter defibrillator implantations can occur in 
the inpatient or outpatient setting, an episode payment model would 
need to include beneficiaries receiving such procedures at all sites-
of-service so as to not influence decisions on where procedures are 
performed based on payment-related rather than clinical considerations. 
Episode payment models that begin with the same procedure performed in 
the inpatient or outpatient setting would require methodological 
development beyond the approaches that have been used thus far in CMS's 
other EPMs that rely upon the MS-DRG for a hospitalization to begin an 
episode and identify historical episodes for setting episode prices. 
Such models that involve episode payment for procedures furnished in 
the inpatient or outpatient setting may allow for significant 
physician-led opportunities that would allow the models to be 
identified as Advanced APMs. We seek comment on how these types of 
procedures could be included in future episode payment models, 
including identifying the accountable entity, and the role of 
physician-led opportunities; defining the episode beginning and end; 
setting episode prices; applying risk-adjustment to account for 
differences in expected episode spending for a heterogeneous population 
of beneficiaries; and any other issues of importance for the design of 
such an episode payment model.
    We also seek comment on potential future episode payment models 
that would include care for medical conditions that result in the 
serious health event of an inpatient hospitalization, which often 
represents, regardless of the specific reason for the hospitalization, 
a common pathway that includes failure of outpatient care management 
and care coordination for beneficiaries with chronic conditions. While 
we do include in the proposed AMI model beneficiaries who solely 
receive medical treatment, we note that beneficiaries with AMI are 
almost always hospitalized and their MS-DRGs at discharge are generally 
predictable and consistent based on their AMI diagnoses. This is not 
the case for a number of medical conditions for which grouping by MS-
DRGs is more complicated or less consistent. Many non-procedural 
hospitalizations of Medicare beneficiaries are ultimately categorized 
based on the principal ICD-CM diagnosis code reported on a claim, which 
in turn is mapped to a Major Diagnostic Category (MDC) based on the 
involved organ system, which then leads to the assignment of any of 
various specific MS-DRGs based on the medical groups in the MDC. For 
example, the medical groups for the Respiratory System MDC are 
pulmonary embolism, infections, neoplasms, chest trauma, pleural 
effusion, pulmonary edema and respiratory failure, chronic obstructive 
pulmonary disease, simple pneumonia, RSV pneumonia and whooping cough, 
interstitial lung disease, pneumothorax, bronchitis and asthma, 
respiratory symptoms and other respiratory diagnoses.\34\ Unlike a 
beneficiary who undergoes a surgical procedure or who is hospitalized 
for a specific medical condition such as AMI, the ultimate MS-DRG at 
discharge assigned to a beneficiary hospitalized for diagnosis and 
management of respiratory symptoms may not be clear during the 
hospitalization itself, or even afterward, until the inpatient claim is 
submitted and paid by Medicare. This makes it challenging for providers 
to engage in care delivery redesign targeted to a specific patient 
population identified by MS-DRG. Additionally, it is possible that 
beneficiaries hospitalized for certain medical conditions also may 
follow common clinical pathways before and after discharge for which 
similar care redesign strategies could be developed and used despite 
those beneficiaries' assignments to different MS-DRGs for their anchor 
hospitalizations. Thus, we believe that hospitalization for most 
medical conditions would require special consideration in the 
development of potential future episode payment models that goes beyond 
CMS's current approach of relying upon the MS-DRG for the anchor 
hospitalization to begin an episode and identify historical episodes 
for setting episode prices. We seek comment on design features needed 
to address these considerations, including defining the beginning and 
end of episodes; setting episode prices,

[[Page 50812]]

including risk-adjustment, that would support the provision of 
appropriate and coordinated care for beneficiaries following hospital 
discharge for a period of time during the episode; and any other issues 
of importance for the design of such an episode payment model.
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    \34\ Medical Severity Diagnosis Related Groups (MS-DRGs): 
Definitions Manual. Version 33.0A. 3M Health Information Systems. 
(October 1, 2015).
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d. Health Information Technology Readiness for Potential Future Episode 
Payment Models
    We are particularly interested in issues related to readiness of 
providers and suppliers that are not hospitals to take on financial 
responsibility for episode cost and quality in potential future episode 
payment models. We have some experience in BPCI Models 2 and 3 with 
non-hospital providers and suppliers, specifically post-acute care 
providers and physician group practices (PGPs), who assume financial 
responsibility for the cost of episode care. In BPCI Model 2, PGPs may 
directly bear financial responsibility for episode cost for up to 48 
clinical conditions for the anchor inpatient admission and up to 90 
days post-hospital discharge. In BPCI Model 3, PGPs and post-acute care 
providers, including skilled nursing facilities, home health agencies, 
inpatient rehabilitation facilities, and long-term care hospitals, may 
directly bear financial responsibility for episode cost for up to 48 
clinical conditions for a duration that extends up to 90 days following 
initiation of post-acute care following discharge from an inpatient 
hospitalization.
    Under these circumstances, PGPs and post-acute care providers 
typically need to use health IT to assist them in effectively 
coordinating the care of BPCI beneficiaries across settings throughout 
the episodes. The risk-bearing entities participating in BPCI have 
expressed readiness to take on financial responsibility for episode 
cost, and they commonly rely upon health IT for assistance in managing 
the care for BPCI beneficiaries across settings for episodes that 
extend for a substantial period of time. However, a recent national 
survey of IT in nursing homes showed common use of IT for 
administrative activities but less use for clinical care.\35\ 
Anecdotally, stakeholders have told us that accountable non-hospital 
providers and suppliers, especially those that are not integrated with 
health systems, may have less well-developed tools for following 
patients throughout episodes, potentially resulting in greater 
challenges in reducing the cost and improving the quality of episode 
care under the BPCI models. Therefore, we understand that limitations 
in the availability of health IT that can be used in beneficiary 
management across care settings may pose a significant barrier to the 
readiness of non-hospital providers and suppliers to assume financial 
responsibility for episodes in potential future episode payment models.
---------------------------------------------------------------------------

    \35\ Alexander Gregory L. ``An Analysis of Nursing Home Quality 
Measures and Staffing.'' Quality management in health care 17.3 
(2008): 242-251. PMC. Web. 16 July 2016.
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    In the CJR model, acute care hospitals are financially responsible 
for cost and quality during LEJR episodes-of-care. CJR model 
participant hospitals may form partnerships with post-acute care 
providers such as skilled nursing facilities and home health agencies, 
as well as physicians and PGPs, to share financial risk and collaborate 
on care redesign strategies, as in BPCI. Although hospitals are the 
financially responsible entities under the CJR model, we recognize that 
partnerships with post-acute care providers could be a crucial driver 
of episode spending and quality, given that many beneficiaries in the 
CJR model receive post-acute care services after discharge from the 
hospital. We also recognize that tools such as health IT may be 
critical for certain care management and quality strategies targeted 
toward the goal of lower cost and higher quality episode care. 
Limitations in the availability of health IT may pose a barrier to 
effective post-acute care provider collaboration and sharing of 
financial risk in episode payment models even when hospitals are the 
financially responsible entities under such models, such as the CJR 
model and the three new EPMs proposed in this rulemaking.
    We recognize that there is wide variation in the readiness of other 
providers and suppliers to bear financial responsibility for episodes, 
either directly or indirectly through sharing arrangements with the 
directly responsible entities where those arrangements may include 
upside and downside risk. For instance, adoption of health IT among 
providers in the post-acute care market, such as skilled nursing 
facilities, continues to lag behind hospitals and providers of 
ambulatory care services. In addition to facing significant resource 
constraints, post-acute care providers were not included as an eligible 
provider type under the Medicare and Medicaid Electronic Health Record 
(EHR) Incentive Programs. The recent extension of Medicaid 90/10 
funding offers new opportunities for states to include post-acute care 
providers in projects focused on infrastructure development, but will 
not address the cost of health IT adoption among post-acute care 
providers.\36\
---------------------------------------------------------------------------

    \36\ https://www.medicaid.gov/federal-policy-guidance/downloads/SMD16003.pdf.
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    To ensure that post-acute care providers and other types of 
providers and suppliers can succeed under future episode payment 
models, either as the directly financially responsible entity or as 
collaborators with other directly financially responsible entities, we 
are interested in opportunities to increase provider readiness as part 
of the design of potential future episode payment models and the 
potential refinement of current episode payment models. Specifically, 
we would like to explore: Incentives to encourage post-acute care 
providers, as well as other providers and suppliers that furnish 
services to episode payment model beneficiaries, to make necessary 
investments in health IT infrastructure; payment mechanisms that could 
leverage savings achieved under episode payment models to contribute to 
these investments; and any other strategies to enhance the adoption, 
implementation, and upgrading of certified health IT. We seek comment 
on these ideas, as well as the following questions:
     What are key challenges associated with the inclusion of 
post-acute care providers as the financially responsible entity or as 
collaborators with other financially responsible entities in episode 
payment models today?
     What would be a sufficient financial incentive or bonus to 
enhance the adoption, implementation, and upgrading of certified health 
IT in post-acute care settings?
     How else can episode payment models encourage the use of 
certified health IT and information sharing among providers and 
suppliers caring for episode payment model beneficiaries to improve 
care coordination and patient outcomes?
     Within the existing CJR model, are there additional 
opportunities to encourage investment in adoption, implementation, and 
upgrading of certified health IT among post-acute care providers to 
support improvements in care coordination and patient outcomes? What 
CJR model refinements could enable direct investments to support these 
improvements, particularly among post-acute care providers who are 
unaffiliated with CJR model participant hospitals but who provide 
services to CJR model beneficiaries, including post-acute care 
providers who may enter into financial arrangements with CJR model 
participant hospitals as CJR collaborators?

[[Page 50813]]

B. Proposed Definition of the Episode Initiator and Selected Geographic 
Areas

1. Background
    The proposed new EPMs will complement the current CJR model and 
continue efforts to move Medicare towards paying providers based on 
quality and value. As discussed during rulemaking for the CJR model, 
CMS is interested in testing and evaluating the impact of an episode 
payment approach for a broad range of episodes in a variety of other 
circumstances. In addition to including hospitals that have not chosen 
to voluntarily participate in earlier models, we also are interested in 
expanding the range of episodes included beyond elective surgical 
procedures such that the impact on a broader range of beneficiaries, 
hospitals, and circumstances may be tested. We also are interested in 
evaluating the impact on hospitals when an increasing percentage of 
care to Medicare beneficiaries is paid for through alternative payment 
models.
    As with CJR, we propose in Sec.  512.105(c) that the hospital be 
the accountable financial entity and that these episode payment models 
be implemented in all IPPS hospitals in the geographic areas selected, 
subject to exclusions as specified in Sec. Sec.  512.230 and 512.240 of 
the proposed rule. While these are considered new episode payment 
models and do not reflect an expansion or extension of any previous 
models, they do intentionally build significantly upon the work of BPCI 
and, most significantly, the framework established for CJR under 42 CFR 
part 510 published on November 24, 2015. Given the extensive 
consideration given to many of these issues during the CJR model 
planning and rulemaking periods, we believe this is important as we 
seek to build a model that is scalable across all providers and episode 
types. We also seek to limit the burden for hospitals and other 
providers that may be participating across multiple episode types. 
Therefore, to the extent applicable and appropriate, we have sought 
consistency with rules established for the CJR model. We seek comment 
on those areas where alternative options are proposed or should be 
considered that would not add additional operational burden or 
complexity.
2. Proposed Definition of Episode Initiator
    Under the proposed EPMs, we propose, consistent with our definition 
under the CJR model that episodes would begin with the admission to an 
IPPS acute-care hospital that triggers an AMI, CABG or SHFFT episode as 
specified in section III.C.4.a. of this proposed rule. As with the CJR 
model, we propose that hospitals would be the only episode initiators 
in these episode payment models. For purposes of these episodes payment 
models 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. Under this 
proposal, all acute care hospitals in Maryland would be excluded and 
payments to Maryland hospitals would be excluded in the regional 
pricing calculations as described in section III.D.4. of this proposed 
rule. This is the same policy that is being followed with the CJR 
model. In addition, we also propose to exclude other all-payer state 
models which may be implemented in the future. We welcome comments on 
this proposal and whether there are potential approaches for including 
Maryland acute-care hospitals or, potentially, other hospitals in 
future all-payer state models in these episode payment models.
    As implemented with the CJR model, we propose to designate IPPS 
hospitals as the episode initiators to ensure that all services covered 
under FFS Medicare and furnished by EPM participant hospitals in 
selected geographic areas to beneficiaries who do not meet the 
exclusion criteria specified in section III.C.4. of this proposed rule 
are included. In addition, the episodes must not be BPCI episodes that 
we are proposing to exclude as outlined in this section and in section 
III.C.4. of this proposed rule. We believe that utilizing the hospital 
as the episode initiator is a straightforward approach for these models 
because patients covered under these DRGs and diagnoses require 
hospital admission for these services, whether provided on an emergent 
or planned basis. Under these new models covering medical admissions 
and services that are not necessarily elective, we will be able to 
expand our testing of a more generalized bundled payment model. 
Finally, as described in section III.B.4., our proposed geographic area 
selection approach relies upon our definition of hospitals as the 
entities that initiate episodes.
3. Financial Responsibility for the Episode of Care
    As with the CJR model, we continue to believe it is most 
appropriate to identify a single type of provider to bear financial 
responsibility for making repayment, if any, to CMS under the model and 
propose to make hospitals, as the episode initiators, financially 
responsible for the episode of care for the following several reasons:
     Hospitals play a central role in coordinating episode-
related care and ensuring smooth transitions for beneficiaries 
undergoing services related to SHFFT, AMI and CABG episodes. A large 
portion of a beneficiary's recovery trajectory from an AMI, CABG, or 
SHFFT begins during the hospital stay.
     Most hospitals already have some infrastructure related to 
health information technology, patient and family education, and care 
management and discharge planning. This includes post-acute care 
coordination infrastructure and resources such as case managers, which 
hospitals can build upon to achieve efficiencies under these EPMs.
     By definition, these episodes always begin with an acute 
care hospital stay. While often preceded by an emergency room visit and 
possible transfer from another hospital's emergency room, or followed 
by post-acute care, these parties are not necessarily always present 
and would not be appropriate to target as the financially responsible 
party for this purpose.
    EPM episodes may be associated with multiple hospitalizations 
through transfers. When multiple hospitalizations occur, we propose 
that the financial responsibility be given to the hospital to which the 
episode is attributed as described in section III.C.4. We recognize 
that, particularly where the admission may be preceded by an emergency 
room visit and subsequent transfer to a tertiary or other regional 
hospital facility, patients often wish to return home to their local 
area for post-acute care. Many hospitals have recently heightened their 
focus on aligning their efforts with those of community providers, both 
those in the immediate area as well as more outlying areas from which 
they receive transfers and referrals, to provide an improved continuum 
of care. In many cases, this is due to the incentives under other CMS 
models and programs, including ACO initiatives such as the Shared 
Savings Program, the Hospital Readmissions Reduction Program (HRRP), 
and the CJR model. By focusing on the hospital as the accountable or 
financially responsible entity, we hope to continue to encourage this 
coordination across providers and seek comment on ways we can best 
encourage these relationships within the scope of these EPMs.
    In support of our proposal that hospitals be the episode initiators 
under these EPMs, we believe that hospitals

[[Page 50814]]

are more likely than other providers to have an adequate number of 
episode cases to justify an investment in episode management for these 
EPMs. We also believe that hospitals are most likely to have access to 
resources that would allow them to appropriately manage and coordinate 
care throughout these episodes. Finally, the hospital staff is already 
involved in discharge planning and placement recommendations for 
Medicare beneficiaries, and more efficient post-acute care service 
delivery provides substantial opportunities for improving quality and 
reducing costs under EPMs. For those hospitals that are already 
participating in CJR, we believe the efforts that have been put in 
place to support patients receiving LEJR will be supportive of the new 
EPMs proposed under this rule, particularly for SHFFT episodes which we 
propose to implement in the same geographic areas as the CJR model.
    Finally, as noted when planning for the CJR model, although the 
BPCI initiative includes the possibility of a physician group practice 
as a type of episode initiating participant, the physician groups 
electing to participate in BPCI have done so because their practice 
structure supports care redesign and other infrastructure necessary to 
bear financial responsibility for episodes. These physician groups are 
not necessarily representative of the typical group practice. As with 
the CJR model, the infrastructure necessary to accept financial 
responsibility for episodes is not present across all physician group 
practices, and thus we do not believe it would be appropriate to 
designate physician group practices to bear the financial 
responsibility for making repayments to CMS under the proposed EPMs. We 
seek comment on our proposal to establish financial responsibility and 
accountability under the AMI, CABG, and SHFFT EPMs consistent with our 
implementation of the CJR model.
    Currently, there are SHFFT, AMI, and CABG episodes being tested in 
BPCI Models 2, 3 or 4. The last remaining BPCI Model 1 hospital will 
end December 31, 2016 and will, therefore, not overlap with EPM. In 
addition, under BPCI, there are episodes for PCI, which, if an AMI were 
also involved, would fall under the AMI model being proposed here. We 
are proposing that IPPS hospitals located in an area selected for any 
one of the episode payment models proposed in this rule that also are 
episode initiators for episodes in the risk-bearing phase of BPCI 
Models 2 or 4, be excluded from participating in the AMI, CABG, or 
SHFFT EPMs if the applicable episode otherwise would qualify to be 
covered under BPCI. This exclusion would be in effect only during the 
time that the relevant qualifying episodes are included in one of the 
BPCI models. Likewise, we are proposing that if the EPM participant is 
not an episode initiator for overlapping episodes under BPCI Models 2 
or 4, but these same episodes are initiated during the anchor 
hospitalization by a physician group practice (PGP) under BPCI Model 2 
(where the services are provided at the episode initiating hospital) 
then the episode also shall be covered under BPCI and be excluded from 
the EPMs being proposed under this rule. Otherwise qualifying EPM 
episodes (that is, those that are not part of an overlapping BPCI AMI, 
CABG, PCI or SHFFT episode) at the participant hospital would be 
included in these new EPMs. However, because BPCI participation is 
voluntary and participating providers may select which episodes to 
participate in, a BPCI participating provider will participate in any 
of the proposed AMI, CABG, or SHFFT EPMs for any episodes not otherwise 
preempted under their BPCI participation. For example, a BPCI Model 2 
hospital in an AMI episode model geographic area participating in BPCI 
only for CABGs will be an EPM participant in the AMI model. Similarly, 
an acute care hospital participating in BPCI for LEJR but not SHFFT 
episodes would be exempt from participation in the CJR model in a CJR 
model geographic area but would participate in the SHFFT model for 
SHFFT episodes. In addition, providers participating in BPCI may also 
collaborate with an EPM participant for episodes not covered under 
BPCI. It should be noted that due to differences in how the AMI episode 
is defined under the AMI model versus BPCI and the inclusion of PCI MS-
DRGs under the latter, a patient with the same discharge MS-DRG and 
diagnoses may qualify for a PCI episode under BPCI and an AMI episode 
under the AMI model. Our intent is to give precedence to BPCI 
regardless of which episode a patient qualifies for if the patient 
would be covered under BPCI.
    In section III.D.6. we discuss in more detail how we propose to 
handle situations when a beneficiary receives services that would 
qualify for inclusion in more than one CMS payment model during the 
same or overlapping periods of time. We welcome input on how these 
overlaps should be handled to best encourage ongoing care coordination 
while minimizing the impact on other models and limiting confusion and 
operational burden for providers.
    While we propose that the EPM participant be financially 
responsible for the episode of care under these EPMs, we also believe 
that effective care redesign requires meaningful collaboration among 
acute care hospitals, post-acute care 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 to be aligned and engaged, financially and otherwise, with 
the EPM participants, with the potential to share financial 
responsibility with those EPM participants. We note that all 
relationships between and among providers and suppliers must comply 
with all relevant laws and regulations, including the fraud and abuse 
laws and all Medicare payment and coverage requirements unless 
otherwise specified further in this section and in sections III.I. and 
III.J. of this proposed rule. Depending on a hospital's current degree 
of clinical integration, new and different contractual relationships 
among hospitals and other health care providers may be important, 
although not necessarily required, for EPM success in a community. We 
acknowledge that financial incentives for other providers may be 
important aspects of the model in order for EPM participants to partner 
with these providers and incentivize certain strategies to improve 
episode efficiency.
    While we acknowledge the important role of conveners in the BPCI 
model, and AMI, CABG, and SHFFT model participants may wish to enter 
into relationships with EPM collaborators and other entities in order 
to manage the episode of care or distribute risk, we propose that the 
ultimate financial responsibility of the episode remains with the EPM 
participant. Exceptions to this general rule for beneficiaries covered 
under certain risk bearing ACO arrangements are outlined in section 
III.D.6. As with the CJR model, we do not intend to restrict the 
ability of EPM participants to enter into administrative or risk 
sharing arrangements related to these EPMs, except to the extent that 
such arrangements are already restricted or prohibited by existing law. 
We refer readers to section III.I. of this proposed rule for further 
discussion of model design elements that may outline financial 
arrangements between EPM participants and other providers and 
suppliers.

[[Page 50815]]

4. Proposed Geographic Unit of Selection and Exclusion of Selected 
Hospitals
    In order to determine the geographic unit of selection for these 
episode payment models, we conducted an analysis similar to that used 
for the CJR model. For the CJR 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 concluded that selection based on MSAs provided the best 
balance between choosing smaller geographic units while still capturing 
the impact of market patterns reflecting the mobility of patients and 
providers and limiting the potential risk for patient shifting and 
steerage between MSAs. HRRs are based on where patients receive 
selected tertiary care services which do not include orthopedic 
services. Therefore, HRRs may not be representative of where patients 
receive specialty orthopedic care or more routine orthopedic services 
such as hip and knee arthroplasty. Selection of states rather than MSAs 
would have greatly reduced the number of independent geographic areas 
subject to selection and, therefore, the statistical power of the 
evaluation. For similar reasons and to maintain consistency with the 
CJR model, we are, similarly, recommending implementation at the MSA 
level.
    We also similarly considered whether these new models should be 
limited to hospitals where a high volume of these episodes occur, 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. However, as 
with the CJR model, 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 
payments for these episodes 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.D.6. of this 
proposed rule as model participants would help to minimize the risk of 
participant hospitals shifting higher cost cases out of the EPM.
    In determining where to implement these EPMs, we also considered 
whether implementation of the CJR model in the same geographic area 
should be a factor. We realize that there is likely to be considerable 
overlap in the selection criteria between MSAs where the SHFFT EPM 
might be appropriate and those MSAs where the CJR model is now being 
implemented. While limiting burden on hospitals is an important 
consideration, we also believe that the infrastructure being put in 
place as a result of the CJR model presents significant advantages for 
implementation of the SHFFT model. For similar reasons, and in order to 
minimize patient steerage and/or transfer for reasons due solely to the 
implementation of these new payment models, we believe that it is 
appropriate to implement the AMI model and CABG model together in the 
same geographic areas, albeit not necessarily in the same areas as the 
CJR model.
    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 propose that the SHFFT model be 
implemented in those MSAs where the CJR model is being implemented. We 
also are proposing that the AMI and CABG models be implemented in MSAs 
selected independently based on the criteria discussed in this proposed 
rule. This will result in four separate categories of MSAs: (1) MSAs 
where only the CJR and SHFFT model episodes are being implemented; (2) 
MSAs where only the CABG model and AMI model episodes are being 
implemented; (3) MSAs where the CJR as well as the AMI, CABG, and SHFFT 
models are being implemented; and (4) MSAs where neither CJR nor any of 
the new episode payment models are being implemented. We believe this 
will provide an opportunity to test the impact of implementing EPMs 
across not only a greater diversity of episodes but also as an 
increasing percentage of hospital discharges. We seek comment on our 
proposal to implement the SHFFT model in the same geographic region as 
the CJR model and to implement both the AMI model and the CABG model in 
the same MSAs, some of which may overlap with MSAs where the CJR and 
SHFFT models also are being implemented.
5. Overview and Options for Geographic Area Selection for AMI and CABG 
Episodes
    We propose that the AMI and CABG EPMs be implemented together in 
the same MSAs. These AMI/CABG-participating MSAs may or may not also be 
LEJR/SHFFT-participating MSAs. The selection of MSAs for AMI/CABG EPMs 
would occur through a random selection of eligible MSAs.
    We propose to require participation in the AMI and CABG models of 
all hospitals, with limited exceptions as previously discussed in 
section III.B.4. of this proposed rule, paid under the IPPS that are 
physically located in a county in an MSA selected through the 
methodology outlined in section III.B.5.b. in this proposed rule, to 
test and evaluate the effects of an episode-based payment approach for 
the proposed EPMs. We propose 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 as of the date the 
selection is made.
    Although MSAs are revised periodically, with counties added or 
removed from certain MSAs, we propose to maintain the same cohort of 
selected hospitals throughout the 5-year performance periods of the 
EPMs with limited exceptions as described later in this section. Thus, 
we propose neither to add hospitals to an EPM if after the start of 
such EPM new counties are added to one of the selected MSAs nor to 
remove hospitals from an EPM if counties are removed from one of the 
selected MSAs. We believe that this approach will best maintain the 
consistency of the participants in the EPMs, which is crucial for our 
ability to evaluate their respective results. However, 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.D. of this proposed rule for 
discussion of how target prices will be determined for such hospitals.)
    The manner in which CMS tracks and identifies hospitals is through 
the CMS Certification Number (CCN). In keeping with this approach, 
these EPMs 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 an EPM's 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 applicable EPM if the physical 
address associated with the CCN is in the MSA selected, unless 
otherwise excluded. Similarly, all hospitals under the same CCN, even 
if some are physically located in the MSA

[[Page 50816]]

selected for participation, would not participate in the applicable EPM 
if the physical address associated with the CCN is not in the MSA.
    We considered including hospitals in a given MSA based on whether 
the hospitals were classified into the MSA for IPPS wage index 
purposes. However, such a process would be more complicated, and we 
could not find any compelling reasons favoring such approach. For 
example, we could assign hospitals to metro divisions of MSAs when 
those divisions exist. In addition, there is the IPPS process of 
geographic reclassification by which a hospital's payments can be based 
on a geographic area other than the one where the hospital is 
physically located. For the purpose of the EPMs, it is simpler and more 
straightforward to use a hospital's physical location as the basis of 
its assignment to a geographic unit. This decision would have no impact 
on a hospital's payment under the IPPS. We seek comment on our proposal 
to include a hospital as an EPM participant based on the physical 
location associated with the CCN of the hospital in one of the counties 
included in a selected MSA.
a. Exclusion of Certain MSAs
    We considered whether certain MSAs should be exempt from the 
possibility of selection for the AMI/CABG EPMs' implementation. We 
considered exclusions based on the anticipated number of AMI episodes 
and CABG episodes in the MSA. We also considered exclusions based on 
the degree to which such EPMs' episodes would be impacted by overlaps 
with other payment initiatives, including BPCI and ACOs.
    First, we considered the advisability of MSA exclusions based on 
the number of episodes in a year. We identified qualifying AMI and CABG 
episodes that initiated between January 1, 2014, and December 31, 2014. 
AMI and CABG episodes were attributed to an MSA based on the location 
of the CCN associated with the initiating hospital using the Provider 
of Service file. Due to the smaller number of relevant AMI and CABG 
episodes occurring in MSAs, an exclusion rule that required a large 
number of episodes in each MSA would result in fewer MSAs eligible for 
selection than was necessary given the desired number of MSAs and the 
requirement that to have 50 percent or more of MSAs remain in a pool of 
possible comparison MSAs. From the perspective of evaluating changes to 
utilization and spending under EPMs, there is no analytic need to 
eliminate MSAs with small numbers. In fact, including smaller MSAs has 
the analytic advantage of giving CMS more experience operating EPMs in 
the smaller-MSA contexts that will help us generalize our EPM-
evaluation findings.
    We have a strong interest in being able to observe how well EPMs 
operate in areas with a lower volume of episodes, and, in particular, 
the consequences of the model for AMI episodes where CABG is not 
commonly performed or where standard practice is to refer all CABGs 
outside of the MSA. Given our desire to assess the operation of the AMI 
EPM in areas with little or no CABG episodes and the desire to have the 
two cardiac EPMs be administered together in the same MSAs, we propose 
that the MSA exclusion rules be based on the number of AMI episodes 
only. This will allow for the inclusion of MSAs with no CABGs.
    There is no analytic requirement for a minimum number of cases and 
there are advantages to including smaller cities. At the same time, we 
acknowledge that areas with few AMI cases may believe that they will 
face challenges under the EPMs. Therefore, we propose an exclusion rule 
that MSAs with fewer than 75 AMI episodes (determined as discussed in 
section III.C. of this proposed rule) will be removed from the 
possibility of selection. Cases in hospitals paid under either the CAH 
methodology or the Maryland All-Payer Model are not included in the 
count of eligible episodes. We examined a number of different minimum-
episode-number cutoffs. The use of the 75 AMIs in a year was a designed 
to balance limiting the impact of outlier cases on the MSA average 
episode spending and the desire to retain a non-negligible 
representation of MSAs in the under 100,000 population and the 100,000 
to 200,000 population ranges in our selection pool. The application of 
Exclusion Rule 1: ``less than 75 qualifying AMI episodes in the 
reference year'' resulted in the removal of 49 MSAs from possible 
selection.
    Second, we assessed exclusion rules based on overlap with BPCI. We 
propose Exclusion Rule 2 such that MSAs are removed from possible 
selection if there were fewer than 75 non-BPCI AMI episodes in the MSA 
in the reference year. For the purposes of this exclusion, the number 
of non-BPCI episodes was estimated by subtracting BPCI cases from the 
total number of cases used in Exclusion Rule 1. BPCI cases for this 
purpose are ones during the reference year associated with a hospital 
or a PGP BPCI Model 2 or 4 episode initiator participating in an AMI, 
PCI, or CABG episode as of January 1, 2016. Such criterion removed an 
additional 26 MSAs from potential selection.
    Third, we propose to exclude MSAs from possible selection based on 
whether the number of non-BPCI AMI episodes calculated under Exclusion 
Rule 2 is less than 50 percent of the total number of AMI episodes 
calculated under Exclusion Rule 1. We anticipate that some degree of 
overlap in the BPCI and other EPMs will be mutually helpful. However, 
we acknowledge that some providers may have concerns that a BPCI Model 
2 AMI and PCI participation rate of more than 50 percent may impair the 
ability of participants in either the EPMs or the BPCI models to 
succeed in the objectives of the initiative. As a result of this third 
criterion, 13 additional MSAs were removed from possible selection.
    We considered whether there should be an exclusion rule based on 
the anticipated degree of overlap between the AMI and CABG EPMs and 
patients who are aligned prospectively to ACOs that are taking two-
sided risk, such as ACOs participating in the Next Generation ACO model 
or Track 3 of the Shared Savings Program. We examined numbers 
associated with ACOs meeting this status as of May 1, 2016, and this 
examination did not result in any additional MSAs falling below the 75 
AMI episodes threshold. Consequently, we are not proposing any MSA 
exclusion rule based on the presence of ACOs.
    Please refer to Table 1 for the status of each MSA based on these 
exclusion criteria, available at https://innovation.cms.gov/initiatives/epm. After applying these three exclusions, 294 MSAs out of 384 total 
MSAs are eligible for selection using our proposed selection 
methodology.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
b. Proposed Selection Approach
    We propose the selection of 98 MSAs through the use of simple 
random selection from the 294 eligible MSAs.
    Simple random selection is often considered to be an appropriate 
default approach to experimental design unless there is a compelling 
reason to depart from it. One common alternative approach is to perform 
random selection separately within subgroups. Selection within 
subgroups can be a useful approach to limiting differences between 
intervention and control groups to improve statistical power or for 
facilitating over or under sampling to allow the evaluation to examine 
effects of the intervention on particular types of MSAs or because 
those types of MSAs are of particular interest for policy reasons.
    In CJR, we used a stratified random assignment approach in which we 
organized MSAs into strata based on MSA population size and historic 
LEJR episode payments. Under the CJR model, we believed a stratified 
approach was appropriate due to wide regional variation in prices, 
primarily associated with the use of post-acute services. The 
stratified approach served as a means to oversample in higher-expense 
MSAs as these areas have both the most need for and the most 
opportunity under the CJR model.
    In assessing whether stratification would be proposed for the EPMs, 
we assessed a variety of factors described later in this section. 
Absent stratification, the rate at which a particular type of MSA will 
appear in the sample will be proportional to how often in appears among 
eligible MSAs. If a particular type of MSA is relatively common, it is 
likely to occur often enough that we do not need to deliberately over-
sample for it. In the end, our analyses did not provide sufficient 
evidence that it is necessary to create selection subgroups of MSAs to 
guide the selection approach. As a result, we are proposing to use 
simple random selection from the entire pool of eligible MSAs.
(1) Factors Considered but Not Used
    We considered a variety of possible MSA characteristics for 
possible use in classifying sub-groups. Though we did consider many of 
these variables important, we believe that a simple random selection, 
where warranted, is preferable.
    Some of the factors we considered that we are not proposing to use 
in the selection methodology include the following:
     Measures associated with AMI-episode and CABG episode 
wage-adjusted spending, respectively. In considering how to 
operationalize such measures, we considered a number of alternatives 
including average total episode spending payments in an MSA, average 
episode spending associated with the initial hospital stay(s) and 
average episode spending occurring in the period after discharge from 
the initial hospital.
     Measures associated with variation in practice patterns 
associated with AMI and CABG episodes. In considering how to 
operationalize this measure, we considered a number of alternatives 
including the extent to which both an AMI and a CABG episode are 
associated with having a transfer hospital stay at the beginning of the 
episode, and the extent to which CABG hospitalizations occur following 
a hospital transfer from either within or from outside the same MSA.
     Measures associated with relative market share of 
providers with respect to AMI and/or CABG episodes, including the 
presence or absence of regional referral centers and the number of 
providers with the capacity to perform CABGs or otherwise treat complex 
cardiac patients.
     Health care supply measures of providers in the MSA 
including acute or post-acute bed counts, and number of relevant 
physician specialties such as cardiologists and cardiothoracic 
surgeons.
     MSA-level demographic measures such as: (1) average 
income; (2) distributions of population by age, gender or race; (3) 
percent dually eligible; and (4) percent with specific health 
conditions or other demographic composition measures.
     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.
    Though these measures are not proposed to be part of the selection 
process, we acknowledge that these and other market-level factors may 
be important to the proper understanding of the evaluation of the 
impact of EPMs. We intend to consider these and other measures in 
determining which MSAs are appropriate comparison markets for the 
evaluation and for possible subgroup analysis or risk-adjustment 
purposes. The evaluations will include beneficiary-, provider-, and 
market-level characteristics in how they will examine the performance 
of these proposed EPMs.
(2) Sample-Size Calculations and the Number of Selected MSAs
    Our analyses of the necessary sample size led us to propose the 
selection of 98 MSAs, out of the 294 MSAs eligible

[[Page 50828]]

for selection and 384 total MSAs, to participate in both the AMI and 
CABG EPMs. In this section, we discuss the assumptions and modeling 
that went into our proposal to test these EPMs in 98 MSAs. The 
discussion of the method of selection of these 98 MSAs is addressed in 
the following section. In coming to the decision to target 98 MSAs, we 
are proposing an approach that limits the size of the intervention to 
the greatest degree possible, while still ensuring that we have 
sufficient statistical power to reliably evaluate the effects of the 
EPMs. Going below this threshold would jeopardize our ability to be 
confident in our results and to be able to generalize from the EPMs to 
the larger national context.
    In calculating the necessary size of the AMI and CABG EPMs, a key 
consideration was to 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 both the AMI and the CABG EPMs was wage-
adjusted total episode spending. The data used for the wage-adjusted 
total episode spending is the 3-year data pull previously described 
that covers AMI and CABG episodes with admission dates from July 1, 
2012, through December 31, 2014. For the purposes of the sample-size 
calculation, we aim to be able to reliably identify between a 2-percent 
and 3-percent reduction in wage-adjusted episode spending after 1 year 
of experience. We chose this range because those numbers represent the 
anticipated amount of the discount proposed to apply under various 
conditions of the AMI and CABG EPMs' implementation.
    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 positives'' and 
``false negatives.'' A false positive occurs if a statistical test 
concludes that a model was successful (that is, saved money) when it in 
fact was not. A false negative occurs if a statistical test fails to 
find statistically-significant evidence that the model was successful, 
when it in fact was successful. In considering the minimum sample size 
needs of the AMI and CABG EPMs, 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 chance of a false negative. In 
contrast, the proposed sample size for this project was based on a 10-
percent chance of a false positive and no more than a 30-percent chance 
of a false negative in order to minimize reduce sample size 
requirements to the greatest degree possible.
    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. We are proposing to base the sample size 
calculation at the MSA level. The proposed EPMs are an example of what 
is known as a ``nested comparative study.'' Under a nested comparative 
study, assignment to an intervention or comparison arms of the study is 
based on membership in pre-existing, identifiable group where the 
groups are not formed at random, but rather through some physical, 
social, geographic, or other connection among their members. Because 
these groups are not formed at random, individual members of each group 
are likely to share important commonalities. In the context of the 
proposed EPMs spending and outcomes for patients cared for within a 
given MSA are relatively similar to one another due to such factors as 
the existence of common practice or referral patterns, the underlying 
health in the population, and the availability of providers in an area.
    In statistical terms, these commonalities create a positive 
correlation (called an intra-class correlation) among hospitals or 
beneficiaries in the same MSA. Due to that intra-class correlation, the 
variability of any aggregate statistic--such as the estimated 
difference in outcomes between the intervention and comparison arms of 
the study--has two components--(1) variability attributable to 
variation among hospitals or beneficiaries in a given MSA; and (2) 
variability attributable to differences between MSAs. An accurate power 
analysis must account for both components of variability.
    In determining the necessary sample size, we take into 
consideration the degree to which commonalities within MSAs exist and 
the number of independent beneficiaries and hospitals expected to be 
included in the EPM within each MSA. As part of this process, we 
empirically examined the number of beneficiaries, the number of 
hospitals, and the number of MSAs, as well as the level of correlation 
in episode payments between each level. Based on this empirical 
examination, we determined that the correlation was high enough that 
the degree of variability would be primarily driven by the number of 
MSAs in the model, indicating that the MSA is the appropriate unit of 
analysis for the power calculations.
    Using the aforementioned assumptions, a power calculation for AMI 
was run which indicated that at 98 MSAs we would be able to reliably 
detect a 3-percent reduction in wage-adjusted episode spending after 1 
year with a false-positive rate of 10 percent and a false-negative rate 
of between 20 percent and 40 percent. We are targeting a false-negative 
rate of 30 percent. The extent to which this rate can be lowered will 
depend on the ability of evaluation models to substantially reduce 
variation through risk adjustment and modeling. We believe it is 
prudent to choose a sample size where the targeted amount is in the 
middle of this expected band.
    We separately assessed the sample-size needs associated with CABG 
episodes. At 98 MSAs, we anticipate being able to detect a 2.25-percent 
reduction in wage-adjusted episode expenditures after 1 year with a 
false-positive rate of 10 percent and a false-negative rate of between 
20-40 percent. The effective number of MSAs where the CABG EPM will be 
tested will be reduced because approximately 6 percent of eligible MSAs 
had no CABG episodes in the reference year. However, our power 
calculations do not lead us to believe we need to increase the sample 
size based on this fact. The number of CABG MSAs can experience this 
reduction and maintain equivalent levels of power to the AMI episodes.
(3) Method of Selecting MSAs
    As previously discussed, we are seeking to choose 98 MSAs from our 
pool of eligible MSAs through simple random selection. We propose to 
make the selection in the final rule using SAS Enterprise Guide 7.1 
software to run a computer algorithm 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 will be generated using the

[[Page 50829]]

birthdate of the person executing the program.\37\
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    \37\ 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_sur veyselect_sect003.htm/.
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    We seek comment on our proposal to implement the AMI and CABG 
models in the selected MSAs, some of which may overlap with MSAs where 
the CJR and SHFFT models also are being implemented.

C. Episode Definition for the EPMs

1. Background
    Episode payment models incentivize improvement in the coordination 
and quality of care experienced by a Medicare beneficiary, as well as 
episode efficiency, by bundling payment for services furnished to the 
beneficiary for specific clinical conditions over a defined period of 
time. A key model design feature is the definition of the episodes 
included in the model. The definition of episodes has two significant 
dimensions--(1) a clinical dimension that describes which clinical 
conditions and associated services are included in the model; and (2) a 
time dimension that describes the beginning, middle, and end of the 
model.
2. Overview of Three Proposed Episode Payment Models
    We propose three new EPMs--AMI, CABG, and SHFFT--that each begin 
with a hospitalization and extend 90 days after hospital discharge. The 
proposed AMI model generally includes beneficiaries discharged under an 
AMI MS-DRG (280-282), representing admission to an IPPS hospital for 
AMI that is treated with medical management, or an IPPS admission for a 
PCI MS-DRG (246-251) with an International Classification of Diseases 
(ICD)-Clinical Modification (CM) AMI diagnosis code describing an 
initial AMI diagnosis in the principal or a secondary diagnosis code 
position.
    The proposed CABG model generally includes beneficiaries discharged 
under a CABG MS-DRG (231-236), representing an IPPS admission for this 
coronary revascularization procedure irrespective of AMI diagnosis. The 
proposed SHFFT model generally includes beneficiaries discharged under 
hip and femur procedures except major joint MS-DRG (480-482), 
representing an IPPS admission for a hip fixation procedure in the 
setting of a hip fracture.
    One reason these particular episodes were chosen for the proposed 
EPMs is that the initiation of treatment for each of the three clinical 
conditions included in an episode occurs almost exclusively during a 
hospitalization, which we believe would minimize the possibility of 
shifting beneficiaries in or out of the EPM based on the site-of-
service where treatment is initiated. The majority of evaluation and 
treatment for AMI is performed in the inpatient hospital setting, 
commonly beginning when beneficiaries present with symptoms to the 
emergency department of a hospital. Patients experiencing an AMI are 
almost uniformly admitted to the hospital for further evaluation and 
management.\38\ Although PCIs can be performed and may be paid by 
Medicare in the hospital outpatient setting in addition to being 
performed during a hospitalization, the majority of patients 
experiencing an AMI who are candidates for procedural revascularization 
receive PCI procedures during the initial hospitalization for AMI where 
evaluation also occurs.\39\ CABG procedures are furnished exclusively 
in the inpatient hospital setting. We note that all of the Current 
Procedural Terminology (CPT) codes that physicians report for CABG are 
listed on the hospital Outpatient Prospective Payment System (OPPS) 
inpatient-only list in Addendum E of the 2016 OPPS final rule with 
comment period that is posted on the CMS Web site.\40\ The hip fixation 
procedures performed in the SHFFT model also are predominantly 
furnished in the inpatient hospital setting, and we further note that 
almost all of the CPT codes that describe these procedures also are on 
the OPPS inpatient-only list.
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    \38\ Amsterdam et al. 2014 AHA/ACC Guideline for the Management 
of Patients with Non-ST--Elevation Acute Coronary Syndromes. 
Circulation. 2014; 130:e344--e426.
    \39\ Episodes for beneficiaries with AMI initiated by all U.S. 
IPPS hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule, that 
end in CY 2014.
    \40\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1633-FC.html.
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    Hospitals' ability to identify EPM beneficiaries during the 
hospitalization that begins the episode (hereinafter the anchor 
hospitalization) also is an important consideration in developing 
episode payment models that, like the CJR model, rely upon MS-DRG 
assignment for IPPS claims following their submission in order to 
identify beneficiaries for model inclusion. This is especially 
important for medical management of conditions for which the 
predictability of the ultimate MS-DRG for the hospitalization is less 
certain than for surgical or procedural MS-DRGs. AMI represents a 
relative exception among medical conditions as it is associated with 
specific clinical and laboratory features that enable hospitals to 
identify beneficiaries with AMI during the anchor hospitalization whom 
would likely be included in an AMI model episode through their ultimate 
discharge under an AMI MS-DRG. We note that ICD-CM coding rules allow 
AMI diagnosis codes in both the primary and secondary position to map 
to AMI MS-DRGs.\41\ In the case of procedural episodes such as CABG, 
SHFFT, and AMI model episodes for beneficiaries treated with PCI, the 
MS-DRG for the procedure performed would determine the ultimate MS-DRG 
assignment for the hospitalization unless additional surgeries higher 
in the MS-DRG hierarchy also are reported.\42\ Therefore, we propose 
these three EPMs for clinical conditions where MS-DRG assignment is 
likely to be certain and known during the anchor hospitalization, even 
though treatment for AMI may involve only medical management. We 
believe hospitals participating in the proposed EPMs would be able to 
identify beneficiaries in EPM episodes through their AMI, CABG, and 
SHFFT episode MS-DRGs during the anchor hospitalization, allowing 
active coordination of EPM beneficiary care during and after 
hospitalization.
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    \41\ Medical Severity Diagnosis Related Groups (MS-DRGs): 
Definitions Manual. Version 33.0A. 3M Health Information Systems. 
(October 1, 2015). https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html.
    \42\ Medical Severity Diagnosis Related Groups (MS-DRGs): 
Definitions Manual. Version 33.0A. 3M Health Information Systems. 
(October 1, 2015). https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html.
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3. Clinical Dimensions of AMI, CABG, and SHFFT Model Episodes
    As we stated in the CJR model Final Rule, we believe that a 
straightforward approach for hospitals and other providers to identify 
Medicare beneficiaries in these episode payment models would be 
important for the care redesign that is required for EPM success, as 
well as for operationalization of the proposed payment and other EPM 
policies (80 FR 73299). Therefore, as in the CJR model, we propose that 
an EPM episode would be initiated by an admission to an acute care 
hospital for an anchor hospitalization paid under EPM-specific MS-DRGs 
under the IPPS (80 FR 73300).

[[Page 50830]]

a. Definition of the Clinical Conditions Included in AMI, CABG, and 
SHFFT Model Episodes
(1) AMI (Medical Management and PCI) Model
    We propose the AMI model to incentivize improvements in the 
coordination and quality of care, as well as episode efficiency, for 
beneficiaries treated for AMI with either medical management or 
coronary artery revascularization with PCI. We propose to define 
beneficiary inclusion in the AMI model by discharge under an AMI MS-DRG 
(280-282), representing those individuals admitted with AMI who receive 
medical therapy but no revascularization, and discharge under a PCI MS-
DRG (246-251) with an ICD-10-CM diagnosis code of AMI on the IPPS claim 
for the anchor hospitalization in the principal or secondary diagnosis 
code position. We note that we would use AMI International 
Classification of Diseases, 9th revision clinical modification (ICD-9-
CM) diagnosis codes to identify historical episodes for setting AMI 
model-episode benchmark prices in the early performance years of the 
AMI model. The Uniform Hospital Discharge Data Set (UHDDS) defines the 
principal diagnosis for hospitalization as ``that condition established 
after study to be chiefly responsible for occasioning the admission of 
the patient to the hospital for care'' and other (secondary) diagnoses 
as ``all conditions that coexist at the time of admission, that develop 
subsequently, or that affect the treatment received and/or the length 
of stay. Diagnoses that relate to an earlier episode which have no 
bearing on the current hospital stay are to be excluded.'' \43\ We 
propose to include those beneficiaries discharged under PCI MS-DRGs 
with an AMI ICD-10-CM diagnosis code in the principal or secondary 
diagnosis code position to ensure that beneficiaries with an AMI that 
is not chiefly responsible for occasioning the hospitalization are 
included in the AMI model because the AMI itself is likely to 
substantially influence the hospitalization and post-discharge recovery 
(and be responsible for leading to the PCI) even if an AMI ICD-10-CM 
diagnosis code is reported in a secondary diagnosis code position. For 
example, a beneficiary receiving a PCI with an ICD-10-CM diagnosis code 
of pneumonia in the principal position and an AMI ICD-10-CM diagnosis 
code in a secondary position would be included in the AMI model, which 
would be appropriate because the course of the beneficiary's recovery 
and management during the AMI model episode would be primarily 
associated with the AMI and PCI. While pneumonia is typically an acute 
illness that may sometimes result in hospitalization, underlying 
chronic conditions may increase the likelihood that a beneficiary would 
be hospitalized for pneumonia, a condition that is more commonly 
treated on an outpatient basis. AMI in association with a 
hospitalization for pneumonia would represent a sentinel event for the 
beneficiary resulting from underlying CAD that signals a need for a 
heightened focus on medical management of CAD and other beneficiary 
risk factors for future cardiac events and that may themselves have 
increased the beneficiary's risk for pneumonia. Thus, care coordination 
and management in the 90 days post-hospital discharge for these 
beneficiaries would be focused on managing CAD and the beneficiary's 
cardiac function after the AMI.
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    \43\ https://www.cdc.gov/nchs/data/icd/icd10cm_guidelines_2014.pdf.
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    We acknowledge that this proposal to identify beneficiaries 
included in the AMI model through a combination of MS-DRGs and AMI ICD-
CM diagnosis codes represents a modification of the CJR model episode 
definition methodology. The CJR model defined episodes based on MS-DRGs 
alone, specifically MS-DRG 469 (Major joint replacement or reattachment 
of lower extremity with Major Complications or Comorbidities (MCC)) and 
MS-DRG 470 (Major joint replacement or reattachment of lower extremity 
without MCC), because the anchor hospitalization for the CJR model was 
defined by admission for a surgical procedure alone (80 FR 73280). 
However, the proposed AMI model is defined by admission for a medical 
condition that includes a range of treatment options, including medical 
treatment and PCI. Therefore, to identify beneficiaries admitted for 
AMI and treated with PCI requires ICD-CM diagnosis codes paired with 
MS-DRGs to identify the subset of PCI MS-DRG cases associated with AMI 
that would otherwise be excluded from an AMI model based solely on AMI 
MS-DRGs.
    For the purposes of defining historical AMI model episodes, we 
propose to exclude beneficiaries discharged under PCI MS-DRGs with an 
AMI ICD-9-CM diagnosis code in the principal or secondary position if 
there is an intracardiac ICD-9-CM procedure code in any procedure code 
field. Intracardiac procedure codes do not represent PCI procedures 
indicated for the treatment of the coronary artery obstruction that 
results in AMI, but instead represent a group of procedures indicated 
for treating congenital cardiac malformations, cardiac valve disease, 
and cardiac arrhythmias. These intracardiac procedures are performed 
within the heart chambers rather than PCI procedures for AMI that are 
performed within the coronary blood vessels. To reflect this clinical 
distinction, the FY 2016 IPPS update removed intracardiac procedures 
from MS-DRGs 246-251 and assigned them to new MS-DRGs 273 and 274 (80 
FR 49367). Therefore, to be consistent with our proposed definition of 
AMI model episodes that initiate with PCI MS-DRGs 246-251 (not with MS-
DRGs 273 and 274) and an AMI ICD-9-CM diagnosis code in the principal 
or secondary position, we are proposing to define historical AMI model 
episodes for beneficiaries discharged under PCI MS-DRGS 246-251 as 
those that do not include the ICD-9-CM procedure codes in Table 2. 
These codes are also posted on the CMS Web site at https://innovation.cms.gov/inititatives/epm.

 Table 2--Proposed ICD-9-CM Procedure Codes in any Position on the IPPS
 Claim for PCI MS-DRGS (246-251) That Do Not Define Historical AMI Model
                                Episodes
------------------------------------------------------------------------
      ICD-9-CM Procedure code        ICD-9-CM Procedure code description
------------------------------------------------------------------------
35.52.............................  Repair of atrial septal defect with
                                     prosthesis, closed technique.
35.96.............................  Percutaneous balloon valvuloplasty.
35.97.............................  Percutaneous mitral valve repair
                                     with implant.
37.26.............................  Catheter based invasive
                                     electrophysiologic testing.
37.27.............................  Cardiac mapping.
37.34.............................  Excision or destruction of other
                                     lesion or tissue of heart,
                                     endovascular approach.

[[Page 50831]]

 
37.36.............................  Excision, destruction, or exclusion
                                     of left atrial appendage.
37.90.............................  Insertion of left atrial appendage
                                     device.
------------------------------------------------------------------------

    In FY 2014, there were approximately 395,000 beneficiaries 
discharged from a short-term acute care hospitalization (excluding 
Maryland) with an AMI ICD-9-CM diagnosis code in the principal or 
secondary position on the IPPS claim. Of these beneficiaries, 58 
percent were discharged under MS-DRGs that would initiate an AMI model 
episode, specifically an AMI MS-DRG (33 percent) and PCI MS-DRG (25 
percent). Five percent of beneficiaries were discharged from CABG MS-
DRGs and 3 percent were discharged from AMI MS-DRGs representing death 
during the hospitalization. The remaining 34 percent of beneficiaries 
with an AMI ICD-CM diagnosis code in the principal or secondary 
position were distributed across over approximately 300 other MS-DRGs, 
with the septicemia MS-DRGs accounting for 8 percent and the remainder 
accounting for 3 percent or less of beneficiaries with an AMI ICD-CM 
diagnosis code on the IPPS claim.\44\ We note that the AMI ICD-9-CM 
diagnosis code was most commonly in a secondary position for discharges 
from these other MS-DRGs, likely representing beneficiaries 
hospitalized for another condition who experienced an AMI during that 
hospitalization. We note that CMS's AMI quality measures used in the 
Hospital Inpatient Quality Reporting (HIQR) Program are based on all 
beneficiaries discharged under any MS-DRG who have an AMI ICD-CM 
diagnosis code only in the principal position, reflecting the measures' 
focus on the most homogeneous beneficiary population with AMI as the 
condition responsible for occasioning the hospital admission. This is 
in contrast with our proposed use of an AMI ICD-10-CM diagnosis code in 
the principal or a secondary position for the AMI model in order to 
identify those beneficiaries receiving a PCI whose hospitalization and 
post-discharge recovery and management would primarily be associated 
with the PCI and AMI.
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    \44\ Inpatient claims from all U.S. IPPS hospitals not in 
Maryland were derived from the October 2013-September 2014 Inpatient 
Claims File located in the Chronic Conditions Warehouse.
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    The proposed specifications for AMI episodes, including ICD-9-CM 
AMI diagnosis codes for historical episodes used to set the initial AMI 
model-episode benchmark prices and ICD-10-CM AMI diagnosis codes for 
the proposed performance years of the model, are displayed in Table 3. 
The ICD-9-CM intracardiac procedure codes used to exclude inpatient 
claims with PCI MS-DRGS 246-251 from anchoring AMI model historical 
episodes used to set initial AMI model-episode benchmark prices are 
displayed in Table 3.
    Based on Medicare claims data for historical AMI episodes ending in 
CYs 2012-2014, the annual number of potentially eligible beneficiary 
discharges for the AMI model nationally was approximately 168,000.\45\ 
This number is less than the approximately 229,000 discharges for 
beneficiaries with AMI discharged from AMI MS-DRGs 280-282 and PCI MS-
DRGs 246-251 that could be expected to be included in the AMI model for 
several reasons. Discharges do not result in historical episodes when a 
beneficiary does not meet the beneficiary care inclusion criteria 
discussed in section III.C.4.a.(1) of this proposed rule; is not 
discharged alive from PCI MS-DRGS 246-251; is discharged from a 
transfer hospital during a chained anchor hospitalization; or is 
discharged from a readmission during an AMI model episode that does not 
initiate new model episodes.
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    \45\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule, that 
began in CYs 2012-2014.
---------------------------------------------------------------------------

    The proposed list of ICD-9-CM and ICD-10-CM AMI diagnosis codes 
used to identify beneficiaries discharged under a PCI MS-DRG (MS-DRGs 
246-251) in historical episodes and during the performance years of the 
model that will be included in the AMI model episodes are discussed in 
section III.C.4.a.(2) of this proposed rule. To make changes to this 
list as necessary based on annual ICD-10-CM coding changes or to 
address issues raised by the public throughout the EPM performance 
years, we propose implementing the following sub-regulatory process, 
which mirrors the sub-regulatory process as described in the CJR model 
final rule for updating hip fracture ICD-9-CM and ICD-10-CM diagnosis 
codes (80 FR 73340) and for updating the exclusions list (80 FR 73305 
and 73315). We propose to use this process on an annual, or more 
frequent, basis to update the AMI ICD-10-CM diagnosis code list and to 
address issues raised by the public. As part of this process we propose 
the following standard when revising the list of ICD-10-CM diagnosis 
codes representing AMI: The ICD-10-CM diagnosis code is sufficiently 
specific that it represents an AMI. We propose to then post a list of 
potential AMI ICD-10-CM diagnosis codes to the CMS Web site at https://innovation.cms.gov/inititatives/epm to allow for public input on our 
planned application of these standards, and then adopt the AMI ICD-10-
CM diagnosis code list with posting to the CMS Web site of the final 
AMI ICD-CM diagnosis code list after our consideration of the public 
input. We would provide sufficient time for public input based on the 
complexity of potential revisions under consideration, typically at 
least 30 days, and, while we would not respond to individual comments 
as would be required in a regulatory process, we could discuss the 
reasons for our decisions about changes in response to public input 
with interested stakeholders.
    The proposals for identifying the beneficiaries included in the AMI 
model and the sub-regulatory process for updating the AMI ICD-10-CM 
diagnosis code list are included in Sec.  512.100(c)(1) and (d), 
respectively. We seek comment on our proposals to identify 
beneficiaries included in the AMI model and the sub-regulatory process 
for updating the AMI ICD-10-CM diagnosis code list. The proposal to 
exclude inpatient claims with PCI MS-DRGS 246-251 from anchoring AMI 
model historical episodes used to set initial AMI model-episode 
benchmark prices when there is an ICD-9-CM intracardiac procedure code 
on the claim is included in Sec.  512.100(d)(4). We seek comment on our 
proposal to exclude inpatient claims with PCI MS-DRGS 246-251 from 
anchoring AMI model historical episodes used to set initial AMI model-
episode benchmark prices when there is an ICD-9-CM intracardiac 
procedure code on the claim.

[[Page 50832]]

(2) CABG Model
    We propose the CABG model to incentivize improvements in the 
coordination and quality of care, as well as episode efficiency, for 
beneficiaries treated with CABG irrespective of AMI during the CABG 
hospitalization, thereby including beneficiaries undergoing elective 
CABG in the CABG model as well as beneficiaries with AMI who have a 
CABG during their initial AMI treatment. The CABG model is similar to 
the CJR model in that the anchor hospitalization is defined by 
admission for a surgical procedure, which is defined by the MS-DRGs for 
that procedure alone (80 FR 73280). All CABG procedures are performed 
in the inpatient hospital setting. Thus, we propose to include 
beneficiaries admitted and discharged from an anchor hospitalization 
paid under CABG MS-DRGs (231-236) under the IPPS in the CABG model. 
Based on Medicare claims data for historical CABG episodes beginning in 
CYs 2012-2014, the annual number of potentially eligible beneficiary 
discharges for the CABG model nationally was approximately 48,000.\46\
---------------------------------------------------------------------------

    \46\ Episodes for CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule, that 
began in CYs 2012-2014.
---------------------------------------------------------------------------

    The proposal for identifying beneficiaries included in the CABG 
model is included in Sec.  512.100(c)(2). We seek comment on our 
proposal to identify beneficiaries included in the CABG model.
(3) SHFFT (Excludes Lower Extremity Joint Replacement) Model
    We propose the SHFFT model to incentivize improvements in the 
coordination and quality of care, as well as episode efficiency, for 
beneficiaries treated surgically for hip and femur fractures, other 
than hip arthroplasty. Together, the CJR and SHFFT models cover all 
surgical treatment options (that is, hip arthroplasty and fixation) for 
Medicare beneficiaries with hip fracture.
    The SHFFT model is similar to the CJR model in that the anchor 
hospitalization is defined by admission for a surgical procedure, which 
is defined by the MS-DRGs for that procedure alone (80 FR 73280). 
Additionally, most SHFFT procedures are furnished in the inpatient 
hospital setting, consisting primarily of hip fixation procedures, with 
or without reduction of the fracture, as well as open and closed 
surgical approaches. Thus, we propose to include beneficiaries admitted 
and discharged from an anchor hospitalization paid under SHFFT MS-DRGs 
(480-482) under the IPPS in the SHFFT model. Based on Medicare claims 
data for historical SHFFT episodes beginning in CYs 20122014, the 
annual number of potentially eligible beneficiary discharges for the 
SHFFT model nationally was approximately 109,000.\47\
---------------------------------------------------------------------------

    \47\ Episodes for SHFFT beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule that 
began in CYs 2012-2014.
---------------------------------------------------------------------------

    The proposal for identifying beneficiaries included in the SHFFT 
model is included in Sec.  512.100(c)(3). We seek comment on our 
proposal to identify beneficiaries included in the SHFFT model.
b. Definition of the Related Services Included in EPM Episodes
    The general principles for the proposed definition of related 
services are the same for the AMI, CABG, and SHFFT models, so we 
address them in a single discussion in this section. Like the CJR 
model, we are interested in testing inclusive AMI, CABG, and SHFFT 
model episodes to incentivize comprehensive, coordinated, patient-
centered care for the beneficiary throughout the episode (80 FR 73303). 
Therefore, we propose to exclude Medicare items and services furnished 
during the EPM episodes only when unrelated to the EPM episode 
diagnosis and procedures based on clinical rationale that would result 
in standard exclusions from all of the episodes in a single EPM. Thus, 
we propose to include all items and services paid under Medicare Part A 
and Part B unless they fall under an exclusion because they are 
unrelated to the EPM episodes.
    Also like the CJR model, we propose that the items and services 
ultimately included in the EPM episodes after the exclusions are 
applied are called related items and services, and that Medicare 
spending for related items and services be included in the historical 
data used to set EPM-episode benchmark prices and in the calculation of 
actual EPM episode payments that would be compared against the quality-
adjusted target price to assess the performance of EPM participants (80 
FR 73303 and 73315). Additionally, we propose that Medicare spending 
for unrelated items and services (excluded from the EPMs' episode 
definitions) would not be included in the historical data used to set 
EPM-episode benchmark prices or in the calculation of actual EPM 
episode payments. We propose that related items and services for EPM 
episodes would include the following items and services paid under 
Medicare Part A and Part B, after the EPM-specific exclusions are 
applied:
     Physicians' services.
     Inpatient hospital services.
     Inpatient psychiatric facility (IPF) services.
     Long-Term Care Hospital (LTCH) services.
     Inpatient Rehabilitation Facility (IRF) services.
     Skilled Nursing Facility (SNF) services.
     Home Health Agency (HHA) services.
     Hospital outpatient services.
     Independent outpatient therapy services.
     Clinical laboratory services.
     Durable medical equipment.
     Part B drugs.
     Hospice.
    We note that inpatient hospital services would include services 
paid through IPPS operating and capital payments. The AMI, CABG, and 
SHFFT model episodes also could include certain per-member-per-month 
model payments as discussed in section III.D.6.d. of this proposed 
rule. These proposed items and services for the EPMs are the same items 
and services included in CJR model episodes (80 FR 73303 and 73315).
    Similar to the CJR model and for the reasons explained in the CJR 
Final Rule, we propose to exclude drugs that are paid outside of the 
MS-DRGs included in the EPM episode definitions, specifically 
hemophilia clotting factors, identified by CPT code, diagnosis code, 
and revenue center on IPPS claims, from the EPM episodes (80 FR 73303 
and 73315). Hemophilia clotting factors, in contrast to other drugs 
that are administered during a hospitalization and paid through the MS-
DRG, are paid separately by Medicare in recognition that clotting 
factors are costly and essential to appropriate care of certain 
beneficiaries. Therefore, we believe there are no EPM episode 
efficiencies to be gained in the variable use of these high cost drugs.
    We also propose to exclude IPPS new technology add-on payments for 
drugs, technologies, and services from these EPM episodes, excluding 
them from both the actual historical episode data used to set EPM-
episode benchmark prices and from actual EPM episode payments that are 
reconciled to the quality-adjusted target prices like the CJR model (80 
FR 73303-73304 and 73315). This would apply to both the anchor 
hospitalization and any related

[[Page 50833]]

readmissions during the EPM episodes. 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 under the MS-DRG system. 
We believe it would not be appropriate for the EPM to potentially 
diminish beneficiaries' access to new technologies or to burden 
hospitals who choose to use these new drugs, technologies, or services 
with concern about these payments counting toward EPM participants' 
actual EPM episode payment. Additionally, new drugs, technologies, or 
services approved for the add-on payments vary unpredictably over time 
in their application to specific clinical conditions.
    Finally, we propose to exclude OPPS transitional pass-through 
payments for medical devices as defined in Sec.  419.66 from the EPM 
episodes because, through the established OPPS review process, we have 
determined that these technologies have a substantial cost but also 
lead to substantial clinical improvement for Medicare beneficiaries. 
This proposal also is consistent with the CJR model final exclusions 
policy (80 FR 73308 and 73315).
    We propose to follow the same general principles in determining 
other proposed excluded Part A and Part B services from the EPM 
episodes that we use in the CJR model in order to promote coordinated, 
high-quality, patient-centered care (80 FR 73304). These include 
identifying excluded (unrelated) services rather than included 
(related) services based on clinical review. We would operationalize 
these principles for the new EPMs, as we do for the CJR model, by 
excluding unrelated inpatient hospital admissions during the EPM 
episode by identifying MS-DRGs for exclusion on an EPM-specific basis 
(80 FR 73304 through 73312 and 73315). We would further exclude 
unrelated Part B services during the EPM episode based on the diagnosis 
code on the claim by identifying categories of ICD-CM codes for 
exclusion (identified by code ranges) on an EPM-specific basis. ICD-9-
CM diagnosis code exclusions would apply to historical episodes used to 
construct EPM-episode benchmark prices, while ICD-10-CM diagnosis code 
exclusions would apply to EPM episodes during the EPMs' performance 
years. We propose to identify unrelated Part B services and 
readmissions based on the BPCI Model 2 Part B exclusions lists that 
apply to the anchor MS-DRG that initiates the EPM episode, or to the 
price MS-DRG if it is different than the anchor MS-DRG as described 
further in section III.D.4.b.(2)(a) of this proposed rule. This 
proposal is consistent with our use of the BPCI Model 2 LEJR ICD-9-CM, 
ICD-10-CM, and MS-DRG exclusions lists in the CJR model (80 FR 73304 
and 73315).
    The BPCI episode-specific exclusions lists were initially developed 
more than 3 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 lists have been shared with thousands of entities and 
individuals participating in episodes in one or more phases of BPCI, 
and have undergone refinement in response to stakeholder input about 
specific diagnoses for exclusion, resulting in only minimal changes 
over the last 3 years. Thus, the BPCI exclusions lists have 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 propose their use 
in the AMI, CABG, and SHFFT models based on our confidence related to 
our several years of experience that these definitions are reasonable 
and workable for AMI, CABG, and SHFFT model episodes, for both 
providers and CMS, and based on our rulemaking for the CJR model. We 
note that the BPCI Model 2 exclusions lists for the 48 clinical 
conditions being tested in the BPCI models include lists that apply to 
every MS-DRG that could be an anchor MS-DRG (or price MS-DRG, if 
applicable) for the proposed AMI, CABG, and SHFFT model episodes.
    Similar to the CJR model, we propose to include in EPM episodes all 
Part A services furnished post-hospital discharge during the EPM 
episode, as these services are typically intended to be comprehensive 
in nature (80 FR 73304 and 73315). We specifically propose to exclude 
unrelated hospital readmissions for MS-DRGs that group to the following 
categories of diagnoses: Oncology, trauma medical admissions, surgery 
for chronic conditions unrelated to a condition likely to have been 
affected by care furnished during the EPM episode, and surgery for 
acute conditions unrelated to a condition resulting from or likely to 
have been affected by care during the EPM episode. The rationale for 
these exclusions is the same as the rationale for their exclusion in 
the CJR model (80 FR 73304).
    Specifically with respect to Part B services, similar to the CJR 
model, we propose to exclude acute disease diagnoses unrelated to a 
condition resulting from or likely to have been affected by care during 
the EPM episode, and 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 care during the EPM 
episode or whether substantial services were likely to be provided for 
the chronic condition during the EPM episode (80 FR 73305 and 73315). 
Thus, we would include all Part B services with principal diagnosis 
codes on the associated Part B claims that are directly related 
(clinically and per coding conventions) to EPM episodes, claims for 
diagnoses that are related to the quality and safety of care furnished 
during EPM episodes, and claims for services for diagnoses that are 
related to preexisting chronic conditions such as diabetes, which may 
be affected by care furnished during EPM episodes.
    In general, the anchor MS-DRG that initiates the AMI, CABG, or 
SHFFT episode would determine the exclusions list that applies to the 
EPM episode. For example, AMI model episodes may have different 
exclusions lists applied based on whether the AMI model episode is 
initiated by admission to the participant hospital that results in 
discharge from an AMI anchor MS-DRG or a PCI anchor MS-DRG with AMI 
ICD-10-CM diagnosis code. If a price MS-DRG applies to the AMI model 
episode that includes a chained anchor hospitalization as described in 
section III.D.4.b.(2)(a) of this proposed rule, the exclusions list 
that applies to the price MS-DRG would apply to the AMI model episode. 
Complete lists of proposed excluded MS-DRGs for readmissions and 
proposed excluded ICD-CM codes for Part B services furnished during EPM 
episodes after EPM beneficiary discharge from an anchor or chained 
anchor hospitalization in the AMI, CABG, and SHFFT models are posted on 
the CMS Web site at https://innovation.cms.gov/initiatives/epm.
    Like the CJR model policy, we propose that these exclusion lists 
would be updated by sub-regulatory guidance on an annual basis, at a 
minimum, to reflect annual changes to ICD-10-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 throughout the course of the 
EPMs' performance period (80 FR 73304 through 73305 and 73315). The 
standards for this updating process reflect the aforementioned general 
principles for determining excluded services. That is, we propose to 
not

[[Page 50834]]

exclude any items or services that are directly related to the EPM 
episode diagnosis or procedure (for example, a subsequent admission for 
heart failure or repeat revascularization) or the quality or safety of 
care (for example, sternal wound infection following CABG); or to 
chronic conditions that may be affected by the EPM diagnosis or 
procedure and the post-discharge care (for example, diabetes). We 
propose to exclude items and services for chronic conditions that are 
generally not affected by the EPM diagnosis or procedure and the post-
discharge care (for example, prostate removal for cancer), and for 
acute clinical conditions not arising from existing EPM episode-related 
chronic clinical conditions or complications from the EPM episode (for 
example, appendectomy).
    Similar to the CJR model, we propose that the potential revised 
exclusions, which could include additions to or deletions from the 
exclusions lists, would be posted to the CMS Web site to allow for 
public input (80 FR 73305 and 73315). Through the process for public 
input on potential revised exclusions and then posting of the final 
revised exclusions, we propose to provide information to the public 
about when the revisions would take effect and to which episodes they 
would apply.
    The proposal for included services for an EPM is included in Sec.  
512.210(a). The proposal for excluded services from the EPM episode is 
included in Sec.  512.210(b). The proposal for updating the lists of 
excluded services for EPMs is included in Sec.  512.210(c). We seek 
comment on our proposals for included and excluded services for the 
AMI, CABG, and SHFFT models and updating the lists of excluded 
services.
4. EPM Episodes
a. Beneficiary Care Inclusion Criteria and Beginning of EPM Episodes
(1) General Beneficiary Care Inclusion Criteria
    Because of the clinical variability leading up to these EPM 
episodes and the challenge of identifying unrelated services given the 
multiple chronic conditions experienced by many EPM beneficiaries, we 
propose to follow the CJR model precedent and not begin an EPM episode 
prior to the anchor hospitalization (80 FR 73315 and 73318). We propose 
that all services that are already included in the IPPS payment based 
on established Medicare policies (for example, 3-day payment window 
payment policies) would be included in these EPM episodes, and that the 
defined population of Medicare beneficiaries whose care would be 
included in the EPMs would meet all of the following criteria on 
admission to the anchor or chained anchor hospitalization:
     Enrolled in Medicare Part A and Part B.
     Eligible for Medicare not on the basis of end-stage renal 
disease.
     Not enrolled in any managed care plan (for example, 
Medicare Advantage, Health Care Prepayment Plans, cost-based health 
maintenance organizations).
     Not covered under a United Mine Workers of America health 
plan, which provides health care benefits for retired mine workers.
     Have Medicare as their primary payer.
     Not aligned to an ACO in the Next Generation ACO model or 
an ACO in a track of the Comprehensive ESRD Care Initiative 
incorporating downside risk for financial losses.
     Not under the care of an attending or operating physician, 
as designated on the inpatient hospital claim, who is a member of a 
physician group practice that initiates BPCI Model 2 episodes at the 
EPM participant for the MS-DRG that would be the anchor MS-DRG under 
the EPM.
     Not already in any BPCI model episode.
     Not already in an AMI, SHFFT, CABG or CJR model episode 
with an episode definition that does not exclude the MS-DRG that would 
be the anchor MS-DRG under the applicable EPM.
    For a discussion of our proposal to exclude certain ACO-aligned 
beneficiaries from EPM episodes, we refer to section III.D.6.c.(3) of 
this proposed rule. For a discussion of our proposals for addressing 
potential overlap of beneficiaries in episode payment models that are 
relevant to these last two criteria, we refer to sections III.D.6.c.(1) 
and (2) of this proposed rule.
    The proposal for beneficiary care inclusion policies is included in 
Sec.  512.230. We seek comment on our proposal of beneficiary care 
inclusion policies.
(2) Beginning AMI Model Episodes
    We propose that, as long as the beneficiary meets the general 
beneficiary care inclusion criteria, then an AMI model episode would 
begin with admission of a Medicare beneficiary to an IPPS hospital for 
the following MS-DRGs, where the specific MS-DRG is called the anchor 
MS-DRG for the episode:
     AMI MS-DRGs--
    ++ 280 (Acute myocardial infarction, discharged alive with MCC);
    ++ 281 (Acute myocardial infarction, discharged alive with CC); and
    ++ 282 (Acute myocardial infarction, discharged alive without CC/
MCC).
     PCI MS-DRGs, when the claim includes an AMI ICD-10-CM 
diagnosis code in the principal or secondary position on the IPPS claim 
as specified in Table 3--
    ++ 246 (Percutaneous cardiovascular procedures with drug-eluting 
stent with MCC or 4+ vessels/stents);
    ++ 247 (Percutaneous cardiovascular procedures with drug-eluting 
stent without MCC);
    ++ 248 (Percutaneous cardiovascular procedures with non-drug-
eluting stent with MCC or 4+ vessels/stents);
    ++ 249 (Percutaneous cardiovascular procedures with non-drug-
eluting stent without MCC);
    ++ 250 (Percutaneous cardiovascular procedures without coronary 
artery stent with MCC); and
    ++ 251 (Percutaneous cardiovascular procedures without coronary 
artery stent without MCC).
    Table 3 displays the ICD-9-CM codes that we propose to use to 
identify historical AMI episodes for beneficiaries discharged from PCI 
MS-DRGs, as well as the ICD-10-CM diagnosis codes that would be used to 
identify AMI model episodes for beneficiaries discharged from PCI MS-
DRGs throughout the duration of the AMI model. The proposed sub-
regulatory process for updating this AMI ICD-10-CM diagnosis code list 
is described previously in section III.C.3.a.(1) of this proposed rule.
    We first identified the ICD-9-CM diagnosis codes for the initial 
AMI episode-of-care that were historically used to report care for a 
newly diagnosed AMI patient admitted to the hospital. These codes all 
have a fifth digit of ``1'' and were applicable until the patient was 
discharged from acute medical care, including for any transfers to and 
from other acute care facilities that occurred. These AMI ICD-9-CM 
diagnosis codes would be used to identify historical AMI episodes for 
developing AMI model-episode benchmark prices for anchor PCI MS-DRGs. 
We propose to cross-walk the ICD-9-CM diagnosis codes for the initial 
AMI episode-of-care to the ICD-10-CM diagnosis codes that would be 
reported for similar beneficiaries during the AMI model performance 
years. The proposed crosswalk in Table 3 is consistent with the 
crosswalk CMS posted for public comment regarding ICD-9-CM to ICD-10-CM 
diagnosis

[[Page 50835]]

codes used for HIQR Program measures, including AMI quality 
measures.\48\
---------------------------------------------------------------------------

    \48\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/HIQR-ICD9-to-ICD10-Tables.pdf.

 Table 3--Proposed ICD-9-CM and ICD-10-CM AMI Diagnosis Codes in the Principal or Secondary Position on the IPPS
                        Claim for PCI MS-DRGS (246-251) That Initiate AMI Model Episodes
----------------------------------------------------------------------------------------------------------------
                                                                       ICD-10-CM
       ICD-9-CM Diagnosis code            ICD-9-CM Description      Diagnosis code      ICD-10-CM Description
----------------------------------------------------------------------------------------------------------------
410.01..............................  Acute myocardial infarction           121.09  ST elevation (STEMI)
                                       of anterolateral wall,                        myocardial infarction
                                       initial episode of care.                      involving other coronary
                                                                                     artery of anterior wall.
                                                                             122.0  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of anterior
                                                                                     wall.
410.11..............................  Acute myocardial infarction           121.01  ST elevation (STEMI)
                                       of other anterior wall,                       myocardial infarction
                                       initial episode of care.                      involving left main
                                                                                     coronary artery.
                                                                            121.02  ST elevation (STEMI)
                                                                                     myocardial infarction
                                                                                     involving left anterior
                                                                                     descending coronary artery.
                                                                            121.09  ST elevation (STEMI)
                                                                                     myocardial infarction
                                                                                     involving other coronary
                                                                                     artery of anterior wall.
                                                                             122.0  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of anterior
                                                                                     wall.
410.21..............................  Acute myocardial infarction           121.10  ST elevation (STEMI)
                                       of inferolateral wall,                        myocardial infarction
                                       initial episode of care.                      involving other coronary
                                                                                     artery of inferior wall.
                                                                             122.1  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of inferior
                                                                                     wall.
410.31..............................  Acute myocardial infarction           121.11  ST elevation (STEMI)
                                       of inferoposterior wall,                      myocardial infarction
                                       initial episode of care.                      involving right coronary
                                                                                     artery.
                                                                             122.1  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of inferior
                                                                                     wall.
410.41..............................  Acute myocardial infarction           121.19  ST elevation (STEMI)
                                       of other inferior wall,                       myocardial infarction
                                       initial episode of care.                      involving other coronary
                                                                                     artery of inferior wall.
                                                                             122.1  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of inferior
                                                                                     wall.
410.51..............................  Acute myocardial infarction           121.29  ST elevation (STEMI)
                                       of other lateral wall,                        myocardial infarction
                                       initial episode of care.                      involving other sites.
                                                                             122.8  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of other sites.
410.61..............................  True posterior wall                   121.29  ST elevation (STEMI)
                                       infarction, initial episode                   myocardial infarction
                                       of care.                                      involving other sites.
                                                                             122.8  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of other sites.
410.71..............................  Subendocardial infarction,             121.4  Non[dash]ST elevation
                                       initial episode of care.                      (NSTEMI) myocardial
                                                                                     infarction.
                                                                             122.2  Subsequent non[dash]ST
                                                                                     elevation (NSTEMI)
                                                                                     myocardial infarction.
410.81..............................  Acute myocardial infarction           121.21  ST elevation (STEMI)
                                       of other specified sites,                     myocardial infarction
                                       initial episode of care.                      involving left circumflex
                                                                                     coronary artery.
                                                                            121.29  ST elevation (STEMI)
                                                                                     myocardial infarction
                                                                                     involving other sites.
                                                                             122.8  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of other sites.
410.91..............................  Acute myocardial infarction            121.3  ST elevation (STEMI)
                                       of unspecified site,                          myocardial infarction of
                                       initial episode of care.                      unspecified site.
                                                                             122.9  Subsequent ST elevation
                                                                                     (STEMI) myocardial
                                                                                     infarction of unspecified
                                                                                     site.
----------------------------------------------------------------------------------------------------------------

    The proposal for beginning AMI model episodes is included in Sec.  
512.240(a)(1). We seek comment on our proposal to begin AMI model 
episodes.
(3) Beginning CABG Model Episodes
    We propose that, as long as a beneficiary meets the general 
beneficiary care inclusion criteria, a CABG model episode would begin 
with the admission of a Medicare beneficiary to an IPPS hospital for a 
CABG that is paid under the following CABG MS-DRGs and the specific MS-
DRG is called the anchor MS-DRG for the episode:
     231 (Coronary bypass with percutaneous transluminal 
coronary angioplasty (PTCA) with MCC).
     232 (Coronary bypass with PTCA without MCC).
     233 (Coronary bypass with cardiac catheterization with 
MCC).
     234 (Coronary bypass with cardiac catheterization without 
MCC).
     235 (Coronary bypass without cardiac catheterization with 
MCC).
     236 (Coronary bypass without cardiac catheterization 
without MCC).
    The proposal for beginning CABG episodes is included in Sec.  
512.240(b)(1). We seek comment on our proposal to begin CABG model 
episodes.

[[Page 50836]]

(4) Beginning SHFFT Episodes
    We propose that as long as a beneficiary meets the general 
inclusion criteria, a SHFFT model episode would begin with the 
admission of a Medicare beneficiary to an IPPS hospital for surgical 
treatment of hip or femur fracture (other than joint replacement) that 
is paid under the following SHFFT MS-DRGs and where the specific MS-DRG 
is called the anchor MS-DRG for the episode:
     480 (Hip and femur procedures except major joint with 
MCC).
     481 (Hip and femur procedures except major joint with 
complication or comorbidity (CC).
     482 (Hip and femur procedures except major joint without 
CC or MCC).
    The proposal for beginning SHFFT model episodes is included in 
Sec.  512.240(c)(1). We seek comment on our proposal to begin SHFFT 
model episodes.
(5) Special Policies for Hospital Transfers of Beneficiaries With AMI
    The asymmetric distribution of cardiac care across hospitals makes 
transfer, either from an inpatient admission or from the emergency 
department (without inpatient admission) of one hospital to another, a 
common consideration in the treatment course for beneficiaries with an 
initial diagnosis of AMI. Therefore, transfer for cardiac care is an 
important consideration for the AMI and CABG models.
    The availability of revascularization and intensive cardiac care 
are particularly important considerations in the transfer of 
beneficiaries with an AMI. A substantial portion of hospitals do not 
have revascularization capability (that is, a cardiac catheterization 
lab for PCI or cardiothoracic surgeons who can perform CABG) or 
cardiovascular intensive care units (CVICU) and, therefore, must 
transfer beneficiaries to provide access to these services. In the PCI 
and CABG examples, the discharge from the transfer hospital that 
accepted the beneficiary would result in discharge under the MS-DRGs 
for PCI (246-251) or CABG (231-236). For the CVICU example, the 
transfer hospital's discharge MS-DRG would be AMI (280-282). There is 
evidence of the asymmetric distribution of cardiac care in the 2014 
IPPS and critical access hospital claims data: while 4,332 hospitals 
submitted at least one claim for an AMI MS-DRG, only 1,755 (41 percent) 
and 1,156 (27 percent) of these hospitals filed at least one claim for 
PCI or CABG MS-DRGs, respectively.\49\
---------------------------------------------------------------------------

    \49\ AMI, CABG and PCI MS-DRG inpatient claims from all U.S. 
IPPS hospitals and CAHs derived from the 2014 Geographic Variations 
Inpatient Claims File located in the Chronic Conditions Warehouse.
---------------------------------------------------------------------------

    The potential transfer scenarios are best illustrated by the care 
pathways experienced by beneficiaries with AMI. These beneficiaries 
typically present to a hospital's emergency department where the 
evaluation identifies the AMI diagnosis and determines the initial 
indicated treatments. Depending on the beneficiary's clinical needs and 
the hospital's treatment capacity, the beneficiary could be--
     Admitted to the initial treating hospital, with no 
transfer to another hospital during the initial hospitalization for 
AMI. We refer to this scenario as no transfer;
     Admitted to the initial treating hospital and later 
transferred to a transfer hospital. We refer to this scenario as 
inpatient-to-inpatient transfer and the transfer hospital as an i-i 
transfer hospital; or
     Transferred from the initial treating hospital to a 
transfer hospital without admission to the initial treating hospital. 
We refer to this scenario as outpatient-to-inpatient transfer and the 
transfer hospital as an o-i transfer hospital.
    Our proposals and alternatives considered for these scenarios are 
described in detail in this section. In our proposals for AMI or CABG 
model episodes for initial AMI care, our overarching policy is that 
every AMI or CABG model episode would begin at the first AMI or CABG 
model participant to which the beneficiary is admitted for an AMI MS-
DRG, PCI MS-DRG with an AMI ICD-CM diagnosis code, or CABG MS-DRG. The 
AMI or CABG model participant where the episode begins would then be 
financially responsible for the AMI or CABG model episode unless the 
episode is canceled.
    Based on our analysis of Medicare claims data, about 75 percent of 
historical AMI episodes and CABG episodes for beneficiaries with AMI 
begin through the emergency department of the hospital where the anchor 
hospitalization for the AMI or CABG model episode would occur. In 
another 18 percent of historical AMI episodes and CABG episodes for 
beneficiaries with AMI, the anchor hospitalization occurs at a transfer 
hospital following an emergency department visit at another hospital 
without admission to that hospital for an MS-DRG that would initiate an 
AMI or CABG model episode.\50\
---------------------------------------------------------------------------

    \50\ Episode for beneficiaries with AMI initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule that end in CY 2014.
---------------------------------------------------------------------------

    In each of these scenarios, policies to determine which episode 
type applies, the beginning of the episode, and the specific hospital 
with financial responsibility for the episode must be determined (for 
example, AMI or CABG, if CABG is provided as an initial treatment in an 
outpatient-to-inpatient or inpatient-to-inpatient scenario). In this 
section, we discuss each of the scenarios in detail and provide a 
summary of the scenarios in Table 4.
    In the no transfer scenario, the episode would begin upon admission 
to an AMI or CABG model participant under circumstances that meet the 
criteria discussed in sections III.C.4.a.(1) and (2) or (3) of this 
proposed rule, and the AMI or CABG model episode that applies would be 
determined by the specific MS-DRG for the anchor hospitalization. 
Financial responsibility for the episode would be attributed to the 
sole treating hospital involved in the initial AMI care. Under this 
proposal, the treating hospital's quality measure performance would 
determine the effective discount factor to be applied to the AMI or 
CABG model benchmark episode price for the episode at reconciliation as 
described in section III.D.4.b.(10) of this proposed rule.
    The inpatient-to-inpatient transfer scenario has several potential 
outcomes. If the beneficiary initially presents for AMI care to a 
hospital that is not an AMI model participant and is admitted and then 
transferred to an i-i transfer hospital that is an AMI or CABG model 
participant, the episode would first initiate at the i-i transfer 
hospital and, therefore, the i-i transfer hospital would be financially 
responsible for the AMI or CABG model episode. The i-i transfer 
hospital's quality measure performance would determine the effective 
discount factor to be applied to the AMI or CABG model benchmark 
episode price for the episode at reconciliation as described in section 
III.D.4.b.(10) of this proposed rule.
    Conversely, if a beneficiary initially presents for AMI care to an 
AMI model participant and is admitted and then transferred to an i-i 
transfer hospital (hereinafter a chained anchor hospitalization) and 
the i-i transfer hospital is not an AMI or CABG model participant, the 
episode would initiate at the initial treating hospital and would only 
be canceled for beneficiaries discharged from the i-i transfer hospital

[[Page 50837]]

under MS-DRGs that are not anchor MS-DRGs for AMI or CABG model 
episodes is discussed in section III.C.4.b. of this proposed rule. The 
initial treating hospital's quality measure performance would determine 
the effective discount factor to be applied to the AMI or CABG model 
benchmark episode price for the episode at reconciliation as described 
in section III.D.4.b.(10) of this proposed rule. We also refer to 
section III.D.4.b.(2)(a) of this proposed rule for further discussion 
of price MS-DRGs that may differ from the anchor MS-DRG in AMI model 
episodes that include a chained anchor hospitalization, in order to 
provide pricing adjustments for episodes where the initial treating 
hospital is responsible for the AMI model episode.
    Inpatient-to-inpatient transfers between AMI and CABG model 
participant hospitals are further considered in this section and 
specifically include beneficiaries experiencing an AMI who are 
transferred for revascularization (that is, PCI or CABG) or a higher 
level of medical AMI care. We note that of all beneficiaries 
experiencing an AMI in historical episodes, about half received no 
revascularization (PCI or CABG) during the anchor hospitalization or 
the 90-day post-hospital discharge period, about 40 percent received a 
PCI, and less than 10 percent had CABG surgery.\51\ Moreover, three-
quarters of CABG procedures and over 90 percent of PCIs for 
beneficiaries experiencing an AMI occurred at the hospital that first 
admitted the beneficiary for an inpatient hospitalization.\52\
---------------------------------------------------------------------------

    \51\ Episodes for beneficiaries with AMI initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule, and that end in CY 2014.
    \52\ Episodes for beneficiaries with AMI initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule, and that end in CY 2014.
---------------------------------------------------------------------------

    However, given the asymmetric distribution of cardiac care capacity 
there will be beneficiaries who initiate an AMI model episode by 
admission to an initial treating hospital but then require transfer to 
an i-i transfer hospital for additional treatment during the AMI model 
episode, resulting in a chained anchor hospitalization. For historical 
AMI episodes ending in CY 2014, only about 12 percent of beneficiaries 
who would have initiated an AMI model episode through admission and 
assignment to an AMI MS-DRG at the initial treating hospital were 
transferred to an i-i transfer hospital, with 30 percent and 20 percent 
receiving PCI or CABG, respectively, at the i-i transfer hospital. 
Another 20 percent were discharged from the i-i transfer hospital in 
the chained anchor hospitalization under an AMI MS-DRG. The remaining 
30 percent of beneficiaries were discharged from the i-i transfer 
hospital in the chained anchor hospitalization under other MS-DRGs that 
would not have initiated AMI or CABG model episodes, including cardiac 
valve surgery, septicemia, and renal failure. From the perspective of 
hospital capacity and transfer patterns, most hospitals transferred 
less than 10 percent of beneficiaries initiating a historical AMI 
episode under an AMI MS-DRG at the first admitting hospital, and only a 
handful of hospitals transferred the majority of their patients in this 
scenario.\53\ This small number of hospitals that transferred the 
majority of their patients includes a range of urban and rural 
hospitals with 50 to 250 beds.
---------------------------------------------------------------------------

    \53\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that end in CY 2014.
---------------------------------------------------------------------------

    The need to transfer a beneficiary in an AMI model episode during 
the anchor hospitalization for appropriate care that results in a 
chained anchor hospitalization where the hospitals are both AMI or CABG 
model participants raises considerations about whether attribution of 
the AMI model episode should be to the first treating hospital that 
admitted the beneficiary or the i-i transfer hospital, as well as 
considerations about the specific model (AMI or CABG) for attribution 
of the episode in some circumstances. For example, if the first 
treating hospital initiates an AMI model episode by admitting a 
beneficiary and then transfers the beneficiary to another hospital 
where the beneficiary is treated and ultimately discharged from acute 
care, ending the chained anchor hospitalization under a CABG MS-DRG, 
then we need to determine whether the beneficiary would be included in 
the AMI or CABG model, which hospital assumes financial responsibility 
for the beneficiary's episode, and under what circumstances, if any, 
would the AMI model episode be canceled if a transfer occurs.
    In considering the model episode that includes the beneficiary's 
care and accountability for the beneficiary in inpatient-to-inpatient 
transfer scenarios between AMI and CABG model participant hospitals 
that result in a chained anchor hospitalization for AMI, several 
factors are relevant, including the timing of final discharge 
disposition of the beneficiary, including to post-acute care; the 
location of the post-acute care; the identity and location of the 
physician who is most responsible for managing the beneficiary's care 
after discharge; and consistency across other CMS transfer policies. We 
note that while 64 percent of CABG beneficiaries in historical episodes 
received post-acute care services following discharge from the anchor 
hospitalization (most commonly home health services--43 percent 
received home health services only and 13 percent a combination of home 
health and SNF services), only 36 percent of historical AMI 
beneficiaries received post-acute services.\54\ Of further relevance 
for beneficiaries with an AMI diagnosis is that significant follow up 
care is usually performed by cardiologists who manage the patient's 
underlying cardiovascular disease, rather than the interventional 
cardiologist or cardiothoracic surgeon that perform the 
revascularization procedure. PCI procedures, billed by interventional 
cardiologists, have a 0-day global period, reflecting that follow up 
care is not typically furnished by interventional cardiologists. We 
further note that patients in commercial programs that require travel 
to regional centers of excellence for CABG generally only stay in the 
remote location away from the patient's home for a week or so post-
hospital discharge. We expect that beneficiaries hospitalized for 
treatment of AMI, even if they are transferred to a revascularization 
hospital resulting in a chained anchor hospitalization, would receive 
most follow up care in their local communities, a view that was 
supported by many commenters on the CJR model proposed rule who 
asserted that many patients requiring post-acute care prefer to return 
to their home communities for that care following hospital discharge 
(80 FR 23457). Finally, consistency across other CMS program policies 
when a beneficiary with an AMI experiences an inpatient-to-inpatient 
transfer is relevant to developing policies for the proposed AMI and 
CABG models. Specifically, we note that the Hospital-Level, Risk-
Standardized Payment Associated with a 30-Day Episode of Care for AMI 
(NQF #2431) measure used in the hospital value-based purchasing (HVBP) 
Program attributes payments for transferred beneficiaries to the 
hospital that

[[Page 50838]]

admitted the patient for the initial AMI hospitalization.\55\
---------------------------------------------------------------------------

    \54\ Episodes for AMI and CABG beneficiaries initiated by all 
U.S. IPPS hospitals and constructed using standardized Medicare FFS 
Parts A and B claims, as proposed in this rule that end in CY 2014.
    \55\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    Based on these considerations, we propose that once an AMI model 
episode is initiated at an AMI model participant hospital through an 
inpatient hospitalization, the AMI model episode would continue under 
the financial responsibility of that participant hospital, regardless 
of whether the beneficiary is transferred to another AMI or CABG model 
participant hospital for further medical management of AMI, or for a 
PCI or CABG during a chained anchor hospitalization. Under this 
proposal, the initial treating hospital's quality measure performance 
would determine the effective discount factor to be applied to the AMI 
model benchmark episode price for the episode at reconciliation as 
described in section III.D.4.b.(10) of this proposed rule. Our proposal 
to cancel AMI model episodes for beneficiaries discharged from the i-i 
transfer hospital under MS-DRGs that are not anchor MS-DRGs for AMI or 
CABG model episodes is discussed in section III.C.4.b. of this proposed 
rule. We also refer to section III.D.4.b.(2)(a) of this proposed rule 
for further discussion of price MS-DRGs that may differ from the anchor 
MS-DRG in AMI model episodes that include a chained anchor 
hospitalization, in order to provide pricing adjustments for episodes 
where the initial treating hospital is responsible for the AMI model 
episode.
    We note that we do not propose to cancel the AMI model episode even 
if the transfer and admission to the i-i transfer hospital would 
otherwise initiate a CABG model episode at the i-i transfer hospital. 
We believe that once the AMI model episode has been initiated, all 
related care during the episode (including hospital care for transfers 
and related readmissions for CABG) should be fully attributed to the 
AMI model episode in the manner described in this section for the 
episode and that the first hospital that initiated the AMI model 
episode should be financially responsible for the AMI episode. 
Therefore, we do not propose to cancel the AMI model episode if a CABG 
is performed during a chained anchor hospitalization, nor do we propose 
that a beneficiary could simultaneously be in an AMI and CABG model 
episode for overlapping periods of time due to the different MS-DRGs 
that apply during the chained anchor hospitalization. Instead, we would 
make an AMI model episode pricing adjustment for these circumstances by 
paying the AMI model participant based on a price MS-DRG that is 
different from the anchor MS-DRG to reflect Medicare payment for the 
CABG as discussed in section III.D.4.b.(2)(a) of this proposed rule.
    We considered several alternatives to our proposal for AMI model 
episode attribution for inpatient-to-inpatient transfer scenario where 
both hospitals are AMI or CABG model participants. First, we considered 
canceling the AMI model episode initiated at the initial treating 
hospital when a transfer occurs, and basing any AMI or CABG model 
episode initiation on the MS-DRG for the final i-i transfer hospital 
admission in the chained anchor hospitalization as long as that latter 
hospital is an AMI or CABG model participant. This would place 
financial responsibility for the episode on the i-i transfer hospital 
if the beneficiary goes on to be discharged from acute care at that 
hospital. Attributing episodes under this alternative policy would 
assign beneficiaries to the final i-i transfer hospital for the AMI or 
CABG model episode based on the model episode definitions in sections 
III.C.4.a.(2) and (3) of this proposed rule. That is, if the 
beneficiary is discharged from the final admission in the chained 
anchor hospitalization under an AMI MS-DRG or a PCI MS-DRG, then the 
AMI model episode initiated at the initial treating hospital would be 
canceled and the i-i transfer hospital accepting the beneficiary on 
referral would initiate an AMI model episode. Similarly, if the 
beneficiary is discharged from the final admission in the chained 
anchor hospitalization under a CABG MS-DRG, then the AMI model episode 
initiated at the first hospital would be canceled and the i-i transfer 
hospital accepting the beneficiary on referral would initiate a CABG 
model episode. Under this alternative, the i-i transfer hospital's 
quality measure performance would determine the effective discount 
factor to be applied to the AMI or CABG model benchmark episode price 
for the episode at reconciliation as described in section 
III.D.4.b.(10) of this proposed rule. However, we do not propose this 
alternative because we believe that post-acute care and care management 
following hospital discharge are more likely to be effectively provided 
near the beneficiary's home community, rather than near the i-i 
transfer hospital accepting the beneficiary upon referral.
    Second, we considered proposing an episode hierarchy such that, 
during a chained anchor hospitalization, the most resource-intensive 
MS-DRG during the whole chained anchor hospitalization would determine 
the model episode and the financially responsible hospital for the 
episode. For example, if we establish CABG, PCI, and AMI MS-DRGs in 
descending order of inpatient hospital resource-intensity, we would 
initiate a model episode based on the most resource-intensive MS-DRG 
during the chained anchor hospitalization and attribute the model 
episode to the hospital discharging the beneficiary under that MS-DRG. 
Under this scenario, either the initial treating or i-i transfer 
hospital's quality measure performance would determine the effective 
discount factor to be applied to the AMI or CABG model benchmark 
episode price for the episode at reconciliation as described in section 
III.D.4.b.(10) of this proposed rule, depending on the specific 
hospital discharging the beneficiary under the most resource-intensive 
MS-DRG during the chained anchor hospitalization. However, we do not 
propose this alternative because we believe, like the first alternative 
we considered, this could frequently lead to episode responsibility 
being attributed to the i-i transfer hospital when the local hospital 
first caring for the beneficiary with AMI may be better positioned to 
coordinate care in the beneficiary's home community.
    Thus, our proposal would place responsibility for care during the 
90-day post-hospital discharge period in the AMI model episode on the 
AMI model participant hospital to which the beneficiary initially 
presented for AMI care and was admitted, rather than on the i-i 
transfer hospital to which the beneficiary was transferred after 
initiating the AMI model episode. Given the broad episode definition of 
AMI model episodes, we believe that the post-discharge care required 
following hospitalization that includes CABG, PCI, or medical 
management is best coordinated and managed by the hospital that 
originally admitted the beneficiary for the AMI. Such post-discharge 
care could include follow up for adherence to cardiac rehabilitation 
referral and management of the beneficiary's underlying CAD and 
comorbidities. Even in the case of the more common surgical 
complications of CABG, such as wound infection, the beneficiary 
commonly would be admitted to the local hospital for treatment.
    We further propose that, as discussed in section III.I.3 of this 
proposed rule, hospitals may be collaborators in the AMI, CABG, and 
SHFFT models in order to increase the financial alignment of hospitals 
and other EPM collaborators with EPM participants that are

[[Page 50839]]

financially responsible for EPM episodes. Therefore, we expect that 
community hospital participants in the AMI model would be able to enter 
into collaboration agreements with i-i transfer hospitals accepting AMI 
model beneficiaries on referral to allow sharing of episode 
reconciliation payments or repayment responsibility with the i-i 
transfer hospitals if those hospitals play a significant role in care 
redesign of AMI or CABG care pathways or management of beneficiaries 
throughout AMI or CABG model episodes, including during the 90 days 
post-hospital discharge. We expect that community hospitals would need 
to coordinate closely with i-i transfer hospitals accepting AMI model 
beneficiaries on referral as the beneficiaries in AMI model episodes 
are discharged from those hospitals, in order to improve the quality 
and efficiency of AMI model episodes. This coordination could 
potentially be enhanced if i-i transfer hospitals are AMI model 
collaborators with financial incentives that are aligned with those of 
the AMI model participants through sharing arrangements.
    The proposal for AMI model episode attribution in circumstances 
that involve inpatient-to-inpatient transfers of beneficiaries with AMI 
is included in Sec.  512.240(a)(2). We seek comment on our proposal for 
AMI model episode attribution in circumstances that involve inpatient-
to-inpatient transfers of beneficiaries with AMI, including comment on 
the alternatives considered.
    In the outpatient-to-inpatient transfer scenario where a 
beneficiary with AMI is transferred from the emergency department of 
the initial treating hospital without admission to that hospital as an 
inpatient to an o-i transfer hospital for admission, we propose that 
the AMI or CABG model episode would begin at the o-i transfer hospital 
based on the MS-DRG (and AMI ICD-CM diagnosis code if a PCI MS-DRG 
applies) that is assigned to that anchor hospitalization. That is, if a 
beneficiary receives initial AMI care in a hospital emergency 
department without admission and is transferred to an AMI or CABG model 
participant (the o-i transfer hospital) for admission, then the AMI or 
CABG model episode would begin in the first hospital involved in the 
beneficiary's AMI or CABG care that admits the beneficiary as an 
inpatient, specifically the o-i transfer hospital. Therefore, the o-i 
transfer hospital would be financially responsible for the AMI or CABG 
model episode. This proposed attribution is in accordance with the 
proposed AMI and CABG model rules, as discussed in sections 
III.C.4.a.(2) and (3) of this proposed rule, that initiate an AMI model 
episode with a hospitalization that results in discharge from an AMI 
MS-DRG or PCI MS-DRG with an AMI ICD-CM diagnosis code in the principal 
or secondary position from an AMI model participant or a CABG model 
episode with a hospitalization that results in discharge from a CABG 
MS-DRG. Under this proposal, the o-i transfer hospital's quality 
measure performance would determine the effective discount factor to be 
applied to the AMI or CABG model benchmark episode price for the 
episode at reconciliation as described in section III.D.4.b.(10) of 
this proposed rule. Under this proposal, regardless of whether the 
initial treating hospital is an AMI or CABG model participant, an AMI 
or CABG model episode would only be initiated at the o-i transfer 
hospital if that hospital is an AMI or CABG model participant.
    We considered an overarching alternative policy that would begin 
every AMI or CABG model episode at the first AMI or CABG model 
participant at which either:
     The beneficiary presented to the emergency department for 
initial AMI care before being transferred to an o-i transfer hospital; 
or
     The beneficiary was admitted for an AMI MS-DRG, PCI MS-DRG 
with an AMI ICD-CM diagnosis code, or a CABG MS-DRG.
    The AMI or CABG model participant where the episode begins would 
then be financially responsible for the AMI or CABG model episode 
unless the episode is canceled. Under this alternative, there would no 
changes to our proposals for attributing episodes with no transfers or 
inpatient-to-inpatient transfers.
    However, under this alternative, if the beneficiary presented for 
initial AMI care to the emergency department of an AMI or CABG model 
participant, the AMI or CABG model episode would begin at this initial 
treating hospital when a beneficiary is transferred from the emergency 
department for his or her first inpatient hospitalization which occurs 
at an o-i transfer hospital. This would place financial responsibility 
for the AMI or CABG model episode on the initial treating hospital 
despite the fact that the beneficiary was transferred from that 
hospital without being admitted, and the initial treating hospital's 
quality measure performance would determine the effective discount 
factor to be applied to the AMI or CABG model benchmark episode price 
for the episode at reconciliation as described in section 
III.D.4.b.(10) of this proposed rule.
    Identifying the emergency department visit at the initial treating 
hospital would require using Field (Form Locator) 15--Point of Origin 
for Admission or Visit code on the CMS 1450 IPPS claim from the o-i 
transfer hospital to identify transfer from another hospital and 
linking that claim to the hospital outpatient claims from the initial 
treating hospital for the emergency department visit and other hospital 
outpatient services that occurred within a certain period of time prior 
to the o-i transfer hospital admission and that are related to the AMI 
care. The episode would be assigned to the AMI model even if the 
beneficiary received a CABG at the o-i transfer hospital, and we would 
assign financial responsibility for the AMI model episode to the 
initial treating hospital. Under this alternative, the initial treating 
hospital's quality measure performance would determine the effective 
discount factor to be applied to the AMI model benchmark episode price 
for the episode at reconciliation as described in section 
III.D.4.b.(10) of this proposed rule. We would also need to identify 
other types of related services to include in the episode that would 
begin prior to the o-i transfer hospital admission, such as physicians' 
services for care in the emergency department.
    This alternative would have the benefit of consistently including 
all care in each AMI or CABG model episode that occurs following 
presentation of a beneficiary with AMI to the emergency department of 
an AMI or CABG model participant in the AMI or CABG model episode, 
regardless of whether an AMI or CABG model episode involves no 
transfer, o-i transfer, or i-i transfer. However, because this 
alternative would begin the AMI model episode prior to the initial 
hospital admission, we would need to establish additional policies for 
identifying the beneficiaries who initiate these episodes and define 
the timeframe and services that would be included in the AMI or CABG 
model episode prior to admission to the o-i transfer hospital.
    We do not propose this alternative because we believe the policies 
necessary to begin the AMI or CABG model episode at the first treating 
hospital when an inpatient hospitalization does not occur would be 
complex, challenging to operationalize, and require assumptions about 
the relationship of care to the AMI based solely on administrative 
claims data that are insufficient to ensure we can accurately identify 
related care. We believe it remains problematic to define the services 
to be included in AMI or CABG model episodes if those services precede 
an inpatient hospitalization that

[[Page 50840]]

would otherwise initiate the AMI or CABG model episode. For example, we 
would need to define the timeframe for beginning an AMI or CABG model 
episode with an emergency department visit for AMI that results in a 
transfer to the o-i transfer hospital, as well as the Part A and Part B 
services to be included in the AMI or CABG model episode that would 
result. As we discuss in section III.C.4.a.(1) of this proposed rule, 
we do not propose to begin any EPM episode prior to the anchor 
hospitalization because of the clinical variability leading up to all 
EPM episodes and the challenge of identifying unrelated services prior 
to the inpatient hospitalization. Thus, we do not propose to make an 
exception for transfers from the emergency department of the initial 
treating AMI or CABG model participant hospital when the beneficiary 
with AMI is not admitted to that hospital.
    We seek comment on the proposal for AMI and CABG model episode 
initiation and attribution for the outpatient-to-inpatient transfer 
scenario, as well as the alternative considered that would begin an 
episode upon presentation of a beneficiary for initial AMI care to the 
emergency department of an AMI or CABG model participant when the care 
results in an outpatient-to-inpatient transfer.
    Table 4 provides a summary of our proposals for episode initiation 
and attribution at the beginning of AMI care for no transfer, 
inpatient-to-inpatient transfer, and outpatient-to-inpatient transfer 
scenarios, including a description of how these relate to the 
participation in the AMI or CABG models of hospitals providing initial 
AMI care.

   Table 4--Proposed Initiation and Attribution of AMI and CABG Model
    Episodes That Involve No Transfer, or Outpatient-to-Inpatient or
      Inpatient-to-Inpatient Transfers at the Beginning of AMI Care
------------------------------------------------------------------------
                                              Episode initiation and
                Scenario                           attribution
------------------------------------------------------------------------
No transfer (participant): Beneficiary   Initiate AMI or CABG model
 admitted to an initial treating          episode based on anchor
 hospital that is a participant in the    hospitalization MS-DRG.
 AMI or CABG model for an AMI MS-DRG,    Attribute episode to the
 PCI MS-DRG with AMI ICD-CM diagnosis     initial treating hospital.
 code, or CABG MS-DRG.
No transfer (nonparticipant):            No AMI or CABG model episode is
 Beneficiary admitted to an initial       initiated.
 treating hospital that is not a
 participant in the AMI or CABG model
 for an AMI MS-DRG, PCI MS-DRG with AMI
 ICD-CM diagnosis code, or CABG MS-DRG.
Inpatient-to-inpatient transfer          Initiate AMI or CABG model
 (nonparticipant to participant):         episode based on the MS-DRG at
 Beneficiary admitted to an initial       i-i transfer hospital.
 treating hospital that is not an AMI    Attribute episode to the i-i
 or CABG model participant and later      transfer hospital.
 transferred to an i-i transfer
 hospital that is an AMI or CABG model
 participant for an AMI MS-DRG, PCI MS-
 DRG with AMI ICD-CM diagnosis code, or
 CABG MS-DRG.
Inpatient-to-inpatient transfer          Initiate AMI or CABG model
 (participant to participant or           episode based on anchor
 participant to nonparticipant):          hospitalization MS-DRG at
 Beneficiary admitted to an initial       initial treating hospital. If
 treating hospital that is an AMI or      the chained anchor
 CABG model participant for an AMI MS-    hospitalization results in a
 DRG, PCI MS-DRG with AMI ICD-CM          final AMI, PCI, or CABG MS-
 diagnosis code, or CABG MS-DRG and       DRG, calculate episode
 later transferred to an i-i transfer     benchmark price based on the
 hospital for an AMI, PCI, or CABG MS-    AMI, PCI or CABG MS-DRG with
 DRG, regardless of whether the i-i       the highest IPPS weight. If
 transfer hospital is an AMI or CABG      the final MS-DRG is not an
 model participant.                       AMI, PCI, or CABG MS-DRG,
                                          cancel the episode. Attribute
                                          episode to the initial
                                          treating hospital.
Outpatient-to-inpatient transfer         Initiate AMI or CABG model
 (nonparticipant to participant or        episode based on anchor
 participant to participant):             hospitalization MS-DRG at o-i
 Beneficiary transferred without          transfer hospital. Attribute
 admission from the initial treating      episode to the o-i transfer
 hospital, regardless of whether the      hospital.
 initial treating hospital is an AMI or
 CABG model participant, to a o-i
 transfer hospital that is an AMI or
 CABG model participant and is
 discharged from the o-i transfer
 hospital for an AMI MS-DRG, PCI MS-DRG
 with AMI ICD-CM diagnosis code, or
 CABG MS-DRG.
Outpatient-to-inpatient transfer         No AMI or CABG model episode is
 (participant to nonparticipant):         initiated.
 Beneficiary transferred without
 admission from the initial treating
 hospital that is an AMI or CABG
 participant to an o-i transfer
 hospital that is not an AMI or CABG
 model participant.
------------------------------------------------------------------------

b. Middle of EPM Episodes
    Similar to the CJR model, we propose that once an EPM episode 
begins, it would continue until the end of the episode as described in 
the following section, unless certain circumstances arise during the 
episode (80 FR 73318). When an EPM episode is canceled, we propose that 
the services furnished to beneficiaries prior to and following the EPM 
episode cancellation would continue to be paid by Medicare as usual but 
there would be no actual EPM episode spending calculation that would be 
reconciled against the EPM quality-adjusted target price.
    Specifically, we propose that the following circumstances occurring 
during an EPM episode would cancel the EPM episode:
     The beneficiary ceases to meet any of the general 
beneficiary inclusion criteria described in section III.C.4.a.(1) of 
this proposed rule, except the three criteria regarding inclusion in 
other episode payment model episodes.
     The beneficiary dies during the anchor hospitalization.
     The beneficiary initiates any BPCI model episode.
    For purposes of cancellation of EPM episodes for beneficiary 
overlap with other episode payment models, we propose that if a 
beneficiary in an EPM episode would initiate any BPCI model episode, 
the EPM episode would be canceled. We refer to section III.D.6.c.(1) of 
this proposed rule for further discussion of our proposals addressing 
potential overlap of beneficiaries in the proposed EPMs with BPCI. We 
also refer to section III.D.6.c.(3) of this proposed rule for 
discussion of our proposal to cancel EPM episodes for beneficiaries who 
become aligned with specified ACOs during EPM episodes.
    Our proposal to only cancel the EPM episode if a beneficiary dies 
during the anchor hospitalization differs from the final CJR model 
policy that cancels an

[[Page 50841]]

episode if a beneficiary dies any time during the episode (80 FR 
73318). As discussed in the CJR model Final Rule for LEJR episode, we 
believe that it also would be appropriate to cancel an episode in the 
AMI, CABG, and SHFFT models when a beneficiary dies during the anchor 
hospitalization as there would be limited incentives for efficiency 
that could be expected during the anchor hospitalization itself (80 FR 
73318). We agreed with commenters on the CJR model proposed rule that 
we should cancel CJR model episodes for death any time during those 
episodes, because beneficiary deaths following LEJR would be uncommon 
and expected to vary unpredictably, leading to extremely high or low 
episode spending that was not typical for a LEJR episode. A recent 
analysis that pooled results from 32 studies showed the incidence of 
mortality during the first 30 and 90 days following hip replacement to 
be 0.30 percent and 0.65 percent, respectively, confirming our 
expectation of low mortality rates during LEJR episodes.\56\ In 
contrast, the 30-day national CABG and AMI mortality rates as displayed 
on Hospital Compare are significantly higher at approximately 3 percent 
and 14 percent respectively.\57\ Several CMS programs use 30-day 
mortality measures for CABG and AMI as measures of hospital quality, 
and these measures are proposed for use in the pay-for-performance 
methodology for the CABG and AMI models as discussed in section 
III.E.3.f. of this proposed rule. Similarly, a 2009 study shows a 30-
day hip fracture mortality rate for Medicare beneficiaries of 
approximately 5 percent, significantly higher than the mortality rate 
following LEJR procedures.\58\ Thus, we would expect that deaths during 
SHFFT model episodes would be more common than in CJR model episodes. 
Because beneficiaries in AMI, CABG, and SHFFT model episodes are at 
significant risk of death during these episodes that extends 90 days 
post-hospital discharge, we consider mortality to be a harmful 
beneficiary outcome that should be targeted for improvement through 
care redesign incentivized by the EPMs for these clinical conditions. 
Therefore, we do not believe it would be appropriate to exclude 
beneficiaries from AMI, CABG, or SHFFT model episodes who die any time 
during the episode like we do in the CJR model. Instead, we propose to 
maintain beneficiary episodes in the EPMs even if death occurs during 
the episodes, meaning we would calculate actual EPM episode spending 
when beneficiaries die following discharge from the anchor 
hospitalization but within the 90-day post-hospital discharge episode 
duration and reconcile it against the quality-adjusted target price. We 
believe this proposal would encourage EPM participants to actively 
manage EPM beneficiaries to reduce their risk of death, especially as 
death is often preceded by expensive care for emergencies and 
complications. Because of the higher mortality rates for all of the 
proposed EPM episodes than for LEJR episodes in the CJR model, we do 
not consider mortality following hospital discharge to be atypical and, 
therefore, we propose to cancel EPM episodes only for death during the 
anchor hospitalization.
---------------------------------------------------------------------------

    \56\ Berstock JR, Beswick AD, Lenguerrand E, Whitehouse MR, Blom 
AW. Mortality after total hip replacement surgery: A systematic 
review. Bone & Joint Research. 2014; 3(6):175-182. doi:10.1302/2046-
3758.36.2000239.
    \57\ https://www.medicare.gov/hospitalcompare/search.html.
    \58\ Brauer CA, Coca-Perraillon M, Cutler DM, Rosen AB. 
Incidence and Mortality of Hip Fractures in the United States. JAMA. 
2009;302(14):1573-1579. doi:10.1001/jama.2009.1462.
---------------------------------------------------------------------------

    We further propose that the following circumstances also would 
cancel an AMI model episode in the circumstances of a chained anchor 
hospitalization when the beneficiary is discharged from acute care 
under an MS-DRG from the final transfer hospital in the chained anchor 
hospitalization that could not, itself, initiate an AMI or CABG model 
episode, regardless of whether the final transfer hospital is an AMI or 
CABG model participant (that is, the episode would be canceled if the 
final transfer hospital MS-DRG is any MS-DRG other than an AMI MS-DRG, 
PCI MS-DRG, or CABG MS-DRG);
    While we would begin an AMI model episode with the first 
hospitalization in the chained anchor hospitalization that would 
initiate an episode as discussed in section III.C.4.a.(5) of this 
proposed rule, we understand that a variety of types of care at i-i 
transfer hospitals could occur following the discharge from the 
hospital that began the AMI model episode during the chained anchor 
hospitalization, most commonly further medical management of AMI and 
revascularization that could be appropriately included in the AMI model 
episode. We further note that less than 0.2 percent of beneficiaries in 
historical AMI episodes have more than one inpatient-to-inpatient 
transfer during the chained anchor hospitalization.\59\ However, in 
some cases transfer to another hospital during an AMI episode could 
result in a final i-i transfer hospital MS-DRG for care that would not 
itself have initiated an AMI (or CABG) model episode if all inpatient 
hospital care were furnished at a single hospital. For example, a 
beneficiary in an AMI model episode could be transferred to another 
hospital where the beneficiary undergoes cardiac valve surgery or 
treatment for renal failure or stroke. In some of these cases, further 
treatment at the i-i transfer hospital could be due to potentially 
avoidable complications resulting from insufficient care management 
during the AMI model episode that is initiated at the first hospital. 
In other cases the care at the i-i transfer hospital could be 
unavoidable and clinically appropriate, resulting from the 
beneficiary's evolving AMI or other associated chronic conditions and 
the specific capabilities of the hospital that initiated the AMI model 
episode. Therefore, we believe it would be most appropriate to cancel 
AMI model episodes under the circumstances when a beneficiary in an AMI 
model episode is discharged from acute care under an MS-DRG from the 
final i-i transfer hospital in the chained anchor hospitalization that 
is not an AMI, PCI, or CABG MS-DRG that could initiate an AMI or CABG 
model episode (that is, the episode would be canceled if the final 
transfer hospitalization MS-DRG is any MS-DRG other than an AMI, PCI, 
or CABG MS-DRG). We note that we would not require an AMI ICD-10-CM 
diagnosis code on all claims in a chained anchor hospitalization for a 
beneficiary in an AMI model episode in order to provide to an adjusted 
payment at the price MS-DRG for the AMI model episode as discussed in 
section III.D.4.b.(2)(a) of this proposed rule. We also would not 
cancel the AMI model episode if an AMI ICD-10-CM diagnosis code is not 
on the claim for the final transfer hospitalization, as long as the 
discharge is under an AMI, PCI, or CABG MS-DRG. Because the beneficiary 
would be in an AMI model episode during a chained anchor 
hospitalization, we would treat the beneficiary who is transferred to 
an i-i transfer hospital according to all policies that apply to the 
diagnosis of AMI in the CABG and AMI models, regardless of whether an 
AMI ICD-10-CM diagnosis code was on the PCI or CABG MS-DRG claim from 
the final i-i transfer hospital. Overall, this proposal would treat the 
hospital that initiated the AMI model episode and then transferred the 
beneficiary most similarly to a hospital that furnished all of the 
beneficiary's inpatient care itself,

[[Page 50842]]

with respect to whether or not the beneficiary's care is ultimately 
included as an episode in the AMI model.
---------------------------------------------------------------------------

    \59\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that end in CY 2014.
---------------------------------------------------------------------------

    Finally, we do not propose to cancel an AMI episode altogether for 
a CABG readmission during the 90-day post-hospital discharge period or 
cancel the AMI model episode and initiate a CABG model episode because 
planned CABG readmission following an anchor hospitalization that 
initiates an AMI model episode may be an appropriate clinical pathway 
for certain beneficiaries. Instead, we propose to provide an adjusted 
AMI model-episode benchmark price that includes a CABG readmission in 
such circumstances so as not to financially penalize participant 
hospitals for relatively uncommon, costly, clinically appropriate care 
patterns for beneficiaries in AMI model episodes. We refer to section 
III.D.4.b.(2)(c) of this proposed rule for discussion of the adjusted 
AMI model-episode benchmark price that would apply in the case of CABG 
readmission during an AMI model episode.
    The proposals for cancellation of EPM episodes are included in 
Sec.  512.240(a)(3), (b)(2), and (c)(2). We seek comment on our 
proposals for cancellation of EPM episodes.
c. End of EPM Episodes
(1) AMI and CABG Models
    We propose a 90-day post-hospital discharge episode duration for 
AMI model episodes. AMI in general, whether managed medically or with 
revascularization, has a lengthy recovery period, during which the 
beneficiary has a higher than average risk of additional cardiac events 
and other complications, as well as higher utilization of diagnostic 
testing and related cardiac procedures. AMI frequently serves as a 
sentinel event that marks the need for a heightened focus on medical 
management of coronary artery disease and other beneficiary risk 
factors for future cardiac events, cardiac rehabilitation over multiple 
months, and beneficiary education and engagement. Given the broad 
episode definition for AMI model episodes that includes beneficiaries 
receiving both medical and PCI management for an acute event, we do not 
believe that an episode longer than 90 days would be feasible due to 
the higher risk of including unrelated services in the episode beyond 
several months after hospital discharge. However, we believe that 90-
day post-hospital discharge episodes would provide substantial 
incentives for aggressive medical management, cardiac rehabilitation, 
and beneficiary education and engagement, whereas a shorter episode 
duration would have less effect. We acknowledge that ongoing disease 
management for beneficiaries with cardiovascular disease must extend 
long after the conclusion of the proposed AMI model episodes. 
Nevertheless, we believe the proposed 90-day post-hospital discharge 
episode duration remains appropriate for an episode payment model 
focused around a hospitalization. We expect that the medical management 
and care coordination during AMI model episodes would continue to be 
provided as beneficiaries transition out of AMI model episodes, 
potentially into a primary care medical home or other model or program 
with accountability for population health, such as an ACO.
    We further note based on analysis of historical episodes that about 
10 percent of beneficiaries hospitalized with AMI who received a CABG 
received the CABG between 2 and 90 days post-discharge from the anchor 
hospitalization (these beneficiaries would be in AMI model episodes), 
while the remaining 90 percent of CABGs for beneficiaries hospitalized 
with AMI were provided during the initial hospitalization (these 
beneficiaries would in CABG model episodes). In contrast, fewer than 3 
percent of those AMI model beneficiaries who received an inpatient or 
outpatient PCI during an AMI model episode received the PCI between 2 
and 90 days post-discharge from the anchor hospitalization, while more 
than 97 percent received the PCI during the anchor hospitalization.\60\ 
We refer to section III.D.4.b.(2)(c) of this proposed rule for further 
discussion of pricing adjustments and alternatives considered for 
setting EPM-episode benchmark prices for AMI model episodes where PCI 
or CABG occurs during the AMI episode but post-discharge from the 
anchor or chained anchor hospitalization.
---------------------------------------------------------------------------

    \60\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that end in CY 2014.
---------------------------------------------------------------------------

    Finally, for similar reasons, we believe CABG model episodes should 
extend 90 days post-hospital discharge. About one-third of CABG 
procedures are performed in the context of a hospital admission for 
AMI, leading to the same considerations discussed previously in this 
section around the appropriate episode duration for beneficiaries with 
AMI. The remaining CABG model beneficiaries are likely to have 
significant ischemic heart disease, making the occurrence of CABG 
itself a sentinel event, like AMI, that marks the need for a heightened 
focus on medical management of CAD and other beneficiary risk factors 
for future cardiac events, cardiac rehabilitation over multiple months, 
and beneficiary education and engagement. Moreover, CABG procedures 
have 90-day global periods under the Physician Fee Schedule, consistent 
with the lengthy period of recovery associated with major chest 
surgery. Thus, a 90-day post-hospital discharge episode duration is 
consistent with the recovery period from CABG surgery. We acknowledge 
that ongoing disease management for beneficiaries with cardiovascular 
disease must extend long after the conclusion of the proposed CABG 
model episodes. Nevertheless, we believe the proposed 90-day post-
hospital discharge episode duration remains appropriate for an episode 
payment model focused around a hospitalization. We expect that the 
medical management and care coordination during CABG model episodes 
would continue to be provided as beneficiaries transition out of CABG 
model episodes, potentially into a primary care medical home or other 
model or program with accountability for population health, such as an 
ACO.
    As in the CJR model, we propose that the day of discharge from the 
anchor hospitalization counts as day 1 of the post-hospital discharge 
period (80 FR 73324). However, in the case of an AMI model episode that 
includes a chained anchor hospitalization, we would count the day of 
discharge from the final hospitalization in the chained anchor 
hospitalization as day 1 of the post-hospital discharge period. Since 
the post-hospital discharge period is intended to extend 90 days for 
recovery following hospital discharge, we believe it is appropriate 
under these circumstances to begin the 90-day count when the 
beneficiary is ultimately discharged from acute care for the first time 
during the AMI model episode. However, the hospital that initiated the 
AMI model episode in the chained anchor hospitalization would continue 
to be responsible in the AMI model for the episode discussed previously 
in section III.C.4.a.(5) of this proposed rule.
    The proposals for the end of AMI and CABG model episodes are 
included in Sec. Sec.  512.240(a)(1) and (b)(1), respectively. We seek 
comment on our proposals to end AMI and CABG model episodes.
(2) SHFFT Model
    We believe that SHFFT model beneficiaries are similar to CJR model 
beneficiaries who undergo hip replacement for fracture. We believe

[[Page 50843]]

that the same episode duration as the CJR model of 90 days is 
appropriate for SHFFT model episodes in order to include the full time 
for recovery of function for these beneficiaries, which extends beyond 
60 days based on patterns of post-acute care provider use (80 FR 73319 
through 73324). Therefore, we propose a 90-day post-hospital discharge 
duration for SHFFT model episodes.
    The proposal for the end of SHFFT model episodes are included in 
Sec.  512.240(c)(1). We seek comment on our proposal to end SHFFT model 
episodes.

III. Provisions of the Proposed Regulations

D. Methodology for Setting EPM Episode Prices and Paying EPM 
Participants in the AMI, CABG, and SHFFT Models

1. Background
a. Overview
    We propose that the AMI, CABG, and SHFFT models would provide 
incentives for EPM participants to work with other health care 
providers and suppliers to improve the quality and efficiency of care 
for Medicare beneficiaries by paying EPM participants or holding them 
responsible for repaying Medicare based on EPM participants' 
performance with respect to the quality and spending for AMI, CABG, and 
SHFFT episodes in a manner similar to the CJR model. Given the general 
similarity between the design of the CJR model and these EPMs, there is 
precedent for adopting the general payment and pricing parameters used 
under the CJR model, with modification to appropriately pay for EPM 
episodes that include the different clinical conditions treated in AMI, 
CABG, and SHFFT model episodes. The following sections describe our 
proposals for the:
     Performance year, retrospective episode payments, and two-
sided risk EPMs.
     Adjustments to actual EPM-episode payments and to 
historical episode payments used to set episode prices.
     EPM episode price-setting methodologies.
     Process for reconciliation.
     Adjustments for overlaps with other Innovation Center 
models and CMS programs.
     Limits or adjustments to EPM participants' financial 
responsibility.
b. Key Terms for EPM Episode Pricing and Payment
    For purposes of ease of understanding of the technical discussion 
that follows around EPM episode pricing and payment, we are providing 
the following definitions of terms that are used in sections that 
precede their technical definition and cross-references to other 
sections of this proposed rule for more detailed discussion of the 
policies associated with these terms.
     Anchor hospitalization--hospitalization that initiates an 
EPM episode and has no subsequent inpatient-to-inpatient transfer 
chained anchor hospitalization.
     Chained anchor hospitalization--an anchor hospitalization 
that initiates an AMI model episode and has at least one subsequent 
inpatient-to-inpatient transfer.
     Anchor MS-DRG--MS-DRG assigned to the first 
hospitalization discharge, which initiates an EPM episode.
     Price MS-DRG--for EPM episodes without a chained anchor 
hospitalization, the price MS-DRG is the anchor MS-DRG. For AMI model 
episodes with a chained anchor hospitalization, the price MS-DRG is the 
MS-DRG assigned to the AMI model episode according to the hierarchy 
described in III.D.4.b.(2)(i).
     Episode benchmark price--dollar amount assigned to EPM 
episodes based on historical EPM-episode data (3 years of historical 
Medicare payment data grouped into EPM episodes according to the EPM 
episode definitions as discussed in sections III.C.3. and III.C.4. of 
this proposed rule) prior to the application of the effective discount 
factor, as described throughout sections III.D.4.b through e. of this 
proposed rule.
     CABG readmission AMI model episode benchmark price--
episode benchmark price assigned to certain AMI model episodes with 
price MS-DRG 280-282 or 246-251 and with a readmission for MS-DRG 231-
236, as described in sections III.D.4.b.(2)(c) and III.D.4.e. of this 
proposed rule.
     Quality-adjusted target price--dollar amount assigned to 
EPM episodes as the result of reducing the episode benchmark price by 
the EPM participant's effective discount factor based on the EPM 
participant's quality performance, as described in sections 
III.D.4.b.(10) and III.E.3.f. of this proposed rule.
     Excess EPM-episode spending--dollar amount corresponding 
to the amount by which actual EPM-episode payments for all EPM episodes 
attributed to an EPM participant exceed the quality-adjusted target 
prices for the same EPM episodes, as discussed in section III.D.2.c. of 
this proposed rule.
2. Performance Years, Retrospective Episode Payments, and Two-Sided 
Risk EPMs
a. Performance Period
    Consistent with the methodology for the CJR model, we propose 5 
performance years (PYs) for the EPMs, which would include EPM episodes 
for the periods displayed in the following Table 5:

                   Table 5--Performance Years for EPMS
------------------------------------------------------------------------
                                                  EPM episodes included
     Performance year  (PY)       Calendar year    in performance year
------------------------------------------------------------------------
1..............................            2017  EPM episodes that start
                                                  on or after July 1,
                                                  2017 and end on or
                                                  before December 31,
                                                  2017.
2..............................            2018  EPM episodes that end
                                                  between January 1,
                                                  2018 and December 31,
                                                  2018, inclusive.
3..............................            2019  EPM episodes that end
                                                  between January 1,
                                                  2019 and December 31,
                                                  2019, inclusive.
4..............................            2020  EPM episodes that end
                                                  between January 1,
                                                  2020 and December 31,
                                                  2020, inclusive.
5..............................            2021  EPM episodes that end
                                                  between January 1,
                                                  2021 and December 31,
                                                  2021, inclusive.
------------------------------------------------------------------------

    As displayed in Table 5, some EPM episodes that would begin in a 
given calendar year may be captured in the following performance year 
due to some EPM episodes ending after December 31st of a given calendar 
year. For example, EPM episodes beginning in December 2017 and ending 
in March 2018 would be part of performance year 2. We believe that the 
proposed period of time for the EPMs, which generally aligns with the 
performance period for other Innovation Center models, for example, the 
CJR and Pioneer ACO models, should be sufficient to test and gather the 
data needed to evaluate the EPMs (80 FR 73325). In contrast, we would 
be concerned whether an EPM with fewer than 5 performance years would 
be sufficient for these purposes.

[[Page 50844]]

    We also recognize that our proposal would allow only 6 months of 
EPM episodes for PY1 as compared to 9 months for the CJR model. We 
considered extending the first PY, for example, to 18 months. As 
discussed further in section III.D.2.c. of this proposed rule, however, 
we are instead proposing to delay the requirement for participants to 
begin accepting downside risk until the second quarter of PY2. As such, 
EPM participants would have a comparable transition period to that of 
CJR participants with respect to when they must accept downside risk 
while still allowing us to make timely reconciliation payments to EPM 
participants as well as to most effectively align EPM reconciliation 
with the reconciliation processes for other models and programs with 
which the EPMs overlap (for example, the Shared Savings Program, 
Pioneer ACO model, Comprehensive Primary Care Initiative, and Oncology 
Care Model). We believe that it is important to synchronize the timing 
of reconciliation for EPMs with other efforts that need this 
information when making their financial calculations. We seek comment 
on this proposal.
b. Retrospective Payment Methodology
    Consistent with the CJR model, we propose to apply a retrospective 
payment methodology to the proposed EPMs (80 FR 73329). Under this 
proposal, all providers and suppliers caring for Medicare beneficiaries 
in EPM episodes would continue to bill and be paid as usual under the 
applicable Medicare payment systems. After the completion of an EPM 
performance year, Medicare claims for services furnished to EPM 
beneficiaries would be grouped into EPM episodes and aggregated, and 
EPM participants' actual EPM episode-payments compared to quality-
adjusted target prices (which account for the level of EPM episode 
quality), as described in section III.D.5.a. of this proposed rule. 
Based on an EPM participant's performance (taking into account quality 
and spending), we would determine if Medicare would make a payment to 
the participant (reconciliation payment), or if the participant owes 
money to Medicare (resulting in Medicare repayment).
    We considered an alternative option of paying for EPM episodes 
prospectively by paying one lump sum amount to the EPM participant for 
the expected spending for the EPM episode which extends 90 days post-
hospital-discharge. However, as was the case when we established 
regulations for the CJR model, we continue to believe that such an 
option would be challenging to implement at this time given the payment 
infrastructure changes for both EPM participants and Medicare that 
would need to be developed to pay and manage prospective episode 
payments under these EPMs (80 FR 73329). Moreover, we continue to 
believe that a retrospective payment approach can accomplish the 
objective of testing episode payments in 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.
    We seek comment on this proposal.
c. Two-Sided Risk EPMs
    As we did for the CJR model, we propose to establish two-sided risk 
for hospitals participating in the EPMs. Under this proposal, for each 
of performance years 1 through 5, we would make EPM-episode 
reconciliation payments to EPM participants that achieve reduced actual 
EPM payments relative to their quality-adjusted target prices (80 FR 
73229-7333). Likewise, beginning with episodes ending in the second 
quarter of performance year 2 and extending through each of performance 
years 3 through 5, we would hold EPM participants responsible for 
repaying Medicare when their actual EPM-episode payments exceed their 
quality-adjusted target prices. As such, our proposal differs from CJR 
in that we are proposing a modestly shorter period in which EPM 
participants would accept downside risk in order to allow them a 
comparable transition period to that of CJR participants in which to do 
so. Accordingly, we will refer to the two portions of performance year 
2 as--
     Performance Year 2 (NDR) or PY2 (NDR) for the first 
quarter, that is January 1, 2018 to March 31, 2018, in which EPM 
participants assume no downside risk and therefore would have no 
Medicare repayment responsibility; and
     Performance Year 2 (DR) or PY2 (DR) for the second, third 
and fourth quarters, that is April 1, 2018 to December 31, 2018, in 
which EPM participants assume downside risk and would have Medicare 
repayment responsibility. We believe that our proposal to establish 
two-sided risk would provide appropriate incentives for EPM 
participants to improve their care quality and efficiency under the 
EPMs. We also continue to believe, as we indicated in the CJR Final 
Rule, that we would diminish these incentives if we instead proposed to 
establish one-sided risk, in which an EPM participant could qualify for 
a reconciliation payment but not be held responsible for Medicare 
repayments (80 FR 73329). In recognition that EPM participants may need 
to make infrastructure, care coordination and delivery, and financial 
preparations for the EPMs, which can take several months or longer to 
implement, we do believe that it is reasonable to delay EPM participant 
responsibility for repaying excess EPM-episode spending in performance 
year 1 to more strongly align EPM-participant incentives with care 
quality. Thus, similar to what we did for the CJR model, we are 
proposing to phase-in this repayment responsibility beginning in the 
second quarter of EPM performance year 2 as displayed in Table 6.
    We refer to section III.E.3.f. of this proposed rule for additional 
information on the effective discount factors used to calculate 
quality-adjusted target prices, as well as the quality categories that 
determine an EPM participant's effective discount factor that would be 
applied to the EPM benchmark episode price at reconciliation to 
calculate the repayment amount during the phase-in period in EPM 
performance year 2 (quarters 2 through 4) and performance year 3. Table 
6 also presents the phase-in of the proposed stop-loss limits and 
discount percentages, which are discussed in detail in section 
III.D.7.b. and III.D.4.b.(10) of this proposed rule.
    We seek comment on this proposal.

                               Table 6--Stop-Loss Thresholds and Discount Percentage Ranges for Medicare Repayments by PY
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                PY1          PY2 (NDR)      PY2 (DR) %         PY3 %           PY4 %           PY5 %
--------------------------------------------------------------------------------------------------------------------------------------------------------
Stop-loss threshold.....................................  n/a as no downside risk in PY1               5              10              20              20
                                                                   and PY2 (DR)

[[Page 50845]]

 
Discount percentage (range) for Repayment, Depending on                                          0.5-2.0         0.5-2.0         1.5-3.0         1.5-3.0
 Quality Category.......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Stop-loss thresholds for certain hospitals, including rural and sole-community hospitals are 3% for PY2 (DR) and 5% for PY3-PY5.

3. Adjustments to Actual EPM-Episode Payments and to Historical Episode 
Payments Used to Set Episode Prices
a. Overview
    We propose to calculate actual EPM-episode payments and historical 
episode payments (3 years of historical Medicare payment data grouped 
into EPM episodes according to the EPM episode definitions as discussed 
in sections III.C.3. and III.C.4. of this proposed rule) to calculate 
EPM quality-adjusted target prices for each performance year of the 
EPMs as we did for the CJR model--that is, for each non-cancelled EPM 
episode, we would calculate these amounts based on Medicare payments 
for Parts A and B claims for services included in the EPM episode 
definition. As was the case for the CJR model, we also propose to 
include certain payment adjustments in the EPMs for: (1) Special 
payment provisions under existing Medicare payment systems; (2) 
payments for services that straddle episodes; and (3) high payment 
episodes (80 FR 73330 through 73336). We also propose to additionally 
include an adjustment for reconciliation payments and Medicare 
repayments when updating EPM participant episode benchmark and quality-
adjusted target prices (80 FR 73330 through 73331). We refer to section 
III.D.6. of this proposed rule for discussion of adjustments for 
overlaps with other Innovation Center models and CMS programs.
b. Special Payment Provisions
    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 HVBP Program, the Hospital-Acquired 
Condition (HAC) Reduction Program, and the HIQR Program and Outpatient 
Quality Reporting (OQR) Program. IPPS hospitals and CAHs are subject to 
the Medicare Electronic Health Record (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 
certain requirements related to low volume Medicare discharges and 
distance from another hospital receive a low volume add-on payment. 
Also, some IPPS hospitals qualify to be sole community hospitals (SCHs) 
or Medicare Dependent Hospitals (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 post-acute care 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: Inpatient Rehabilitation Facility 
Quality Reporting Program (IRF QRP); Skilled Nursing Facility Quality 
Reporting Program (SNF QRP); Inpatient Psychiatric Facility Quality 
Reporting Program (IPF QRP); Home Health Quality Reporting Program (HH 
QRP); Long-Term Care Hospital Quality Reporting Program (LTCH QRP); and 
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.
    Ambulatory Surgical Centers (ASCs) have their own Quality Reporting 
Program (ASC QRP). Physicians also have a set of special payment 
provisions based on quality and reporting: Medicare EHR Incentive 
Program for Eligible Professionals; Physician Quality Reporting System 
(PQRS); and Physician Value-based Modifier Program.
    Consistent with how we determine payments under the CJR model, we 
propose to adjust both the actual and historical EPM-episode payments 
used to set EPM-episode benchmark and quality-adjusted target prices by 
excluding these special payments from EPM-episode calculations using 
the CMS Price Standardization methodology (80 FR 73333). We believe 
that in applying this methodology to exclude these payments from our 
calculations, we would best maintain appropriate incentives for both 
the proposed EPMs and the existing incentive programs. Also, not 
excluding add-on payments based on the characteristics of providers 
caring for EPM beneficiaries, such as more indigent patients, having 
low Medicare hospital volume, being located in a rural area, supporting 
greater levels of physician training, and having a greater proportion 
of beneficiaries with HIV, from actual EPM-episode payments could 
inappropriately result in certain EPM participants that receive more 
add-on payments having worse episode payment performance compared to 
quality-adjusted target prices than what their performance would 
otherwise have been. Additionally, not excluding enhanced payments for 
MDHs and SCHs could result in higher or lower quality-adjusted target 
prices just because EPM participants received their enhanced payments 
in 1 historical year but not the other, regardless of actual 
utilization. We also believe that excluding special payments would 
ensure an EPM participant'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 under the proposed models. In 
addition to the various incentives, enhanced payments, 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

[[Page 50846]]

reduction to Medicare payment for most Medicare FFS services.
    For more information on the CMS Price (Payment) Standardization 
Detailed Methodology, we refer to the QualityNet Web site at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350 and to 80 FR 73331.
    Accordingly, we propose to exclude these special payments from EPM-
episode calculations using the CMS Price Standardization methodology at 
Sec.  512.300(e)(2). We seek comment on our proposal to exclude special 
payments using the CMS Price Standardization methodology.
c. Services That Straddle Episodes
    A service that straddles an EPM episode is one that begins before 
the start of or continues beyond the end of an EPM episode that extends 
90 days post-hospital discharge. Under the CJR model, we prorate 
payments so that they include only the portion of the payment that is 
included in the CJR model episode, using separate approaches to prorate 
payments under each payment system, for example, IPPS, non-IPPS and 
other inpatient services, and home health services (80 FR 73333 through 
73335). We propose to apply the CJR model methodologies for prorating 
payments when calculating actual EPM-episode payments and when 
calculating historical EPM-episode payments used to set EPM-episode 
benchmark and quality-adjusted target prices. We believe these 
methodologies would most accurately account for spending within EPM 
episodes under the proposed EPMs.
    The proposed methodologies for prorating payments are included in 
Sec.  512.300(f). We seek comment on our proposed methodologies for 
prorating payments.
d. High-Payment EPM Episodes
    For the CJR model, we defined a high-payment episode as an episode 
with payments 2 standard deviations or more above the mean calculated 
at the regional level (80 FR 73336 through 73337). As with the CJR 
model, we propose applying a high-payment episode ceiling when 
calculating actual EPM-episode payments and when calculating historical 
EPM-episode payments used to set EPM-episode benchmark and quality-
adjusted target prices. We propose to apply the ceiling according to 
the following groupings that align with our proposed EPM price-setting 
methodology.
    First, for SHFFT model episodes, we propose to calculate and apply 
the ceiling separately for each SHFFT price MS-DRG at the regional 
level.
    Second, for AMI model episodes with price MS-DRGs 280-282 or 246-
251 without readmission for CABG MS-DRGs, we propose to calculate and 
apply the ceiling separately for each price MS-DRG at the regional 
level.
    Third, for CABG model episodes, we propose to apply ceilings 
separately to the payments that occurred during the anchor 
hospitalization of the CABG model episode and to the payments that 
occurred after the anchor hospitalization. For the anchor 
hospitalization portion of CABG model episodes, we propose to calculate 
and apply the ceiling separately by each price MS-DRG in 231-236 at the 
regional level. For the post-anchor hospitalization portion we propose 
to calculate and apply the ceiling separately for the following 
groupings at the regional level:
     With AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG with major complication or comorbidity (231, 
233, or 235).
     With AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG without major complication or comorbidity (232, 
234, or 236).
     Without AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG with major complication or comorbidity (231, 
233, or 235).
     Without AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    Fourth, for AMI model episodes with price MS-DRG 231-236, we 
propose to apply ceilings separately to the payments that occurred 
during the chained anchor hospitalization and to the payments that 
occurred after the chained anchor hospitalization. For the anchor 
hospitalization portion of the episode, we propose to apply the 
regional level ceiling calculated for the anchor hospitalization 
portion of a CABG model episode for the corresponding price MS-DRG, as 
described previously. For the post-anchor hospitalization portion of 
the episode, we propose to apply the regional level ceiling calculated 
for the post-anchor hospitalization portion of a CABG model episode for 
the corresponding price MS-DRG with AMI diagnosis.
    Fifth, for AMI model episodes with price MS-DRG 280-282 or 246-251 
and with readmission for CABG MS-DRGs, we propose to apply the ceiling 
separately to the payments during the CABG readmission and all other 
payments during the episode. For payments during the CABG readmission 
portion of the AMI model episode we propose to apply the regional level 
ceiling calculated for the anchor hospitalization portion of a CABG 
model episode for the corresponding CABG readmission MS-DRG, as 
described previously. For all other payments during the AMI model 
episode, we propose to apply the regional level ceiling calculated for 
AMI model episodes with price MS-DRG 280-282 or 246-251 and without 
readmission for CABG MS-DRGs corresponding to the AMI price MS-DRG.
    We believe that this ceiling would protect EPM participants from 
variable repayment risk for especially-high payment EPM episodes where 
the clinical scenarios for these cases each year may differ 
significantly and unpredictably.
    The proposal for capping high payment EPM episodes is included in 
Sec.  512.300(e)(1). We seek comment on our proposal to cap high 
payment EPM episodes.
e. Treatment of Reconciliation Payments and Medicare Repayments When 
Calculating Historical EPM-Episode Payments To Update EPM-Episode 
Benchmark and Quality-Adjusted Target Prices
    For the CJR model, we exclude CJR model reconciliation payments and 
Medicare repayments from the expenditure data used to update historical 
claims when calculating CJR model target prices, although we received 
comments on the proposed rule encouraging us to include these payments. 
For example, commenters supported their inclusion because CJR-
participating hospitals otherwise would be providing care coordination 
services that would not be paid directly or accounted for under 
applicable Medicare FFS payments systems and thus might be funded 
through reconciliation payments. Further, by excluding reconciliation 
payments from our calculations, commenters suggested that we may 
underestimate their actual resource costs when updating target prices 
for the care necessary during episodes. The CJR Final Rule discussed 
our view that including reconciliation payments would have the effect 
of Medicare paying CJR model participant hospitals their target prices, 
regardless of whether such participant was below, above, or met their 
episode target price. We also noted that we had not discussed any 
alternatives in the CJR model proposed rule, and that we might

[[Page 50847]]

consider including these payments in updating historical claims through 
future rulemaking (80 FR 73332).
    After further consideration, we are proposing to include both 
reconciliation payments and Medicare repayments when calculating 
historical EPM-episode payments to update EPM-episode benchmark and 
quality-adjusted target prices. We concur with the views expressed by 
commenters on the CJR model proposed rule that including these payments 
would more fully recognize the total resource costs of care under an 
EPM than would their exclusion. As indicated in section V.5 of this 
proposed rule, we are also proposing to modify our policy for the CJR 
model to also include reconciliation payments and Medicare repayments 
when updating target prices under that model We also considered an 
option where we would include only reconciliation payments when 
updating but not Medicare repayments; however, we believe this option 
would not achieve our intention of more fully capturing the costs of 
care under the EPM. We would further note that the inclusion of both 
reconciliation payments and Medicare repayments could have differential 
effects on an EPM participant's benchmark and quality-adjusted target 
prices based on whether or not it received a reconciliation payment or 
made a Medicare repayment. For example, all else equal, including an 
EPM reconciliation payment when updating an EPM participant's EPM-
episode benchmark and quality-adjusted target prices would modestly 
increase the quality-adjusted target prices in performance years 3 
through 5 in comparison to not including the reconciliation payment. 
Conversely, all else equal, including a Medicare repayment when 
updating an EPM participant's EPM-episode benchmark and quality-
adjusted target prices would reduce the next performance year's 
quality-adjusted target price in comparison to not including the 
Medicare repayment.
    Following analogous logic, we also propose to include BPCI Net 
Payment Reconciliation Amounts in our calculations when updating EPM-
episode benchmark and quality-adjusted target prices. We would note, 
however, that the effects of these proposals would largely be confined 
to PY3 of the EPMs and diminish as EPM-participant historical EPM-
episode updates are eventually determined based on regional payments in 
subsequent years of the EPMs. This is because the net sum of EPM 
reconciliation payments, Medicare repayments, and BPCI Net Payment 
Reconciliation Amounts would represent a small portion of the total 
historical EPM-episode payments captured in regional pricing.
    When updating EPM-episode benchmark and quality adjusted target 
prices for CABG model episodes, we propose to apportion EPM 
reconciliation payments and BPCI Net Reconciliation Payment Amounts 
proportionally to the anchor hospitalization and post-anchor 
hospitalization portions of CABG model historical episodes. We also 
propose to calculate the proportions based on regional average 
historical episode payments that occurred during the anchor 
hospitalization portion of CABG model episodes and regional average 
historical episode payments that occurred during the post-anchor anchor 
hospitalization portion of CABG model episodes that were initiated 
during the 3 historical years. This aligns with the general proposal to 
calculate the CABG model-episode benchmark price as the sum of the 
corresponding CABG anchor hospitalization benchmark price and the 
corresponding CABG post-anchor hospitalization benchmark price, as 
discussed in III.D.4.b.(2)(ii) and III.D.4.d. of this proposed rule.
    The proposal to include both reconciliation payments and Medicare 
repayments when calculating historical EPM-episode payments to update 
EPM-episode benchmark and quality-adjusted target prices is included in 
Sec.  512.300(c)(8). We seek comment on our proposal to include both 
reconciliation payments and Medicare repayments when calculating 
historical EPM-episode payments to update EPM-episode benchmark and 
quality-adjusted target prices.
4. EPM-Episode Price-Setting Methodologies
a. Overview
    Whether an EPM participant receives a reconciliation payment or is 
made responsible to repay Medicare under the proposed EPM is based on 
the EPM participant's actual EPM-episode payments relative to quality-
adjusted target prices, as well as the EPM participant's eligibility 
for reconciliation payment based on acceptable, good, or excellent 
quality performance. While our proposals for relating EPM participant 
quality performance to EPM payments are further discussed in section 
III.E.3.f of this proposed rule, the remainder of this section will 
discuss the proposed approach to establishing EPM-episode benchmark and 
quality-adjusted target prices.
    For the purposes of price-setting, any references in this proposed 
rule to AMI ICD-CM diagnosis codes means those ICD-9-CM and ICD-10-CM 
diagnosis codes for historical EPM episodes or ICD-10-CM diagnosis 
codes for EPM episodes during the EPM performance years that can be 
found in the specific EPM episode definitions parameters spreadsheet. 
Also, for the purposes of price-setting, any references in this 
proposed rule to intracardiac ICD-CM procedure codes means those ICD-9-
CM procedure codes for historical EPM episodes that can be found in the 
specific EPM episode definitions parameters spreadsheet. The EPM 
episode definitions parameters spreadsheets are posted on the CMS Web 
site at https://innovation.cms.gov/inititatives/epm.
    We propose to establish EPM-episode benchmark and quality-adjusted 
target prices for each EPM participant based on the following MS-DRGs 
and diagnoses included in the AMI, CABG, and SHFFT models as discussed 
in sections III.C.3 and III.C.4. of this proposed rule:
(1) AMI Model
     AMI MS-DRGs--
    ++ 280 (Acute myocardial infarction, discharged alive with MCC);
    ++ 281 (Acute myocardial infarction, discharged alive with CC);
    ++ 282 (Acute myocardial infarction, discharged alive without CC/
MCC); and
     PCI MS-DRGs, when the claim includes an AMI ICD-CM 
diagnosis code in the principal or secondary position on the inpatient 
claim and when the claim does not include an intracardiac ICD-CM 
procedure code in any position on the inpatient claim--
    ++ 246 (Perc cardiovasc proc with drug-eluting stent with MCC or 4+ 
vessels/stents);
    ++ 247 (Perc cardiovasc proc with drug-eluting stent without MCC);
    ++ 248 (Perc cardiovasc proc with non-drug-eluting stent with MCC 
or 4+ vessels/stents);
    ++ 249 (Perc cardiovasc proc with non-drug-eluting stent without 
MCC);
    ++ 250 (Perc cardiovasc proc without coronary artery stent with 
MCC); and
    ++ 251 (Perc cardiovasc proc without coronary artery stent without 
MCC).
(2) CABG Model DRGs--
     231 (Coronary bypass with PTCA with MCC);
     232 (Coronary bypass with PTCA without MCC);
     233 (Coronary bypass with cardiac cath with MCC);
     234 (Coronary bypass with cardiac cath without MCC);

[[Page 50848]]

     235 (Coronary bypass without cardiac cath with MCC); and
     236 (Coronary bypass without cardiac cath without MCC).
(3) SHFFT Model DRGs--
     480 (Hip and femur procedures except major joint with 
MCC);
     481 (Hip and femur procedures except major joint with CC); 
and
     482 (Hip and femur procedures except major joint without 
CC or MCC).
    We propose to generally apply the CJR model methodology to set EPM-
episode benchmark and quality-adjusted target prices, with the addition 
of some adjustments based on the specific clinical conditions and care 
patterns for EPM episodes included in the AMI, CABG, and SHFFT models 
(80 FR 73337 through 73338). The proposed price-setting methodology 
incorporates the following features:
     Set different EPM benchmark and quality-adjusted target 
prices for EPM episodes based on the assigned price MS-DRG in one of 
the included MS-DRGs to account for patient and clinical variations 
that impact EPM participants' costs of providing care. Inpatient claims 
with PCI MS-DRGs 246-251 that contain an intracardiac ICD-CM procedure 
code in any position would not anchor an historical episode, nor be 
considered when assigning a price MS-DRG. This is because beginning in 
FY 2016, inpatient claims containing an intracardiac ICD-10-CM 
procedure code in any position no longer map to MS-DRGs 246-251.
     Adjust EPM benchmark and quality-adjusted target prices 
for certain EPM episodes involving chained anchor hospitalizations, 
specific readmissions, or the presence of an AMI ICD-CM diagnosis code 
for CABG MS-DRGs.
     Use 3 years of historical Medicare FFS payment data 
grouped into EPM episodes according to the EPM episode definitions in 
sections III.C.3 and III.C.4. of this proposed, termed historical EPM 
episodes and historical EPM-episode payments. The specific set of 3 
historical years would be updated every other performance year.
     Apply Medicare payment system (for example, IPPS, OPPS, 
IRF PPS, SNF, MPFS.) updates to the historical EPM-episode data to 
ensure we incentivize EPM participants based on historical utilization 
and practice patterns, not Medicare payment system rate changes that 
are beyond such participants' control. Because different Medicare 
payment system updates become effective at two different times of the 
year, we would calculate one set of EPM-benchmark and quality-adjusted 
target prices for EPM episodes initiated between January 1 and 
September 30 and another set for EPM episodes initiated between October 
1 and December 31.
     Blend together EPM-participant hospital-specific and 
regional historical EPM-episode payments, transitioning from primarily 
hospital-specific to completely regional pricing over the course of the 
5 performance years, to incentivize both historically-efficient and 
less-efficient EPM participants to furnish high quality, efficient care 
in all years of the EPM Regions would be defined as each of the nine 
U.S. Census divisions.
     Normalize for hospital-specific wage-adjustment variations 
in Medicare payment systems when combining hospital-specific and 
regional historical EPM episodes.
     Pool together EPM episodes by groups of price MS-DRGs to 
allow a greater volume of historical cases and allow us to set more 
stable prices.
     Apply an effective discount factor on EPM-episode 
benchmark prices to serve as Medicare's portion of reduced expenditures 
from the EPM episode, with any remaining portion of reduced Medicare 
spending below the quality-adjusted target price potentially available 
as reconciliation payments to the EPM participant where the anchor 
hospitalization occurred.
     Further discussion on each of the proposed features and 
sequential steps to calculate EPM-episode benchmark and quality-
adjusted target prices can be found in sections III.D.4.b through e. of 
this proposed rule, which immediately follow.
    We also propose to calculate and communicate EPM-episode benchmark 
and quality-adjusted target prices to EPM participants prior to the 
performance period in which the prices apply (that is, prior to January 
1, 2018, for prices covering EPM episodes that start between January 1, 
2018, and September 30, 2018; prior to October 1, 2018, for prices 
covering EPM episodes that start between October 1, 2018, and December 
31, 2018). We believe that prospectively communicating EPM-episode 
benchmark and quality-adjusted target prices to EPM participants would 
help them make infrastructure, care coordination and delivery, and 
financial refinements they may deem appropriate to prepare for the new 
episode target prices under the model.
    The proposal to prospectively communicate quality-adjusted target 
prices are included in Sec.  512.300(c)(9). We seek comment on our 
proposal to prospectively communicate these prices.
b. EPM-Episode Benchmark and Quality-Adjusted Target Price Features
(1) Risk-Stratifying EPM-Episode Benchmark Prices Based on MS-DRG and 
Diagnosis
    To account for some of the clinical and resource variations that 
would be expected to occur under the EPMs, we propose generally to 
apply the episode pricing methodology that was applied to the CJR model 
to develop the EPM-episode benchmark prices, hereinafter called the 
standard EPM-episode benchmark price. In addition, for each EPM 
participant, we propose to risk-stratify and establish special EPM-
episode benchmark prices for episodes in different pricing scenarios as 
described in this section, as well as sections III.D.4.c. through e. of 
this proposed rule. For purposes of this proposed rule, risk-
stratification means the methodology for developing the EPM-episode 
benchmark price that accounts for clinical and resource variation in 
historical EPM episodes so that the quality-adjusted target price 
(calculated from the EPM-episode benchmark price) can be compared to 
actual EPM episode payments for EPM beneficiaries with similar care 
needs to those in historical EPM episodes.
    For the SHFFT model, we propose to set the price MS-DRG equal to 
the anchor MS-DRG. We propose to calculate standard SHFFT model-episode 
benchmark prices based on price MS-DRGs following the general payment 
methodology that was applied to the CJR model with risk stratification 
according to the anchor MS-DRG (80 FR 73337 through 73358).
    Similarly, for AMI model episodes without chained anchor 
hospitalizations and without readmissions for CABG MS-DRGs, we propose 
to set the price MS-DRG equal to the anchor MS-DRG. We propose to 
calculate standard AMI model-episode benchmark prices based on price 
MS-DRGs following the general payment methodology that was applied to 
the CJR model with risk stratification according to the anchor MS-DRG 
(80 FR 73337 through 73358). We propose to apply the CJR model payment 
methodology separately to AMI model episodes with anchor AMI MS-DRGs 
280-282 and anchor PCI MS-DRGs 246-251 with a corresponding AMI ICD-CM 
diagnosis code on the inpatient claim for the anchor hospitalization 
and without an intracardiac ICD-CM procedure code in any position on 
the inpatient claim for the anchor hospitalization.
    For episodes in the AMI model with chained anchor hospitalizations 
and no readmissions for CABG MS-DRGs, we

[[Page 50849]]

propose to set the price MS-DRG based on the hierarchy described in 
section III.D.4.b.(2)(a) and to calculate AMI model-episode benchmark 
prices based on price MS-DRGs as described in sections III.D.4.b.(2)(a) 
and III.D.4.c. of this proposed rule.
    For AMI model episodes without chained anchor hospitalizations and 
with readmissions for CABG MS-DRGs, we propose to set the price MS-DRG 
as the anchor MS-DRG and to calculate CABG readmission AMI model-
episode benchmark prices as described in sections III.D.4.b.(2)(b), 
III.D.4.b.(2)(c), and III.D.4.e of this proposed rule.
    For AMI model episodes with chained anchor hospitalizations that do 
not include CABG MS-DRGs and with readmissions for CABG MS-DRGs, we 
propose to set the price MS-DRG based on the hierarchy described in 
section III.D.4.b.(2)(a) and to calculate CABG readmission AMI model-
episode benchmark prices as described in sections III.D.4.b.(2)(b), 
III.D.4.b.(2)(c), and III.D.4.e. of this proposed rule.
    For CABG model episodes, we propose to set the price MS-DRG as the 
anchor MS-DRG and to calculate CABG model-episode benchmark prices as 
the sum of the CABG anchor hospitalization portion price and the CABG 
post-anchor hospitalization portion price, which would be calculated by 
applying the general payment methodology that was applied to the CJR 
model separately to the expenditures that occurred during the anchor 
hospitalization of the CABG model episode and to the expenditures that 
occurred after the anchor hospitalization as discussed in sections 
III.D.4.b.(2)(b) and III.D.4.d. of this proposed rule (80 FR 73337 
through 73358).
    Finally, we propose that after assigning an EPM-episode benchmark 
price to each EPM episode, the EPM-episode quality-adjusted target 
price would be the EPM-episode benchmark price reduced by the effective 
discount factor for the corresponding EPM that corresponds to the EPM 
participant's quality category, as discussed in sections III.D.4.b.(10) 
and III.E.3.f. of this proposed rule.
(2) Adjustments To Account for EPM-Episode Price Variation
    We also have considered further adjustments to account for clinical 
and resource variation that could affect EPM participants' costs for 
EPM episodes. As was the case for the CJR model, we continue to believe 
that no standard risk adjustment approach that is widely-accepted 
throughout the nation exists for the proposed EPM episodes (80 FR 73338 
through 73339). Thus, we are not proposing to make risk adjustments 
based on beneficiary-specific demographic characteristics or clinical 
indicators. Likewise, we continue to believe that CMS Hierarchical 
Condition Categories (HCC) used to adjust for risk in the Medicare 
Advantage program would not be appropriate for risk-adjusting EPM 
episodes as such categories are used to predict total Medicare 
expenditures in an upcoming year for MA plans and may not be 
appropriate for use in predicting expenditures over a shorter period of 
time, such as the EPM episodes. Further, the validity of HCC scores for 
predicting Medicare expenditures for shorter episodes-of-care or 
specifically for the AMI, CABG, and SHFFT model episodes that we are 
proposing has not been determined. Thus, we do not propose to risk-
adjust EPM-episode benchmark or quality-adjusted target prices using 
HCC scores for the currently proposed EPMs. We refer to the CJR Final 
Rule for additional discussion of our assessment of risk-adjustment 
options for the CJR model, which informs our views on their 
appropriateness for the proposed EPMs (80 FR 73338 through 73340).
    However, we believe there are circumstances that could account for 
spending variation in EPM episodes where certain pricing adjustments 
could be appropriate. We have identified several scenarios where 
increased EPM-episode efficiencies would be limited for certain groups 
of EPM beneficiaries and a standard EPM-episode benchmark price based 
on the anchor MS-DRG would, therefore, not account for circumstances 
where clinically-appropriate care could consistently result in higher 
EPM-episode payments. For example, as discussed in section 
III.C.4.a.(5) of this proposed rule, variation could arise from the 
asymmetric distribution of cardiac care across hospitals, which makes 
transfers, either from a hospitalization or from the emergency 
department (without inpatient admission) of one hospital to another, a 
common consideration in the treatment course for beneficiaries with an 
initial diagnosis of AMI, resulting in a chained anchor hospitalization 
for inpatient-to-inpatient transfers. Alternately, we recognize that 
certain episodes involving hospital readmissions for clinically-
appropriate planned follow-up care may have higher episode spending 
than episodes with a single hospitalization or with chained anchor 
hospitalizations involving transfers that do not have any readmissions. 
Further, a beneficiary who has a CABG in the context of hospitalization 
for an AMI may have different spending in the 90 days post-hospital-
discharge due to different health needs than a beneficiary who has an 
elective CABG. Accordingly, we propose specific policies and payment 
adjustments in recognition of the systematic, consistent variation in 
EPM-episode spending that could result from such circumstances.
(a) Adjustments for Certain AMI Model Episodes With Chained Anchor 
Hospitalizations
    In section III.C.4.a.(5) of this proposed rule, we proposed that 
once an AMI model episode is initiated at an AMI model participant, the 
AMI model episode continues under the responsibility of that specific 
participant, regardless of whether the beneficiary is transferred to 
another hospital for further medical management of AMI or 
revascularization through PCI or CABG during a chained anchor 
hospitalization. Given there could be significant differences between 
the discharge MS-DRG from the hospital that initiates the AMI episode 
and the hospital to which a beneficiary is transferred, as well as the 
Medicare payment associated with these different MS-DRGs and the post-
discharge spending for these beneficiaries, we believe it would be 
appropriate to adjust the AMI model-episode benchmark prices for 
certain AMI model episodes involving a chained anchor hospitalization.
    More specifically, we believe that it would be appropriate to make 
an adjustment when a final hospital discharge MS-DRG in the chained 
anchor hospitalization is an anchor MS-DRG under either the AMI or CABG 
model. Thus, for episodes involving a chained anchor hospitalization 
with a final discharge diagnosis of any of AMI MS-DRG 280-282, PCI MS-
DRG 246-251 without an intracardiac ICD-CM procedure code in any 
position on the inpatient claim, or CABG MS-DRG 231-236, we propose to 
set a chain-adjusted AMI model-episode benchmark price or ``price MS-
DRG'' based on the AMI, PCI, or CABG MS-DRG in the chained anchor 
admission with the highest IPPS weight. If a CABG MS-DRG occurs in a 
chained anchor hospitalization that was initiated with an AMI MS-DRG or 
PCI MS-DRG without an intracardiac ICD-CM procedure code in any 
position on the corresponding inpatient claim, we propose that the AMI 
model episode would begin with and be attributed to the first hospital, 
and we propose to set the price MS-DRG to the CABG MS-DRG in the 
chained anchor

[[Page 50850]]

hospitalization with the highest IPPS weight.
    If the price MS-DRG is an AMI or PCI MS-DRG, we propose to set the 
episode benchmark price as the standard AMI model-episode benchmark 
price for the price MS-DRG, subject to a possible adjustment for 
readmission for CABG MS-DRGs, as described in section III.D.4.b.(2)(c) 
of this proposed rule. If the price MS-DRG is a CABG MS-DRG, we propose 
to set the AMI model-episode benchmark price as the CABG model-episode 
benchmark price for the corresponding CABG MS-DRG, with no further 
adjustment in the event of a readmission for CABG MS-DRGs.
    Table 7 displays the weights for CABG, PCI, and AMI MS-DRGs 
established in the FY 2016 IPPS final rule, which are subject to change 
each FY through the annual IPPS rulemaking (80 FR 49325 through 49886).

 Table 7--FY 2016 IPPS Weights for MS-DRGS 231-236, 246-251, and 280-282
------------------------------------------------------------------------
            MS-DRG                    MS-DRG title            Weights
------------------------------------------------------------------------
231..........................  CORONARY BYPASS W PTCA W           7.8056
                                MCC.
232..........................  CORONARY BYPASS W PTCA W/          5.7779
                                O MCC.
233..........................  CORONARY BYPASS W CARDIAC          7.3581
                                CATH W MCC.
234..........................  CORONARY BYPASS W CARDIAC          4.9076
                                CATH W/O MCC.
235..........................  CORONARY BYPASS W/O                5.8103
                                CARDIAC CATH W MCC.
236..........................  CORONARY BYPASS W/O                3.8013
                                CARDIAC CATH W/O MCC.
246..........................  PERC CARDIOVASC PROC W             3.2494
                                DRUG-ELUTING STENT W MCC
                                OR 4+ VESSELS/STENTS.
247..........................  PERC CARDIOVASC PROC W             2.1307
                                DRUG-ELUTING STENT W/O
                                MCC.
248..........................  PERC CARDIOVASC PROC W             3.0696
                                NON-DRUG-ELUTING STENT W
                                MCC OR 4+ VES/STENTS.
249..........................  PERC CARDIOVASC PROC W             1.9140
                                NON-DRUG-ELUTING STENT W/
                                O MCC.
250..........................  PERC CARDIOVASC PROC W/O           2.6975
                                CORONARY ARTERY STENT W
                                MCC.
251..........................  PERC CARDIOVASC PROC W/O           1.6863
                                CORONARY ARTERY STENT W/
                                O MCC.
280..........................  ACUTE MYOCARDIAL                   1.6971
                                INFARCTION, DISCHARGED
                                ALIVE W MCC.
281..........................  ACUTE MYOCARDIAL                   1.0232
                                INFARCTION, DISCHARGED
                                ALIVE W CC.
282..........................  ACUTE MYOCARDIAL                   0.7557
                                INFARCTION, DISCHARGED
                                ALIVE W/O CC/MCC.
------------------------------------------------------------------------

    We believe that this proposal could minimize potential 
disincentives to AMI model participants from transferring patients when 
different or higher levels of care are needed. This is because the AMI 
model-episode benchmark prices we set would be more representative of 
the AMI spending based on the totality of care furnished during the 
chained anchor hospitalization and post-discharge period within the AMI 
model episode and for which the AMI model participants would be held 
accountable. We also believe that our proposal could encourage AMI 
model participants that frequently transfer patients after admission to 
improve their efficiency and the quality of care by transferring 
beneficiaries needing higher levels of care prior to hospital admission 
and managing those beneficiaries admitted to reduce the need for later 
transfers.
    As an alternative, we also considered an approach where we would 
set the target price taking into consideration IPPS payments for both 
the MS-DRG assigned to the first admission in the chained anchor 
hospitalization and the MS-DRG assigned to the final admission in the 
chained anchor hospitalization. We could apply this approach to all AMI 
model participant hospitals or to only a subset of hospitals based on 
special situations that could lead to more common transfer scenarios 
that are unavoidable, such as small bed-size, rural location, 
interventional or cardiac surgery capacity, or other characteristic of 
the hospitals. All AMI model episodes involving chained anchor 
hospitalizations would include at least two IPPS payments for the 
chained anchor hospitalization, compared to one IPPS payment for most 
AMI episodes with only an anchor hospitalization that does not result 
in an inpatient-to-inpatient transfer. The alternative approach would 
likely result in a higher AMI-model episode benchmark price than under 
our proposal for AMI model episodes including a chained anchor 
hospitalization. Therefore, we believe this alternative approach could 
have the effect of further reducing potential disincentives to 
hospitals from transferring patients when different or a higher level 
of care is needed; however, we are not convinced this approach would 
ultimately improve care quality and efficiency under the AMI model.
    First, we are concerned that this alternative approach could serve 
as an incentive for hospitals to admit and then transfer patients when 
doing so might not be medically necessary, which would neither enhance 
care quality nor efficiency. A recent study showed that non-procedure 
hospitals, defined as hospitals that lack onsite cardiac 
catheterization and coronary revascularization facilities, vary 
substantially in their use of the transfer process for Medicare 
beneficiaries admitted with AMI.\61\ Beneficiaries transferred from 
hospitals that had a high transfer rate experienced greater use of 
invasive cardiac procedures after admission to the transfer hospital 
than beneficiaries transferred from hospitals with a low transfer rate. 
However, higher transfer rates were not associated with a significantly 
lower risk-standardized mortality rate at 30 days, and at one year, 
there was only a 1.1 percent mortality rate difference between 
hospitals with higher and lower transfer rates. As such, we believe 
this alternative approach could be appropriate for only a subset of AMI 
model participant hospitals based on specific hospital characteristics 
that could lead to a higher frequency of unavoidable transfers for AMI 
model beneficiaries rather than appropriate for hospitals overall. In 
addition, if we were to adopt this alternative approach, we believe it 
would also be necessary to incorporate methods for monitoring changes 
in the frequency of AMI model participant hospital patient transfers 
over the model's performance years, as well as assessing the 
appropriateness of those transfers. For example, to address changes in 
transfer frequency, we might compare how often an AMI model participant 
hospital transferred a beneficiary following an inpatient admission 
within each performance year relative to the frequency of transfers 
during its initial 3-year historical period. To address

[[Page 50851]]

appropriateness of transfers, we might consider reviewing and comparing 
a sample of a hospital's transfers within a performance year as 
compared to the historical period. Furthermore, we might also propose 
future changes to this approach where changes in the frequency or 
appropriateness of transfers were identified.
---------------------------------------------------------------------------

    \61\ Barreto-Filho J, Wang Y, Rathore SS et al. Transfer Rates 
From Nonprocedure Hospitals After Initial Admission and Outcomes 
Among Elderly Patients With Acute Myocardial Infarction. JAMA Intern 
Med. 2014;174(2):213-222. doi:10.1001/jamainternmed.2013.11944.
---------------------------------------------------------------------------

    Second, in contrast to our proposal, we believe that this 
alternative approach would not have the benefit of encouraging AMI 
model participant hospitals to make an early decision and transfer 
patients prior to rather than following inpatient admission when doing 
so prior to admission would be appropriate for the beneficiary's 
clinical circumstances and the hospital's capabilities. While we 
recognize that in some cases, an AMI model beneficiary admitted to the 
initial treating hospital may need to be transferred to a referral 
hospital that can provide a different or higher level of care, we 
believe it is important that the AMI model's payment methodology 
support the goal of rapid decision-making by the AMI model participant 
hospital about the AMI model beneficiary's care pathway based on 
clinical guidelines that often incorporate a time dimension in the 
guidelines for care.
    Thus, on balance, we believe our proposed methodology would best 
establish appropriate incentives to improve care quality and efficiency 
under the AMI model by encouraging timely decisions about admission to 
the initial treating hospital and incentivizing only those transfers 
that are necessary to meet AMI model beneficiary's health care during 
the course of their hospitalization. Our proposal would adjust the AMI 
model-episode benchmark price that applies to the episode when a 
chained anchor hospitalization occurs and results in more costly care 
at the transfer hospital than would be expected based on the anchor MS-
DRG at the initial treating hospital who would be accountable for the 
episode under the AMI model, thus accounting for the care at the 
referral hospital.
    In contrast, some chained anchor hospitalizations could begin an 
episode based on an MS-DRG that anchors an episode in the model such as 
an AMI MS-DRGs that subsequently also includes an MS-DRG that does not 
anchor an episode under the model (for example, heart failure, renal 
failure, or cardiac valve replacement). Some of these non-anchor MS-
DRGs could be related to the AMI episode but are unavoidable, for 
example, cardiac valve surgery, while others could potentially reflect 
complications resulting from inadequate care management during the 
episode (for example, heart or renal failure).
    As discussed in section III.C.4.b. of this proposed rule, we 
propose to cancel an AMI model episode when the final MS-DRG in a 
chained anchor hospitalization is from an MS-DRG that would not an 
anchor MS-DRG under the AMI or CABG model. We believe that, in tandem, 
these proposals would allow for appropriate pricing of AMI model 
episodes that continue and include chained anchor hospitalizations.
    The proposals to establish pricing for AMI model episodes involving 
chained anchor hospitalizations are included in Sec.  512.300(c)(7)(i). 
We seek comment on our proposals for pricing AMI episodes involving 
chained anchor hospitalizations and the alternative proposals we 
considered. We also seek comment on the alternative considered that 
would account for both the MS-DRGs at the first and last hospitals 
caring for the AMI model beneficiary during the chained anchor 
hospitalization in setting the AMI-model episode benchmark price for 
episodes involving a chained anchor hospitalization. In particular, 
under such an alternative, we seek comment on the clinical 
circumstances in which inpatient-to-inpatient transfers are unavoidable 
and whether or not there are hospital characteristics that would lead 
us to expect higher frequencies of unavoidable inpatient-to-inpatient 
transfers for AMI model beneficiaries than hospitals overall. We also 
seek comment on how we could discourage unintended consequences under 
this alternative, such as less timely decisions about the most 
appropriate hospital to treat the beneficiary and increased beneficiary 
transfers that are unnecessary or inappropriate for improved quality of 
AMI model episode care.
(b) Adjustments for CABG Model Episodes
    Among Medicare beneficiaries historically discharged under a CABG 
MS-DRG, average episode spending was substantially higher for those 
beneficiaries who also had AMI ICD-CM diagnosis codes on their 
inpatient claims ($57,000) than those who did not ($44,000).\62\ About 
30 percent of CABG beneficiaries had AMI ICD-CM diagnosis codes on 
their claims, while about 70 percent did not, and this percentage of 
CABG beneficiaries with AMI varied substantially across IPPS hospitals 
furnishing CABG procedures.\63\ While average spending, in total, was 
substantially higher for CABG beneficiaries with AMI than without AMI, 
average spending during the anchor hospitalization was not 
substantially higher. Rather, much of this variation in CABG model 
episode spending occurred after discharge from the anchor 
hospitalization and correlated both with the presence of AMI and 
whether the CABG beneficiary was discharged from the anchor 
hospitalization in a CABG MS-DRG with major complication or comorbidity 
(MS-DRGs 231, 233, or 235) as opposed to a CABG MS-DRG without major 
complication or comorbidity (MS-DRGs 232, 234, or 236). Specifically, 
we found that average CABG episode spending after discharge from the 
anchor hospitalization was--
---------------------------------------------------------------------------

    \62\ Episodes for CABG model beneficiaries initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule, that began in CYs 2012-
2014.
    \63\ Episodes for CABG model beneficiaries initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule, that began in CYs 2012-
2014.
---------------------------------------------------------------------------

     $9,000 for non-AMI CABG beneficiaries discharged from MS-
DRGs 232, 234, or 236;
     $11,000 for CABG beneficiaries with AMI discharged from 
MS-DRGs 232, 234, or 236;
     $16,000 for non-AMI CABG beneficiaries discharged from MS-
DRGs 231, 233, or 235; and
     $20,000 for CABG beneficiaries with AMI discharged from 
MS-DRGs 231, 233, or 235.\64\
---------------------------------------------------------------------------

    \64\ Episodes for CABG model beneficiaries initiated by all U.S. 
IPPS hospitals and constructed using standardized Medicare FFS Parts 
A and B claims, as proposed in this rule, that began in CYs 2012-
2014.
---------------------------------------------------------------------------

    Thus, for CABG model episodes, we propose to set CABG model-episode 
benchmark prices by first splitting historical CABG model-episode 
expenditures into expenditures that occurred during anchor 
hospitalizations and expenditures that occurred after discharge from 
the anchor hospitalizations.
    We propose to calculate the CABG anchor hospitalization benchmark 
price by following the general payment methodology that was applied to 
the CJR model, with expenditures limited to those that occurred during 
the anchor hospitalization and risk stratification according to the 
price CABG MS-DRG (80 FR 73337 through 73358).
    We also propose to calculate the CABG post-anchor hospitalization 
benchmark price by following the general payment methodology that was 
applied to the CJR model, with

[[Page 50852]]

expenditures limited to those that occurred after the anchor 
hospitalization and risk-stratification according to the presence of an 
AMI ICD-CM diagnosis code on the anchor inpatient claim and whether the 
price MS-DRG is a CABG MS-DRG with major complication or comorbidity 
(231, 233, or 235) or a CABG MS-DRG without major complication or 
comorbidity (232, 234, or 236) (80 FR 73337 through 73358).
    We propose that the CABG model-episode benchmark price for an 
episode would be the sum of the corresponding CABG anchor 
hospitalization benchmark price and the corresponding CABG post-anchor 
hospitalization benchmark price, as discussed in this section and in 
III.D.4.d.
    The proposals to establish pricing for CABG model episodes are 
included in Sec.  512.300(c)(7)(ii). We seek comment on our proposals 
to establish pricing for CABG model episodes.
(c) Adjustments for Certain AMI Model Episodes With CABG Readmissions
    In section III.C.4.b of this proposed rule, we discuss AMI model 
episodes where a beneficiary is discharged from an AMI model 
participant under an AMI MS-DRG and is later readmitted for a CABG. In 
that section, we did not propose to cancel the AMI model episode 
altogether for a CABG readmission during the 90-day post-hospital 
discharge period or cancel the AMI model episode and initiate a CABG 
model episode because planned CABG readmission following an anchor 
hospitalization that initiates an AMI episode may be an appropriate 
clinical pathway for certain beneficiaries. For example, we noted that 
historically approximately 10 percent of those AMI beneficiaries who 
received CABGs during AMI episodes would receive the CABGs between 2 
and 90 days post-discharge from the anchor hospitalization, and most of 
those readmissions did not occur through hospital emergency 
departments. Even though CABG readmissions are not excluded from AMI 
model episodes (because they are clinically-related to the AMI model 
episode), we propose to provide an adjusted AMI model-episode benchmark 
price in such circumstances so as not to financially penalize AMI model 
participants for relatively uncommon, costly, clinically-appropriate 
care patterns for AMI model beneficiaries. Accordingly, we are 
proposing to establish an adjusted CABG-readmission AMI model-benchmark 
episode price for AMI model episodes with a price MS-DRG of 280-282 or 
246-251 that have readmission for a CABG MS-DRG 231-236.
    Specifically, if a CABG readmission occurs during an AMI model 
episode with a price MS-DRG of 280-282 or 246-251, we propose to 
calculate a CABG-readmission AMI model-episode benchmark price equal to 
the sum of the standard AMI model-episode benchmark price corresponding 
to the price MS-DRG (AMI MS-DRGs 280-282 or PCI MS-DRGs 246-251) and 
the CABG anchor hospitalization benchmark price corresponding to the 
MS-DRG of the CABG readmission. Because the adjustment would be based 
on the anchor hospitalization benchmark price, which does not include 
costs associated with the post-discharge period for CABG, this 
adjustment approach would avoid ``double counting'' post-discharge 
costs. Because adjusting for spending that occurred during a CABG 
readmission accounts for most of the spending variation between AMI 
model episodes with a CABG readmission and AMI model episodes without a 
CABG readmission, we propose no additional adjustment to the price for 
AMI model episodes with a CABG readmission.
    In the event of any other readmission other than CABG during an AMI 
model episode that is not excluded from the AMI model episode 
definition, we would apply the usual rules of EPM-episode pricing that 
would include the spending for the related readmission in the actual 
AMI model-episode spending, without other adjustments. Fewer than 3 
percent of those AMI model beneficiaries who receive inpatient or 
outpatient PCIs during AMI episodes receive the PCIs between 2 and 90 
days post-discharge from the anchor or chained anchor hospitalizations, 
and we do not propose to make a pricing adjustment for PCIs that occur 
later in the AMI model episodes after discharge from the anchor or 
chained anchor hospitalizations. Since a PCI for an AMI typically is 
provided during the anchor or chained anchor hospitalization and most 
PCIs later in an episode occur in the context of a beneficiary 
presenting through the emergency department, we believe that the 
beneficiary likely has experienced a complication of care resulting in 
a PCI that may potentially be avoided through care management during 
the AMI model episode. Given that our intention is to offer appropriate 
incentives for care quality and efficiency by holding AMI model 
participants accountable for readmissions that could be related to the 
quality of care provided prior to the readmission, we believe that an 
adjustment other than for a CABG readmission would not be appropriate.
    The proposal for adjusting episodes involving CABG readmissions is 
included in Sec.  512.300(c)(7)(iii). We seek comment on our proposal 
for adjusting episodes involving CABG readmissions.
(d) Potential Future Approaches to Setting Target Prices for AMI and 
Hip Fracture Episodes
    As previously described, our proposed approach for pricing AMI and 
CABG model episodes for beneficiaries with AMI sets different episode 
target prices depending upon whether the beneficiary is managed 
medically, undergoes PCI, or undergoes CABG during the acute phase of 
the episode, as well as whether the episode involves a chained anchor 
hospitalization or CABG readmission. Similarly, the target price set 
for beneficiaries experiencing hip fracture would depend on whether the 
patient undergoes hip fixation (and therefore initiates a SHFFT model 
episode) or hip arthroplasty (and therefore initiates a CJR model 
episode). We believe that this is a prudent approach that both 
recognizes the resource costs of services provided while encouraging 
care redesign during the portions of these episodes that we believe 
present the greatest opportunities to improve the quality and 
efficiency of the care delivered.
    However, we note that the general principle guiding our payment 
reform efforts is that the payment system should hold providers 
accountable for the overall quality and cost of the care their 
beneficiaries receive rather than setting their payment based on the 
specific services delivered or settings in which they are delivered. We 
believe that this approach gives providers maximum flexibility to 
redesign care in ways that both produce the best outcomes for patients 
and controls the growth in spending for these services.
    For this reason, we are interested in exploring future approaches 
to episode payment that would set an inclusive target price for 
episodes for beneficiaries with AMI that does not depend on whether the 
beneficiary is managed medically or receives PCI or CABG during the 
acute portion of the episode and, similarly, future approaches that 
would set prices for episodes for beneficiaries with hip fracture that 
do not depend on whether the beneficiary undergoes hip fixation or hip 
arthroplasty. While we believe that the choice of treatment during the 
acute phase of these episodes may be determined predominantly by 
clinical factors such that financial factors may play a smaller role in 
shaping episode

[[Page 50853]]

care redesign than they do following hospital discharge, we 
nevertheless believe it would be valuable to consider testing an 
inclusive episode payment model. Providers may be able to redesign and 
implement care pathways that we might not have otherwise anticipated, 
especially as the evidence-base for AMI and hip fracture treatment 
continues to grow and evolve.
    We seek comment on this type of approach to setting an inclusive 
episode target price and on any episode payment model design features 
that would be needed to make such an approach successful. In 
particular, we seek comment on potential approaches to risk-adjustment 
aimed at ensuring that providers are appropriately paid for caring for 
high-complexity episode beneficiaries in the context of this 
alternative approach. We would seek to ensure that all providers caring 
for these episode beneficiaries, including those providers for which we 
propose additional protections and those that serve a high percentage 
of potentially vulnerable populations of medically and socially complex 
patients as discussed in section III.D.7.c. of this proposed rule, 
would not bear undue financial risk and to mitigate any incentives to 
avoid caring for high-complexity patients. In addition, we seek comment 
on whether and how our methodology linking quality performance to 
payment under the proposed EPMs and the CJR model might need to be 
modified in the context of this alternative approach that would set an 
inclusive episode target price, in order to appropriately incentivize 
the delivery of high-quality care and discourage stinting on 
appropriate care.
(e) Summary of Pricing Methodologies for AMI, CABG, and SHFFT Model 
Episode Scenarios
    Tables 8 through 10 summarize the standard pricing methodologies 
and the adjustments that would occur that are proposed in sections 
III.D.4.b.(1) and (2) of this proposed rule for AMI, CABG, and SHFFT 
model episodes.

                  Table 8--AMI Model Pricing Scenarios
------------------------------------------------------------------------
          AMI pricing scenario                        Price
------------------------------------------------------------------------
          AMI Scenarios without Chained Anchor Hospitalization
------------------------------------------------------------------------
Single hospital AMI MS[dash]DRG or PCI   Episode benchmark price is
 MS[dash]DRG (with AMI diagnosis).        standard episode benchmark
                                          price based on anchor
                                          MS[dash]DRG (which is the
                                          price MS[dash]DRG).
------------------------------------------------------------------------
           AMI Scenarios with Chained Anchor Hospitalizations
------------------------------------------------------------------------
A chained anchor hospitalization where   Episode benchmark price is the
 the discharge from the first hospital    standard episode benchmark
 is an AMI MS[dash]DRG or PCI             price or the CABG model
 MS[dash]DRG (with AMI diagnosis) that    episode benchmark price
 results in a final discharge from an     corresponding to price
 AMI, PCI, or CABG MS[dash]DRG            MS[dash]DRG, assigned as the
 (transfer PCI and CABG MS[dash]DRGs      AMI, PCI, or CABG MS[dash]DRG
 not required to have AMI ICD[dash]CM     with highest IPPS weight.
 diagnosis code).
                                         If the price MS[dash]DRG is a
                                          CABG MS[dash]DRG, the CABG
                                          model episode benchmark price
                                          is the sum of the CABG anchor
                                          hospitalization price for the
                                          MS[dash]DRG and the CABG
                                          post[dash]anchor
                                          hospitalization price based on
                                          with AMI ICD[dash]CM diagnosis
                                          code and whether the CABG
                                          MS[dash]DRG is w/MCC or not.
------------------------------------------------------------------------
                     AMI Scenarios with Readmissions
------------------------------------------------------------------------
An AMI MS[dash]DRG or PCI MS[dash]DRG    Episode benchmark price is the
 (with AMI diagnosis) anchored episode    sum of the standard episode
 without a chained anchor                 benchmark price corresponding
 hospitalization ongoing with CABG        to the price MS[dash]DRG and
 readmission.                             the CABG anchor
                                          hospitalization benchmark
                                          price corresponding to the
                                          CABG readmission MS[dash]DRG.
AMI MS[dash]DRG or PCI MS[dash]DRG       Episode benchmark price is the
 (with AMI diagnosis) anchored AMI        sum of the standard episode
 episode with chained anchor              benchmark price for the price
 hospitalization (not containing a CABG   MS[dash]DRG assigned to the
 MS[dash]DRG) ongoing with CABG           chained anchor hospitalization
 readmission.                             and the CABG anchor
                                          hospitalization benchmark
                                          price corresponding to the
                                          CABG readmission MS[dash]DRG.
------------------------------------------------------------------------


                  Table 9--CABG Model Pricing Scenarios
------------------------------------------------------------------------
         CABG pricing scenario                        Price
------------------------------------------------------------------------
Single hospital CABG MS[dash]DRG with    Episode benchmark price is the
 AMI diagnosis.                           sum of the CABG anchor
                                          hospitalization benchmark
                                          price for the MS[dash]DRG and
                                          the CABG post[dash]anchor
                                          hospitalization benchmark
                                          price based on the presence of
                                          an AMI ICD[dash]CM diagnosis
                                          code and whether the anchor
                                          MS[dash]DRG is w/MCC or w/o
                                          MCC.
Single hospital CABG MS[dash]DRG         Episode benchmark price is the
 without AMI diagnosis.                   sum of the CABG anchor
                                          hospitalization benchmark
                                          price for the MS[dash]DRG and
                                          the CABG post[dash]anchor
                                          hospitalization benchmark
                                          price based on no AMI
                                          ICD[dash]CM diagnosis code and
                                          whether the anchor MS[dash]DRG
                                          is w/MCC or w/o MCC.
------------------------------------------------------------------------


[[Page 50854]]


                 Table 10--SHFFT Model Pricing Scenarios
------------------------------------------------------------------------
         SHFFT Pricing scenario                       Price
------------------------------------------------------------------------
SHFFT MS[dash]DRG......................  Episode benchmark price is
                                          standard episode benchmark
                                          price based on anchor
                                          MS[dash]DRG (which is the
                                          price MS[dash]DRG).
------------------------------------------------------------------------

(3) Three Years of Historical Data
    As was the case for the CJR model, we propose to use 3 years of 
historical EPM episodes for calculating EPM participants' EPM-episode 
benchmark prices, with each set of historical episodes updated every 
other year (80 FR 73340 through 73341). Under our proposal, each of the 
first 2 years of historical data would be trended to the most recent of 
the 3 years, based on national trend factors for each combination of 
price MS-DRGs and payments would be updated for each payment system 
(for example, IPPS, PFS, etc.) based on annual changes in input costs 
(see sections III.D.4.b(4) and III.D.4.b(5) of this proposed rule that 
immediately follow). Under our proposal, we would establish historical 
EPM-episode payments based on episodes that started between--
     January 1, 2013 and December 31, 2015 for performance 
years 1 and 2;
     January 1, 2015 and December 31, 2017 for performance 
years 3 and 4; and
     January 1, 2017 and December 31, 2019 for performance year 
5.
    We believe that 3 years of historical EPM-episode data should 
provide sufficient historical episode volume to reliably calculate EPM-
episode benchmark prices, and that updating these data every other year 
would allow us to make the most current claims data available in a way 
that incorporates the effects of regular Medicare payment system 
updates and changes in utilization without creating uncertainty in 
pricing for EPM participants. We would further note that the effects of 
updating EPM-participant hospital-specific data on an EPM-episode's 
benchmark prices would diminish over time as the contribution of 
regional pricing on EPM benchmark prices will increase from one-third 
for performance years 1 and 2 to two-thirds in performance year 3, and 
100 percent in performance years 4 and 5.
    The proposal for 3 years of historical data updated every other 
year under the proposed EPMs is included in Sec.  512.300(c)(1).
    We seek comment on our proposal for 3 years of historical data 
updated every other year.
(4) Trending Historical Data to the Most Recent Year
    We recognize that some payment variation could exist in the 3 years 
of historical EPM-episode data due to annual Medicare payment system 
updates (for example, IPPS, OPPS, IRF PPS, SNF PPS) and national 
changes in utilization patterns. Thus, EPM episodes in the third year 
of the 3 historical years might have higher average payments than those 
from the earlier 2 years, in part due to Medicare payment rate 
increases over the course of the 3-year period. Also, EPM-episode 
payments could change over time due to national trends reflecting 
changes in industry-wide practice patterns. For example, readmissions 
for all patients, including those in CABG model episodes, may decrease 
nationally due to improved industry-wide surgical protocols that reduce 
the chance of infections. We do not intend for the incentives under the 
EPMs to be affected by Medicare payment system rate changes that are 
beyond EPM participants' control or to provide reconciliation payments 
to (or require repayments from) EPM participants for achieving lower 
(or higher) Medicare expenditures solely because they followed national 
changes in practice patterns. Instead, we aim to incentivize EPM 
participants to improve care quality and efficiency based on their 
hospital-specific inpatient and post-discharge care practices under the 
EPMs.
    To mitigate the effects of Medicare payment system updates and 
changes in national utilization practice patterns on the 3 years of 
historical episode data, we propose to apply a national trend factor to 
each of the years of historical EPM-episode payments as we do with the 
CJR model (80 FR 73341 through 73342). Specifically, we propose to 
inflate the 2 oldest years of historical EPM-episode payments for EPM 
episodes to the most recent year of the 3 historical years using 
changes in the national EPM-episode payments for each different type of 
EPM episode. That is, we propose to apply separate national trend 
factors for the following pricing scenarios:
     SHFFT model episodes, separately by each price MS-DRG in 
480-482.
     AMI model episodes without CABG readmissions, separately 
by each price MS-DRG in 280-282 and 246-251; and
     The anchor hospitalization portion of CABG model episodes, 
separately by each price MS-DRG in 231-236.
     The post-anchor hospitalization portion of CABG model 
episodes, separately for:
    ++ With AMI ICD-CM diagnosis code on the anchor inpatient claim and 
CABG price MS-DRG with major complication or comorbidity (231, 233, or 
235);
    ++ With AMI ICD-CM diagnosis code on the anchor inpatient claim and 
CABG price MS-DRG without major complication or comorbidity (232, 234, 
or 236);
    ++ Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG with major complication or comorbidity (231, 233, 
or 235); and
    ++ Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    For example, when using Calendar Year (CY) 2013 through 2015 
historical EPM-episode data to establish EPM-episode benchmark prices 
for performance years 1 and 2, we would calculate an aggregate national 
average SHFFT model episode payment in historical episodes with price 
MS-DRG 480 for each of the 3 historical years. To trend historical 
payments to the most recent year in an historical window, we would 
create a ratio based on national average historical EPM-episode payment 
for that episode type in a previous year and for the most recent year. 
Thus, in this example, we would create a ratio of national average 
SHFFT model historical episode payment with price MS-DRG 480 in CY 2015 
as compared to that national average SHFFT model historical episode 
payment in CY 2013 in order to trend the CY 2013 historical SHFFT model 
episode payments to CY 2015. Similarly, we would determine the ratio of 
the national average SHFFT model historical episode payment for CY 2015 
to national average SHFFT model historical episode payment in CY 2014 
to trend 2014 SHFFT model episode payments to CY 2015. This process 
would be repeated for each pricing scenario previously listed.

[[Page 50855]]

    We believe this method for trending data would capture updates in 
Medicare payment systems as well as national utilization pattern 
changes that might have occurred within that 3-year period. Moreover, 
as with the CJR model, we believe that adjusting for national rather 
than regional trends in utilization would be most appropriate as any 
Medicare payment system updates and significant changes in utilization 
practice patterns would not be region-specific but rather be reflected 
nationally.
    The proposal for trending historical data is included in Sec.  
512.300(c)(11). We seek comment on our proposal for trending historical 
data.
(5) Update Historical EPM-Episode Payments To Account for Ongoing 
Payment System Updates
    As previously mentioned, we propose to prospectively update the 
historical EPM-episode payments to account for ongoing updates to 
Medicare payment systems (for example, IPPS, OPPS, IRF PPS, SNF, PFS, 
etc.) in order to ensure we incentivize EPM participants based on 
historical utilization and practice patterns, not Medicare payment 
system rate changes that are beyond hospitals' control. Under our 
proposal, we would apply the same methodology developed for the CJR 
model to incorporate Medicare payment updates (80 FR 73342 through 
73446).
    Because Medicare payment systems rates are not updated at the same 
time during the year--for example, rates under the IPPS, IRF PPS, and 
SNF payment systems are updated effective October 1, while the hospital 
OPPS and MPFS rates are updated annually effective January 1--we 
propose to generally update historical EPM-episode payments and 
calculate EPM-episode benchmark prices separately for EPM episodes 
initiated between January 1 and September 30 versus October 1 and 
December 31 of each performance year, and at other intervals if 
determined necessary. The EPM-episode benchmark price in effect as of 
the day the EPM episode is initiated would be the EPM-episode benchmark 
price for the whole EPM episode. Note that for performance year 5, the 
second set of EPM-episode benchmark prices would be for EPM episodes 
that start and end between and including October 1 and December 31 
because the fifth performance period of the SHFFT, CABG, and AMI models 
would end on December 31, 2021. Also, an EPM episode benchmark price 
for a given EPM performance year could be applied to EPM episodes 
included in another performance year. For example, an EPM episode 
initiated in November 2017, and ending in February 2018 would have an 
EPM-episode benchmark price based on the second set of 2017 EPM-episode 
benchmark prices (for EPM episodes initiated between October 1, 2017, 
and December 31, 2017), and it would be captured in the CY 2018 EPM 
performance year (performance year 2) because it ended between January 
1, 2018, and December 31, 2018. We refer to section III.D.2.a. of this 
proposed rule for further discussion on the definition of EPM 
performance years.
    We propose to update historical EPM-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 EPM 
participant's historical EPM-episode payments:
     Inpatient acute.
     Physician.
     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 EPM episodes 
each EPM performance year. The six update factors for each of the 
previously stated components would be EPM-participant hospital-specific 
and would be weighted by the percent of the Medicare payment for which 
each of the six components accounts in the EPM participant's historical 
EPM episodes. The weighted update factors would be applied to 
historical EPM-participant 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 EPM participant's historical EPM-episode 
payments the component represents, and summing together the results. 
Each of an EPM participant's six update factors would be based on how 
inputs have changed in the various Medicare payment systems for the 
specific EPM participant.
    As an example, we will assume for purposes of this example that 50 
percent of an EPM participant's historical EPM-episode payments were 
for inpatient acute care services, 15 percent were for physician 
services, 35 percent were for SNF services, and 0.0 percent were for 
the remaining services. We will also assume for purposes of 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 
EPM participant in this example would have its historical average EPM-
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 sections III.D.4.c through d. of 
this proposed rule. Also, as discussed further in sections III.D.4.c. 
through d. the update factors would vary by price MS-DRG. For example, 
in CABG model episodes, the update factors would be calculated 
separately for the anchor hospitalization portion of episodes and the 
post-anchor hospitalization portion of episodes, as described in 
section III.D.4.d.
    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 EPM-participant hospital-specific update factors. 
Instead of using historical EPM episodes attributed to a specific 
hospital, region-specific update factors would be based on all 
historical EPM episodes initiated at any IPPS hospital within the 
region with historical EPM episodes, regardless of whether or not the 
MSAs in which the hospitals are located were selected for inclusion in 
the models. We refer to the CJR Final Rule for further discussion of 
our specific methodology and considerations for adopting this 
methodology for updating historical EPM-episode payments for ongoing 
payment system updates (80 FR 73342 through 73446).
    The proposal for updating episode payments for ongoing annual 
Medicare payment updates is included in Sec.  512.300(c)(10). We seek 
comment on our proposal for updating episodes payments for ongoing 
annual Medicare payment updates.
(6) Blend Hospital-Specific and Regional Historical Data
    We propose to calculate EPM-episode benchmark prices using a blend 
of EPM-participant hospital-specific and regional historical average 
EPM-episode payments, including historical EPM-episode payments for all 
IPPS hospitals that are in the same U.S. Census division, which is 
discussed further in section III.D.4.b.(7) of this proposed rule. 
Specifically, we propose to blend two-thirds of the EPM-participant 
hospital-specific historical EPM-episode payments and one-third of the 
regional historical EPM-episode payments to set an EPM participant's 
EPM-episode benchmark prices for the first 2 performance years of the 
proposed EPMs (CYs 2017 and 2018). For performance year 3 of the EPMs 
(CY

[[Page 50856]]

2019), we propose to adjust the proportion of the EPM-participant 
hospital-specific and regional historical EPM-episode payments used to 
calculate the EPM-episode benchmark prices from two-thirds EPM-
participant hospital-specific and one-third regional to one- third EPM-
participant hospital-specific and two-thirds regional. Finally, we 
propose to use only regional historical EPM-episode payments for 
performance years 4 and 5 of the EPMs (CYs 2020 and 2021) to set an EPM 
participant's EPM episode-benchmark prices, rather than a blend between 
the hospital-specific and regional historical EPM episode payments.
    Consistent with our methodology for the CJR model, we propose two 
exceptions. First, we propose to use only regional historical EPM-
episode payments to calculate EPM episode- benchmark prices for EPM 
participants with low historic EPM-episode volume (80 FR 73544). For 
SHFFT model episodes, this exception applies to SHFFT model 
participants with fewer than 50 historical SHFFT model episodes in 
total across the 3 historical years. For AMI model episodes anchored by 
MS-DRGs 280-282, this exception applies to AMI model participants with 
fewer than 75 of these particular AMI model historical episodes in 
total across the 3 historical years. For AMI model episodes anchored by 
PCI MS-DRGs 246-251, this exception applies to AMI model participants 
with fewer than 125 of this particular AMI model historical episodes in 
total across the 3 historical years. For CABG model episodes, this 
exception applies to CABG model participants with fewer than 50 
historical CABG model episodes in total across the 3 historical years. 
The proposed thresholds for low historic volume in this proposed rule 
are higher than the CJR model threshold for low historical LEJR episode 
volume of 20 episodes in total across the 3 historical years. The 
higher thresholds are based on the volume thresholds from the BPCI 
Model 2 Risk Track B for 90-day episodes, which increase when the ratio 
of within-hospital episode spending variation to between-hospital 
episode spending variation increases. That is, as EPM episode payment 
variation increases within a hospital relative to EPM-episode payment 
variation between hospitals, it is necessary to have more EPM episodes 
at that hospital to estimate a stable EPM- episode benchmark price 
using data from only that hospital. We propose to set higher thresholds 
for the SHFFT, AMI, and CABG models based on internal analysis from 
BPCI episode data that shows higher within-hospital episode spending 
variation relative to between-hospital episode spending variation for 
episodes anchored by the EPM MS-DRGs, compared to episodes anchored by 
MS-DRGs 469 and 470 included in the CJR model.\65\
---------------------------------------------------------------------------

    \65\ BPCI Model 2 Baseline Price Common Template calculations 
for 90-day episodes in Risk Track B calculates BPCI volume 
thresholds based on the ratio of within-hospital episode spending 
variation and between-hospital episode spending variation for BPCI 
Clinical Episodes, based on episodes that met BPCI eligibility 
criteria and that began in July 1, 2009-June 30, 2012.
---------------------------------------------------------------------------

    Second, in the case of an EPM participant that has undergone a 
merger, consolidation, spin-off, or other reorganization that results 
in a new hospital entity without 3 full years of historical claims 
data, we propose that EPM participant hospital-specific historical EPM-
episode payments would be determined using the historical EPM episode 
payments attributed to their predecessor(s), as in the CJR model (80 FR 
73544).
    The aforementioned proposals align with our method for blending EPM 
participant hospital-specific and regional data under the CJR model. We 
refer to the CJR model Final Rule for further discussion on 
alternatives to and reasons for adopting this methodology for the CJR 
model, which informs our proposal with respect to the proposed EPMs (80 
FR 73346-73349).
    The proposal for blending payments when establishing participants' 
benchmark and quality-adjusted targets and certain exceptions is 
included in Sec.  512.300(c)(2), (3), and (4). We note that the 
specific order of steps, and how this step fits in with others, is 
discussed further in section III.D.4.c. of this proposed rule. We seek 
comment on our proposal for blending payments when establishing 
participants' benchmark and quality-adjusted targets as well as the 
proposed exceptions.
(7) Define Regions as U.S. Census Divisions
    As we do for the CJR model, for all 5 performance years, we 
proposed to define ``region'' as one of the nine U.S. Census divisions 
\66\ in Figure 1 (80 FR 73349 through 73350).
---------------------------------------------------------------------------

    \66\ 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.

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

[[Page 50857]]

[GRAPHIC] [TIFF OMITTED] TP02AU16.011

    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. We clarify that we would ascribe the same regional component 
of EPM-episode benchmark prices for EPM participants in MSAs that span 
U.S. Census divisions. That is, selected MSAs that span U.S. Census 
divisions would be attributed to one U.S. Census division for purposes 
of calculating the regional component of an EPM-episode benchmark 
price. Specifically, we will attribute an MSA to the U.S. Census 
division in which the majority of people in the MSA reside.
---------------------------------------------------------------------------

    \67\ https://www.eia.gov/consumption/commercial/census_maps.cfm.
---------------------------------------------------------------------------

    The proposal to define a region as one of the nine U.S. Census 
divisions is included in Sec.  512.300(c)(2). We seek comment on our 
proposal to define region in this manner.
(8) Normalize for Provider-Specific Wage Adjustment Variations
    Some variation in historical EPM-episode payments across hospitals 
in a region may be due to wage adjustment differences in Medicare 
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) that reflects the relative wage level in the 
geographic are of the facility or practitioner (or the beneficiary's 
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 another hospital's EPM 
episode-benchmark price with a different level would introduce 
unintended pricing distortion not based on utilization pattern 
differences.
    To preserve how wage levels affect provider payment amounts, while 
minimizing the distortions introduced when calculating the regional-
component of blended EPM-episode benchmark prices, we propose to 
normalize for wage indices at the claim level for both historical EPM-
episode payments and actual EPM-episode payments. As discussed in 
section III.D.3.b. of proposed rule, we propose to utilize the CMS 
Price (Payment) Standardization Detailed Methodology to calculate EPM-
episode benchmark and quality-adjusted target prices and actual EPM-
episode spending. This methodology removes wage level differences in 
calculating standardized payment amounts.
    We believe it is important to reintroduce wage index variations 
near the end of the EPM-episode price-setting methodology and when 
calculating actual EPM-episode payments during an EPM performance year, 
to account for the differences in cost for care redesign across 
different geographic areas of the country. For example, hiring 
additional hospital staff to aid in patient follow-up during the post-
discharge period of an AMI model episode would be significantly more 
costly in San Francisco than in rural Idaho. If we do not reintroduce 
wage index variations into EPM-episode benchmark price and actual EPM-
episode payment calculations, we would calculate reconciliation and 
repayment amounts that would not capture labor cost variation 
throughout the country, and EPM participants in certain regions may see 
less opportunity and financial incentive to invest in care redesign. 
Thus, when setting EPM-episode benchmark prices and calculating actual 
EPM-episode payments, we propose to reintroduce the hospital-specific 
wage variations by multiplying EPM-episode payments by the wage 
normalization factor when calculating the EPM-episode benchmark prices 
and actual EPM -episode payments for each EPM participant, as described 
in section III.D.4.c. of the proposed rule.
    We propose to use the following algorithm to create a wage 
normalization factor: 0.7 * IPPS wage index + 0.3. The 0.7 approximates 
the

[[Page 50858]]

labor share in IPPS, IRF PPS, SNF, and HHA Medicare payments. The 
specific order of steps, and how this step fits in with others, is 
discussed further in section III.D.4.c. of the proposed rule. We refer 
to the CJR model Final Rule for more detailed information on our 
normalization process adopted for the CJR model (80 FR 73350 through 
73352).
    The proposal to normalize for provider-specific wage adjustment 
variations is included in Sec.  512.300(c)(12). We seek comment on our 
proposal to normalize for these variations.
(9) Combining Episodes To Set Stable Benchmark and Quality-Adjusted 
Target Prices
    For the purposes of having sufficient episode volume to set stable 
EPM-episode benchmark and quality-adjusted target prices, we propose 
generally to follow the process from the CJR model to calculate 
severity factors, EPM-participant hospital-specific weights, and 
region-specific weights that allow us to surmount issues of low volume 
for EPM episodes with particular characteristics by aggregating EPM 
episodes and portions of EPM episodes across dimensions that include 
anchor MS-DRGs, the presence of AMI ICD-CM diagnosis code on the anchor 
inpatient claim, and the presence of a major complication or 
comorbidity for anchor CABG MS-DRGs (80 FR 73352 through 73353). Where 
the CJR Final Rule refers to anchor factors, for the purposes of this 
proposed rule we refer to severity factors to avoid confusion when 
performing calculations pertaining to expenditures that occurred during 
the anchor hospitalization and after the anchor hospitalization in CABG 
model episodes.
    For SHFFT model episodes, we propose to combine episodes with price 
MS-DRGs 480-482 to use a greater historical episode volume to set more 
stable SHFFT episode benchmark and quality-adjusted target prices. To 
do so, we propose to calculate severity factors for episodes with price 
MS-DRGs 480 and 481 equal to--
[GRAPHIC] [TIFF OMITTED] TP02AU16.012

The national average would be based on SHFFT model episodes attributed 
to any IPPS hospital. The resulting severity factors would be the same 
for all SHFFT model participants. For each SHFFT model participant, a 
hospital weight would be calculated using the following formula, where 
SHFFT model episode counts are SHFFT-model-participant hospital-
specific and based on the SHFFT model episodes in the 3 historical 
years used in SHFFT model episode benchmark and quality-adjusted target 
price calculations:
[GRAPHIC] [TIFF OMITTED] TP02AU16.013

    A SHFFT model participant's hospital-specific average episode 
payment would be calculated by multiplying such participant's hospital 
weight by its combined historical average episode payment (sum of 
historical episode payments for historical episodes with price MS-DRGs 
480-482 divided by the number of historical episodes with price MS-DRGs 
480-482). 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 episode with 
price MS-DRGs 480 and 481 as more than one episode (assuming episodes 
with price MS- DRGs 480 and 481 have higher average payments than 
episodes with price MS-DRG 482) so that the pooled historical average 
episode payment, and subsequently the SHFFT model episode benchmark and 
quality-adjusted target prices, are not skewed by the SHFFT model 
participant's relative breakdown of historical episodes with price MS-
DRGs 480 and 481 versus historical episodes with price MS-DRG 482.
    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 SHFFT model episodes that were 
attributed to any IPPS hospital located within the region. The 
hospital-specific and region-specific pooled historical average 
payments would be blended together as discussed in section 
III.D.4.b.(6) of the proposed rule. The specific order of steps, and 
how this step fits in with others, is discussed further in section 
III.D.4.c. of the proposed rule.
    Afterwards, the blended pooled calculations would be ''unpooled'' 
by setting the episode benchmark price for episodes with price MS-DRG 
482 to the resulting calculation, and by multiplying the resulting 
calculation by the severity factors to produce the episode benchmark 
prices for episodes with price MS-DRGs 480 and 481. Applying the 
discount factor as discussed in III.D.4.b.(10) and III.D.4.c. would 
result in the SHFFT model quality-adjusted target prices for episodes 
with price MS-DRGs 480-482.
    For episodes in the AMI model with price MS-DRGs in 280-282 or 246-
251

[[Page 50859]]

and without readmissions for CABG MS-DRGs, we propose to follow an 
analogous procedure to the SHFFT model with the following 
modifications. First we propose to group episodes with price MS-DRGs 
280-282 separately from episodes with price MS-DRGs 246-251 for the 
calculations. Second, we propose to calculate severity factors for 
episodes with price MS-DRGs 280-282 as--
[GRAPHIC] [TIFF OMITTED] TP02AU16.014

    Third, we propose to calculate hospital-specific weights and 
region-specific weights for episodes with price MS-DRGs 280-282 as--
[GRAPHIC] [TIFF OMITTED] TP02AU16.015

Fourth, we propose to calculate severity factors for episodes with 
price MS-DRG 246-251 as--
[GRAPHIC] [TIFF OMITTED] TP02AU16.016

Fifth, we propose to calculate hospital-specific weights and region-
specific weights for episodes with price MS-DRG 246-251 as--
[GRAPHIC] [TIFF OMITTED] TP02AU16.017


[[Page 50860]]


    After blending historical and regional pooled episode payments for 
episodes with price MS-DRGs 280-282, the blended pooled calculations 
would be ''unpooled'' by setting the episode benchmark price for price 
MS-DRG 282 to the resulting calculation, and by multiplying the 
resulting calculation by the severity factors to produce the episode 
benchmark prices for price MS-DRGs 280 and 281.
    After blending historical and regional pooled episode payments for 
episodes with price MS-DRGs 246-251, the blended pooled calculations 
would be ''unpooled'' by setting the episode benchmark price for price 
MS-DRG to the resulting calculation, and by multiplying the resulting 
calculation by the severity factors to produce the episode benchmark 
prices for price MS-DRGs 246-251.
    Applying the discount factor as discussed in III.D.4.b.(10) and 
III.D.4.c would result in the quality-adjusted target prices for price 
MS-DRGs 280-282 and 246-251.
    For episodes in the CABG model with price MS-DRGs in 231-236, we 
propose to calculate severity factors, hospital-specific weights, and 
region-specific weights separately for the anchor hospitalization 
portion of CABG model episodes and the post-anchor hospitalization 
portion of CABG model episodes.
    For the anchor hospitalization portion of CABG model episodes, we 
propose to follow an analogous procedure to the SHFFT model with the 
anchor hospitalization portion of CABG model episodes grouped by the 
price MS-DRG. Specifically, we propose to calculate anchor 
hospitalization severity factors for price MS-DRGs 231-235 as--
[GRAPHIC] [TIFF OMITTED] TP02AU16.018

    We also propose to calculate hospital-specific weights and region-
specific weights for the anchor hospitalization portion of CABG model 
episodes as--
[GRAPHIC] [TIFF OMITTED] TP02AU16.019

    After blending historical and regional pooled anchor 
hospitalization payments for the CABG model episodes, the blended 
pooled calculations would be ''unpooled'' by setting the price MS-DRG 
236 anchor hospitalization benchmark price to the resulting 
calculation, and by multiplying the resulting calculation by the 
severity factors to produce the anchor hospitalization benchmark prices 
for price MS-DRGs 231-235.
    For the post-anchor hospitalization portion of CABG model episodes, 
we propose to follow an analogous procedure to the SHFFT model with the 
post-anchor hospitalization portion of

[[Page 50861]]

CABG model episodes grouped in the following manner--
     With AMI diagnosis on the anchor inpatient claim and price 
MS-DRG with major complication or comorbidity (231, 233, or 235)
     With AMI diagnosis on the anchor inpatient claim and price 
MS-DRG without major complication or comorbidity (232, 234, or 236)
     Without AMI diagnosis on the anchor inpatient claim and 
price MS-DRG with major complication or comorbidity (231, 233, or 235)
     Without AMI diagnosis on the anchor inpatient claim and 
price MS-DRG without major complication or comorbidity (232, 234, or 
236)

Specifically, we propose to calculate post-anchor hospitalization 
severity factors as--
[GRAPHIC] [TIFF OMITTED] TP02AU16.020

[GRAPHIC] [TIFF OMITTED] TP02AU16.021

    We also propose to calculate hospital-specific weights and region-
specific weights for the post-anchor hospitalization portion of CABG 
model episodes as--
[GRAPHIC] [TIFF OMITTED] TP02AU16.022

    After blending historical and regional pooled post-anchor 
hospitalization payments for the CABG model episodes, the blended 
pooled calculations would be ''unpooled'' by setting the without AMI 
ICD-CM diagnosis code on the anchor inpatient claim and price MS-DRG 
without major complication or comorbidity (232, 234, or 236) post-
anchor hospitalization benchmark price to the resulting calculation, 
and by multiplying the resulting calculation by the severity factors to 
produce the post-anchor hospitalization benchmark prices for:
     With AMI diagnosis on the anchor inpatient claim and price 
MS-DRG with major complication or comorbidity (231, 233, or 235)
     With AMI diagnosis on the anchor inpatient claim and price 
MS-DRG without major complication or comorbidity (232, 234, or 236)
     Without AMI diagnosis on the anchor inpatient claim and 
price MS-DRG with major complication or comorbidity (231, 233, or 235)

    We propose to calculate episode benchmark prices for CABG model 
episodes by summing combinations of CABG anchor hospitalization 
benchmark prices and CABG post-anchor hospitalization benchmark prices. 
Applying the discount factor as discussed in III.D.4.b.(10) and 
III.D.4.d of this proposed rule would result in the quality-adjusted 
target prices for CABG model episodes.
    For episodes in the AMI model with CABG readmissions, we propose to 
perform no additional blending of hospital-specific and regional-
specific episode payments. We propose to calculate the AMI model 
episode benchmark and quality-adjusted target prices for such episodes 
as described in section III.D.4.e. of this proposed rule.
    The proposals to combine episodes to set stable benchmark and 
quality-adjusted target prices are included in Sec.  512.300(c)(13). We 
seek comment on our proposals for combining episodes for these 
purposes.
(10) Effective Discount Factors
    As discussed in section III.D.2.c. of this proposed rule, we 
propose to make EPM participants partly or fully accountable for EPM-
episode payments in relationship to the EPM quality-adjusted target 
price. As part of this, in setting an episode quality-adjusted target 
price for an EPM participant, we propose to apply an effective discount 
factor to an EPM participant's hospital-

[[Page 50862]]

specific and regional blended historical EPM-episode payments for a 
performance period. We expect EPM participants to have a significant 
opportunity to improve the quality and efficiency of care furnished 
during episodes in comparison with historical practice, because the 
EPMs would facilitate the alignment of financial incentives among 
providers caring for EPM beneficiaries. Our proposed effective discount 
factors are intended to serve as Medicare's portion of reduced 
expenditures from an EPM episode with any EPM-episode expenditures 
below the quality-adjusted target price potentially available as 
reconciliation payments to the EPM participant where the anchor 
hospitalization occurred.
    For the EPMs, we propose to establish a 3 percent effective 
discount factor to calculate the quality-adjusted target prices for EPM 
participants in the below acceptable and acceptable quality categories, 
as discussed in section III.E.3.f. of this proposed rule and similar to 
the CJR model (80 FR 73355). The effective discount factor to calculate 
the quality-adjusted target price for EPM participants in the good and 
excellent quality categories would be 2 percent and 1.5 percent, 
respectively.
    Because of the proposed phase-in of repayment responsibility as 
discussed in section III.D.2.c. of this proposed rule, with no 
responsibility in either performance year 1 or performance year 2 (NDR) 
and only partial repayment responsibility in performance year 2 (DR) 
and all of performance year 3, an EPM participant with actual EPM-
episode payments that exceed the quality-adjusted target prices 
multiplied by the EPM participant's number of EPM episodes to which 
each quality-adjusted target price would apply in performance year 2 
(DR) and performance year 3 would owe Medicare less that would 
otherwise result from this calculation. As discussed in section 
III.E.3.f of this rule, an ``applicable discount factor'' applies to 
repayment amounts in performance years 2 and 3 while this repayment 
responsibility is being phased-in. We refer to section III.E.1. and 
specifically Tables 20 through 28 in this proposed rule for further 
illustration of the discount percentages that would apply for 
reconciliation payment and Medicare repayment over the 5 EPM 
performance years. We believe this methodology offers EPM participants 
an opportunity to create savings for themselves and Medicare, while 
also maintaining or improving quality of care for EPM model 
beneficiaries.
    The proposal to establish discount factors that would apply to the 
quality categories is included in Sec.  512.300(d). We seek comment on 
our proposal to establish discount factors that apply to the quality 
categories.
c. Approach To Combine Pricing Features for all SHFFT Model Episodes 
and AMI Model Episodes Without CABG Readmissions
    The following presents our proposed methodology for combining the 
pricing features presented in section III.D.4.b. of this proposed rule 
with respect to SHFFT model episodes and AMI model episodes without a 
CABG readmission.
     Step 1--Calculate historical EPM-episode payments for 
episodes that were initiated during the 3-historical-years of each 
applicable EPM (that is, individually for each of the SHFFT and AMI 
models) (section III.D.4.b.(3) of this proposed rule) for all IPPS 
hospitals for all Medicare Part A and B services included in the EPM 
episodes. Limit the potential AMI model episodes to those episodes with 
price MS-DRGs in 280-282 or 246-251 and without readmissions for CABG 
MS-DRGs. We note that specific PBPM payments may be excluded from 
historical EPM-episode payment calculations as discussed in section 
III.D.6.d. of this proposed rule.
     Step 2--Remove the effects of special payment provisions 
(section III.D.3.b. of this proposed rule) and normalize for wage index 
differences (section III.D.4.b.(8) of this proposed rule) by 
standardizing Medicare FFS payments at the claim-level.
     Step 3--Prorate Medicare payments for included episode 
services that span a period of care that extends beyond the episode 
(section III.D.3.c. of this proposed rule.).
     Step 4--Trend forward the 2 oldest historical years of 
data to the most recent year of historical data (section III.D.4.b.(4) 
of this proposed rule). Separate national trend factors would be 
applied for each combination of price MS-DRGs.
     Step 5--Cap high episode payment episodes with a region- 
and price-MS-DRG-specific high payment ceiling (section III.D.3.d. of 
this proposed rule), using the episode output from the previous step.
     Step 6--Group episodes based on price MS-DRGs (SHFFT MS-
DRGs 480-482; AMI MS-DRGs 280-282; PCI MS-DRGs 246-251). Within each 
group of episodes, calculate severity factors and EPM-participant 
hospital-specific weights (section III.D.4.b.(9) of this proposed rule) 
using the episode output from the previous step to pool together 
episodes in each group of price MS-DRGs, resulting in EPM-participant 
hospital-specific pooled historical average episode payments for each 
group of price MS-DRGs. Similarly, calculate region-specific weights to 
calculate region-specific pooled historical average episode payments 
for each group of price MS-DRGs.
     Step 7--Calculate EPM-participant hospital-specific and 
region-specific weighted update factors (section III.D.4.b.(5) of this 
proposed rule). Multiply each EPM-participant hospital-specific and 
region-specific pooled historical average episode payment by its 
corresponding EPM-participant hospital-specific and region-specific 
weighted update factors to calculate EPM-participant hospital-specific 
and region-specific updated, pooled, historical average episode 
payments.
     Step 8--Blend together each EPM-participant hospital-
specific updated, pooled, historical average episode payment with the 
corresponding region-specific updated, pooled, historical average 
episode payment according to the proportions for the EPM performance 
year (III.D.4.b.(6) of this proposed rule). EPM participants 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.
     Step 9--Multiply the outputs of step (8) by the wage 
normalization factor described in section III.D.4.b.(8) of this 
proposed rule to reintroduce geographic variation. For purposes of this 
proposed rule, we will define the three outputs of this step as the 
standard episode benchmark price for--

++ SHFFT model episodes with price MS-DRG 482
++ AMI model episodes with price MS-DRG 282 without readmission for 
CABG, and
++ AMI model episodes with price MS-DRG 251 without readmission for 
CABG.

     Step 10--Multiply the output of step (9) by the 
appropriate severity factors (step (6) of this calculation process and 
detailed in section III.D.4.b.(9) of this proposed rule) to calculate 
the standard episode benchmark prices for--

++ SHFFT model episodes with price MS-DRGs 480-481
++ AMI model episodes with price MS-DRGs 280-281 without readmission 
for CABG
++ AMI model episodes with price MS-DRGs 246-250 without readmission 
for CABG


[[Page 50863]]


     Step 11--Multiply the outputs of step (9) and (10) by 1 
minus the applicable effective discount factor based on the EPM 
participant's quality category as described in sections III.D.4.b.(10) 
and III.E.3.f. of this proposed rule. For purposes of this proposed 
rule, we will define the outputs of this step as the episode quality-
adjusted target prices for:

++ SHFFT model episodes with price MS-DRGs 480-482
++ AMI model episodes with price MS-DRGs 280-282 without readmission 
for CABG, and
++ AMI model episodes with price MS-DRGs 246-251 without readmission 
for CABG
d. Approach To Combine Pricing Features for CABG Model Episodes
    The following presents our proposed methodology for combining the 
pricing features presented in section III.D.4.b of this proposed rule 
with respect to CABG model episodes.
(1) Anchor Hospitalization Portion of CABG Model Episodes
     Step 1--Calculate historical episode payments that 
occurred during the anchor hospitalization of CABG model episodes that 
were initiated during the 3 historical years (section III.D.4.b.(2) of 
this proposed rule) for all IPPS hospitals for all Medicare Part A and 
B services included in the episodes. We note that specific PBPM 
payments may be excluded from historical episode payment calculations 
as discussed in section III.D.6. of this proposed rule.
     Step 2--Apply steps III.D.4.c.(2) through (4) to the 
results of step (1) with trend factors calculated based on the anchor 
hospitalization portion of CABG model episodes with price MS-DRGs 231-
236.
     Step 3--Group the anchor hospitalization portion of 
episodes based on price MS-DRGs 231-236 and apply steps III.D.4.c.(6) 
through (10) to the anchor hospitalization portion of the CABG model 
episodes with severity factors, hospital-specific weighted update 
factors, and region-specific weighted update factors calculated to 
apply based only on the anchor hospitalization portion of CABG model 
episodes with price MS-DRGs 231-236. For purposes of this proposed 
rule, we will define the output of this step as CABG anchor 
hospitalization benchmark prices for CABG model episodes with price MS-
DRGs 231-236.
(2) Approach To Combine Pricing Features for Post-Anchor 
Hospitalization Portion of CABG Model Episodes
     Step 1--Calculate historical episode payments that 
occurred after the anchor hospitalization for CABG model episodes that 
were initiated during the 3 historical years (section III.D.4.b.(2) of 
this proposed rule) for all IPPS hospitals for all Medicare Parts A and 
B services included in the episodes. We note that specific PBPM 
payments may be excluded from historical episode payment calculations 
as discussed in section III.D.6. of this proposed rule.
     Step 2--Apply steps III.D.4.c.(2) through (4) to the 
results of step (1) with trend factors calculated based on the post-
anchor hospitalization portion of CABG model episodes with price MS-
DRGs 231-236, as described in section III.D.4.b.(4) of this proposed 
rule.
     Step 3--Group the post-anchor hospitalization portion of 
episodes based on--

++ With AMI diagnosis on the anchor inpatient claim and price MS-DRG 
with major complication or comorbidity (231, 233, or 235)
++ With AMI diagnosis on the anchor inpatient claim and price MS-DRG 
without major complication or comorbidity (232, 234, or 236)
++ Without AMI diagnosis on the anchor inpatient claim and price MS-DRG 
with major complication or comorbidity (231, 233, or 235)
++ Without AMI diagnosis on the anchor inpatient claim and price MS-DRG 
without major complication or comorbidity (232, 234, or 236).

    Then apply steps III.D.4.c.(6)-(10) to the post-anchor 
hospitalization portion of the CABG model episodes with severity 
factors, hospital-specific weights, and region-specific weights 
calculated to apply based on the groups previously described in this 
step. For purposes of this proposed rule, we will define the output of 
this step as CABG post-anchor hospitalization benchmark prices for CABG 
model episodes corresponding to the groups described in this step.
(3) Combine CABG Anchor Hospitalization Benchmark Price and CABG Post-
Anchor Hospitalization Benchmark Price
     Step 1--Sum the CABG anchor hospitalization benchmark 
price corresponding to each price CABG MS-DRG and the CABG post-anchor 
hospitalization price corresponding to each of the post-anchor 
hospitalization groupings described in III.D.4.d.(2). For purposes of 
this proposed rule, we will define the outputs of those calculations to 
be CABG model episode benchmark prices for--

++ CABG model episodes with price MS-DRG 231 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 232 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 233 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 234 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 235 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 236 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 231 and without AMI diagnosis
++ CABG model episodes with price MS-DRG 232 and without AMI diagnosis
++ CABG model episodes with price MS-DRG 233 and without AMI diagnosis
++ CABG model episodes with price MS-DRG 234 and without AMI diagnosis
++ CABG model episodes with price MS-DRG 235 and without AMI diagnosis, 
and
++ CABG model episodes with price MS-DRG 236 and without AMI diagnosis

    The CABG episode benchmark prices for each price CABG MS-DRG with 
AMI diagnosis would also apply as AMI model episode benchmark prices 
for AMI model episodes with price MS-DRGs 231-236.
     Step 2--Multiply the results of step 1 by the appropriate 
effective discount factor that reflects the EPM participant's quality 
category as described in sections III.D.4.b.(10) and III.E.3.f. of this 
proposed rule. For purposes of this proposed rule, we will define the 
outputs of this step to be CABG model episode quality-adjusted target 
prices for--

++ CABG model episodes with price MS-DRG 231 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 232 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 233 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 234 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 235 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 236 and with AMI diagnosis
++ CABG model episodes with price MS-DRG 231 and without AMI diagnosis
++ CABG model episodes with price MS-DRG 232 and without AMI diagnosis

[[Page 50864]]

++ CABG model episodes with price MS-DRG 233 and without AMI diagnosis
++ CABG model episodes with price MS-DRG 234 and without AMI diagnosis
++ CABG model episodes with price MS-DRG 235 and without AMI diagnosis, 
and
++ CABG model episodes with price MS-DRG 236 and without AMI diagnosis

    The episode quality-adjusted target prices for each anchor CABG MS-
DRG with AMI diagnosis would also apply as AMI model episode quality-
adjusted target prices for AMI model episodes with price MS-DRGs 231-
236. The effective discount factor applied to calculate the AMI model 
episode quality-adjusted target prices for AMI model episodes with 
price MS-DRGs 231-236 could differ from the effective discount factor 
applied to calculate CABG model episode quality-adjusted target prices 
for CABG model episodes if the participant had different levels of 
quality performance on the AMI and CABG model composite quality scores 
that determine the discount factor for the quality-adjusted target 
prices.
e. Approach To Combine Pricing Features for AMI Model Episodes With 
CABG Readmissions
    The following presents our proposed methodology for combining the 
pricing features presented in section III.D.4.b of this proposed rule 
with respect to AMI model episodes with a CABG readmission.
    In general, the AMI model episode benchmark price for AMI model 
episodes with CABG readmission is the sum of the applicable standard 
AMI model episode benchmark price for an AMI episode without 
readmission corresponding to the AMI price MS-DRG and the applicable 
CABG anchor hospitalization benchmark price for a CABG model episode 
corresponding to the CABG readmission MS-DRG in the AMI model.
     Step 1--For each combination of AMI price MS-DRG and CABG 
readmission MS-DRG, sum the corresponding AMI model episode benchmark 
price and CABG anchor hospitalization benchmark price. This results in 
54 possible CABG readmission AMI model episode benchmark prices, 
corresponding to--

++ Price MS-DRG 280; Readmission MS-DRG 231
++ Price MS-DRG 280; Readmission MS-DRG 232
++ Price MS-DRG 280; Readmission MS-DRG 233
++ Price MS-DRG 280; Readmission MS-DRG 234
++ Price MS-DRG 280; Readmission MS-DRG 235
++ Price MS-DRG 280; Readmission MS-DRG 236
++ Price MS-DRG 281; Readmission MS-DRG 231
++ Price MS-DRG 281; Readmission MS-DRG 232
++ Price MS-DRG 281; Readmission MS-DRG 233
++ Price MS-DRG 281; Readmission MS-DRG 234
++ Price MS-DRG 281; Readmission MS-DRG 235
++ Price MS-DRG 281; Readmission MS-DRG 236
++ Price MS-DRG 282; Readmission MS-DRG 231
++ Price MS-DRG 282; Readmission MS-DRG 232
++ Price MS-DRG 282; Readmission MS-DRG 233
++ Price MS-DRG 282; Readmission MS-DRG 234
++ Price MS-DRG 282; Readmission MS-DRG 235
++ Price MS-DRG 282; Readmission MS-DRG 236
++ Price MS-DRG 246; Readmission MS-DRG 231
++ Price MS-DRG 246; Readmission MS-DRG 232
++ Price MS-DRG 246; Readmission MS-DRG 233
++ Price MS-DRG 246; Readmission MS-DRG 234
++ Price MS-DRG 246; Readmission MS-DRG 235
++ Price MS-DRG 246; Readmission MS-DRG 236
++ Price MS-DRG 247; Readmission MS-DRG 231
++ Price MS-DRG 247; Readmission MS-DRG 232
++ Price MS-DRG 247; Readmission MS-DRG 233
++ Price MS-DRG 247; Readmission MS-DRG 234
++ Price MS-DRG 247; Readmission MS-DRG 235
++ Price MS-DRG 247; Readmission MS-DRG 236
++ Price MS-DRG 248; Readmission MS-DRG 231
++ Price MS-DRG 248; Readmission MS-DRG 232
++ Price MS-DRG 248; Readmission MS-DRG 233
++ Price MS-DRG 248; Readmission MS-DRG 234
++ Price MS-DRG 248; Readmission MS-DRG 235
++ Price MS-DRG 248; Readmission MS-DRG 236
++ Price MS-DRG 249; Readmission MS-DRG 231
++ Price MS-DRG 249; Readmission MS-DRG 232
++ Price MS-DRG 249; Readmission MS-DRG 233
++ Price MS-DRG 249; Readmission MS-DRG 234
++ Price MS-DRG 249; Readmission MS-DRG 235
++ Price MS-DRG 249; Readmission MS-DRG 236
++ Price MS-DRG 250; Readmission MS-DRG 231
++ Price MS-DRG 250; Readmission MS-DRG 232
++ Price MS-DRG 250; Readmission MS-DRG 233
++ Price MS-DRG 250; Readmission MS-DRG 234
++ Price MS-DRG 250; Readmission MS-DRG 235
++ Price MS-DRG 250; Readmission MS-DRG 236
++ Price MS-DRG 251; Readmission MS-DRG 231
++ Price MS-DRG 251; Readmission MS-DRG 232
++ Price MS-DRG 251; Readmission MS-DRG 233
++ Price MS-DRG 251; Readmission MS-DRG 234
++ Price MS-DRG 251; Readmission MS-DRG 235, and
++ Price MS-DRG 251; Readmission MS-DRG 236

     Step 2--Multiply the results of step 1 by the effective 
discount factor that reflects the EPM participant's quality category, 
as described in sections III.D.4.b.(10) and III.E.3.f. of this proposed 
rule. For purposes of this proposed rule, we will define the outputs of 
this step to be AMI model episode quality-adjusted target prices for 
the same combinations of AMI price MS-DRG and readmission MS-DRG in 
step (1).
5. Process for Reconciliation
a. Net Payment Reconciliation Amount (NPRA)
    Consistent with the CJR model, we propose to conduct reconciliation 
for each EPM by calculating an EPM-specific NPRA for each EPM 
participant (80 FR 73381 through 73383). After the completion of an EPM 
performance year, we propose to retrospectively calculate an EPM 
participant's actual EPM-episode payments based on the EPM episode 
definitions as discussed in sections III.C.3. and III.C.4. of this 
proposed rule and the payment policies applicable to calculating actual 
EPM-episode payments as discussed in the subsections of section III.D.3 
of this proposed rule.
    We propose to compare each EPM participant's actual EPM episode 
payments to its quality-adjusted target prices. We propose, as 
discussed in

[[Page 50865]]

section III.D.4. of this proposed rule, that an EPM participant would 
have multiple quality-adjusted target prices for EPM episodes ending in 
a given performance year, based on the anchor MS-DRG for the EPM 
episode, whether the EPM episode included a chained anchor 
hospitalization; whether the EPM episode included readmission for CABG 
MS-DRGs; whether the EPM episode included an AMI ICD-CM diagnosis code 
on the anchor inpatient claim; the performance year when the EPM 
episode was initiated; when the EPM 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 
the potential effective discount factors. The difference between each 
EPM episode's actual EPM episode payment and the relevant quality-
adjusted target price under the EPM (calculated as quality-adjusted 
target price subtracted by actual EPM episode payment) would be 
aggregated for all EPM episodes in each EPM for an EPM participant 
within the performance year, representing the NPRA. For performance 
year 2, we would perform two separate aggregations in order to create 
two NPRAs--one reflecting episodes that ended during performance year 2 
(NDR), and a second for episodes that ended during performance year 2 
(DR).
    We propose to not include any reconciliation payments or repayments 
to Medicare under the EPMs for a given performance year when 
calculating actual episode spending and, therefore the NPRA for a 
subsequent performance year. We want to incentivize providers to 
provide high-quality and efficient care in all years of the EPMs. If 
reconciliation payments for a performance year were counted as Medicare 
expenditures in a subsequent performance year, an EPM participant 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 propose to not have the NPRA for 
a given performance year be impacted by EPM repayments or 
reconciliation payments made in a prior performance year. For example, 
if an EPM participant receives a $10,000 reconciliation payment in the 
second quarter of 2018 for achieving episode spending below the 
quality-adjusted target price for performance year 1, that $10,000 
reconciliation payment amount would not be included in the performance 
year 2 calculations of actual EPM-episode payments.
    The NPRA would be subject to the stop-loss and stop-gain limits 
described in section III.D.7.b. of this proposed rule.
b. Payment Reconciliation
    We propose to retrospectively reconcile an EPM participant's actual 
EPM-episode payments against the quality-adjusted target prices 2 
months after the end of the performance year. 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 an EPM reconciliation payment or hold hospitals 
responsible for repayment, as applicable, in quarter 2 of that calendar 
year.
    We also propose that during the following performance year's 
reconciliation process, we would calculate the prior performance year's 
actual EPM episode payments a second time to account for final claims 
run-out and any canceled EPM episodes, due to overlap with other models 
or other reasons as specified in section III.C.4.b of this proposed 
rule. This calculation, termed the subsequent reconciliation, 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, as well as the post-episode spending 
and ACO overlap calculation in order to determine the amount of the 
payment Medicare would make to the EPM participant or such 
participant's repayment amount. We note that the subsequent 
reconciliation calculation would be combined with the previous 
calculation of NPRA for a performance year to ensure the stop-loss and 
stop-gain limits discussed in section III.D.7.b. of this proposed rule 
are not exceeded for a given performance year.
    For the performance year 1 reconciliation process, we would 
calculate an EPM participant's NPRA as previously described, and if 
positive, such participant would receive the amount as a reconciliation 
payment from Medicare, subject to the stop-gain limit for performance 
year 1. If negative, the EPM participant would not be responsible for 
repayment to Medicare, consistent with our proposal to phase in 
financial responsibility beginning in the second quarter of performance 
year 2.
    For the performance year 2 reconciliation process, we would 
calculate two separate NPRAs for an EPM participant--one for episodes 
that ended during performance year 2 (NDR) and a second for episodes 
that ended during performance year 2 (DR). While these NPRAs would be 
separately determined for each of these two periods, whether an EPM 
participant receives a Medicare reconciliation payment or makes a 
Medicare repayment in performance year 2 would be determined based on 
the sum of these two separately determined NPRAs. The NPRA for both 
performance year 2 (NDR) and performance year 2 (DR) would be subject 
to the same stop-gain limit of 5 percent, but because EPM participants 
would only have repayment responsibility for negative NPRA in 
performance year 2 (DR), the stop-loss limit of 5 percent would only 
apply to performance year 2 (DR). Thus, if an EPM participant's NPRA 
for the first quarter of performance year 2 is positive, that amount 
would be counted toward a reconciliation payment from Medicare, subject 
to the stop-gain limit for performance year 2. If negative, the EPM 
participant would not be responsible for repayment to Medicare of the 
amount determined for performance year 2 (NDR). If an EPM participant's 
NPRA is positive for episodes ending during performance year 2 (DR), 
that amount would be counted toward a reconciliation payment from 
Medicare, subject to the stop-gain limit for performance year 2. If 
negative, the EPM participant would be responsible for repayment to 
Medicare of the amount determined for episodes ending during 
performance year 2 (DR), subject to the stop loss limits for 
performance year 2 (DR).
    During the subsequent reconciliation process for performance year 
2, we would also calculate the prior performance year's actual EPM 
episode payments a second time separately for episodes that ended 
during performance year 2 (NDR) and for episodes that ended during 
performance year 2 (DR).
    Also, starting with the EPM reconciliation process for performance 
year 2, in order to determine the reconciliation or repayment amount, 
the amount from the subsequent reconciliation calculation would be 
combined with the NPRA for that subsequent year. The result of the 
post-episode spending calculation for performance year 1, as proposed 
in section III.D.7.e., and the dollar amount of the EPM discount 
percentage that was paid out as shared savings to an ACO during the 
prior year as specified in section III.D.6.b. of this proposed rule, 
would also be added to the NPRA and subsequent reconciliation 
calculation in

[[Page 50866]]

order to create the reconciliation payment or repayment amount. If the 
amount is positive, and if the EPM participant is in the acceptable or 
better quality category for the EPM (discussed further in section 
III.E.3.f of this proposed rule), the EPM participant would receive the 
amount as a reconciliation payment from Medicare. If the amount is 
negative, Medicare would hold the EPM participant responsible for 
repaying the absolute value of the repayment amount following the rules 
and processes for all other Medicare debts. For example, when we 
conduct reconciliation for performance year 2 in early 2019, we would 
calculate the performance year 2 NPRA and the subsequent reconciliation 
calculation, post-episode spending, and ACO overlap calculation for 
performance year 1. These amounts would be added together to create the 
reconciliation payment or repayment amount.
    Note that given our proposal to not hold EPM participants 
financially responsible for repayment for the first performance year, 
during the reconciliation process for performance year 2, the 
subsequent reconciliation 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. 
Likewise given our proposal to not hold EPM participants financially 
responsible for repayment for episodes ending during performance year 2 
(NDR), during the reconciliation process for performance year 3, the 
subsequent reconciliation calculation amount for performance year 2 
(NDR) would be compared against the performance year 2 (NDR) NPRA to 
ensure that the sum of the NPRA calculated for performance year 2 (NDR) 
and the subsequent reconciliation calculation for performance year 2 
(NDR) is not less than zero.
    For performance year 2 (DR) and performance years 3 through 5, 
though, we propose that Medicare would hold the participant responsible 
for repaying part or all of the absolute value of the repayment amount, 
as proposed in section III.D.2.c. of this proposed rule, following the 
rules and processes for all other Medicare debts. Table 11 illustrates 
a simplified example of how the subsequent reconciliation calculation 
may affect the following year's reconciliation payment. Note that this 
example assumes the EPM participant is not responsible for post-episode 
spending or ACO overlap for performance year 1.

                                                         Table 11--Sample Reconciliation Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Difference
                                                                                        Performance      between PY1                      Reconciliation
                                                                       Performance         year 1         subsequent      Performance    payment made to
                                                                      year 1 (2017)      subsequent     reconciliation   year 2 (2018)         EPM
                                                                           NPRA        reconciliation  calculation and       NPRA *       participant in
                                                                                        calculation          NPRA                         quarter 2 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital A.........................................................         $50,000          $40,000        ($10,000)          $25,000          $15,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note the calculation of NPRA for performance year 2 represents the combined amounts of the NPRA for performance year 2 (NDR) and performance year 2
  (DR).

    The second column represents the NPRA calculated for performance 
year 1, meaning that EPM participant Hospital A's aggregated episode 
payment was $50,000 below the sum of quality-adjusted target prices for 
all of Hospital A's EPM episodes. The third column represents the 
subsequent reconciliation calculation, indicating that when calculating 
actual EPM-episode payments during performance year 1 a second time, we 
determined that Hospital A's aggregated EPM-episode payment was $40,000 
below the sum of quality-adjusted target prices for all of Hospital A's 
EPM episodes, due to claims run out, 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 payment amount for PY2, 
which is reflected in the sixth column.
    This reconciliation process would account for overlap between the 
CJR model and other CMS models and programs as discussed in section 
III.D.6.b of this proposed rule, and would also involve updating 
performance year EPM-episode claims data. We also note that in cases 
where an EPM participant has appealed one or more of its EPM quality 
measure results through the HIQR Program appeal process (which is not 
part of the proposed EPM appeals process), where such HIQR Program 
appeal findings would result in a different effective discount factor 
for the EPM participant to calculate the quality-adjusted target prices 
from EPM-episode benchmark prices, the subsequent reconciliation 
calculation would account for these changes as well.
    For example, for performance year 1 for these EPMs in 2017, we 
would capture claims submitted by March 1, 2018, and reconcile payments 
for EPM participants approximately 6 months after the end of the 
performance year 1 in quarter 2 of calendar year 2018. We would carry 
out the subsequent reconciliation calculation in the following year in 
quarter 2 of calendar 2019, simultaneously with the reconciliation 
process for the second performance year, 2018. Table 12 displays the 
reconciliation timeframes for the EPMs.

                                                Table 12--Proposed Timeframe for Reconciliation for EPMs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Second          Calculation amounts
                                                                                                             reconciliation, ACO        included in
        EPM performance year         EPM performance period   Reconciliation claims    NPRA  calculation      overlap, and post-       reconciliation
                                                                  submitted by                                 episode spending    payment and repayment
                                                                                                                 calculations             amounts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 1 *...........................  Episodes beginning on   March 1, 2018.........  Q2 2018..............  March 1, 2019........  Q2 2019
                                      or after July 1, 2016
                                      and ending through
                                      December 31, 2017.

[[Page 50867]]

 
Year 2.............................  Episodes ending         March 1, 2019.........  Q2 2019..............  March 1, 2020........  Q2 2020
                                      January 1, 2018
                                      through December 31,
                                      2018.
Year 3.............................  Episodes ending         March 1, 2020.........  Q2 2020..............  March 2, 2021........  Q2 2021
                                      January 1, 2019
                                      through December 31,
                                      2019.
Year 4.............................  Episodes ending         March 2, 2021.........  Q2 2021..............  March 1, 2021........  Q2 2021
                                      January 1, 2020
                                      through December 31,
                                      2020.
Year 5.............................  Episodes ending         March 1, 2022.........  Q2 2022..............  March 1, 2023........  Q2 2023
                                      January 1, 2021
                                      through December 31,
                                      2021.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note that the reconciliation for Year 1 would not include repayment responsibility from EPM participants.

    We propose 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 EPM 
episodes. We believe that beginning to pull 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 EPM 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 recognize 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 
believe that the 2 months of claims run-out would be an accurate 
reflection of EPM-episode payments and consistent with the claims run-
out timeframes used for reconciliation in other payment models, such as 
BPCI Models 2 and 3 and the CJR model. 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 are concerned that this approach would 
significantly delay earned reconciliation payments under the EPMs.
    However, we propose to conduct a subsequent reconciliation 
calculation 14 months after the end of a performance year to account 
for canceled episodes, post-episode spending, overlap with other CMS 
models and programs, and any remaining claims available at that time. 
The proposals for the annual reconciliation and subsequent 
reconciliation calculation are included in Sec.  512.305 and Sec.  
512.307. We seek comment on these proposals for an annual 
reconciliation and subsequent calculation.
c. Reconciliation Report
    For EPM participants to receive timely and meaningful feedback on 
their performance under the models as well as better understand the 
basis of their reconciliation payment or Medicare repayment for a given 
performance year, if any, we propose to annually issue to EPM 
participants a reconciliation report, similar to the CJR Reconciliation 
Report we make available to CJR participants (80 FR 73408). We propose 
that these reports would contain the following information:
     Information on the EPM participant's composite quality 
score described in section III.E.3.a. through III.E.3.e of this 
proposed rule.
     The total actual episode payments for the EPM participant.
     The NPRA.
     Whether the EPM participant is eligible for a 
reconciliation payment or must make a repayment to Medicare.
     The NPRA and subsequent reconciliation calculation amount 
for the previous performance year, as applicable.
     The post-episode spending amount and ACO overlap 
calculation for the previous performance year, as applicable.
     The reconciliation payment or repayment amount.
    For performance year 2, we propose that the reconciliation report 
would include information separately for the performance year 2 (NDR) 
and performance year 2 (DR) portions of that year.
    As discussed in section III.D.8 of this proposed rule, EPM 
participants would review their reconciliation report and would be 
required to provide written notice of any error, in a calculation error 
form that must be submitted in a form and manner specified by CMS. 
Unless the EPM participant provides such notice, the reconciliation 
report would be deemed final within 45 calendar days after it is 
issued, and CMS would proceed with payment or repayment. The proposal 
to issue a reconciliation report is included in Sec.  512.305(f). We 
seek comments on our proposal to issue a reconciliation report to EPM 
participants and what other information, if any, would be helpful to 
include in this report.
6. Adjustments for Overlaps With Other Innovation Center Models and CMS 
Programs
a. Overview
    Three issues may arise in overlap situations that must be addressed 
under EPM. First, we acknowledge that there may be circumstances where 
a hospital in a geographic area selected for the AMI, CABG or SHFFT 
model is also participating in BPCI for the same episode. We refer to 
this as ``provider overlap.'' Second, there may be situations where a 
Medicare beneficiary receives care that could potentially be counted 
under more than one episode or total cost of care payment model. We 
refer to this as ``beneficiary overlap.'' Finally, EPM reconciliation 
payments and Medicare repayments made under Parts 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 
beneficiary's cost of care under Medicare. Therefore, a payment 
reconciliation policy is necessary in order to credit the entity that 
is closest to that care for the episode of care in terms of time, 
location, and care management responsibility.
    We establish our proposal for provider overlap at Sec.  512.100(b) 
and Sec.  512.230(g). We establish our proposal for beneficiary overlap 
at Sec.  512.230(f), Sec.  512.230(h), and Sec.  512.230(i). We 
establish our proposal for payment reconciliation at Sec.  512.210 and

[[Page 50868]]

Sec.  512.305. We seek comment on our proposals to account for overlap 
between EPMs and other CMS models or programs.
b. Provider Overlap
(1) BPCI Participant Hospitals in Geographic Areas Selected for EPMs
    Provider overlap exists when a hospital in a geographic area 
selected for the AMI, CABG or SHFFT model is also an episode initiator 
in BPCI for an episode anchored by that EPM's DRG. BPCI is an episode 
payment model testing AMI, CABG, SHFFT, and 45 other episodes in acute 
care, post-acute care, or both acute care and post-acute care settings.
    Similar to CJR, we propose that in the geographic areas where the 
AMI, CABG and SHFFT models will be implemented, an acute care hospital 
participating in BPCI Model 2 or 4 will participate in an EPM for 
episodes anchored by EPM MS-DRGs that are not covered under the 
hospital's current BPCI agreement. If a BPCI hospital in an EPM-
selected area withdraws from BPCI episodes anchored by EPM MS-DRGs, the 
BPCI hospital will participate in the EPMs for which it was previously 
excluded. This proposal promotes accountable care by ensuring 
beneficiary coverage by BPCI or an EPM in selected areas.
    We establish the proposal for hospitals in geographic areas 
selected for EPMs that are also participating in BPCI episodes anchored 
by EPM DRGs at Sec.  512.100(b). We seek comment on this proposal.
(2) BPCI Physician Group Practice (PGP) Episode Initiators in Hospitals 
Participating in EPMs
    It is possible that a physician in a BPCI PGP may treat a Medicare 
beneficiary in a hospital participating in one or more EPM. We propose 
that if a beneficiary is admitted to an EPM participant for an episode 
anchored by EPM MS-DRGs covered under the PGP's BPCI agreement and the 
attending or operating physician on the admission's inpatient claim is 
a member of the BPCI PGP, the BPCI episode will take precedence over 
the EPM episode for which the hospital would otherwise be the 
accountable entity. In other words, if, for any portion of the EPM 
episode, a beneficiary would also be in a BPCI PGP episode, we will 
cancel or never initiate the EPM episode. For example--
     A beneficiary is admitted for a CABG to an EPM participant 
in the CABG model. The attending or operating physician on the 
inpatient claim for the admission is in a BPCI Model 2 PGP 
participating in CABG. The episode is initiated under BPCI; an EPM 
episode does not initiate.
     A beneficiary is admitted for an AMI to an EPM participant 
in the AMI model. The beneficiary receives a PCI while hospitalized. 
The attending or operating physician on the inpatient claim for the 
admission is in a BPCI Model 2 PGP participating in PCI episodes but 
not medical AMI episodes. A PCI episode is initiated under BPCI; an EPM 
episode does not initiate.
     A beneficiary is admitted for an AMI to an EPM participant 
in the AMI model. A PCI was not part of the beneficiary's treatment. 
The attending or operating physician on the inpatient claim for the 
admission is in a BPCI Model 2 PGP participating in PCI episodes only. 
The episode is initiated under the AMI model. A PCI episode under BPCI 
Model 2 would not initiate unless a PCI were performed on the 
beneficiary, and
     A beneficiary is admitted for an AMI to an EPM participant 
in the AMI model. A CABG was not part of the beneficiary's treatment. 
The attending or operating physician on the inpatient claim is in a 
BPCI Model 2 PGP participating in CABG episodes only. The episode is 
initiated under the AMI model. A CABG episode under BPCI Model 2 would 
not be initiated unless a CABG was performed on the beneficiary while 
hospitalized.
    We establish the proposal for BPCI PGP episode initiators in 
hospitals participating in EPMs at Sec.  512.230(g). We seek comment on 
this proposal.
(c) Beneficiary Overlap
(1) Beneficiary Overlap With BPCI
    We also need to account for instances where a different model's 
episode could initiate during an ongoing EPM episode. We propose that 
any BPCI Model 2, 3 or 4 episode, regardless of its anchor DRG 
exclusion status from an EPM episode definition, takes precedence over 
an AMI, CABG or SHFFT episode such that it would cancel or prevent the 
initiation of an AMI, CABG or SHFFT episode. For example--
     If a beneficiary is in an ongoing AMI model episode and is 
treated for SHFFT by a hospital, PGP physician, or post-acute care 
provider participating in a BPCI SHFFT episode, the initial AMI model 
episode will be canceled. The second entity will initiate a new episode 
under BPCI subject to the payment rules under that model, and
     If a beneficiary is in an ongoing BPCI AMI episode and is 
readmitted for SHFFT to an EPM participant in the SHFFT model, the BPCI 
episode would continue and the SHFFT model episode would not initiate.
    Participants in BPCI have an expectation that eligible episodes 
will be part of the BPCI model test, whereas based on our proposal EPM 
participants would be aware that episodes may be canceled when there is 
overlap with BPCI episodes. We aim to preserve the integrity of ongoing 
model tests without introducing major modifications that could make 
evaluation of existing models more challenging. Given the current 
scheduled end date for the BPCI, we are proposing to give precedence to 
episodes covered under BPCI Models 2, 3 and 4 initiated on or before 
September 30, 2018.
    We acknowledge this BPCI-EPM overlap policy differs from the CJR 
beneficiary overlap policy, where a beneficiary may be in a CJR LEJR 
episode and a non-LEJR BPCI episode concurrently. However, in CJR this 
overlap is rare. Within the 90-day post-hospital discharge period, 
included readmissions occur for less than 1 percent of LEJR 
beneficiaries. In contrast, included readmissions occur for 
approximately 25 percent of AMI and CABG beneficiaries. The high 
incidence of included readmissions for AMI, CABG and SHFFT episodes 
necessitates a different policy to avoid double-paying savings and 
double-counting losses, as well as not initiating new episodes when the 
readmission is a complication of care during the first episode that 
could be managed.
    We considered alternative options for dealing with situations in 
which a beneficiary in an EPM episode could also be in a BPCI episode, 
including allowing the first episode initiated to take precedence 
regardless of the model under which it occurred. This would encourage 
more accountable care, particularly with AMI, CABG, and SHFFT episodes 
that are more likely to involve readmissions for complications than 
generally occur with LEJR. However, preventing BPCI episodes from being 
initiated, particularly those initiated by post-acute care providers 
which, by definition, occur after an anchor hospitalization, could 
substantially reduce the number of such episodes and our ability to 
fully test BPCI. Moreover, operational challenges due to different 
timelines for payment reconciliation are of concern.
    We establish the proposal for beneficiary overlap with BPCI at 
Sec.  512.230(h). We seek comment on this proposal.

[[Page 50869]]

(2) Beneficiary Overlap With the CJR Model and Other EPMs
    As discussed in section III.C.4. of this proposed rule, if a 
beneficiary is in a SHFFT, AMI or CABG model or CJR episode and has a 
hospital readmission that is not excluded from the ongoing episode 
definition and would otherwise initiate an episode in a different EPM 
or the CJR model, that hospital readmission will not initiate another 
episode or cancel the ongoing episode. If a beneficiary is in a SHFFT, 
AMI or CABG model episode or CJR episode and has a hospital readmission 
that is excluded from the ongoing episode definition and could initiate 
an episode in a different EPM or the CJR model, the subsequent EPM or 
CJR episode will initiate, the ongoing episode would continue, and both 
episodes will occur concurrently. For example--
     The CJR model episode definition does not exclude the MS-
DRGs that would initiate a SHFFT model episode. If a beneficiary is in 
the CJR model and receives SHFFT at an EPM participant in the SHFFT 
model during the ongoing CJR episode, the CJR episode will continue and 
the SHFFT model episode will not initiate;
     SHFFT model episode definition does not exclude the MS-
DRGs that would initiate a CJR LEJR episode. If a beneficiary is in the 
SHFFT model and receives an LEJR at a CJR hospital during the ongoing 
SHFFT episode, the SHFFT episode will continue and the CJR episode will 
not initiate;
     The SHFFT model episode definition does not exclude the 
MS-DRGs that would initiate an AMI model episode. If a beneficiary is 
in the SHFFT model and is readmitted for an AMI to an EPM participant 
in the AMI model during the ongoing SHFFT model episode, the SHFFT 
model episode will continue and the AMI model episode will not 
initiate;
     The AMI model episode definition does not exclude the MS-
DRGs that would initiate a CABG model episode. If a beneficiary is in 
the AMI model and is readmitted for a CABG to the same or another EPM 
participant in the CABG model during the ongoing AMI model episode, the 
AMI model episode will continue and the CABG model episode will not 
initiate.
    We believe that an overlap policy that gives precedence to the 
ongoing episode over subsequent episodes initiated during the post-
hospital discharge period, except where the second admission is 
explicitly excluded, aligns with our stated goal of encouraging more 
accountable care. Moreover, this policy would establish an 
operationally straightforward policy for future EPMs.
    We establish the proposal for beneficiary overlap with the CJR 
model and other EPMs at Sec.  512.230(i). We seek comment on this 
proposal.
(3) Beneficiary Overlap With Shared Savings Models and Programs
    We expect many beneficiaries in an AMI, CABG or SHFFT model episode 
will also be aligned or attributed to a Shared Savings Program 
participant or a participant in an ACO model initiated by the CMS 
Innovation Center. For the purposes of this discussion, the term ACO 
will be used generically to refer to either Shared Savings Program or 
Innovation Center ACO models. Shared savings payments to ACOs and 
shared savings losses repaid by ACOs to CMS have the potential to 
overlap with EPM reconciliation payments. As with CJR, we propose to 
attribute savings achieved during an EPM episode to the EPM 
participant, and include EPM reconciliation payments for ACO-aligned 
beneficiaries as ACO expenditures. In order to address comments 
received during rulemaking for CJR, we propose to test an alternative 
strategy to address ACO overlap. Specifically, we propose to exclude 
beneficiaries from EPMs who are aligned to ACOs in the Next Generation 
ACO model and End Stage Renal Disease (ESRD) Seamless Care 
Organizations (ESCOs) in the Comprehensive ESRD Care initiative in 
tracks with downside risk for financial losses. We do not propose to 
exclude beneficiaries aligned to Shared Savings Program ACOs in Tracks 
1, 2, or 3 at this time. However, we seek comment on excluding 
beneficiaries from EPMs that are prospectively assigned to SSP Track 3 
as well as to other financial risk tracks. The Shared Savings Program 
is a national program. We do not believe that testing a new approach to 
addressing overlap, which could potentially disrupt ACO investments, 
operations, and care redesign activities, would be appropriate at this 
time prior to a test with a smaller population. We plan to monitor and 
learn from the test of excluding beneficiaries prospectively assigned 
to an ACO from risk tracks and consider these results and comments in 
future rule-making.
    Several strong considerations drive us to otherwise follow CJR 
precedent for addressing ACO overlap. First, CMS continues to avoid 
double payment of savings and double recoupment of losses, which is an 
important principle of successful payment reform. Second, in 
implementing the EPMs, there would be no additional operational effort 
due to consistency in ACO overlap policies across models. In this 
respect, we anticipate little to no difficulty in replicating prior 
policy as new episode payment models are introduced. Third, this would 
have no negative financial impact on EPM participants, an important 
consideration for future EPMs. The payment reconciliation for EPM 
participants is described in section III.D.5. of this proposed rule.
    Therefore, we propose to follow the policy set forth in the CJR 
Final Rule for accounting for overlap between EPMs and the Shared 
Savings Program and ACO models other than the Next Generation ACO model 
and CEC listed previously.
    Additionally, for programmatic consistency among ACO models and 
programs, given that our ACO models generally are tested for the 
purpose of informing future potential changes to the Shared Savings 
Program, we believe that the ACO model overlap adjustment policy should 
be aligned with the Shared Savings Program policy. Thus, we propose 
that under EPMs, we would make an adjustment to the reconciliation 
amount 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 
an EPM hospital also participates in the ACO and the beneficiary in the 
EPM episode is also aligned to that ACO. This adjustment would be 
necessary to ensure that the applicable discount under the EPM is not 
reduced because a portion of that discount is paid out in shared 
savings to the ACO and thus, indirectly, back to the hospital.
    However, we propose not to make an adjustment under EPMs when a 
beneficiary receives an AMI, SHFFT, or CABG at a hospital participating 
in the corresponding EPM and is aligned to an ACO in which the hospital 
is not participating. While this proposal would leave overlap 
unaccounted for in such situations, we do not believe it would be 
appropriate to hold responsible for repayment the hospital that managed 
the beneficiary during the episode through an EPM adjustment, given 
that the participant may have engaged in care redesign and reduced 
spending during the EPM episode. The participant may be unaware that 
the beneficiary is also aligned to an ACO. However, we recognize that 
as proposed this policy would allow an unrelated ACO full credit for 
the Medicare savings achieved during the episode. The evaluation of 
each of the EPMs, as discussed in section IV. of this proposed rule, 
would examine overlap in such

[[Page 50870]]

situations and the potential effect on Medicare savings.
    We note that our proposed policy as outlined in this proposed rule 
would entail CMS reclaiming from the EPM participant any discount 
percentage paid out as shared savings for the Shared Savings Program or 
ACO models only when the hospital is an ACO participant and the 
beneficiary is aligned with that ACO, while other total cost of care 
models such as the Comprehensive Primary Care Plus initiative (CPC+) 
would adjust for the discount percentage in their calculations. We 
believe that other ACO models in testing that share operating 
principles with the Shared Savings Program should follow the same 
policies as the EPM 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.
    However, there are circumstances when an alternative option may be 
appropriate to consider. Therefore, we are also considering an EPM-ACO 
overlap policy that would exclude from EPMs beneficiaries who are 
aligned to ACOs in the Next Generation ACO model and ESCOs in the 
Comprehensive ESRD Care Initiative in tracks with downside risk for 
financial losses. Some ACOs have successfully managed acute care and 
post-acute care expenditures below regional or national mean costs, and 
expressed that the current CJR and BPCI ACO overlap policies deprives 
them of a key source of savings. We are aware of situations in certain 
markets that seem to reduce opportunities for ACOs to achieve savings 
given historic experience that indicates these particular ACOs are able 
to manage the care within episodes as successfully as EPM participants. 
Attributing savings to participants in episode payment models, such as 
CJR participants and EPM participants under this proposed rule, creates 
a problem where the ACO is accountable for coordinating a beneficiary's 
care over a performance year but is not able to benefit from savings 
achieved from episodes completed during the performance year. Data 
shows that post-acute care spending is among the most significant 
sources of savings for ACOs currently, and where they focus significant 
investments.68 69
---------------------------------------------------------------------------

    \68\ McWilliams J, Michael Laura A, Hatfield Michael E, Chernew 
Bruce E, Landon and Aaron L Schwartz. ``Early Performance of 
Accountable Care Organizations in Medicare--NEJM.'' N Engl J Med. 
Massachusetts Medical Society, 13 Apr. 2016. Web. 02 May 2016. 
https://www.ncbi.nlm.nih.gov/pubmed/27075832.
    \69\ McWilliams J, Michael Michael E. Chernew, Bruce E Landon 
and Aaron L Schwartz. ``Performance Differences in Year 1 of Pioneer 
Accountable Care Organizations.'' N Engl J Med. (2015); 372(20): 
1927-936. Massachusetts Medical Society, 15 Apr. 2015. Web. 02 May 
2016. https://www.ncbi.nlm.nih.gov/pubmed/25875195.
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    Certain considerations weigh against exclusion of all ACO-aligned 
beneficiaries from participation in EPM episodes. Such a blanket 
exclusion would remove a large proportion of Medicare FFS beneficiaries 
from the EPMs, many of whom would inevitably receive care at EPM 
participants. This would dilute the power of the EPM test and 
generalizability of EPM findings. Additionally, differences between ACO 
beneficiary alignment algorithms do not support a blanket exclusion. It 
is more operationally feasible to identify and exclude beneficiaries 
who are prospectively aligned to ACOs. In retrospective alignment 
models, beneficiaries may be aligned to an ACO at the end of the 
performance year, before the performance year, or preliminarily aligned 
to one ACO before the performance year and subsequently aligned to a 
different ACO after all qualifying services are considered. In 
retrospective alignment, there will be significant numbers of 
beneficiaries aligned at final reconciliation to a given ACO who were 
not identified as preliminarily aligned to that ACO prior to the 
performance year. That is, they were identified either as unaligned to 
any ACO or aligned to a different ACO. In prospective alignment models 
and tracks, the list of aligned beneficiaries is available prior to the 
start of the performance year and a beneficiary's alignment does not 
change on the basis of his or her utilization in the performance year 
(subject to various exclusions made on a quarterly basis, such as a 
beneficiary's election into a Medicare Advantage plan).
    Because ACOs in two-sided risk arrangements have stronger 
incentives than those in one-sided risk arrangements to reduce total 
cost of care, especially given the possibility of paying CMS shared 
losses, we believe that ACOs in two-sided risk arrangements may be best 
positioned to assume the risk associated with EPM episodes, while ACOs 
in one-sided risk arrangements may be less well-positioned to do so. 
ACOs in one-sided risk arrangements, such as those in the Shared 
Savings Program Track 1, do not bear the risk of owing losses to CMS. 
In contrast, ACOs in two-sided risk arrangements, such as the Next 
Generation ACO model, are held to as much as 80 percent to 100 percent 
of first dollar losses. Thus, we believe that pursuing a blanket 
exclusion from EPMs of aligned beneficiaries from all ACOs would 
inappropriately disadvantage EPM participants that carry significant 
financial risk under EPM.
    This proposed ACO overlap policy would grant ACOs in models and 
tracks with the highest levels of downside risk for financial losses--
the Next Generation ACO model and tracks of the Comprehensive ESRD Care 
Initiative with downside risk for financial losses--paramount financial 
opportunity in exchange for accepting total cost of care responsibility 
for their beneficiaries. EPM participants may still realize 
opportunities to save by partnering with ACOs, but outside of the EPM 
arrangement. Specifically, we refer to section IIII.I. of this proposed 
rule which describes opportunities for gainsharing allowed under these 
models.
    This policy tests the effects of such an ACO-aligned beneficiary 
exclusion policy within a broader test of the effectiveness of EPMs. We 
can learn its impact on EPM participants and ACOs that have 
beneficiaries excluded from EPMs, as well as ACOs that do not have 
beneficiaries excluded from EPMs. This will improve our understanding 
about the appropriate entity to hold accountable for the costs within 
the episode. For this reason we are recommending this test be limited 
to the AMI, CABG, and SHFF, and CJR models, and ACO models being 
conducted under CMS' Innovation Center, and are not proposing to 
implement the policy more broadly to other ACOs, such as those in the 
Shared Savings Program. In proposing the exclusion of beneficiaries in 
only a limited number of ACO initiatives we attempt to balance the 
desire to build a new payment reform initiative while mitigating the 
potential challenges to existing shared savings models and programs. We 
seek comment on this proposal as well as input on extending the 
proposal to CJR and other ACOs accepting two-sided risk, such as those 
ACOs in the Shared Savings Program Track 3.
    We have investigated CMS data related to the services under 
consideration in the AMI, CABG and SHFFT models. A small fraction of 
total beneficiaries aligned to ACOs qualifying for this exclusion in 
fact have relevant anchor hospitalizations that would initiate an EPM 
in a given calendar year. For instance, from 2013 through 2015, about 
2.4 percent of beneficiaries aligned to Pioneer ACO model participants 
had an anchor hospitalization that would have

[[Page 50871]]

initiated an AMI, CABG or SHFFT model.
    We have considered several additional options to account for EPM-
ACO beneficiary overlap prior to proposing the strategy outlined 
previously. We considered whether to split the risk, including at an 
equal sharing rate, at the time of financial reconciliation between EPM 
participants and ACOs when episodes included overlapping beneficiaries. 
This has the advantage of mitigating the supposed ``carve out'' of ACO 
expenditures, but requires CMS to arbitrarily declare a level of risk 
sharing. We are also concerned about the operational feasibility of 
such calculations, given that reconciliation would have to occur in 
tandem, resulting in long delays in payments or recoupments for both 
EPM participants and ACOs. We also considered whether to attribute to 
ACOs the more favorable of either the episode-specific target price or 
the actual expenditures incurred by the beneficiary during the episode 
time period. However, this policy would result in significant losses to 
the Medicare Trust Fund, as the double payment of savings/losses would 
be a certainty.
    We establish the proposal to exclude from the EPMs beneficiaries 
who are aligned to an ACO in the Next Generation ACO Model or 
Comprehensive ESRD Care Initiative at Sec.  512.230(f). We establish 
the proposal to attribute savings achieved during an EPM episode to the 
EPM participant, and include EPM reconciliation payments for other ACO-
aligned beneficiaries as ACO expenditures at Sec.  512.305 and Sec.  
512.307. We seek comment on our proposals to account for beneficiary 
overlap with shared savings models and programs.
d. Payment Reconciliation of Overlap With Non-ACO CMS Models and 
Programs
    In general, Per-Beneficiary Per-Month (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 an EPM, but the clinical relationship 
between the services paid by the PBPM payments and the EPM will vary. 
For purposes of this proposed rule, we consider clinically related 
those services paid by PBPM payments that are for the purpose of care 
coordination and care management of any beneficiary diagnosis or 
hospital admission not excluded from an EPM's episode definition, as 
discussed in section III.C. of this proposed rule.
    As with CJR, we propose to include PBPM payments for new and 
enhanced services in EPM reconciliation calculations if we determine, 
on a model by model basis, that the services paid by PBPM payments are 
(1) not excluded from an EPM model's episode definition; (2) rendered 
during the episode; and (3) paid for from the Medicare Part A or Part B 
Trust Funds. 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.C. of this proposed rule. The PBPM payments for clinically 
related services would not be excluded from the EPMs' historical 
episodes used to calculate target prices when the PBPM payments are 
made from the Part A or Part B Trust Fund, and they would not be 
excluded from calculation of actual episode expenditures during an 
EPM's 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 EPMs, as discussed 
in section III.C. of this proposed rule) would not be the only 
mechanism for exclusion of a service from an EPM. All such PBPM model 
payments we determine are clinically unrelated would be excluded as 
discussed in this proposed rule. Finally, all services paid by PBPM 
payments funded through the Innovation Center's appropriation under 
section 1115A of the Act would be excluded from the EPMs, without a 
specific determination of their clinical relationship to an EPM. We 
believe 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 EPMs. In addition, 
because these services are not paid for from the Medicare Parts A or B 
Trust Funds, we are not confident that they would be covered by 
Medicare under existing law. Therefore, we believe the services paid by 
these PBPM payments are most appropriately excluded from the EPMs. Our 
proposal for the treatment of services paid by PBPM payments in the 
EPMs would pertain to all existing models with PBPM payments, as well 
as future models and programs that incorporate PBPM payments. We 
believe that this proposal is fully consistent with our goal of 
including all related Part A and Part B services in the EPMs, as 
discussed in section III.C. of this proposed rule.
    As with CJR, the OCM and MCCM services and conditions are excluded 
from the AMI, CABG, and SHFFT episode definitions and thus their 
payments are excluded from EPM reconciliation (listed on the CMS Web 
page at https://innovation.cms.gov/Files/x/cjr-pbpmexclusions.xlsx). 
While the OCM will pay for new or enhanced services through PBPM 
payments funded by the Medicare Part B Trust Fund, we do not believe 
these services are clinically related to the EPMs. The OCM incorporates 
episode-based payment initiated by chemotherapy treatment, a service 
generally reported with ICD-9-CM and ICD-10-CM codes that will be 
excluded from the AMI, CABG, and SHFFT episode definition in section 
III.C. of this proposed rule. We believe 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 AMI, CABG and SHFFT model episodes. Therefore, 
we propose that services paid by PBPM payments under the OCM be 
excluded from the AMI, CABG and SHFFT models. Similarly, we propose to 
exclude services paid by PBPM payments under the MCCM. 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 will 
not include such

[[Page 50872]]

payments in the AMI, CABG and SHFFT models' episode spending 
calculations. In addition, unlike the regular hospice benefits, which 
are furnished to beneficiaries in lieu of curative care and which 
therefore can be coordinated during an AMI, CABG or SHFFT model 
episode, the services furnished under the MCCM will be in addition to 
curative services. We note that we are including such curative services 
in the EPM episode, as they are consistent with our episode definition 
described in III.C. of this proposed 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.
    We acknowledge there may be new models 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 
EPM episodes through the same sub regulatory approach that we are 
proposing to use to update the episode definitions (excluded MS-DRGs 
and ICD-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 in the EPMs 
based on the standards we propose to use to update EPM episode 
definitions that are discussed in section III.C. of this proposed rule.
    If we determine that a PBPM payment would primarily be used to pay 
for services to manage an excluded clinical condition, we would exclude 
the PBPM payment from the EPM 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 EPM 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 EPM episode definitions discussed in section III.C. 
of this 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.
    The payment reconciliation is described in section III.D.5. of this 
proposed rule. As with CJR, 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 EPM-related 
reconciliation payments and repayments as described in section III.D.5. 
of this proposed rule, for beneficiaries who are also in EPM episodes.
    We establish the proposal for accounting for non-ACO services and 
payments in the EPM reconciliation process at Sec.  512.210. We seek 
comment on this proposal.
7. Limits or Adjustments to EPM Participants' Financial Responsibility
a. Overview
    We recognize that hospitals that would be designated for 
participation in the proposed EPMs currently vary with respect to their 
readiness to function under an EPM with regard to their organizational 
and systems capacity and structure, as well as their beneficiary 
population served. Some EPM participants may be more quickly able to 
demonstrate high quality performance and savings than others, even 
though we proposed that the EPM-episode benchmark prices be based 
predominantly on the hospital's own historical EPM-episode utilization 
in the early years of the EPMs. We also note that providers may be 
incentivized to excessively reduce or shift utilization outside of an 
EPM's episode by the proposed payment policies of the EPMs. In order to 
mitigate any excessive repayment responsibility for EPM participants or 
reduction or shifting of care outside an EPM episode, especially 
beginning in performance year 2 of the EPMs when we propose to begin to 
phase in responsibility for repaying Medicare for excess EPM-episode 
payments, we propose several specific policies as follows.
b. Limit on Actual EPM-Episode Payment Contribution to Repayment 
Amounts and Reconciliation Payments
(1) Limit on Actual EPM-Episode Payment Contribution to Repayment 
Amounts
    As discussed in section III.D.3.d. of this proposed rule regarding 
our proposed pricing adjustment for high payment EPM episodes, EPM 
participants would not bear financial responsibility for actual EPM-
episode payments greater than a ceiling set at 2 standard deviations 
above the mean regional EPM-episode payment. Nevertheless, EPM 
participants would begin to bear repayment responsibility beginning 
performance year 2 (DR) for those EPM episodes where actual EPM-episode 
payments are greater than the EPM quality-adjusted target prices up to 
the level of the regional EPM-episode ceiling. When aggregated across 
all EPM episodes in a model, the total money owed to Medicare by an EPM 
participant for actual EPM-episode payments above the applicable EPM 
quality-adjusted target price could be substantial if a hospital's EPM 
episodes generally had high payments. As an extreme example, if a 
hospital had all of its EPM episodes paid at 2 standard deviations 
above the mean regional EPM-episode payment, the EPM participant would 
need to repay Medicare a large amount of money, especially if the 
number of EPM episodes was large.
    To limit a hospital's overall repayment responsibility for actual 
EPM-episode payments under the EPMs, (hereafter called a ``stop-loss 
limit''), we propose to establish the same stop-loss limits that were 
adopted for the CJR model (80 FR 73401); except, that they would apply 
beginning in the second rather than first quarter of performance year 
2. Specifically, we propose a 5 percent stop-loss limit in performance 
year 2 (DR), a 10 percent stop-loss limit in performance year 3, and a 
20 percent stop-loss limit for performance years 4 and 5 for each EPM. 
That is, beginning in the second quarter of performance year 2 as we 
phase in repayment responsibility, the EPM participant would owe 
Medicare under each proposed EPM no more than 5 percent of the sum of 
the EPM quality-adjusted target prices for all of the EPM participant's 
EPM episodes during performance year 2 (DR). This responsibility 
gradually phases up to 20 percent by performance year 4.
    For performance year 2, the comparison against the stop loss limit 
would only apply for NPRA attributable to episodes ending in 
performance year 2 (DR). When we calculate the NPRA for performance 
year 2 as described in section III.D.5. of this proposed rule, we would 
ensure the NPRA attributable to episodes ending during performance year 
2 (NDR) is not less than zero and that NPRA attributable to episodes 
ending during performance year 2 (DR) does not exceed the stop-loss 
limit of 5

[[Page 50873]]

percent of the sum of quality-adjusted target prices for episodes that 
ended during performance year 2 (DR).
    Similarly, when we conduct the subsequent reconciliation 
calculation to reassess actual EPM-episode payments for performance 
year 2 (which will occur concurrently with the reconciliation for 
performance year 3), we would combine the performance year 2 (NDR) NPRA 
and the result of the subsequent reconciliation calculation for 
performance year 2 (NDR) to ensure the result is not less than zero. 
Also, we would combine the performance year 2 (DR) NPRA and the result 
of the subsequent reconciliation calculation for performance year 2 
(DR) to ensure the stop-loss limit is not exceeded.
    For performance years 3 through 5, it would not be necessary to 
split the performance years to ensure that the stop-loss limit is not 
exceeded as a single stop-loss limit would apply in each year. For 
example, when we calculate the NPRA for performance year 3, as 
described in section III.D.5. of this proposed rule, we would ensure 
the NPRA does not exceed the stop-loss limit of 10 percent of the sum 
of quality-adjusted target prices. Similarly when we conduct the 
subsequent reconciliation calculation to reassess actual EPM-episode 
payments for performance year 3 (which will occur concurrently with the 
reconciliation for performance year 4), we would combine the 
performance year 3 NPRA and the result of the subsequent reconciliation 
calculation for performance year 3 to ensure the stop-loss limit is not 
exceeded.
    Note that, as described in sections III.D.5.b. and III.D.7.e., the 
result of the post-episode spending calculation and ACO overlap 
calculation that would occur concurrently with the subsequent 
reconciliation calculation for a given performance year would not be 
subject to the stop-loss limit. The result of these calculations will 
be added to the NPRA and subsequent reconciliation calculation to 
create the repayment amount or reconciliation payment. We believe that 
these limits both offer EPM participants reasonable protections while 
maintaining incentives to improve care quality and efficiency. We would 
note that in addition to the CJR model, we apply a similar ultimate 20 
percent stop-loss limit to payments under the BPCI initiative.
    The proposal to limit hospitals' overall payment responsibility 
under the models is included in Sec.  512.305(c)(2)(iii)(A). We seek 
comment on our proposal to limit hospitals' overall payment 
responsibility.
(2) Limitation on Reconciliation Payments
    We believe limits on reconciliation payments made under the 
proposed EPMs would also be appropriate for several reasons. Under our 
proposal, in performance year 1, EPM participants have no repayment 
responsibility for excess EPM episode spending above the EPM quality-
adjusted target price. CMS bears full financial responsibility for 
Medicare actual EPM-episode payments for an EPM episode that exceeds 
the EPM quality-adjusted target price, and we believe our 
responsibility should have judicious limits. Therefore, we believe it 
would be reasonable to cap an EPM participant's reconciliation payment 
due to actual EPM-episode payments for a given performance year as a 
percentage of EPM-episode payment on the basis of responsible 
stewardship of CMS resources. In addition, we note that beginning in 
performance year 1, EPM participants would be eligible for 
reconciliation payments due to the NPRA if actual EPM-episode payments 
are less than the quality-adjusted target prices. This proposal for 
reconciliation payments due to the NPRA provides a financial incentive 
to EPM participants from the beginning of the model to manage and 
coordinate care throughout the EPM episode with a focus on ensuring 
that EPM beneficiaries receive the lowest intensity, medically 
appropriate care throughout the EPM episode that results in high 
quality outcomes. Therefore, we also believe it would be reasonable to 
cap an EPM participant's reconciliation payment resulting from actual 
EPM-episode payments based on concerns about potential excessive 
reductions in utilization under the proposed EPMs that could lead to 
beneficiary harm.
    In determining what would constitute an appropriate reconciliation 
payment limit due to actual episode spending (hereafter called a 
``stop-gain limit''), we believe it should provide significant 
opportunity for EPM participants to receive reconciliation payments for 
greater episode efficiency that includes achievement of quality care 
and actual EPM-episode payment reductions below the quality-adjusted 
target price, while avoiding the creation of significant incentives to 
sharply reduce utilization that could be harmful to EPM beneficiaries. 
We also believe that establishing parallel stop-gain and stop-loss 
limits is important to provide proportionately similar protections to 
CMS and EPM participants for their financial responsibilities under the 
EPMs as well as to protect the health of beneficiaries. Accordingly, we 
propose to establish symmetrical stop-gain limits. Specifically, we 
propose a 5 percent stop-gain limit in performance years 1 and 2, a 10 
percent stop-gain limit in performance year 3, and a 20 percent stop-
gain limit for performance years 4 and 5 for each EPM. That is, in 
performance year 1 as we phase in the stop-gain limits, the 
reconciliation payment that the EPM participant would be eligible to 
receive under each proposed EPM would be no more than 5 percent of the 
sum of the EPM quality-adjusted target prices for all of the EPM 
participant's EPM episodes during the performance year. This limit 
gradually phases up to 20 percent by performance year 4. As indicated 
in the CJR Final Rule, we want to ensure that any savings achieved by 
EPM participants in the early years of the EPM are not due to random 
variation, and that changes undertaken to improve efficiency include 
achievement in care quality and not sharp decreases in utilization that 
could be harmful to beneficiaries (80 FR 73402).
    We clarify that, as with the stop-loss limit as discussed in this 
section, we propose that we would determine whether an EPM participant 
has met the stop-gain limit by assessing the NPRA and subsequent 
reconciliation for a given performance year, if any. We believe this 
approach aligns with our goal to place limits on the amount a 
participant may earn as a reconciliation payment due to reduced actual 
EPM-episode payments.
    We would also 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 EPM- episode services. We refer 
to section III.G. of this proposed rule for our proposals on monitoring 
and addressing hospital performance under the proposed EPMs.
    The proposal to establish a cap on an EPM participant's 
reconciliation payment due to actual EPM-episode payments for a given 
performance year as a percentage of EPM-episode payment is included in 
Sec.  512.305(c)(2)(iii)(B). We seek comment on this proposed cap.
c. Additional Protections for Certain EPM Participants
(1) Proposed Policies for Certain EPM Participants to Further Limit 
Repayment Responsibility
    While the aforementioned proposals generally provide additional 
safeguards to ensure that EPM participants would have limited repayment 
responsibility due to the raw NPRA, we are proposing

[[Page 50874]]

additional protections for certain groups of EPM participants that may 
have a lower risk tolerance and less infrastructure and support to 
achieve efficiencies for high-payment EPM 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.
    For the purpose of these models, we propose 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.
    We propose to define a Sole Community Hospital as it is defined in 
Sec.  412.92. That is, 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.
    We propose to define a Medicare Dependent Hospital (MDH) as it is 
defined in Sec.  412.108. That is, an MDH is 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.
    We propose to define a Rural Referral Center as it is defined in 
Sec.  412.96. Specifically, 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 these criteria, 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 at least 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 at Sec.  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.
    Additional information on these hospitals can be found in the CJR 
Final Rule at 80 FR 73403 through 73405.
    In the CJR Final Rule, we established the same stop-gain limits for 
these hospitals as for hospitals in general (that is, 5 percent in 
performance years 1 and 2, 10 percent in performance year 3, and 20 
percent in performance years 4 and 5); however, we limited losses for 
rural hospitals, SCHs, Medicare Dependent Hospitals and RRCs to 3 
percent in performance year 2, and 5 percent in performance years 3 
through 5 (80 FR 73406). In that Final Rule, we noted that these 
hospitals can face unique challenges that do not exist for most other 
hospitals. For example, these hospitals may be the only source of 
healthcare services for beneficiaries or certain beneficiaries living 
in rural areas, and may be in areas with fewer providers including 
fewer physicians and post-acute care facilities. Further, these 
hospitals may have more limited options in coordinating care and 
reducing spending while maintaining quality of care. We continue to 
believe that urban hospitals may not have similar concerns as they are 
often in areas with many other providers and have a greater opportunity 
to develop efficiencies under the EPMs. Given these circumstances, for 
the CJR model we determined that we should have a more protective stop-
loss limit policy for these hospitals. Given the similarity between the 
CJR model and the proposed EPMs, we have similar concerns, which we 
believe should be addressed by establishing greater protections for 
these hospitals when they are EPM participants. Accordingly, we are 
proposing the same stop-loss thresholds for these hospitals 
participating in the proposed EPMs as were adopted for the CJR model 
except that the thresholds would begin in performance year 2 (DR)--
specifically, 3 percent in performance year 2 (DR), and 5 percent for 
performance years 3 through 5 for each EPM.
    The proposal to establish separate financial loss limits for 
certain hospitals that could be less able to tolerate risk is included 
in Sec.  512.305(c)(2)(iii)(C). We seek comment on our proposed limit 
on financial loss for these hospitals.
(2) Considerations for Hospitals Serving a High Percentage of 
Potentially Vulnerable Populations
    In addition to the aforementioned hospitals, we recognize that 
other EPM participants, for which we do not propose additional 
protections, could also face factors affecting their ability to achieve 
savings under the proposed EPMs, and that these factors could be 
unrelated to their practice patterns but instead could reflect the EPM 
participants' responsibilities for a relatively high percentage of 
potentially vulnerable populations with higher than average historical 
spending and/or less opportunities for efficiencies. For example, this 
could include hospitals that serve a relatively high percentage of 
beneficiaries that are dually eligible for both Medicare and Medicaid 
or whose total Medicare payments include a relatively high proportion 
of disproportionate share hospital payments under 1886(d) (5) (F) of 
the Act. Some of these hospitals are located in rural areas and would 
thus likely be

[[Page 50875]]

classified as a type of hospital for which we propose additional 
protections. However, most hospitals that serve a relatively high 
percentage of beneficiaries that are dually eligible for both Medicare 
and Medicaid or whose total Medicare payments include a relatively high 
proportion of disproportionate share hospital payments are located in 
urban areas, and very few are classified as a rural hospital, RRC, MDH, 
or SCH that would be subject to the additional protections we propose. 
For the first 2 performance years of the EPMs, where quality-adjusted 
target prices are set predominantly based on EPM-participant hospital-
specific data, factors affecting these hospitals may be of less concern 
than in the final 3 performance years of the EPMs where pricing is 
either predominantly or totally based on regional data.
    The potential challenges posed by these kinds of factors is 
highlighted in Section 2(d) of the Improving Medicare Post-Acute Care 
Transformation ``IMPACT'' Act of 2014 (Pub. L. 113-183). Specifically, 
Section 2(d) requires the Secretary to conduct a study that examines 
the effect of individuals' socioeconomic status, including their 
Medicaid eligibility, on quality measures and resource use and other 
measures for individuals under the Medicare program, in recognition 
that less healthy individuals may require more intensive interventions. 
The Secretary is required to submit a report on the results of this 
study within 2 years of enactment of the IMPACT Act. The IMPACT Act 
also requires the Secretary to conduct a second study that examines the 
impact of various risk factors, as well as race, health literacy, 
limited English proficiency (LEP), and Medicare beneficiary activation, 
on quality measures and resource use and other measures under the 
Medicare program in order to recognize that less healthy individuals 
may require more intensive interventions. The Secretary must submit a 
report on the results of this study within 5 years of enactment of the 
IMPACT Act.
    If these studies find a relationship between the factors examined 
in the studies and quality measures and resource use and other 
measures, then the Secretary shall provide recommendations for, among 
other things, how CMS should account for such factors in quality 
measures, resource use measures, and other measures under Medicare; and 
in determining payment adjustments based on such measures in other 
applicable provisions related to the program. Likewise, taking into 
account these studies and their recommendations as well as other 
relevant information, the Secretary is required to routinely, as 
determined appropriate and based on an individual's health status and 
other factors, assess appropriate adjustments to quality measures, 
resource use measures, and other measures under the Medicare program; 
and assess and implement appropriate adjustments to Medicare payments 
based on these measures. The Assistant Secretary for Planning and 
Evaluation is responsible for these studies and a report on the results 
of the first one is forthcoming. Upon issuance of these studies' 
reports, we plan to consider their results as we implement the proposed 
EPMs. We also plan to monitor the influence of beneficiary 
characteristics such as socioeconomic status on EPM participants' 
performance during our implementation and evaluation of the EPMs. Given 
that the performance of EPM participants would be compared largely 
against their own historical episode cost performance data for the 
first 2 years of the models, we do not anticipate that the 
aforementioned factors should materially affect participants' ability 
to achieve savings. However, as we increasingly begin to rely more on 
regional cost performance data to determine episode benchmarks and 
quality-adjusted target prices in performance year 3, these factors 
could become more germane. Thus, in the event we identify the need for 
adjustments, we could consider proposing additional policies through 
subsequent rulemaking. Additionally, we plan to use information 
collected as part of our efforts to monitor beneficiary access to care 
and quality of care as discussed in sections III.G.4. and III.G.5. of 
this proposed rule to inform if potential adjustments would be needed 
in future years of the model.
    Protections for EPM participants are discussed in section 
III.D.7.b.(1) of this proposed rule. We seek comment about all issues 
specific to hospitals serving a high percentage of potentially 
vulnerable populations and their opportunities to advance the goals of 
the EPMs. In particular, we seek comment, including data analysis, 
about approaches to identifying these hospitals; their opportunities to 
achieve high quality episode performance; specific considerations about 
their opportunities to achieve efficient care for the clinical 
conditions included in the AMI, CABG, and SHFFT models; potential 
approaches to risk adjustment as elaborated upon in section 
III.D.4.b.(2)(d) of this proposed rule; potential approaches to 
additional protections that could be considered for the future modeled 
after our proposals in section III.D.7.b.(1) of this proposed rule for 
certain other EPM participants or other alternatives; and evaluation 
methodologies to ensure that we include appropriate comparison groups 
and monitor and evaluate the most relevant outcomes.
d. Application of Stop-Gain and Stop-Loss Limits
    Because hospitals could be participating in the proposed AMI, CABG, 
and SHFFT models concurrently with the CJR model, an additional 
consideration concerns the level at which the stop-loss and stop-gain 
thresholds would be applied, for example, at the hospital level, as is 
currently the case for the CJR model, or at some other level, for 
example, at the model level. Our intention is to establish appropriate 
incentives and protections for hospitals under the proposed EPMs and 
the CJR model without creating unnecessary administrative complexity. 
This issue becomes especially relevant to the proposed EPMs and CJR 
model given that the CJR model and proposed EPMs would be operating at 
different points within their performance periods. That is, episodes 
under the proposed EPMs would always lag 1 performance year behind 
those in the CJR model. Thus, SHFFT model participants that would begin 
the first SHFFT model performance year in 2017 would already be 
participating in their second performance year under the CJR model. 
Consequently, in this example, a stop-loss limit could apply to the 
performance year 2 episodes under the CJR model but not to the 
performance year 1 SHFFT model episodes under the SHFFT model as SHFFT 
model participants would not have repayment responsibility in SHFFT 
model performance year 1 under our proposal. In contrast, for this 
example, the stop-gain limits would be the same for both the SHFFT and 
CJR model since the limit for both performance year 1 and 2 would be 5 
percent.
    Continuing with this example for a later performance year 
(performance year 4 for the CJR model and performance year 3 for the 
SHFFT model), any stop-loss limits that applied would be different. 
That is, the stop-loss limits for the CJR model episodes in performance 
year 4 would be 20 percent in contrast to the 10 percent stop-loss 
limit that would apply to the SHFFT model episodes in performance year 
3. The proposed stop-gain limits would likewise diverge in this example 
as they

[[Page 50876]]

are proposed to be symmetrical with the stop-loss limits.
    Given these differences, we considered two options for setting 
stop-gain and stop-loss limits for hospitals participating in more than 
one of the AMI, CABG, SHFFT, and CJR models. Under the first option, we 
would determine stop-loss and stop-gain limits, in total, at the 
participant level based on weighted thresholds. Specifically, CMS would 
calculate a single weighted stop-loss/gain threshold based on the total 
spending under each model. Thus, using the aforementioned example where 
CJR model episodes would be in performance year 4 of their model and 
SHFFT model episodes would be in performance year 3, assuming 50 
percent of total spending under the CJR and SHFFT models is for CJR 
model episodes and the remaining 50 percent is for SHFFT model 
episodes, the weighted stop-loss limit for the two models at the 
hospital level would be 15 percent: (0.50 x 0.20 for CJR model 
episodes) + (0.5 x 0.10 for SHFFT model episodes) = 0.15. Although this 
option would allow the application of a single stop-loss threshold to a 
hospital's total repayment under the models, we are concerned that 
computing a single limit such as this could either dilute or magnify 
the intended protections of the stop-loss limit under each model. As 
such, a hospital that would have been protected from repayment 
exceeding 10 percent of its SHFFT model quality-adjusted target prices 
multiplied by the number of SHFFT model episodes for performance year 3 
would only be protected for costs above the higher 15 percent level. 
Conversely, a hospital that would have been protected only for 
repayment above 20 percent of its CJR model quality-adjusted target 
prices multiple by the number of CJR model episodes for performance 
year 3 would be protected against repayment above the lower 15 percent 
threshold.
    Alternatively, we considered establishing stop-loss and stop-gain 
thresholds at the model level; that is, separately for each of the AMI, 
CABG, and SHFFT models, in addition to the limits that already exist 
for the CJR model. Under this option, we would separately apply the 
CJR-applicable stop-loss and stop-gain limits to CJR model episodes, 
the AMI-applicable limits to AMI model episodes, and so forth. Thus, 
considering the aforementioned example, the stop-loss limit for CJR 
model episodes in performance year 4 would be 20 percent for the 
hospital's CJR model episodes, while the stop-loss limit for SHFFT 
model episodes for performance year 3 would be 10 percent. While we 
might choose to aggregate these amounts to conduct a single financial 
transaction with a hospital participating in more than one model, we 
believe this option that would apply stop-loss and stop-gain limits at 
the model level for hospitals participating in more than one model is 
superior to first option in that it better maintains appropriate 
incentives and protections under each of the models.
    The proposal to establish stop-gain and stop-loss limits at the 
model level is included in Sec.  512.305(c)(2)(iii)(D). We seek comment 
on our proposal to establish stop-gain and stop-loss limits at the 
model level.
e. EPM Participant Responsibility for Increased Post-Episode Payments
    We note that while episodes under the proposed EPMs would extend 90 
days post-discharge from the anchor or chained anchor hospitalization, 
some EPM participants may have an incentive to withhold or delay 
medically-necessary care until after an EPM episode ends to reduce its 
actual EPM-episode payments. This inappropriate shifting could include 
both those services that are related to the episode (for which the 
hospital would bear financial responsibility as such services would be 
included in the actual EPM-episode payment calculation) and those that 
are unrelated (which would not be included in the actual EPM-episode 
payment calculation), because an EPM participant engaged in shifting of 
medically-necessary services outside the EPM episode for potential 
financial reward may be unlikely to clearly distinguish whether the 
services were related to the EPM episode or not in the hospital's 
decisions.
    We believe that this inappropriate shifting would not be typical, 
especially given the relatively long EPM episode duration. However, in 
order to identify and address inappropriate shifting of care, we 
propose to calculate for each EPM performance year the total Medicare 
Parts A and B expenditures in the 30-day period following completion of 
each EPM episode for all services covered under Medicare Parts A and B, 
regardless of whether the services are included in the proposed EPM 
episode definition (sections III.C.3. and III.C.4 of this proposed 
rule). This proposal is consistent with our processes for BPCI Model 2 
and the CJR model (80 FR 73407 through 73408).
    We propose that the post-episode spending calculation for a 
performance year would occur at the same time we perform the subsequent 
reconciliation calculation for that same year. We believe this 
timeframe will allow sufficient time for claims run out in order to set 
a reliable regional threshold for determining the post-episode 
spending. For example, we would conduct reconciliation for performance 
year 1 in the spring of 2018. The post-episode spending calculation for 
performance year 1 would occur during the next reconciliation process 
(spring 2019), when we conduct the subsequent reconciliation 
calculation for performance year 1 and account for overlap with other 
models and programs.
    Our proposed calculation would include prorated payments for 
services that extend beyond the EPM episode as discussed in section 
III.D.3.c. of this proposed rule. Specifically, we would identify 
whether the average 30-day post-episode spending for an EPM participant 
in any given EPM performance year is greater than 3 standard deviations 
above the regional average 30-day post-episode spending, based on the 
30-day post-episode spending for episodes attributed to all regional 
hospitals participating in the EPM in the same region as the EPM 
participant. We propose that if the EPM participant's average post-
episode spending exceeds this threshold, the EPM participant would 
repay Medicare for the amount that exceeds such threshold. We note that 
an EPM participant's responsibility for post-episode spending would not 
be subject to the stop-loss and stop-gain limits proposed in section 
III.D.7.b. of this proposed rule. Although we believe cases in which an 
EPM participant would be responsible for repayment of post-episode 
spending that exceed the threshold would be rare, our intention is to 
identify and hold EPM participants responsible for situations in which 
those participants have significantly increased spending on services in 
the 30 days following the end of an EPM episode in order to 
inappropriately shift services out of EPM episodes. We do not believe 
such behavior should be subject to stop-loss limits. This policy is 
consistent with our proposal for the CJR model in section V.D.1. of 
this proposed rule.
    Based on our experience with BPCI, we have not found that this 
proposal, including our proposal to include all Medicare Parts A and B 
expenditures to measure 30-day post-episode spending, would 
inappropriately penalize EPM participants. To that end, however, we 
believe our proposed threshold of 3 standard deviations above the 
regional average is a high threshold, and we only propose that an EPM 
participant would repay Medicare for the amount that

[[Page 50877]]

exceeds such threshold. We further note that those EPM participants 
that are eligible for reconciliation payments in an EPM performance 
year and also have average 30-day post-episode spending that is higher 
than 3 standard deviations above the regional average 30-day post-
episode spending would have their reconciliation payments reduced by 
the amount by which spending exceeds 3 standard deviations.
    The proposals to determine if a participant's post-episode spending 
30 days after the end of an episode exceeds 3 standard deviations of 
average spending in their region for that period, and require those 
participants exceeding that threshold to repay Medicare for the amounts 
in excess of 3 standard deviations are included in Sec.  512.307(c). We 
seek comment on our proposals to determine if a participant exceeds 
this threshold and to repay amounts in excess of the threshold.
8. Appeals Process
a. Overview
    Consistent with the BPCI initiative and CJR model, we propose to 
institute appeals processes for the EPMs that would allow EPM 
participants to appeal matters related to payment, CR incentive 
payments, reconciliation amounts, repayment amounts, determinations 
associated with quality measures affecting payment, as well as non-
payment related issues, such as enforcement matters. These matters are 
discussed throughout section III.D. and III.F. respectively.
    We seek comment on the proposal to institute appeals processes, in 
the following discussion, for the EPMs.
b. Notice of Calculation Error (First Level Appeal)
    We propose the following calculation error process for EPM 
participants to contest matters related to payment or reconciliation, 
of which the following is a non-exhaustive list: The calculation of the 
EPM participant's reconciliation amount or repayment amount as 
reflected in the reconciliation report; the calculation of the EPM 
participant's CR incentive payment as reflected in the CR incentive 
payment 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. EPM 
participants would review their reconciliation report and CR incentive 
payment report and be required to provide written notice of any error, 
in a calculation error form that must be submitted in a form and manner 
specified by CMS. Unless the EPM participant provides such notice, the 
reconciliation report and CR incentive report would be deemed final 
within 45 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. We propose that if an EPM participant does not submit 
timely notice of a calculation error, that is notice within 45 calendar 
days of the issuance of the reconciliation report and CR incentive 
payment report the EPM participant would be precluded from later 
contesting any of the following matters contained in the reconciliation 
report or CR incentive payment report for that performance year; any 
matter involving the calculation of the EPM participant's 
reconciliation amount or repayment amount as reflected in the 
reconciliation report; any matter involving the calculation of the EPM 
participant's CR incentive payment as reflected in the CR incentive 
payment 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. Given that EPM participants bear the financial 
risk in the EPM model, only EPM participants may use the dispute 
resolution process described in this section.
    In summary, we propose the following requirements in Sec.  512.310 
(a) for notice of calculation error:
     Subject to the limitations on review in subpart D of this 
part, if an EPM participant wishes to dispute the calculation that 
involves a matter related to payment, a CR incentive payment, 
reconciliation amounts, repayment amounts, or determinations associated 
with quality measures affecting payment, the EPM participant is 
required to provide timely written notice of the error, in a form and 
manner specified by CMS.
     Unless the EPM participant provides such notice, CMS deems 
final the reconciliation report and CR incentive payment report 45 
calendar days after the reconciliation report or CR incentive payment 
report is issued and proceeds with the payment or repayment processes 
as applicable.
     If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the reconciliation report or CR 
incentive payment report, 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 EPM participant.
     Only EPM participants may use the notice of calculation 
error process described in this part.
    We seek comment on the proposed notice of calculation error 
requirements.
c. Dispute Resolution Process (Second Level of Appeal)
    We propose the following dispute resolution process. First, we 
propose that only an EPM participant may utilize the dispute resolution 
process. Second, in order to access the dispute resolution process a 
participant must have timely submitted a calculation error form, as 
previously discussed, for any matters related to payment. We propose 
these matters would include any amount or calculation indicated on a 
reconciliation report or CR incentive payment report, including 
calculations not specifically reflected on a reconciliation report or 
CR incentive payment report but which generated figures or amounts 
reflected on a reconciliation report or a CR incentive payment report. 
The following is a non-exhaustive list of the matters we propose would 
need to be first adjudicated by the calculation error process as 
previously detailed: Calculations of reconciliation or repayment 
amounts; calculation of CR incentive payment amounts; calculations of 
NPRA; and any calculations or percentile distribution involving quality 
measures that we propose could affect reconciliation or repayment 
amounts. If an EPM participant wants to engage in the dispute 
resolution process with regard to one of these matters, we propose it 
would first need to submit a calculation error form. Where the EPM 
participant does not timely submit a calculation error form, we propose 
the dispute resolution process would not be available to the EPM 
participant with regard to those matters for the reconciliation report 
or CR incentive payment report for that performance year.
    If the EPM participant did timely submit a calculation error form 
and the EPM participant is dissatisfied with CMS's response to the EPM 
participant's notice of calculation error, the EPM participant would be 
permitted to

[[Page 50878]]

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 for the EPM 
participant's assertion that CMS or its representatives did not 
accurately calculate the NPRA, the CR incentive payment, or post-
episode spending amount in accordance with EPM rules. The following is 
a non-exhaustive list of representative payment matters:
     Calculations of NPRA, calculations of the CR incentive 
payment, post-episode spending amount, target prices or any items 
listed on a reconciliation report or CR incentive payment 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 EPM participant need not submit a calculation error 
form. We propose to require the EPM participant 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 propose 
CMS would process the request as discussed later in this section.
    We propose 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 
EPM participant in writing within 15 calendar days of receiving the EPM 
participant'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 days after the date of the Scheduling Notice. The provisions at 
Sec.  425.804(b), (c), and (e) (as in effect on the publication date of 
this proposed rule) would apply to reviews conducted pursuant to the 
reconsideration review process for EPM. 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 solicit comment on our proposals related to appeals rights under 
this model. The two-step appeal process for payment matters--(1) 
calculation error form, and (2) reconsideration review--is used broadly 
in other CMS models. We seek 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.F. of this 
proposed rule, and if so, whether the process for such appeals should 
differ from the processes proposed here.
    In summary, we propose the following requirements in Sec.  
512.310(b) for the reconsideration process:
     If the EPM participant is dissatisfied with CMS's response 
to the notice of a calculation error, the EPM participant may request a 
reconsideration review in a form and manner as specified by CMS.
     The reconsideration request must provide a detailed 
explanation of the basis for the dispute and include supporting 
documentation for the EPM participant's assertion that CMS or its 
representatives did not accurately calculate the NPRA, the 
reconciliation payment, the CR incentive payment or the repayment 
amount in accordance with subpart d of this part.
     If CMS does not receive a request for reconsideration from 
the EPM participant within 10 calendar days of the issue date of CMS's 
response to the EPM participant'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.  512.305.
     The CMS reconsideration official notifies the EPM 
participant in writing within 15 calendar days of receiving the EPM 
participant's review request of the following:
    ++ The date, time, and location of the review.
    ++ The issues in dispute.
    ++ The review procedures.
    ++ The procedures (including format and deadlines) for submission 
of evidence.
     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 notification.
     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 the EPM.
     The CMS reconsideration official issues a written 
determination within 30 days of the review. The determination is final 
and binding.
    Only EPM participants may utilize the dispute resolution process 
described in this subpart. We seek comment on the proposed 
reconsideration process for the EPMs.
d. Exception to the Notice of Calculation Error Process and Notice of 
Termination
    Similar to the CJR model and BPCI initiative, if the EPM 
participant contests a matter that does not involve an issue contained 
in, or a calculation which contributes to, an EPM reconciliation report 
or a CR incentive report, a notice of calculation error is not 
required. Consistent with III.D.8(c) in this proposed rule, in 
instances where a notice of calculation error is not required, for 
example an EPM participant's termination from the EPM, we propose the 
EPM participant provide a written notice to CMS requesting review 
within 10 calendar days of the notice. CMS has 30 days to respond to 
the EPM participant's request for review. If the EPM participant fails 
to notify CMS, the decision is deemed final.
    In summary, we propose the following requirements in Sec.  
512.310(c) for an exception to the notice of calculation error process.
     If the EPM participant contests a matter that does not 
involve an issue contained in, or a calculation which contributes to, a 
reconciliation report or CR incentive payment report, a notice of 
calculation error is not required. In these instances, if CMS does not 
receive a request for reconsideration from the EPM participant within 
10 calendar days of the notice of the initial determination, the 
initial determination is deemed final and CMS proceeds with the action 
indicated in the initial determination.
    In summary, we propose the following requirements in Sec.  
512.310(d) for notice of termination:
     If an EPM participant receives notification that it has 
been terminated from the EPM and wishes to appeal such termination, it 
must provide a written notice to CMS requesting review of the 
termination within 10 calendar days of the notice. CMS has 30 days to 
respond to the EPM participant's request for review. If the participant 
fails to notify CMS, the termination is deemed final.

[[Page 50879]]

    We seek comment on the proposed exception to the notice of 
calculation error process and notice of termination.
e. Limitations on Review
    In summary, we propose the following requirements in Sec.  
512.310(e) for 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:
    ++ 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 section 
1115A(b)(3) of Act.
    ++ The termination or modification of the design and implementation 
of a model under section 1115A(b)(3)(B) of Act.
    ++ Decisions to expand the duration and scope of a model under 
section 1115A(c) of the Act, including the determination that a model 
is not expected to meet criteria described in paragraph (e)(1) or (2) 
of this section.
    We seek comment on the proposed limitations on review.

III. Provisions of the Proposed Regulations

E. EPM Quality Measures, Public Display, and Use of Quality Measures in 
the EPM Payment Methodology

1. Background
    As discussed in the CJR model final rule, Medicare payment policy 
has moved away from FFS payments unlinked to quality and towards 
payments that are linked to quality of care (80 FR 73358). Through the 
Medicare Modernization Act and the Affordable Care Act, we have 
implemented specific IPPS programs like the HIQR Program (section 
1886(b)(3)(B) of the Act), the HVBP Program (subsection (o) of section 
1886), the Hospital Acquired Condition Reduction Program (HACRP) 
(subsection (q) of section 1886), and the Hospital Readmissions 
Reduction Program (HRRP) (subsection (p) of section 1886), where 
quality of care is linked to payment. We have also implemented the 
Shared Savings Program, an ACO program that links shared savings 
payment to quality performance. The CJR model similarly incorporates 
pay-for-performance through the potential for financial reward to 
participants based on the hospital's level of quality performance, 
while also including an incentive for quality improvement if the 
hospital's current level of quality is relatively low (80 FR 73374).
    We propose pay-for-performance methodologies similar to the CJR 
model for the proposed EPMs. Specifically, we propose to financially 
reward higher quality in an EPM episode by reducing the effective 
discount factor used to calculate EPM quality-adjusted target prices at 
reconciliation. We would establish the effective discount factor based 
on the EPM participant's overall quality performance and improvement on 
the EPM's quality measures as reflected in the EPM participant's EPM 
composite quality score. We would calculate the EPM participant's 
composite quality score for each EPM performance year at the time of 
reconciliation. The EPM composite quality score would also determine 
whether an EPM participant is eligible for a reconciliation payment if 
savings are achieved beyond the EPM quality-adjusted target price by 
setting a minimum EPM composite quality score for reconciliation 
payment eligibility.
    We note that we continue to believe that EPMs should include pay-
for-performance methodologies that incentivize improvements in patient 
outcomes while simultaneously lowering health care spending (80 FR 
73465). We believe that improved quality of care, specifically achieved 
through coordination and communication among providers in conjunction 
with patients and their caregivers, can favorably influence performance 
on patient outcomes. Like the CJR model, we also believe that the 
proposed three new EPMs would provide the opportunity for EPM 
participants to improve the quality of care based on timely reported 
patient experience, including communications with doctors and nurses, 
and responsiveness of hospital staff (80 FR 73465). Finally, we strive 
to align as many measures as possible in CMS's proposed new EPMs with 
those in ongoing models and programs. Our goal is to focus provider 
improvement efforts and minimize burden on EPM participants in needing 
to become familiar with and report new measures, while still allowing 
us to appropriately capture meaningful quality data and use it in the 
EPMs' pay-for-performance methodologies.
    More specifically, similar to our final decision for the CJR model, 
we are not proposing to use any readmissions measures that could apply 
to clinical conditions in these EPMs but that are already in place or 
have been finalized for the HRRP, specifically the Hospital 30-day all-
cause risk-standardized readmission rate (RSRR) following AMI 
hospitalization (NQF #0505) and the Hospital 30-day all-cause, 
unplanned, RSRR following CABG surgery (NQF #2515), due to the 
incentives, already in place by the HRRP, for hospitals to lower excess 
readmission rates (80 FR 73479). While we consider these readmissions 
measure rates to be important metrics for providing information about 
AMI and CABG hospital performance in the HRRP and HIQR Program for 
payment and public reporting, respectively, other proposed measures for 
the AMI and CABG models support the intent of these models to reduce 
actual payments in an EPM episode while ensuring that quality of care 
for AMI and CABG model beneficiaries is improved.
    Furthermore, while we recognize the lack of complete alignment 
between EPM beneficiaries and the proposed cohorts for the EPM quality 
measures, we believe the proposed measures provide meaningful 
information about EPM participant quality performance and improvement 
that are relevant to EPM beneficiaries. For the AMI and CABG models in 
particular, beneficiaries included in the proposed episode-specific 
measures would significantly overlap with beneficiaries in AMI and CABG 
model episodes. We note that for purposes of the EPMs where we need to 
identify episodes that are included in the EPMs, we use the terms 
anchor and chained anchor hospitalization to identify hospitalizations 
that initiate EPM episodes for beneficiaries whose care is included in 
the EPMs. In describing the quality measures in detail in section 
III.E.4. of this proposed rule, we use the term index hospitalization 
to identify hospitalizations of beneficiaries whose outcomes are 
included in the measures. Thus, anchor hospitalizations and index 
hospitalizations would have varying degrees of overlap depending on the 
specific quality measure.
    Moreover, we note that hospitals are the unit of analysis for the 
EPMs and that the proposed measures are hospital-centric measures, both 
because these are currently available measures that are aligned with 
those in other CMS programs and because one of the major goals of the 
EPMs is to encourage collaboration among different types of providers 
in order to achieve better care and reduced expenditures, while holding 
acute care hospitals financially responsible. For further discussion of 
our proposal that hospitals be

[[Page 50880]]

accountable for EPM episodes, we refer to section III.B.3. of this 
proposed rule.
    We recognize that there are also some gaps in the current proposed 
measures relative to other settings in which patients receive care 
post-hospital discharge during EPM episodes, as well as around 
important complications of care for clinical conditions included in the 
three models. However, we believe that these hospital-level measures 
reasonably assess how well EPM participants provide care for EPM 
beneficiaries since the measures, depending on the EPM, assess--(1) 
important patient outcomes, including mortality as well as 
complications and days of acute care following discharge from the index 
hospitalization which can be costly; and (2) patients' perspectives on 
their hospital experience, which include patient feedback on 
communication with doctors, communication with nurses, responsiveness 
of hospital staff, communication about medicines, discharge 
information, cleanliness of the hospital environment, quietness of the 
hospital environment, and transition to post-hospital care. As we gain 
more experience with the EPMs, as well as the CJR model currently in 
testing, and future EPMs, we plan to work to create a more robust set 
of episode quality measures for these and future models. We will 
continue to assess the evolving inventory of measures and will continue 
to refine quality measures for potential future rulemaking based on 
public comments, changes to the EPMs' payment methodologies, 
recommendations from EPM participants and their collaborators, and new 
CMS episode measure development activities as we learn more about the 
impact of EPMs on quality improvement and episode efficiency. We refer 
to section III.E.4.e. of this proposed rule for a discussion of 
potential future EPM episode measures.
2. Selection of Proposed Quality Measures for the EPMs
a. Overview of Quality Measure Selection
    The outcome and patient experience measures proposed for the EPMs 
were selected in order to: (1) Promote alignment with the financial and 
quality goals of the EPMs; (2) leverage hospitals' familiarity with the 
measures due to their use in other CMS hospital quality programs, 
including programs that tie payment to performance such as the HVBP 
Program; (3) streamline EPM measures for EPM participants testing more 
than one EPM; and (4) ensure consistency with CMS's priorities to 
reduce AMI and CABG mortality and complications while improving patient 
experience, as well as with CMS's priorities to reduce major LEJR 
surgery complications while improving patient experience for SHFFT 
model beneficiaries, like those in the CJR model.
b. AMI Model Quality Measures
    In order to encourage care collaboration among multiple providers 
of AMI model beneficiaries, we propose three required measures and one 
measure that relies on voluntary data submission, in order to determine 
AMI model participant episode quality performance and improvement that 
would be linked to the AMI model payment methodology as discussed in 
section III.E.3.f.(2) of this proposed rule. We propose the following 
measures for the AMI model:
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) Following Acute Myocardial Infarction (NQF #0230) (MORT-30-
AMI).
     Excess Days in Acute Care after Hospitalization for AMI 
(AMI Excess Days).
     HCAHPS Survey (NQF #0166).
     Voluntary Hybrid Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) 
Hospitalization (NQF #2473) (Hybrid AMI Mortality) data submission.
    We refer to sections III.E.4.a. and d. of this proposed rule for a 
detailed discussion of our proposals regarding these measures for the 
AMI model, including their importance as measures of the quality-of-
care for beneficiaries treated for AMI. The proposals for the AMI model 
measures are included in Sec.  512.411, and the proposals for reporting 
the measures are included in Sec.  512.400. We seek comment on our 
proposals for AMI model quality measures.
c. CABG Model Quality Measures
    In order to encourage care collaboration among multiple providers 
of CABG model beneficiaries, we propose two required measures, in order 
to determine CABG model participant episode quality performance and 
improvement that would be linked to the CABG model payment methodology 
as discussed in section III.E.3.f.(3) of this proposed rule. We propose 
the following measures for the CABG model:
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF 
#2558) (MORT-30-CABG).
     HCAHPS Survey (NQF #0166).
    We refer to sections III.E.4.b. and d. of this proposed rule for a 
detailed discussion of our proposals regarding these measures for the 
CABG model, including their importance as measures of the quality-of-
care for beneficiaries treated with CABG.
    The proposals for the CABG model measures are included in Sec.  
512.412., and the proposals for reporting the measures are included in 
Sec.  512.400. We seek comment on our proposals for CABG model quality 
measures.
d. SHFFT Model Quality Measures
    In order to encourage care collaboration among multiple providers 
of SHFFT model beneficiaries, we propose two required measures and one 
measure that relies on voluntary data submission, in order to determine 
SHFFT model participant episode quality performance and improvement 
that would be linked to the SHFFT model payment methodology as 
discussed in section III.E.3.f.(4) of this proposed rule. While we 
recognize that none of the proposed measures specifically target the 
care of SHFFT model beneficiaries, these measures are the same as those 
used for the CJR model because SHFFT model episodes will be tested 
along with the LEJR episodes in the CJR model (80 FR 73501 and 73507) 
at mostly the same hospitals. In addition, as discussed further in 
section III.E.3.e.(3) of this proposed rule, we propose to calculate a 
hospital-level composite quality score that would apply to episode 
payment for both the CJR and SHFFT models, consistent with our proposal 
of the same measures for the two models. We believe that due to the 
inclusion of beneficiaries with hip fracture in both the CJR and SHFFT 
models and our desire to streamline EPM participant measure reporting, 
as well as the focus of both models on major lower extremity orthopedic 
surgery, the same set of quality measures can be used for both models 
to incentivize quality improvement in lower extremity orthopedic 
surgery care and episode efficiency. We are also considering future 
measure development focused specifically on hip and femur fracture 
patients. We expect that many of the physicians and other providers 
collaborating with participant hospitals in the SHFFT and CJR models 
will be the same, such that certain care pathways and episode 
efficiencies may be coordinated for SHFFT and CJR model beneficiaries 
regardless of the model, potentially resulting in quality improvement 
for beneficiaries in both models. We propose the following measures for 
the SHFFT model:

[[Page 50881]]

     Hospital-level RSCR following elective primary THA and/or 
TKA (NQF #1550) (Hip/Knee Complications).
     HCAHPS Survey (NQF #0166).
     Total Hip Arthroplasty (THA)/Total Knee Arthroplasty (TKA) 
voluntary patient-reported outcome (PRO) and limited risk variable data 
submission (Patient-reported outcomes and limited risk variable data 
following elective primary THA/TKA).
    We considered an alternative approach to the required quality 
measures for the SHFFT model given that the proposed measures do not 
specifically target the SHFFT model beneficiaries. This alternative 
approach would not account for any hip-specific measures (such as, 
Hospital-level RSCR following elective primary THA and/or TKA (NQF 
#1550) (Hip/Knee Complications)) and would instead only measure patient 
experience through the HCAHPS Survey (NQF #0166). Although there may be 
some rationale for excluding measures that do not specifically target 
SHFFT model beneficiaries, we do not propose this approach to SHFFT 
model quality measures because we believe that it is critical to 
include a measure of both clinical and patient experience outcomes in 
the setting of lower extremity orthopedic surgery episodes. 
Additionally, we believe that using quality measures for SHFFT model 
episodes that do not align with those in the CJR model could generate 
confusion at CJR model participant hospitals where we propose that the 
SHFFT model be tested as discussed in section III.B.4. of this proposed 
rule.
    We refer to sections III.E.4.c. and d. of this proposed rule for a 
detailed discussion of our proposals regarding these measures for the 
SHFFT model, including their importance as measures of the quality-of-
care for beneficiaries undergoing major lower extremity joint 
replacement surgery.
    The proposals for the SHFFT model measures are included in Sec.  
512.413, and the proposals for reporting the measures are included in 
Sec.  512.400. We seek comment on our proposals for SHFFT model quality 
measures.
3. Proposed Use of Quality Measures in the EPM Payment Methodologies
a. Overview of EPM Composite Quality Score Methodology
    We believe that the proposed EPMs provide another mechanism for 
hospitals to improve quality of care, while also achieving cost 
efficiency. Incentivizing high-value care through episode payments for 
AMI, CABG, and hip fracture care is a primary objective of these 
proposed EPMs. Therefore, incorporating quality performance into the 
episode payment structure is an essential component of the proposed 
EPMs, just as it is for the CJR model (80 FR 73370). For the reasons 
stated previously, we believe it is important for the AMI, CABG, and 
SHFFT models to link the financial reward opportunity with performance 
and improvement in the quality of care for Medicare beneficiaries 
treated for AMI, CABG, and hip fracture.
    As discussed in section III.D.4.a. of this proposed rule, which 
outlines the pricing methodologies for EPM episodes, for each EPM 
participant we propose to set an EPM-episode benchmark price for each 
EPM episode. We would apply the EPM participant's effective discount 
factor based on the participant's quality performance and improvement 
for the EPM performance year to the EPM-episode benchmark episode price 
to calculate the quality-adjusted target price for each EPM episode. We 
refer to section III.E.3.f. of this proposed rule for further 
discussion of the relationship between an EPM participant's quality 
performance and improvement and the effective discount factor. Each EPM 
episode includes an anchor hospitalization for either AMI (AMI MS-DRG 
or PCI MS-DRG with AMI ICD-10-CM diagnosis code in the principal or 
secondary diagnosis code position), CABG (CABG MS-DRG), or SHFFT (SHFFT 
MS-DRG) and a 90-day period after discharge from the anchor or chained 
anchor hospitalization. As discussed in section III.C.4.a.(5) of this 
proposed rule, a chained anchor hospitalization is an anchor 
hospitalization that initiates an AMI model episode and has at least 
one subsequent inpatient-to-inpatient transfer. An EPM quality-adjusted 
target price would represent expected spending on all related Part A 
and Part B items and services furnished during EPM episodes based on 
historical EPM episodes, and would incorporate the EPM participant's 
effective discount factor for the EPM performance year. Participants 
that achieve actual EPM-episode payments below the quality-adjusted 
target price for a given performance year may be eligible for a 
reconciliation payment from CMS, subject to the proposed stop-gain 
limit policy as discussed in section III.D.7.b. of this proposed rule. 
Participants that achieve actual EPM-episode payments that exceed the 
quality-adjusted target price for a given performance year may be 
required to repay Medicare a portion or all of the excess EPM-episode 
spending.
    We propose an EPM composite quality score methodology for linking 
quality and payment in the EPMs that is similar to that methodology 
finalized for the CJR model (80 FR 73363 to 73381). Similar to the CJR 
model, the EPM-specific composite quality score methodology would allow 
both performance and improvement on each EPM's required quality measure 
to be meaningfully valued in the EPMs' pay-for-performance methodology, 
incentivizing and rewarding cost savings in relation to the quality of 
episode care provided by the EPM participant (80 FR 73374 and 73370). 
Specifically, the EPM composite quality score is made up of the 
composite performance score (which includes both patient experience and 
outcome measures, including points for voluntarily reported measures) 
and an improvement score.
    We believe the actual level of quality performance achieved should 
be most highly valued in the EPM composite quality score to reward 
those EPM participants furnishing high quality care to EPM 
beneficiaries, with a smaller contribution to the EPM composite quality 
score made by improvement points if measure result improvement is 
achieved. We acknowledge that substantial improvement on a quality 
measure result is not the sole indicator that an EPM episode-of-care is 
high quality; yet, the improvement spurred by the hospital's 
participation in the EPM deserves to be valued as the EPM participant's 
performance is moving in a direction that is good for the health of 
beneficiaries. Like the CJR model, the EPMs involve a wide range of 
participants that must participate if they are located in the selected 
MSAs, and the participants would be starting from many different 
current levels of quality performance. We note that the Shared Savings 
Program utilizes a similar scoring and weighting methodology, which is 
described in detail in the CY 2011 Shared Savings Program Final Rule 
(see Sec.  425.502). The HVBP Program and the HACRP 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). 
Despite the small number of quality measures proposed for the EPMs, the 
measures represent both clinical outcomes and patient experience, and 
each carries substantial value in the EPM composite quality score.
    Although performance and improvement on each measure would be 
valued in the EPM composite quality score methodology, it is the EPM 
participant's overall quality

[[Page 50882]]

performance under the EPM that would be considered in the pay-for-
performance approach, rather than performance on each quality measure 
individually determining the financial opportunity under the EPM. The 
EPM composite score methodology also provides a framework for 
incorporating additional measures of meaningful outcomes for EPM 
episodes in the future. Finally, while we believe that high performance 
on all of the quality measures represents goals of clinical care that 
should be achievable by all EPM participants that heighten their focus 
on these measures, we appreciate that many participants have room for 
significant improvement in their current measure performance. The EPM 
composite score methodology would provide the potential for financial 
reward for more EPM participants that reach overall acceptable or 
better quality performance, thus incentivizing their continued efforts 
to improve the quality and efficiency of EPM episodes.
    We seek comment on our proposal to use an EPM-specific composite 
quality score in the pay-for-performance methodologies of the AMI, 
CABG, and SHFFT models.
b. Determining Quality Measure Performance
    Similar to our reasoning in the CJR model, we believe that relative 
measure performance for the EPM measures would be the most appropriate 
way to incorporate quality performance into the EPMs because we do not 
have sufficient information about participant performance to set and 
use an absolute performance result on each measure (80 FR 73371). 
Moreover, we believe that participants nationally are currently working 
to improve their performance on the quality measures proposed for the 
EPMs on an ongoing basis as these are included in other CMS programs 
such as the HIQR and HVBP Programs. Therefore, while we expect that EPM 
participants would have a heightened focus on performance on these 
measures as a result of the financial incentives resulting from the EPM 
payment methodology, we are not yet certain what performance outcomes 
can be achieved under best practices.
    Thus, at the time of reconciliation for an EPM performance year, we 
propose to assign each EPM participant's measure point estimate from 
the most recent year as discussed in section III.E.5. of this proposed 
rule to a performance percentile based on the national distribution of 
measure results for subsection (d) hospitals that are eligible for 
payment under the IPPS reporting the measure that meet the minimum 
patient case or survey count. This proposal applies to the MORT-30-AMI 
(NQF #0230) and AMI Excess Days measure results for the AMI model; the 
MORT-30-CABG (NQF #2558) measure result for the CABG model; the Hip/
Knee Complications (NQF #1550) measure result for the SHFFT model; and 
the HCAHPS Survey (NQF #0166) measure result for all of the EPMs.
    The measure-specific parameters that would apply to developing the 
national distributions are displayed in Table 13.

   Table 13--Requirements for Use of Subsection (d) Hospitals That Are
    Eligible for Payment Under the IPPS Measure Results in Developing
           National Distribution of Required Measures for EPMS
------------------------------------------------------------------------
                                        Requirements for use in national
               Measure                            distribution
------------------------------------------------------------------------
MORT-30-AMI (NQF #0230)..............  At least 25 patient cases in the
                                        3-year measure performance
                                        period.
AMI Excess Days......................  At least 25 patient cases in the
                                        3-year measure performance
                                        period.
MORT-30-CABG (NQF #2558).............  At least 25 patient cases in the
                                        3-year measure performance
                                        period.
Hip/Knee Complications (NQF #1550)...  At least 25 patient cases in the
                                        3-year measure performance
                                        period.
HCAHPS Survey (#0166)................  At least 100 completed surveys in
                                        the 4-quarter reporting period.
------------------------------------------------------------------------

    We would assign any low volume EPM participant without a reportable 
value for the measure, new hospitals that are identified as EPM 
participants, or EPM participants where CMS has suppressed the measure 
value due to an error in the data used to calculate the measure to the 
50th performance percentile of the measure result, so as not to 
disadvantage an EPM participant based on its low volume or lack of 
applicable cases because that participant may in actuality provide high 
quality care. We believe that relative measures of quality performance 
are most appropriate for the EPMs as participants continue to make 
progress nationally on improving patient outcomes and experience. 
Proposed measure-specific assignment of points in the EPMs' composite 
quality scores based on relative quality measure performance are 
discussed in sections III.E.3.e.(1), (2), and (3) of this proposed 
rule.
    We seek comment on our proposed overall approach to determining 
quality measure performance based on assigning the EPM participant's 
measure point estimate to a measure performance percentile based on the 
national distribution of measure results from subsection (d) hospitals 
eligible for payment under the IPPS.
c. Determining Quality Measure Improvement
    Consistent with our reasoning for the CJR model, we believe it 
would be important in the EPMs to directly reward EPM participants for 
quality improvement, similar to the pay-for-performance policies under 
other programs such as the HVBP Program and the Shared Savings Program, 
in order to provide a significant incentive for quality improvement for 
EPM participants at all current levels of quality performance (70 FR 
73379). For the CJR model, we adopted a refinement to the composite 
quality score methodology that would supplement the composite quality 
score's valuing of quality performance in the pay-for-performance 
methodology of the CJR model (80 FR 73379). As in the CJR model, we 
believe the heightened focus on EPM episode cost and quality 
performance by participants in the EPMs may lead to substantial year-
over-year quality measure improvement over the EPM performance years. 
Nevertheless, we believe that the actual level of quality performance 
achieved in the EPMs should be most highly valued in the EPM composite 
quality score to reward those participants furnishing high-quality care 
to EPM beneficiaries, with a small contribution to the composite 
quality score made by improvement points if measure result improvement 
is achieved. Thus, we propose adding into the EPM-specific composite 
quality score up to 10 percent of the maximum value for each EPM 
quality measure to which improvement could apply (excluding the 
voluntary data submission measures) for those EPM participants that 
demonstrate substantial improvement from the prior year's measure 
performance on that measure (80 FR 73379 through 73380). The maximum 
EPM composite quality score would be capped at 20 points

[[Page 50883]]

under this proposal. Proposed measure-specific assignment of points for 
improvement in the EPMs' composite quality scores are discussed in 
sections III.E.3.e.(1), (2), and (3).
    For the AMI and CABG models, we propose to define measure 
improvement differently than in the CJR model, using an approach that 
is more similar to the methodologies of other CMS programs such as the 
HVBP Program. The CJR model defined measure improvement for model 
participants relative to a national performance distribution (80 FR 
73380). In contrast, we propose to define measure improvement as any 
improvement in an AMI or CABG model participant's own measure point 
estimate from the previous year, regardless of the participant's 
measure point estimate starting and ending values, if the AMI or CABG 
model participant falls into the top 10 percent of participants based 
on the national distribution of measure improvement over the 2 years 
for subsection (d) hospitals that are eligible for payment under the 
IPPS reporting the measure that meet the minimum patient case or survey 
count. We propose this approach because it represents the greatest 
confidence that we are capturing meaningful improvement on a measure by 
an AMI or CABG model participant in comparison with performance changes 
of other hospitals yet, unlike the CJR and proposed SHFFT model 
methodologies, is founded on an AMI or CABG model participant's own 
measure performance change from year-to-year. We believe that moving 
toward incorporating a model participant's own measure performance 
improvement in the pay-for-performance methodologies for EPMs 
strengthens the incentives in the models for quality improvement, 
especially for EPM participants at the lower end of current measure 
performance.
    For the SHFFT model, we propose to modify the definition of 
improvement used in the CJR model in two ways (80 FR 73379 through 
73380). First, we propose to define measure improvement as improving 2 
deciles or more in comparison to the national distribution of measure 
results from the prior year, based on a comparison of relative quality 
measure performance over the most recent 2 years of available quality 
measure result data. This is the same methodology as finalized for the 
CJR model, except that it reduces the threshold for improvement from 3 
deciles to 2 deciles in order to reward a broader range of improvement. 
Second, we propose to award up to 10 percent of the maximum measure 
performance score on the outcome and patient experience measures 
described in III.E.3.e.(3) of this proposed rule, with a cap of the 
SHFFT model composite quality score at 20 points. This alters the CJR 
model methodology, which calculates the measure performance score, 
voluntary reporting points, and measure improvement score separately 
for a total potential maximum score of 22. Taken together, these two 
changes bring calculation of the SHFFT model composite quality score 
into greater alignment with existing CMS programs, such as the HVBP 
Program, by expanding the number of SHFFT model participants eligible 
for quality improvement points but reducing the number of participants 
who receive both the highest quality performance score on a measure and 
points for measure improvement simultaneously.
    In section V.E. of this proposed rule, we propose changes to the 
CJR model composite quality score calculation consistent with the SHFFT 
model methodology described here, allowing use of the same definition 
of quality improvement for the SHFFT and CJR models, because these 
models would be tested in mostly the same hospitals. We believe this 
approach would provide SHFFT model participants at all current levels 
of quality performance, including those historically lagging, with 
significant incentives to achieve improvement quality of care under the 
SHFFT model. Using a common approach to measuring quality improvement 
for the SHFFT and CJR models would provide a single participant-level 
composite quality score that can be applied at reconciliation for each 
model to determine the payment policies that would apply to the 
participant for the CJR and SHFFT model episodes, taking into 
consideration the different model performance years.
    The proposals to determine quality measure improvement for the AMI, 
CABG, and SHFFT models are included in Sec.  512.315(b)(3), (c)(3), and 
(d)(3), respectively. We seek comment on our proposals to determine 
quality measure improvement for the AMI, CABG, and SHFFT models.
d. Determining Successful Submission of Voluntary Data for AMI and 
SHFFT Models (1) Hybrid AMI Mortality (NQF #2473) Voluntary Data
    Similar to the CJR model, we propose that AMI model participants 
that successfully submit the Hybrid AMI Mortality (NQF #2473) measure 
voluntary data would be eligible for points in the AMI model composite 
quality score (80 FR 73375, 73381). Encouraging collection and 
submission of the Hybrid AMI Mortality (NQF #2473) measure voluntary 
data through the AMI model would increase hospital familiarity with 
submitting hybrid quality measures based on claims data and data 
submitted from electronic health records; further develop an outcome 
measure that provides meaningful information on outcomes for AMI 
hospitalizations that are commonly experienced by Medicare 
beneficiaries; provide another quality measure that may be incorporated 
into the AMI model pay-for-performance methodology in future years, 
pending successful implementation testing of the measure; and inform 
the quality strategy of future payment models.
    The proposed requirements for determining successful submission of 
Hybrid AMI Mortality (NQF #2473) measure voluntary data are included in 
Sec.  512.411(b)(2) and discussed in detail in section 
III.E.4.a.(3)(vii) of this proposed rule. We seek comment on our 
proposals for determining successful submission of voluntary data for 
each AMI model performance year.
(2) Patient-Reported Outcomes and Limited Risk Variable Voluntary Data 
Following Elective Primary THA/TKA
    Like the CJR model, we propose that SHFFT model participants that 
successfully submit Patient-reported outcomes and limited risk variable 
voluntary data following elective primary THA/TKA be eligible for 
points in the SHFFT model composite quality score (80 FR 73375, 73381). 
We note that SHFFT model participants that are also participating in 
the CJR model would not need to submit data twice to satisfy the 
successful submission requirements of both models. If those hospitals 
successfully submit voluntary data for the CJR model they would be 
credited with successful submission under the SHFFT model.
    The proposed requirements for determining successful submission of 
Patient-reported outcomes and limited risk variable voluntary data 
following elective primary THA/TKA are included in Sec.  512.13(b)(2) 
and discussed in detail in section III.E.4.c.(2)(viii) of this proposed 
rule. We seek comment on our proposals for determining successful 
submission of voluntary data for each SHFFT model performance year.
e. Calculation of the EPM-Specific Composite Quality Score
(1) AMI Model Composite Quality Score
    We propose to assign each participant an AMI model composite 
quality score, calculated as the sum of the individual quality measure 
performance scores

[[Page 50884]]

(including successful submission of Hybrid AMI Mortality (NQF #2473) 
measure voluntary data if applicable) and improvement scores. The 
quality measure performance scores would be set to reflect the intended 
weights for each of the quality measures and the successful submission 
of the Hybrid AMI Mortality (NQF #2473) voluntary data in the AMI model 
composite quality score. Each quality measure performance would be 
assigned a weight in the AMI model composite quality score, and 
possible scores for the measures would be set to reflect those weights. 
We would weight AMI model participant performance on each of the three 
required measures and successful submission of Hybrid AMI Mortality 
(NQF #2473) voluntary data according to the measure weights displayed 
in Table 14.

   Table 14--Measures and Associated Performance Weights in AMI Model
                         Composite Quality Score
------------------------------------------------------------------------
                                       Weight in
         Quality measure               composite       Quality domain/
                                     quality score          weight
------------------------------------------------------------------------
MORT[dash]30[dash]AMI (NQF #0230)               50%  Outcome/80%.
AMI Excess Days..................               20%
Hybrid AMI Mortality (NQF #2473)                10%
 Voluntary Data.
HCAHPS Survey (NQF #0166)........               20%  Patient Experience/
                                                      20%.
------------------------------------------------------------------------

    We would assign the lowest weight of 10 percent to the submission 
of Hybrid AMI Mortality (NQF #2473) measure voluntary data because 
these data represent an AMI model participant's meaningful 
participation in advancing the quality measurement of AMI outcomes in 
keeping with our goal to move toward the use of electronic health 
records (EHRs) for measures, and in response to stakeholder feedback to 
include clinical data in outcome measures. Given the importance of AMI 
mortality as an extremely serious AMI outcome, we propose to assign the 
highest individual measure weight of 50 percent to the MORT-30-AMI (NQF 
#0230) measure. We propose to assign another 20 percent of the weight 
to the AMI Excess Days measure that is also included in the outcome 
quality domain. The remaining 20 percent of the AMI model composite 
quality score weight would be assigned to the HCAHPS Survey (NQF #0166) 
measure because we believe that incorporating this quality measure, 
which reflects performance regarding patients' perspectives on care, 
including communication, care transitions, and discharge information, 
is a meaningful patient experience measure of AMI model episode 
quality. This proposal of weights for the outcome and patient 
experience quality domains for the AMI model composite quality score is 
similar to the proposal of weights for the CABG model composite quality 
score described later in this section. We would assign the highest 
overall weight to the outcome quality domain (consisting of two 
measures and voluntary data submission) because the measures in this 
quality domain are specific to meaningful outcomes for AMI model 
beneficiaries. We do not propose to assign the HCAHPS survey (NQF 
#0166) measure the highest weight of the quality and patient experience 
domains, as the measure is not specific to AMI model episodes, but 
rather to all clinical conditions treated by AMI model participants. 
Unlike the CJR model where the quality measure weights in the CJR model 
composite quality score relatively evenly balance the outcome and 
patient experience quality domains, we would assign the highest weight 
in the AMI model to the outcome quality domain (consisting of two 
measures and voluntary data submission) because the measures in this 
quality domain are specific to meaningful, serious outcomes for AMI 
model beneficiaries, especially mortality which is not an outcome 
measure used in the CJR model composite quality score (80 FR 73375).
    Under such an approach, we would first score individually each AMI 
model participant on the MORT-30-AMI (NQF #0230) measure; AMI Excess 
Days measure; and HCAHPS Survey (NQF #0166) measure based on the AMI 
model participant's performance percentile as compared to the national 
distribution of subsection (d) hospitals that are eligible for payment 
under the IPPS measure performance, assigning scores according to the 
point values displayed in Table 15. These individual measure scores 
have been set to reflect the measure weights included in Table 14 so 
they can ultimately be summed without adjustment in calculating the AMI 
model composite quality score. We note that in a chained anchor 
hospitalization where we propose in section III.C.4.a.(5) of this 
proposed rule that once an AMI model episode is initiated at a 
participant hospital, the AMI model episode would continue under the 
responsibility of that participant hospital, the transfer hospital's 
quality measure performance would not be included in assessing the AMI 
model participant's measure performance for the AMI model composite 
quality score. However, because the MORT-30-AMI (NQF #0230) measure 
attributes deaths to the initial hospital that admitted the beneficiary 
as an inpatient for AMI treatment in a transfer scenario, AMI model 
beneficiaries who die following treatment at a transfer hospital would 
be included in the AMI model participant's measure result and, 
therefore, their care represented in this quality measure.

            Table 15--Individual Measure Performance Scoring for Three Required AMI Quality Measures
----------------------------------------------------------------------------------------------------------------
                                                                    MORT-30-AMI     AMI excess     HCAHPS survey
                     Performance percentile                          (points)      days (points)     (points)
----------------------------------------------------------------------------------------------------------------
>=90\th\........................................................           10.00            4.00            4.00
>=80\th\ and <90\th\............................................            9.25            3.70            3.70
>=70\th\ and <80\th\............................................            8.50            3.40            3.40
>=60\th\ and <70\th\............................................            7.75            3.10            3.10
>=50\th\ and <60\th\............................................            7.00            2.80            2.80
>=40\th\ and <50\th\............................................            6.25            2.50            2.50

[[Page 50885]]

 
>=30\th\ and <40\th\............................................            5.50            2.20            2.20
<30\th\.........................................................            0.00            0.00            0.00
----------------------------------------------------------------------------------------------------------------

    Given the current national distribution of subsection (d) hospitals 
eligible for payment under the IPPS performance on these measures, we 
believe 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 AMI model 
composite quality score. These three measures are well-established 
measures in use under CMS hospital programs, so we do not believe that 
scores below the 30th percentile reflect quality performance such that 
they should be assigned any individual quality measure score points 
under the AMI model.
    Additionally, we would assign a measure quality score of 2 points 
for AMI model participants that successfully submit Hybrid AMI 
Mortality (NQF #2473) measure voluntary data and 0 points for 
participants that do not successfully submit these data. Because we 
would not use the actual Hybrid AMI Mortality (NQF #2473) measure 
result as an outcome measure in assessing AMI episode quality 
performance under the AMI model, we propose this straightforward binary 
approach to scoring the submission of Hybrid AMI Mortality (NQF #2473) 
measure voluntary data for hybrid outcome measure testing.
    CMS may, in future regulations, require hospitals to report 
additional data elements from EHRs and propose additional hybrid 
measures in this and other models and programs, such as the HIQR 
Program. If, in future regulations, hospitals are required to report 
these same five data elements (age; heart rate; systolic blood 
pressure; troponin, creatinine) and six linking variables (CMS 
Certification Number (CCN), Medicare Health Insurance Claim (HIC) 
Number, date of birth, sex, admission date, and discharge date) that 
are included in the Hybrid AMI Mortality (NQF #2473) measure to support 
measurement through another CMS program, such as the HIQR Program, CMS 
may propose changes to the AMI model measures and the methodology for 
assigning the AMI model composite quality score.
    Finally, we would award improvement scores on a measure-by-measure 
basis to those AMI model participants that demonstrate improvement on 
the measure; improvement points would be awarded for up to 10 percent 
of the maximum measure performance points available, with the total AMI 
model composite quality score capped at 20. Thus, improvement scores 
would be up to 1.0 points for the MORT-30-AMI (NQF #0230) measure; up 
to 0.4 points for the AMI Excess Days measure; and up to 0.4 points for 
the HCAHPS Survey (NQF #0166) measure.
    We would sum the performance and improvement scores on the three 
quality measures and the score on successful submission of Hybrid AMI 
Mortality (NQF #2473) measure voluntary data to calculate an AMI 
composite quality score for each AMI model participant.
    The proposal for the methodology to calculate the AMI model 
composite quality score is included in Sec.  512.315(b)(1)-(4). We seek 
comment on our proposed methodology to calculate the AMI model 
composite quality score.
(2) CABG Model Composite Quality Score
    We propose to assign each participant a CABG model composite 
quality score, calculated as the sum of the individual quality measure 
performance and improvement scores. The quality measure performance 
scores would be set to reflect the intended weights for each of the 
quality measures. Each quality measure performance would be assigned a 
weight in the CABG model composite quality score and possible scores 
for the measures would be set to reflect those weights. We would weight 
CABG model participant performance on each of the two required measures 
according to the measure weights displayed in Table 16.

   TABLE 16--Measures and Associated Performance Weights in CABG Model
                         Composite Quality Score
------------------------------------------------------------------------
                                       Weight in
          Quality measure              composite       Quality domain/
                                     quality score         weight
------------------------------------------------------------------------
MORT-30-CABG (NQF #2558)..........             75%  Outcome/75%.
HCAHPS Survey (NQF #0166).........             25%  Patient Experience/
                                                     25%.
------------------------------------------------------------------------

    We propose to assign 75 percent of the weight in the CABG model 
composite quality score to the outcome quality domain, assigning all 
weight to the MORT-30-CABG (NQF #2558) measure, and the remaining 25 
percent of the CABG model composite quality score weight to the HCAHPS 
Survey (NQF #0166) measure representing the patient experience quality 
domain. This proposal of weights for the outcome and patient experience 
quality domains for the CABG model composite quality score is similar 
to the proposal of weights for the AMI model composite quality score 
described previously in this section. CABG mortality is an extremely 
serious outcome and, like our proposal for the Mort-30-AMI (NQF #230) 
measure in the AMI model composite quality score, we propose that the 
MORT-30-CABG (NQF #2558) measure would have the highest individual 
measure weight in the CABG model composite quality score. We would 
assign 25 percent of the weight to the HCAHPS survey measure (NQF 
#0166) because we believe that incorporating this quality measure, 
which reflects performance regarding patients' perspectives on care, 
including communication, care transitions, and discharge information, 
is a meaningful

[[Page 50886]]

patient experience measure of CABG model episode quality. We would 
assign the highest overall weight to the outcome quality domain 
(consisting of one measure) because it is specific to meaningful 
outcomes for CABG surgery for CABG model beneficiaries. We do not 
propose to assign the HCAHPS survey (NQF #0166) measure the highest 
weight of the quality and patient experience quality domains, as the 
measure is not specific to CABG model episodes, but rather to all 
clinical conditions treated by CABG model participants. Unlike the CJR 
model where the measure weights in the CJR model composite quality 
score relatively evenly balance the outcome and patient experience 
quality domains, CABG mortality representing the outcome quality domain 
is a serious outcome specific to CABG model beneficiaries such that we 
believe it deserves a high weight in the proposed CABG model composite 
quality score (80 FR 73375).
    Under such an approach, we would first score individually each CABG 
model participant on the MORT-30-CABG (NQF #2558) measure; and HCAHPS 
Survey (NQF #0166) measure based on the participant's performance 
percentile as compared to the national distribution of subsection (d) 
hospitals that are eligible for payment under the IPPS measure 
performance, assigning scores according to the point values displayed 
in Table 17. These individual measure scores have been set to reflect 
the measure weights included in Table 16 so they can ultimately be 
summed without adjustment in calculating the CABG model composite 
quality score.

   Table 17--Individual Scoring for Two Required CABG Quality Measures
------------------------------------------------------------------------
                                       MORT-30-CABG      HCAHPS survey
      Performance percentile             (points)           (points)
------------------------------------------------------------------------
>=90th............................              15.00               5.00
>=80th and <90th..................              13.88               4.63
>=70th and <80th..................              12.75               4.25
>=60th and <70th..................              11.63               3.88
>=50th and <60th..................              10.50               3.50
>=40th and <50th..................               9.38               3.13
>=30th and <40th..................               8.25               2.75
<30th.............................               0.00               0.00
------------------------------------------------------------------------

    Given the current national distribution of subsection (d) hospitals 
that are eligible for payment under the IPPS performance on these 
measures, we believe 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 two 
measures reflect the intended weight of the measure in the CABG model 
composite quality score. These two measures are well-established 
measures in use under CMS hospital programs, so we do not believe that 
scores below the 30th percentile reflect quality performance such that 
they should be assigned any individual quality measure score points 
under the CABG model.
    Finally, we would award improvement scores on a measure-by-measure 
basis to those CABG model participants that demonstrate improvement on 
the measure; improvement points would be awarded for up to 10 percent 
of the maximum measure performance points available, with the total 
CABG model composite quality score capped at 20. Thus, improvement 
scores would be up to 1.5 points for the MORT-30-CABG (NQF #2558) 
measure; and up to 0.5 points for the HCAHPS Survey (NQF #0166) 
measure.
    We would sum the performance and improvement scores on the two 
quality measures to calculate a CABG model composite quality score for 
each CABG model participant.
    The proposal for the methodology to calculate the CABG model 
composite quality score is included in Sec.  512.315(c)(1) through (4). 
We seek comment on our proposed methodology to calculate the CABG model 
composite quality score.
(3) SHFFT Model Composite Quality Score
    We propose to adopt the same calculation of the SHFFT model 
composite quality score as the CJR model, including the proposed 
changes to the CJR model composite quality score methodology described 
in section V.E. of this proposed rule. For those participants in both 
SHFFT and CJR models, the SHFFT model composite quality score 
calculated each year would be the same as the CJR model composite 
quality score (80 73370 through 73381). We propose to assign each SHFFT 
model participant a SHFFT model composite quality score, capped at 20 
points and calculated as the sum of the individual quality measure and 
improvement scores as well as successful submission of THA/TKA 
voluntary PRO and limited risk variable data if applicable. The quality 
measure performance scores would be set to reflect the intended weights 
for each of the quality measures. Each quality measure performance 
would be assigned a weight in the SHFFT model composite quality score 
and possible scores for the measures would be set to reflect those 
weights. We would weight SHFFT model participant performance on each of 
the two required measures and successful submission of THA/TKA 
voluntary PRO and limited risk variable data according to the measure 
weights displayed in Table 30.

  Table 18--Measures and Associated Performance Weights in SHFFT Model
                         Composite Quality Score
------------------------------------------------------------------------
                                     Weight in
        Quality measure          composite quality     Quality domain/
                                       score               weight
------------------------------------------------------------------------
Hip/Knee Complications (NQF                    50%  Outcome/50%.
 #1550.
THA/TKA voluntary PRO and                      10%  Patient Experience/
 limited risk variable                               50%.
 submission.
HCAHPS Survey (NQF #0166)......                40%
------------------------------------------------------------------------


[[Page 50887]]

    Consistent with the CJR model, we propose to assign 50 percent of 
the weight in the SHFFT model composite quality score to the outcome 
quality domain, assigning 50 percent of the weight to the Hip/Knee 
Complications (NQF #1550) measure. We propose to assign 50 percent of 
the weight to the patient experience quality domain, specifically 10 
percent of the weight in that quality domain to the THA/TKA voluntary 
PRO and limited risk variable submission. We would assign 40 percent of 
the weight to the HCAHPS survey measure (NQF #0166) representing the 
patient experience (80 FR 73375). We would assign 40 percent to the 
HCAHPS survey measure (NQF #0166) because we believe 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 SHFFT 
episode quality under the SHFFT model, and because doing so ensures 
that there is a consistent methodology for linking quality performance 
and improvement to payment for SHFFT model participants that are also 
participating in the CJR model. As in the CJR model, we believe this 
weighting appropriately balances patient experience with meaningful 
health outcomes for beneficiaries (80 FR 73375).
    Under such an approach, we would first score individually each 
SHFFT model participant on the Hip/Knee Complications (NQF #1550) 
measure; and HCAHPS Survey (NQF #0166) measure based on the 
participant's performance percentile as compared to the national 
distribution of subsection (d) hospitals that are eligible for payment 
under the IPPS measure performance, assigning scores according to the 
point values displayed in Table 19. These individual measure scores 
have been set to reflect the measure weights included in Table D6 so 
they can ultimately be summed without adjustment in calculating the 
SHFFT model composite quality score. We note that the point score for 
each decile for the two measures for the SHFFT model is the same as 
that used for other CJR model.

  Table 19--Individual Scoring for Two Required SHFFT Quality Measures
------------------------------------------------------------------------
                                         Hip/knee        HCAHPS survey
      Performance percentile          complications      quality score
                                         (points)           (points)
------------------------------------------------------------------------
>=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
------------------------------------------------------------------------

    Given the current national distribution of subsection (d) hospitals 
that are eligible for payment under the IPPS performance on these 
measures, we believe 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 SHFFT model 
composite quality score. These two measures are well-established 
measures in use under CMS hospital programs, so we do not believe that 
scores below the 30th percentile reflect quality performance such that 
they should be assigned any individual quality measure score points 
under the SHFFT model.
    As in the CJR model, we propose to assign a measure quality score 
of 2 points for SHFFT model participants that successfully submit THA/
TKA voluntary PRO and limited risk variable data and 0 points for 
participants that do not successfully submit these data (80 FR 73376).
    Finally, we would award improvement scores on a measure-by-measure 
basis to those SHFFT model participants that demonstrate improvement on 
the measure (defined as year-over-year improvement of 2 or more deciles 
in the performance distribution); improvement points would be awarded 
for up to 10 percent of the maximum measure performance points 
available, with the total SHFFT model composite quality score capped at 
20. Thus, improvement scores would be up to 1.0 points for the Hip/Knee 
Complications (NQF #1550) measure; and up to 0.8 points for the HCAHPS 
Survey (NQF #0166) measure.
    We would sum the performance and improvement scores on the two 
required quality measures and the score on successful submission of 
THA/TKA voluntary PRO and limited risk variable data to calculate a 
SHFFT model composite quality score for each SHFFT model participant. 
For those CJR model participants (the majority of SHFFT model 
participants), the SHFFT model composite quality score would be the 
same as the participant's score for the CJR model.
    The proposal for the methodology to calculate the SHFFT model 
composite quality score is included in Sec.  512.315(d)(1) through (4). 
We seek comment on our proposed methodology to calculate the SHFFT 
model composite quality score.
f. EPM Pay-for-Performance Methodologies To Link Quality and Payment
(1) Overview of Pay-for-Performance Proposals Applicable to the EPMs
    As in the CJR model, we propose that the maximum effective discount 
factor for all EPM participants that could be incorporated in quality-
adjusted target prices would be 3.0 percent (80 FR 733760). We refer to 
section III.D.4.b.(10) of this proposed rule for further discussion of 
the application of the effective discount factor to EPM-episode 
benchmark prices in calculating quality-adjusted target prices. EPM 
participants that provide high-quality episode care would have the 
opportunity to reduce the effective discount factor used to calculate 
their quality-adjusted prices at reconciliation. The effective discount 
factors are displayed in tables in the following EPM-specific sections, 
based on the EPM-specific composite quality score that would place each 
EPM participant into one of four quality categories, specifically 
``Below Acceptable,'' ``Acceptable,'' ``Good,'' and ``Excellent,'' for 
each EPM performance year. Three tables are required to display the 
proposed effective discount factor and applicable discount factor (the 
discount

[[Page 50888]]

factor that represents the phase-in of repayment responsibility in 
performance years 2 (DR) and 3) for each quality category due to the 
phase-in of EPM participant repayment responsibility from no 
responsibility in performance year 1 and performance year 2 (NDR), to 
partial responsibility in performance years 2 (DR) and 3, and finally 
full responsibility in performance years 4 and 5 as discussed in 
section III.D.2.c. Note that the applicable discount factor only 
applies to EPM performance years 2 (DR) and 3.
(2) AMI and CABG Model Pay-for-Performance Methodologies
(a) AMI Model Pay-for-Performance Methodology
    We propose to incorporate the AMI model composite quality score in 
the AMI model payment methodology by (1) requiring a minimum AMI model 
composite quality score for reconciliation payment eligibility if the 
AMI model participant's actual episode payments are less than the 
quality-adjusted target price and (2) determining the effective 
discount factor included in the quality-adjusted target price 
experienced by the AMI model participant in the reconciliation process. 
The payment policies we would apply are displayed in Tables 20, 21, and 
22 for the performance years of the AMI model. Under the AMI model as 
proposed, there is no AMI model participant repayment responsibility in 
performance year 1 and performance year 2 (NDR) and this responsibility 
begins to be phased-in in performance year 2 (DR), with full 
implementation in performance year 4. Because repayment responsibility 
is phased-in, in performance years 2 (DR) and 3, repayment 
responsibility only applies to a portion of the amount of excess AMI 
model episode spending that results from the quality-adjusted target 
prices that include the AMI model participant's effective discount 
factor. We, therefore, refer in the repayment column to the applicable 
discount factor for repayment amount in performance years 2 (DR) and 3. 
The effective discount factor applies to both the reconciliation 
payment and the repayment amount in performance years 4 and 5. We note 
that the average Medicare payment for historical AMI episodes beginning 
in CYs 2012 to 2014 was $24,200.\70\
---------------------------------------------------------------------------

    \70\ Episodes for AMI beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that began in CYs 2012-2014.

 Table 20--Performance Year 1 and Performance Year 2 (NDR): Relationship of AMI Model Composite Quality Score to
       Reconciliation Payment Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                        Effective
                                                                        discount
   AMI model composite quality score            Eligible for           factor for     Effective  discount factor
                                          reconciliation  payment    reconciliation      for repayment amount
                                                                       payment  %
----------------------------------------------------------------------------------------------------------------
<3.6..................................  No.........................             3.0  Not applicable,
>=3.6 and <6.9........................  Yes........................             3.0  Not applicable.
>=6.9 and <=14.8......................  Yes........................             2.0  Not applicable.
>14.8.................................  Yes........................             1.5  Not applicable.
----------------------------------------------------------------------------------------------------------------


  Table 21--Performance Years 2 (DR) and 3: Relationship of AMI Model Composite Quality Score to Reconciliation
               Payment Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective      Applicable
                                                                                     discount        discount
      AMI model composite quality score          Eligible for  reconciliation       factor for      factor for
                                                            payment               reconciliation     repayment
                                                                                    payment  %      amount*  %
----------------------------------------------------------------------------------------------------------------
<3.6........................................  No................................             3.0             2.0
>=3.6 and <6.9..............................  Yes...............................             3.0             2.0
>=6.9 and <=14.8............................  Yes...............................             2.0             1.0
>14.8.......................................  Yes...............................             1.5             0.5
----------------------------------------------------------------------------------------------------------------
* The applicable discount factor for the repayment amount only applies in performance years 2 (DR) and 3 when
  repayment responsibility is being phased-in.


Table 22--Performance Years 4 and 5: Relationship of AMI Model Composite Quality Score to Reconciliation Payment
                   Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective       Effective
                                                                                     discount        discount
      AMI model composite quality score          Eligible for  reconciliation       factor for      factor for
                                                            payment               reconciliation     repayment
                                                                                      payment         amount
----------------------------------------------------------------------------------------------------------------
<3.6........................................  No................................             3.0             3.0
>=3.6 and <6.9..............................  Yes...............................             3.0             3.0
>=6.9 and <=14.8............................  Yes...............................             2.0             2.0
>14.8.......................................  Yes...............................             1.5             1.5
----------------------------------------------------------------------------------------------------------------


[[Page 50889]]

    Under this approach, the maximum AMI model effective discount 
factor included in the quality-adjusted target price would be 3.0 
percent, consistent with the CJR model (80 FR 73365). We believe that a 
maximum effective discount factor of 3.0 percent 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 BPCI participants are testing AMI episodes 
subject to the 3.0 percent discount factor. AMI model participants that 
provide high quality episode care would have the opportunity for a 
lower effective discount factor to be included in their quality-
adjusted target prices at reconciliation as displayed in Tables 20, 21, 
and 22.
    Under this methodology, we would require AMI model participants to 
achieve a minimum AMI model composite quality score of >=3.6 to be 
eligible for a reconciliation payment if actual episode payments were 
less than the quality-adjusted target price based on the 3.0 percent 
maximum effective discount factor. Participants with below acceptable 
quality performance reflected in an AMI model composite quality score 
<3.6 would not be eligible for a reconciliation payment if actual AMI 
model episode payments were less than the quality-adjusted target 
price. A level of quality performance that is below acceptable would 
not affect AMI model participants' repayment responsibility if actual 
AMI model episode payments exceed the quality-adjusted target price. We 
believe that excessive reductions in utilization that lead to low 
actual AMI model episode payments and that could result from the 
financial incentives of an EPM would be limited by a requirement that 
this minimum level of AMI model episode quality be achieved for 
reconciliation payments to be made. This policy would encourage AMI 
model participants to focus on appropriate reductions or changes in 
utilization to achieve high quality care in a more efficient manner. 
Therefore, these participants would be ineligible to receive a 
reconciliation payment if actual AMI model episode payments were less 
than the quality-adjusted target price.
    AMI model participants with an acceptable AMI model composite 
quality score of >=3.6 and <6.9 would be eligible for a reconciliation 
payment if actual AMI model episode payments were less than the 
quality-adjusted target price based on a 3.0 percent effective discount 
factor because their quality performance was at the acceptable level 
established for the AMI model. Therefore, these AMI model participants 
would be eligible to receive a reconciliation payment if actual AMI 
model episode payments were less than the quality-adjusted target 
price.
    AMI model participants with a good AMI model composite quality 
score of >=6.9 and <=14.8 would be eligible for a reconciliation 
payment if actual AMI model episode payments were less than the 
quality-adjusted target price based on a 2.0 percent effective discount 
factor that reflects their good quality performance. Thus, participants 
achieving this level of quality for AMI episodes under the AMI model 
would either have less repayment responsibility (that is, the reduced 
effective discount factor would offset a portion of their repayment 
responsibility) or receive a higher reconciliation payment (that is, 
the reduced effective discount factor would increase the reconciliation 
payment) at reconciliation than they would have otherwise based on a 
comparison of actual AMI model episode payments to quality-adjusted 
target prices that include the maximum 3.0 percent effective discount 
factor.
    Finally, AMI model participants with an excellent AMI model 
composite score quality score of >=14.8 would be eligible to receive a 
reconciliation payment if actual AMI model episode payments were less 
than the quality-adjusted target price based on a 1.5 percent effective 
discount factor that reflects their excellent performance. Thus, 
participants achieving this level of quality for AMI episodes under the 
AMI model would either have less repayment responsibility (that is, the 
reduced effective discount factor would offset a portion of their 
repayment responsibility) or receive a higher reconciliation payment 
(that is, the reduced effective discount factor would increase the 
reconciliation payment) at reconciliation than they would have 
otherwise based on a comparison of actual AMI model episode payments to 
quality-adjusted target prices that include the maximum 3.0 percent 
effective discount factor.
    Under this methodology, the proposed stop-loss and stop-gain limits 
discussed in section III.D.7.b. of this proposed rule would not change. 
We believe this approach to quality incentive payments based on the AMI 
model composite quality score could have the effect of increasing the 
alignment of the financial and quality performance incentives under the 
AMI model to the potential benefit of AMI model participants and their 
collaborators as well as CMS, and would be consistent with the CJR 
model methodology linking quality and payment.
    The proposal to link quality to payment in the AMI model pay-for-
performance methodology is included in Sec.  512.315(b)(5). We seek 
comment on our proposal to link quality to payment in the AMI model 
pay-for-performance methodology.
(b) CABG Model Pay-for-Performance Methodology
    We propose to incorporate the CABG model composite quality score in 
the CABG model payment methodology by--(1) requiring a minimum CABG 
model composite quality score for reconciliation payment eligibility if 
the CABG model participant's actual episode payments are less than the 
quality-adjusted target price; and (2) determining the effective 
discount factor included in the quality-adjusted target price 
experienced by the CABG model participant in the reconciliation 
process. The payment policies we would apply are displayed in Tables 
23, 24, and 25 for the performance years of the CABG model. Under the 
CABG model as proposed, there is no CABG model participant repayment 
responsibility in performance year 1 and performance year 2 (NDR) and 
this responsibility begins to be phased-in in performance year 2 (DR), 
with full implementation in performance year 4. Because repayment 
responsibility is phased-in, in performance years 2 (DR) and 3, 
repayment responsibility only applies to a portion of the amount of 
excess CABG model episode spending that results from the quality-
adjusted target prices that include the CABG model participant's 
effective discount factor. We, therefore, refer in the repayment column 
to the applicable discount factor for repayment amount in performance 
years 2 (DR) and 3. The effective discount factor applies to both the 
reconciliation payment and the repayment amount in performance years 4 
and 5. We note that the average Medicare payment for historical CABG 
episodes beginning in CYs 2012 to 2014 was $47,000.\71\
---------------------------------------------------------------------------

    \71\ Episodes for CABG beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that began in CYs 2012-2014.

[[Page 50890]]



Table 23--Performance Year 1 and Performance Year 2 (NDR): Relationship of CABG Model Composite Quality Score to
       Reconciliation Payment Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective       Effective
                                                                                     discount        discount
     CABG model composite quality score          Eligible for  reconciliation       factor for      factor for
                                                            payment               reconciliation     repayment
                                                                                    payment  %       amount  %
----------------------------------------------------------------------------------------------------------------
<2.8........................................  No................................             3.0             Not
                                                                                                     applicable.
>=2.8 and <4.8..............................  Yes...............................             3.0             Not
                                                                                                     applicable.
>=4.8 and <=17.5............................  Yes...............................             2.0             Not
                                                                                                     applicable.
>17.5.......................................  Yes...............................             1.5             Not
                                                                                                     applicable.
----------------------------------------------------------------------------------------------------------------


 Table 24--Performance Years 2 (DR) and 3: Relationship of CABG Model Composite Quality Score to Reconciliation
               Payment Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective      Applicable
                                                                                     discount        discount
     CABG model composite quality score          Eligible for  reconciliation       factor for      factor for
                                                            payment               reconciliation     repayment
                                                                                    payment  %      amount *  %
----------------------------------------------------------------------------------------------------------------
<2.8........................................  No................................             3.0             2.0
>=2.8 and <4.8..............................  Yes...............................             3.0             2.0
>=4.8 and <=17.5............................  Yes...............................             2.0             1.0
>17.5.......................................  Yes...............................             1.5             0.5
----------------------------------------------------------------------------------------------------------------
* The applicable discount factor for the repayment amount only applies in performance years (DR) and 3 when
  repayment responsibility is being phased-in.


    Table 25--Performance Years 4 and 5: Relationship of CABG Model Composite Quality Score to Reconciliation
               Payment Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective       Effective
                                                                                     discount        discount
     CABG model composite quality score          Eligible for  reconciliation       factor for      factor for
                                                            payment               reconciliation     repayment
                                                                                    payment  %       amount  %
----------------------------------------------------------------------------------------------------------------
<2.8........................................  No................................             3.0             3.0
>=2.8 and <4.8..............................  Yes...............................             3.0             3.0
>=4.8 and <=17.5............................  Yes...............................             2.0             2.0
>17.5.......................................  Yes...............................             1.5             1.5
----------------------------------------------------------------------------------------------------------------

    Under this approach, the maximum CABG model effective discount 
factor included in the quality-adjusted target price would be 3.0 
percent, consistent with the CJR model (80 FR 73365). We believe that a 
maximum effective discount factor of 3.0 percent is reasonable as it is 
within the range of discount percentages included in the Medicare Acute 
Care Episode (ACE) demonstration and it is the Model 2 BPCI discount 
factor for 30 and 60 day episodes, where BPCI participants are testing 
CABG episodes subject to the 3.0 percent discount factor. CABG model 
participants that provide high quality episode care would have the 
opportunity for a lower effective discount factor to be included in 
their quality-adjusted target prices at reconciliation as displayed in 
Tables 23, 24, and 25.
    Under this methodology, we would require CABG model participants to 
achieve a minimum CABG model composite quality score of >=2.8 to be 
eligible for a reconciliation payment if actual episode payments were 
less than the quality-adjusted target price based on the 3.0 percent 
maximum effective discount factor. Participants with below acceptable 
quality performance reflected in an CABG model composite quality score 
<2.8 would not be eligible for a reconciliation payment if actual CABG 
model episode payments were less than the quality-adjusted target 
price. A level of quality performance that is below acceptable would 
not affect participants' repayment responsibility if actual CABG model 
episode payments exceed the quality-adjusted target price. We believe 
that excessive reductions in utilization that lead to low actual CABG 
model episode payments and that could result from the financial 
incentives of an EPM would be limited by a requirement that this 
minimum level of CABG model episode quality be achieved for 
reconciliation payments to be made. This policy would encourage CABG 
model participants to focus on appropriate reductions or changes in 
utilization to achieve high quality care in a more efficient manner. 
Therefore, these participants would be ineligible to receive a 
reconciliation payment if actual CABG model episode payments were less 
than the quality-adjusted target price.
    CABG model participants with an acceptable CABG model composite 
quality score of >=2.8 and <4.8 would be eligible for a reconciliation 
payment if actual CABG model episode payments were less than the 
quality-adjusted target price based on a 3.0 percent effective discount 
factor because their quality performance was at the acceptable level 
established for the CABG model. Therefore, these CABG model 
participants would be eligible to

[[Page 50891]]

receive a reconciliation payment if actual CABG model episode payments 
were less than the quality-adjusted target price.
    CABG model participants with a good CABG model composite quality 
score >=4.8 and <=17.5 would be eligible for a reconciliation payment 
if actual CABG model episode payments were less than the quality-
adjusted target price based on a 2.0 percent effective discount factor 
that reflects their good quality performance. Thus, participants 
achieving this level of quality for CABG episodes under the CABG model 
would either have less repayment responsibility (that is, the reduced 
effective discount factor would offset a portion of their repayment 
responsibility) or receive a higher reconciliation payment (that is, 
the reduced effective discount factor would increase the reconciliation 
payment) at reconciliation than they would have otherwise based on a 
comparison of actual CABG model episode payments to quality-adjusted 
target prices that include the maximum 3.0 percent effective discount 
factor.
    Finally, CABG model participants with an excellent CABG model 
composite score quality score of >17.5 would be eligible to receive a 
reconciliation payment if actual CABG model episode payments were less 
than the quality-adjusted target price based on a 1.5 percent effective 
discount factor that reflects their excellent performance. Thus, 
participants achieving this level of quality for CABG model episodes 
would either have less repayment responsibility (that is, the reduced 
effective discount factor would offset a portion of their repayment 
responsibility) or receive a higher reconciliation payment (that is, 
the reduced effective discount factor would increase the reconciliation 
payment) at reconciliation than they would have otherwise based on a 
comparison of actual CABG model episode payments to quality-adjusted 
target prices that include the maximum 3.0 percent effective discount 
factor.
    Under this methodology, the proposed stop-loss and stop-gain limits 
discussed in section III.D.7.b. of this proposed rule would not change. 
We believe this approach to quality incentive payments based on the 
CABG model composite quality score could have the effect of increasing 
the alignment of the financial and quality performance incentives under 
the CABG model to the potential benefit of CABG model participants and 
their collaborators as well as CMS, and would be consistent with the 
CJR model methodology linking quality and payment.
    The proposal to link quality to payment in the CABG model pay-for-
performance methodology is included in Sec.  512.315(c)(5). We seek 
comment on our proposal to link quality to payment in the CABG model 
pay-for-performance methodology.
(c) Alignment Between the AMI and CABG Model Methodologies
    The AMI and CABG models are closely related, given that they both 
are based on a significant event or procedure for a beneficiary with 
CAD. As discussed in sections III.D.2.b. and c. of this proposed rule, 
we propose the use of a 30-day mortality measure in both models, 
specifically MORT-30-AMI (NQF #0230) with a weight of 50 percent in the 
AMI model composite quality score and MORT-30-CABG (NQF #2558) with a 
weight of 75 percent in the CABG model quality score. The beneficiaries 
included in the measure have some overlap, because some beneficiaries 
with AMI will have a CABG during their hospitalization that begins an 
episode. Analysis of both the MORT-30-AMI (NQF #0230) and MORT-30-CABG 
(NQF #2558) measure national distributions suggests that improving from 
the 25th percentile to 75th percentile represents roughly a 1 
percentage point decrease in mortality rates for both measures.
    In addition, we note that for historical episodes beginning in 2012 
to 2014, the average Medicare spending for an AMI episode that extends 
90 days post-hospital discharge was approximately $24,200 and for a 
CABG episode was approximately $47,000.\72\ However, because we propose 
the same 1.5 percent to 3.0 percent effective discount factor range 
based on quality performance and improvement for the AMI and CABG 
models (and, to a lesser degree, because of the modestly lower weight 
assigned to the mortality measure under the AMI model), the absolute 
dollar amounts tied to changes in AMI or CABG mortality rates are 
different in the two models. A larger absolute financial incentive is 
associated with improvement in CABG mortality than AMI mortality under 
our proposal. We recognize that mortality is a serious outcome for 
beneficiaries with CAD who have a significant event or procedure, and 
we considered setting a wider effective discount factor range based on 
quality in the AMI model than the CABG model to align the absolute 
financial incentives to improve mortality under both models. For 
example, to create a more similar absolute financial incentive between 
the lowest and highest effective discount percentages in the AMI and 
CABG models, we could set the effective discount factor range for the 
AMI model at 0.75 percent to 3.75 percent and the CABG model range at 
1.5 percent to 3 percent. Alternatively, we could set the AMI model 
effective discount factor range at 1.5 percent to 3 percent and 
compress the CABG effective discount factor range. While we do not 
propose different effective discount factor ranges for the AMI and CABG 
models in order to retain consistency with the CJR model and the BPCI 
initiative, we seek comments about the potential benefits and drawbacks 
of establishing the same absolute dollar incentive for similar 
improvements in quality across different models that have similar 
measures but vary in average episode cost. This feedback will be useful 
as we consider future episode payment models and candidate quality 
measures for potential new and existing models, as well as consider 
future refinements to the pay-for-performance methodologies under the 
models. Our goal in all of our episode payment models is to create 
strong financial incentives for quality performance and improvement for 
participants at all level of current quality performance and to 
rationalize the strength of the financial incentives in the context of 
the specificity and importance of the quality measures used under the 
models.
---------------------------------------------------------------------------

    \72\ Episodes for AMI and CABG beneficiaries initiated by all 
U.S. IPPS hospitals and constructed using standardized Medicare FFS 
Parts A and B claims, as proposed in this rule that began in CYs 
2012-2014.
---------------------------------------------------------------------------

(3) SHFFT Model Pay-for-Performance Methodology
    We propose to incorporate the SHFFT model composite quality score 
in the SHFFT model payment methodology by (1) requiring a minimum SHFFT 
model composite quality score for reconciliation payment eligibility if 
the SHFFT model participant's actual episode payments are less than the 
quality-adjusted target price and (2) determining the effective 
discount factor included in the quality-adjusted target price 
experienced by the SHFFT model participant in the reconciliation 
process. The payment policies we would apply are displayed in Tables 
26, 27, and 28 for the performance years of the SHFFT model. Under the 
SHFFT model as proposed, there is no SHFFT model participant repayment 
responsibility in performance year 1 and performance year 2 (NDR) and 
this responsibility begins to be phased-in in performance year 2 (DR), 
with full implementation in performance year 4. Because repayment

[[Page 50892]]

responsibility is phased-in, in performance years 2 (DR) and 3, 
repayment responsibility only applies to a portion of the amount of 
excess SHFFT model episode spending that results from the quality-
adjusted target prices that include the SHFFT model participant's 
effective discount factor. We, therefore, refer in the repayment column 
to the applicable discount factor for repayment amount in performance 
years 2 (DR) and 3. The effective discount factor applies to both the 
reconciliation payment and the repayment amount in performance years 4 
and 5. We note that the average Medicare payment for historical SHFFT 
episodes beginning in CYs 2012 to 2014 was $43,000.\73\
---------------------------------------------------------------------------

    \73\ Episodes for SHFFT beneficiaries initiated by all U.S. IPPS 
hospitals and constructed using standardized Medicare FFS Parts A 
and B claims, as proposed in this rule that began in CYs 2012-2014.
---------------------------------------------------------------------------

    We refer to section V.E. of this proposed rule for discussion of 
the correction to the composite quality score ranges for the four 
quality categories from what was presented in the CJR final rule (80 FR 
73378). The SHFFT model composite quality score ranges displayed in 
Tables 26 through 28 are the corrected ranges that also apply to the 
CJR model.

 Table 26--Performance Year 1 and Performance Year 2 (NDR): Relationship of SHFFT Model Composite Quality Score
      to Reconciliation Payment Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                        Effective
                                                                        discount
  SHFFT model composite quality score           Eligible for           factor for     Effective  discount factor
                                          reconciliation  payment    reconciliation      for repayment amount
                                                                       payment  %
----------------------------------------------------------------------------------------------------------------
<5.0..................................  No.........................             3.0  Not applicable.
>=5.0 and <6.9........................  Yes........................             3.0  Not applicable.
>=6.9 and <=15.0......................  Yes........................             2.0  Not applicable.
>15.0.................................  Yes........................             1.5  Not applicable.
----------------------------------------------------------------------------------------------------------------


 Table 27--Performance Years 2 (DR) and 3: Relationship of SHFFT Model Composite Quality Score to Reconciliation
               Payment Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective      Applicable
                                                                                     Discount        Discount
     SHFFT Model Composite Quality Score          Eligible for Reconciliation       Factor for      Factor for
                                                            Payment               Reconciliation     Repayment
                                                                                    Payment  %      Amount*  %
----------------------------------------------------------------------------------------------------------------
<5.0........................................  No................................             3.0             2.0
>=5.0 and <6.9..............................  Yes...............................             3.0             2.0
>=6.9 and <=15.0............................  Yes...............................             2.0             1.0
>15.0.......................................  Yes...............................             1.5             0.5
----------------------------------------------------------------------------------------------------------------
*The applicable discount factor for the repayment amount only applies in performance years 2 (DR) and 3 when
  repayment responsibility is being phased-in.


   Table 28--Performance Years 4 and 5: Relationship of SHFFT Model Composite Quality Score to Reconciliation
               Payment Eligibility and the Effective Discount Factor Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                     Effective       Effective
                                                                                     discount        discount
     SHFFT model composite quality score         Eligible for  reconciliation       factor for      factor for
                                                            payment               reconciliation     repayment
                                                                                    payment  %       amount  %
----------------------------------------------------------------------------------------------------------------
<5.0........................................  No................................             3.0             3.0
>=5.0 and <6.9..............................  Yes...............................             3.0             3.0
>=6.9 and <=15.0............................  Yes...............................             2.0             2.0
>15.0.......................................  Yes...............................             1.5             1.5
----------------------------------------------------------------------------------------------------------------

    Under this methodology, we would require SHFFT model participants 
to achieve a minimum SHFFT model composite quality score of >=5.0 to be 
eligible for a reconciliation payment if actual episode payments were 
less than the quality-adjusted target price based on the 3.0 percent 
maximum effective discount factor. Participants with below acceptable 
quality performance reflected in a SHFFT model composite quality score 
<5.0 would not be eligible for a reconciliation payment if actual SHFFT 
model episode payments were less than the quality-adjusted target 
price. A level of quality performance that is below acceptable would 
not affect participants' repayment responsibility if actual SHFFT model 
episode payments exceed the quality-adjusted target price. We believe 
that excessive reductions in utilization that lead to low actual SHFFT 
model episode payments and that could result from the financial 
incentives of an EPM would be limited by a requirement that this 
minimum level of SHFFT model episode quality be achieved for 
reconciliation payments to be made. This policy would encourage SHFFT 
model participants to

[[Page 50893]]

focus on appropriate reductions or changes in utilization to achieve 
high quality care in a more efficient manner. Therefore, these 
participants would be ineligible to receive a reconciliation payment if 
actual SHFFT model episode payments were less than the quality-adjusted 
target price.
    SHFFT model participants with an acceptable SHFFT model composite 
quality score of >=5.0 and <6.9 would be eligible for a reconciliation 
payment if actual SHFFT model episode payments were less than the 
quality-adjusted target price based on a 3.0 percent effective discount 
factor because their quality performance was at the acceptable level 
established for the SHFFT model. Therefore, these SHFFT model 
participants would be eligible to receive a reconciliation payment if 
actual SHFFT model episode payments were less than the quality-adjusted 
target price.
    SHFFT model participants with a good SHFFT model composite quality 
score of >=6.9 and <=15.0 would be eligible for a reconciliation 
payment if actual SHFFT model episode payments were less than the 
quality-adjusted target price based on a 2.0 percent effective discount 
factor that reflects their good quality performance. Thus, participants 
achieving this level of quality for SHFFT model episodes under the 
SHFFT model would either have less repayment responsibility (that is, 
the reduced effective discount factor would offset a portion of their 
repayment responsibility) or receive a higher reconciliation payment 
(that is, the reduced effective discount factor would increase the 
reconciliation payment) at reconciliation than they would have 
otherwise based on a comparison of actual SHFFT model episode payments 
to quality-adjusted target prices that include the maximum 3.0 percent 
effective discount factor.
    Finally, SHFFT model participants with an excellent SHFFT model 
composite score quality score of >15.0 would be eligible to receive a 
reconciliation payment if actual SHFFT model episode spending was less 
than the quality-adjusted target price based on a 1.5 percent effective 
discount factor that reflects their excellent performance. Thus, 
participants achieving this level of quality for SHFFT model episodes 
would either have less repayment responsibility (that is, the reduced 
effective discount factor would offset a portion of their repayment 
responsibility) or receive a higher reconciliation payment (that is, 
the reduced effective discount factor would increase the reconciliation 
payment) at reconciliation than they would have otherwise based on a 
comparison of actual SHFFT model episode payments to quality-adjusted 
target prices that include the maximum 3.0 percent effective discount 
factor.
    Under this methodology, the proposed stop-loss and stop-gain limits 
discussed in section III.D.7.b. of this proposed rule would not change. 
We believe this approach to quality incentive payments based on the 
SHFFT model composite quality score could have the effect of increasing 
the alignment of the financial and quality performance incentives under 
the SHFFT model to the potential benefit of SHFFT model participants 
and their collaborators as well as CMS, and would be consistent with 
the CJR model methodology linking quality and payment.
    The proposal to link quality to payment in the SHFFT model pay-for-
performance methodology is included in Sec.  512.315(d)(5). We seek 
comment on our proposal to link quality to payment in the SHFFT model 
pay-for-performance methodology.
4. Details on Quality Measures for the EPMs
a. AMI Model-Specific Measures
(1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #0230) 
(MORT-30-AMI)
(a) Background
    AMI is one of the most common principal hospital discharge 
diagnoses among older adults and is associated with high mortality. AMI 
was the tenth most common principal discharge diagnosis among patients 
with Medicare in 2012.\74\ Each year, over 600,000 Americans will 
experience an AMI. Despite improvements in treatments, 30-day mortality 
rates following AMI exceed 7 percent. CMS pays approximately $11.7 
billion annually for in-hospital costs for Medicare beneficiaries with 
coronary heart disease, of which AMI is a major contributor. The high 
prevalence and considerable morbidity and mortality associated with AMI 
create an economic burden on the healthcare system.\75\
---------------------------------------------------------------------------

    \74\ Agency for Healthcare Research and Quality (AHRQ). 
Healthcare Cost and Utilization Project (HCUP) https://hcupnet.ahrq.gov/.
    \75\ American Heart Association. Heart Disease and Stroke 
Statistics--2010 Update. Dallas, Texas: American Heart Association; 
2010. c2010, American Heart Association.
---------------------------------------------------------------------------

    Hospital mortality is an outcome that is likely attributable to 
care processes and is an important outcome for patients. 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, all contribute 
to patient outcomes. Many current hospital interventions are known to 
decrease the risk of death within 30 days of hospital 
admission.76 77 We believe it is important to assess the 
quality of care provided to Medicare beneficiaries who are hospitalized 
for AMI.
---------------------------------------------------------------------------

    \76\ Jha AK, Orav EJ, Li Z, Epstein AM. The inverse relationship 
between mortality rates and performance in the Hospital Quality 
Alliance measures. Health Aff (Millwood). 2007 Jul-Aug; 26(4):1104-
10.
    \77\ Rathore SS, Curtis JP, Chen J, Wang Y, Nallamothu BK, 
Epstein AJ, Krumholz HM. National Cardiovascular Data Registry. 
Association of door-to-balloon time and mortality in patients 
admitted to hospital with ST elevation myocardial infarction: 
National cohort study. BMJ. 2009 May 19; 338:b1807.
---------------------------------------------------------------------------

    The measure developed by CMS, and currently implemented in the HIQR 
and HVBP Programs, assesses a hospital's risk-standardized mortality 
rate, which is the rate of death after admission to a hospital with a 
principal diagnosis of AMI. The measure outcome is the rate of 
mortality occurring after admission with a principal diagnosis of AMI 
for patients 65 and older during a 30-day period that begins with the 
date of the index admission for the specific hospital. An index 
admission is the hospitalization which is included in the measure 
cohort because it meets all inclusion criteria and does not meet any 
exclusion criteria. The index admission is the hospitalization to which 
the mortality outcome is attributed. The median hospital-level risk-
standardized mortality rate for 2016 public reporting on Hospital 
Compare was 14.2 percent, with a interquartile range from 13.7 percent 
to 14.6 percent in hospitals. The variation in mortality rates suggests 
that important differences in the quality of care delivered across 
hospitals exist, and there is room for quality improvement.
    We developed the measure of hospital-level risk-standardized 
mortality rate (RSMR) following AMI hospitalization, which was later 
endorsed by the NQF (NQF #0230). The measure has been publicly reported 
on Hospital Compare since FY 2007, and was incorporated into what is 
now the HIQR Program since FY 2008 (FY 2008 IPPS/LTCH final rule 71 FR 
67960), and the HVBP Program since FY 2014 (FY 2011 IPPS/LTCH final 
rule 76 FR 26510).
(b) Data Sources
    We propose to use Medicare Part A and Part B FFS claims submitted 
by the

[[Page 50894]]

AMI model participant as the data source for calculation of the MORT-
30-AMI (NQF #0230) measure. Index admission diagnoses and in-hospital 
comorbidities are assessed using Medicare Part A claims. Additional 
comorbidities prior to the index admission are assessed as Part A 
inpatient, outpatient, and Part B office visit Medicare claims in the 
12 months prior to the index (initial) admission. Enrollment and post-
discharge mortality status are obtained from Medicare's enrollment 
database which contains beneficiary demographics, benefits/coverage, 
and vital status information.
(c) Cohort
    The MORT-30-AMI (NQF #0230) measure includes Medicare FFS 
beneficiaries, aged 65 years or older, discharged from non-federal 
acute care hospitals with a principal discharge diagnosis of AMI and 
with a complete claims history for the 12 months prior to admission. 
Eligible hospitalizations are defined using the following ICD-10-CM 
codes: I2109, I2119, I2111, I2119, I2129, I214, and I213.
    We propose that the measure will include index admissions to all 
non-federal acute care hospitals, which includes all AMI model 
participants. Hospital performance will only be publically reported for 
hospitals with 25 or more index admissions in the 3-year measurement 
period. The AMI model cohort would differ from the hospital cohort that 
is currently captured in the measure through the HIQR Program. Although 
performance on the measure will not be publically reported for 
hospitals with fewer than 25 cases, they will receive information about 
their performance. We refer readers to section III.B.5. of this 
proposed rule for participant selection for the AMI model. For eligible 
hospitalizations defined using ICD-9-CM codes, we refer readers to the 
CMS Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(d) Inclusion and Exclusion Criteria
    We propose that an index admission is the hospitalization to which 
the mortality outcome is attributed. We note that for purposes of the 
EPMs where we need to identify episodes that are included in the EPMs, 
we use the terms anchor and chained anchor hospitalization to identify 
hospitalizations that initiate EPM episodes for beneficiaries whose 
care is included in the EPMs. In describing the quality measures 
themselves in detail in section III.E.4. of this proposed rule, we use 
the term index hospitalization to identify hospitalizations of 
beneficiaries whose outcomes are included in the measures. Thus, anchor 
hospitalizations and index hospitalizations would have varying degrees 
of overlap depending on the specific quality measure. The measure 
includes the following index admissions for patients:
     Having a principal discharge diagnosis of AMI.
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Not transferred from another acute care facility.
     Enrolled in Medicare Part A and Part B for the 12 months 
prior to the date of index admission, and enrolled in Part A during the 
index admission.
    This measure excludes the following index admissions for patients:
     Discharged alive on the day of admission or the following 
day who were not transferred to another acute care facility.
     With inconsistent or unknown vital status or other 
unreliable demographic (age and gender) data;
     Enrolled in the Medicare hospice program any time in the 
12 months prior to the index admission, including the first day of the 
index admission;
     Discharged against medical advice American Medical 
Association (AMA); or
     Without at least 30 days of post-discharge enrollment in 
FFS Medicare as the 30-day mortality outcome cannot be assessed for 
these patients.
    Finally, 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, only one index admission for AMI per beneficiary is 
randomly selected for inclusion in the cohort.
(e) Risk-Adjustment
    We note that this measure is aligned with the risk-adjustment 
methodologies adopted for the MORT-30-AMI (NQF #0230) measure under the 
HIQR Program in accordance with section 1886(b)(3)(B)(viii)(VIII) of 
the Act, as finalized in FY 2008 IPPS/LTCH final rule (2008 IPPS/LTCH 
final rule 71 FR 67960). We also note that the measure risk adjustment 
takes into account patient age, sex, and comorbidities to allow a fair 
assessment of hospital performance. The measure defines the patient 
risk factors for mortality using diagnosis codes collected from all 
patient claims 1 year prior to patient index hospitalization for AMI. 
As previously noted in the MORT-30-AMI measure (NQF #0230), ICD-10-CM 
codes on Medicare Parts A and B administrative claims are used to 
inform the risk prediction for each patient; diagnostic codes from 
post-acute care 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. Use of Parts A and B data does not mean the measure is 
applicable to post-acute care settings, only that it uses comprehensive 
data to predict the risk of the outcome and adjust for hospital patient 
case mix. We note that the patient diagnosis codes are grouped using 
Hierarchical Condition Categories (HCCs), which are clinically relevant 
diagnostic groups of codes. The CCs used in the risk-adjustment model 
for this measure are provided on the CMS QualityNet Web site at: 
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069856694.
    In summary, age, sex, and comorbidities present at the time of 
admission are adjusted for differences in hospital case mix (patient 
risk factors). The measure uses the hierarchical logistic regression 
model (HLM) statistical methodology for risk adjustment.
(f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    We propose to calculate hospital 30-day, all-cause, risk-
standardized mortality rates consistent with the methodology used to 
risk standardize all readmission and mortality measures used in CMS 
hospital quality programs. Using HLM, we calculate the hospital-level 
risk-standardized mortality rate following AMI hospitalization by 
producing a ratio of the number of ``predicted'' deaths (that is, the 
adjusted number of deaths at a specific hospital) to the number of 
``expected'' deaths (that is, the number of deaths if an average 
quality hospital treated the same patients) for each hospital and then 
multiplying the ratio by the national raw mortality rate.
    A 3-year rolling period for calculating measure results would be 
consistent with the time frame used for the HIQR Program (FY 2008 IPPS/
LTCH final rule 71 FR 67960). Section III.E.5. of this proposed rule, 
Form, Manner, and Timing of Quality Measure Submission, summarizes the 
proposed measure performance periods for AMI model performance years 1 
through 5. We note that, for each performance year, improvement on the 
MORT-30-AMI (NQF #0230) measure would be determined by comparing 
measure results from that performance year to results in the 3-year 
rolling

[[Page 50895]]

measurement period immediately preceding each AMI model performance 
year to results from the 3-year period from July 1, 2014 through June 
30, 2017, for performance year 2 by comparing measure results in this 
year to results from the 3-year period from July 1, 2015 through June 
30, 2018, in performance year 3 by comparing measure results in this 
year to results from the 3-year period from July 1, 2016 and June 30, 
2019, in performance year 4 by comparing measure results in this year 
to results from the 3-year period from July 1, 2017 and June 30, 2020, 
and in performance year 5 by comparing measure results in this year to 
results from the 3-year period from July 1, 2018 and June 30 2021.
    The proposal to include Hospital-level 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) following AMI hospitalization (NQF 
#0230) measure in the AMI model is included in Sec.  512.411(a)(1). We 
seek comment on this proposal to include Hospital-level 30-Day, All-
Cause, Risk-Standardized Mortality Rate (RSMR) following AMI 
hospitalization (NQF #0230) measure in the AMI model to assess quality 
performance.
(2) Excess Days in Acute Care after Hospitalization for Acute 
Myocardial Infarction (AMI Excess Days)
(a) Background
    The Excess Days in Acute Care after Hospitalization for Acute 
Myocardial Infarction (AMI) measure (AMI Excess Days) is a risk-
standardized outcome measure that compares the number of days that 
patients are predicted to spend in acute care across the full spectrum 
of possible acute care events (hospital readmissions, observation 
stays, and ED visits) after discharge from a hospital for AMI, to the 
days patients are expected to spend in acute care based on their degree 
of illness.
    Some of the costs for AMI can be attributed to high acute care 
utilization for post-discharge AMI patients in the form of 
readmissions, observation stays, and emergency department (ED) visits. 
We note that patients admitted for AMI have disproportionately high 
readmission rates, and that readmission rates following discharge for 
AMI are highly variable across hospitals in the United 
States.78,79
---------------------------------------------------------------------------

    \78\ Krumholz HM, Merrill AR, Schone EM et al. Patterns of 
hospital performance in acute myocardial infarction and heart 
failure 30-day mortality and readmission. Circulation. 
Cardiovascular Quality & Outcomes. Sep 2009;2(5):407-413.
    \79\ Bernheim SM, Grady JN, Lin Z, et al. National patterns of 
risk-standardized mortality and readmission for acute myocardial 
infarction and heart failure. Update on publicly reported outcomes 
measures based on the 2010 release. Circulation. Cardiovascular 
Quality & Outcomes. Sep 2010;3(5):459-467.
---------------------------------------------------------------------------

    For the previously adopted HIQR Program measure, Hospital 30-Day, 
All-Cause Risk- Standardized Readmission Rate (RSRR) following Acute 
Myocardial Infarction (AMI) Hospitalization (NQF #0505) (CY 2009 OPPS/
ASC final rule with comment period; 73 FR 68780 through 68781), 
publicly reported 30-day risk-standardized readmission rates for AMI 
ranged from 17.5 percent to 30.3 percent for the time period between 
July 2011 and June 2012.\80\ However, in addition to an increased risk 
of requiring readmission in the post-discharge period, patients are 
also at risk of returning to the hospital for both observation stays 
and ED visits which also characterize potentially preventable acute 
care. ED visits represent a significant proportion of post-discharge 
acute care utilization for all conditions, including patients with AMI. 
Two recent studies conducted in patients of all ages showed that 9.5 
percent of patients return to the ED within 30 days of hospital 
discharge; additionally, about 12 percent of these patients are 
initially discharged from the ED and are not captured by the previously 
adopted HIQR Program readmission measures.\8.9\ The rising use of 
observation stays among Medicare beneficiaries between 2001 and 2008 
sparked concern among patients, providers, and policymakers that the 
AMI 30-day Readmission (NQF #0505) measure does not capture the full 
range of unplanned acute care events that occur in the post-discharge 
period. In order to address the rising use of observation stays amongst 
Medicare beneficiaries CMS is proposing the Excess Days in Acute Care 
after Hospitalization for AMI (AMI Excess Days) measure for use in the 
AMI model. The AMI Excess Days measure comprehensively captures all 
post-discharge, unplanned acute care events as a count of the excess 
days a hospital's patients spent as inpatients, in observation, or in 
the ED over a 3-year measurement period.
---------------------------------------------------------------------------

    \80\ Centers for Medicare and Medicaid Services. Medicare 
Hospital Quality Chartbook Performance Report on Outcome Measures 
September 2013. September 2013; Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf.
---------------------------------------------------------------------------

    In 2014, we developed the proposed measure of excess days in acute 
care following AMI hospitalization, supported for use in the Hospital 
Quality Reporting Program by the MAP and submitted to the NQF for 
endorsement. We note that this measure was submitted for endorsement to 
the NQF All-Cause Admissions and Readmissions Committee in January 2016 
with appropriate consideration for sociodemographic status. The measure 
was finalized for the HIQR Program FY 2018 payment determination (FY 
2016 IPPS/LTCH final rule 80 FR 49690).
(b) Data Sources
    We propose to use Medicare Part A and Part B FFS claims submitted 
by the AMI model participant as the data source for calculation of the 
AMI Excess Days measure as harmonized with the MORT-30-AMI(NQF #0230) 
and READM-30-AMI(NQF #0505) measures. Index admission diagnoses and in-
hospital comorbidities are assessed using Medicare Part A claims. 
Additional comorbidities prior to the index admission are assessed as 
Part A inpatient, outpatient, and Part B office visit Medicare claims 
in the 12 months prior to the index (initial) admission. Enrollment and 
post-discharge mortality status are obtained from Medicare's enrollment 
database which contains beneficiary demographic, benefits/coverage, and 
vital status information.
(c) Cohort
    The AMI Excess Days measure includes Medicare FFS beneficiaries, 
aged 65 years or older, discharged from non-federal acute care 
hospitals with a principal discharge diagnosis of AMI and with a 
complete claims history for the 12 months prior to index admission. 
Eligible hospitalizations are defined using the following ICD-10-CM 
codes: I2109, I2111, I2119, I2129, I214, and I213.
    We propose that the measure will include index admissions to all 
non-federal acute care hospitals, which includes all participants in 
the AMI model. Hospital performance will only be publically reported 
for hospitals with 25 or more index admissions in the 3-year 
measurement period. The AMI model cohort would differ from the hospital 
cohort that is currently captured in the measure through the HIQR 
Program. Although performance on the measure will not be publically 
reported for hospitals with fewer than 25 cases, such hospitals will 
receive information about their performance on the measure. We refer 
readers to section III.B.5. of this proposed rule for a discussion of 
AMI model participant selection.
(d) Inclusion and Exclusion Criteria
    We propose that an index admission is the hospitalization to which 
the excess days in acute care outcome is attributed. We note that for 
purposes of

[[Page 50896]]

the EPMs where we need to identify episodes that are included in the 
EPMs, we use the terms anchor and chained anchor hospitalization to 
identify hospitalizations that initiate EPM episodes for beneficiaries 
whose care is included in the EPMs. In describing the quality measures 
themselves in detail in section III.E.4. of this proposed rule, we use 
the term index hospitalization to identify hospitalizations of 
beneficiaries whose outcomes are included in the measures. Thus, anchor 
hospitalizations and index hospitalizations would have varying degrees 
of overlap depending on the specific quality measure. The measure 
includes the following index admissions for patients:
     Having a principal discharge diagnosis of AMI.
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Not transferred from another acute care facility.
     Enrolled in Medicare Part A and Part B for the 12 months 
prior to the date of index admission, and enrolled in Part A during the 
index admission.
    The measure excludes the following index admissions for patients:
     Discharged alive on the day of index admission or the 
following day who were not transferred to another acute care facility.
     With inconsistent or unknown vital status or other 
unreliable demographic (age & gender) data.
     Enrolled in the Medicare hospice program any time in the 
12 months prior to the index admission, including the first day of the 
index admission.
     Discharged AMA.
     Without at least 30 days of post-discharge enrollment in 
FFS Medicare as the 30-day excess days outcome cannot be assessed for 
these patients.
    Finally, for the purpose of this measure, hospitalizations that 
occur within 30 days of discharge from an index admission are not 
eligible to also be index admission. Thus, only one index admission for 
AMI per beneficiary is randomly selected for inclusion in the cohort.
(e) Risk-Adjustment
    We propose for the AMI model to align this measure with the risk-
adjustment methodologies adopted for the AMI Excess Days measure under 
the HIQR Program in accordance with section 1886(b)(3)(B)(viii)(VIII) 
of the Act, as finalized in the FY 2016 IPPS/LTCH final rule (80 FR 
49682). We also note that the measure risk adjustment takes into 
account patient age, sex, and comorbidities to allow a fair assessment 
of hospital performance. The measure defines the patient risk factors 
for excess days using diagnosis codes collected from all patient claims 
1 year prior to a patient's index hospitalization for AMI. Accordingly, 
only comorbidities that convey information about the patient at the 
time of index admission or in the 12 months prior, and not 
complications that arise during the course of the index 
hospitalization, are included in the risk-adjustment model. The measure 
does not adjust for patients' index admission source or their discharge 
disposition (for example, SNF) because these factors are associated 
with the structure of the healthcare system, not solely patients' 
clinical comorbidities. Regional differences in the availability of 
post-acute care providers and practice patterns might also exert undue 
influence on measure results. In addition, data fields that capture 
discharge disposition, for example to post-acute care settings, on 
inpatient claims are not audited and are not as reliable as diagnosis 
codes.
    As previously noted in the AMI Excess Days measure, ICD-10-CM 
diagnosis codes present on Parts A and B administrative claims are used 
to inform the risk prediction for each patient. Diagnostic codes from 
post-acute care settings are utilized in the measure calculation, 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 note that the patient diagnosis codes are grouped using 
HCCs, which are clinically relevant diagnostic groups of codes. 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.
    In summary, age, sex, and comorbidities present at the time of 
index admission are adjusted for differences in hospital case mix 
(patient risk factors). The measure uses the HLM statistical 
methodology for risk adjustment.
(f) Calculating the Rate and Performance Period
    We propose to calculate hospital 30-day excess days in acute care 
with the methodology used to risk standardize all excess days measures 
used in CMS hospital quality programs. The outcome of the measure is a 
count of the number of days the patient spends in acute care within 30 
days of discharge. We define days in acute care as days spent in an ED, 
admitted to an observation unit, or admitted as an unplanned 
readmission for any cause within 30 days from the date of discharge 
from the index AMI hospitalization. Each ED treat-and-release visit is 
counted as 1 half-day (0.5 days). Observation stays are recorded in 
terms of hours and are rounded up to the nearest half-day. Each 
readmission day is counted as 1 full day (1 day). We count all eligible 
outcomes occurring in the 30-day period, even if they are repeat 
occurrences. The measure incorporates ``exposure time'' (the number of 
days each patient survives after discharge, up to 30). This exposure 
time is included to account for differential risk for excess days in 
acute care after discharge among those patients who do not survive the 
full post-discharge period. If a readmission or observation stay 
extends beyond the 30-day window, only those days within the 30-day 
window are counted.
    Using a two-part random effects model, or ``hurdle'' model, we 
account for the structure of the data (patients clustered within 
hospitals) and the observed distribution of the outcome. Specifically, 
we model the number of acute care days for each patient as: (a) The 
probability that the patient will have a non-zero number of days in 
post-discharge acute care; and (b) the number of days the patient is 
predicted to spend given that this number is non-zero. The first part 
is specified as a legit model, and the second part is specified as a 
Poisson model, with both parts having the same risk-adjustment 
variables and each part having a random effect. This model is used to 
calculate the predicted (including random effects) and expected 
(assuming random effects are zero) number of days in post-discharge 
acute care for each patient. The average difference between patients' 
predicted and expected estimates for each hospital is used to construct 
the risk-standardized excess days outcome. The excess days outcome is 
reported at the hospital-level per 100 discharges.
    We define the time period for the measure as within 30 days of the 
date of discharge of the index AMI hospitalization. The 30-day post-
discharge window for assessing the outcome is consistent with the 
claims-based MORT-30-AMI (NQF #0230) and Hybrid AMI Mortality (NQF 
#2473) measures as noted in this proposed rule.
    A 3-year rolling performance period would be consistent with that 
used for the HIQR Program (FY 2016 IPPS/LTCH final rule 80 FR 49681). 
Section III.E.5., Form, Manner, and Timing of Quality Measure Data 
Submission, of this proposed rule summarizes the proposed measure 
performance periods for AMI model performance years 1 through 5. We 
note that improvement on the AMI

[[Page 50897]]

Excess Days measure would be determined from the immediate 3-year 
rolling performance period available for the year preceding the AMI 
model performance year as explained in Table 30.
    The proposal to include the Excess Days in Acute Care after 
Hospitalization for AMI measure in the AMI model is included in Sec.  
512.411(a)(2). We seek comment on this proposal to include the Excess 
Days in Acute Care after Hospitalization for AMI measure in the AMI 
model to assess quality performance.
(3) Hybrid Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
Following Acute Myocardial Infarction (AMI) Hospitalization (NQF# 
2473)(Hybrid AMI Mortality)
(a) Background
    In keeping with our goal to move toward the use of EHRs, and in 
response to stakeholder feedback to include clinical data in outcome 
measures, we have developed the hospital 30-day risk-standardized acute 
myocardial infarction (AMI) mortality eMeasure (NQF #2473) (herein 
after referred to as Hybrid AMI Mortality measure). This measure will 
incorporate a combination of claims data and EHR data submitted by 
hospitals, and because of these combined data sources, it is referred 
to as a hybrid measure. The Hybrid AMI Mortality (NQF #2473) measure 
cohort and outcome are identical to those in the hospital 30-day, all-
cause, risk-standardized mortality rate (RSMR) following acute 
myocardial infarction (AMI) (NQF #0230), measure which is also being 
proposed in the AMI model.
    In contrast to the claims-only MORT-30-AMI (NQF #0230) measure, the 
proposed Hybrid AMI Mortality (NQF #2473) measure utilizes five core 
clinical data elements (age; heart rate; systolic blood pressure; 
troponin; creatinine) in the risk-adjustment methodology that are 
obtainable through EHR data. These five core clinical data elements are 
intended to reflect patients' clinical status when they first present 
to an acute care hospital for treatment of AMI. The clinical data 
elements include age at the time of admission, first-captured vital 
signs (heart rate, systolic blood pressure) collected within 2 hours of 
the patient first presenting to the hospital, and the first captured 
laboratory values (troponin, creatinine) collected within 24 hours of 
the patient first presenting to the hospital to which they are 
subsequently admitted. We note that these five data elements are 
routinely collected on hospitalized adults with AMI upon presentation 
to the hospital, consistently captured in medical records under current 
clinical practice, and can be feasibly electronically extracted from 
hospital EHRs.
    In order to prepare for future reporting of the Hybrid AMI 
Mortality (NQF #2473) measure, we are proposing to seek and reward 
voluntary data submission of the five core clinical data elements 
included in the risk model for the Hybrid AMI mortality (NQF #2473) 
measure. We are also proposing to require submission of six additional 
linking variables (CCN, HIC Number, date of birth, sex, admission date, 
and discharge date) to ensure that the datasets containing 
administrative claims data are correctly linked with EHR datasets 
containing the core clinical data elements for proper risk adjustment. 
The voluntary data submission initiative will allow AMI model 
participants to build processes to extract and report the EHR data 
elements, as well as support CMS testing of systems required for Hybrid 
AMI Mortality measure (NQF #2473) production including data receiving 
and auditing, the merging EHR and claims data, calculation and 
production of measure results.
    Finally, we are considering using the Hybrid AMI Mortality (NQF 
#2473) measure as a replacement for the current publicly reported MORT-
30-AMI (NQF #0230) measure in CMS models or programs when appropriate. 
In future years CMS may implement the Hybrid AMI Mortality (NQF #2473) 
measure in models and/or programs, such as in the AMI model or HIQR 
Program. In that event, we would propose to adopt the measure through 
notice and comment rulemaking. We refer readers to more detailed 
information on the measure specifications in this proposed rule and to 
the CMS Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(b) Data Sources
    We propose to use two sources of data submitted by AMI model 
participants to calculate the Hybrid AMI Mortality (NQF #2473) measure: 
Medicare Part A and Part B (FFS claims to identify index admission 
diagnoses; and EHR-captured clinical information collected at 
presentation for risk-adjustment of patients' severity of illness. 
Deaths are identified using the Medicare Enrollment Database which 
contains beneficiary demographic, benefits/coverage, and vital status 
information.
    For the voluntary data submission initiative, EHR data submission 
will align with existing Electronic Clinical Quality Measure (eCQM) 
standards and data reporting procedures for hospitals. In alignment 
with these standards, we are posting the electronic specifications for 
the Hybrid AMI Mortality (NQF #2473) measure, which include the Measure 
Authoring Tool (MAT) output and value sets for all included data 
elements, on the CMS Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The Office of the National Coordinator for Health Information 
Technology (ONC) adopted quality reporting document architecture (QRDA) 
as the standard to support both QRDA Category I (individual patient) 
and QRDA Category III (aggregate) data submission approaches for 
Meaningful Use Stage 2 in the Health Information Technology: Standards, 
Implementation Specifications, and Certification Criteria for 
Electronic Health Record Technology, 2014 Edition; Revisions to the 
Permanent Certification Program for Health Information Technology rule 
(77 FR 54163 through 54292). We intend to provide AMI model 
participants with information about how many qualifying admissions are 
submitted successfully. We refer readers to the definition of 
``successful data submission'' in section III. E.4.a.(3)(vii) of this 
proposed rule.
    We seek comment on our proposal to use the following reporting 
mechanisms in performance year 1: QRDA, a simpler mechanism such as a 
spreadsheet, or both. We propose using QRDA in AMI model performance 
years 2 through 5. The purpose of the use of a simpler reporting format 
in the first performance year reporting format in the first performance 
year would be to allow hospitals to perfect data extraction with the 
2017 data and postpone mastery of reporting in the QRDA format to the 
following year.
(c) Cohort
    The Hybrid AMI Mortality (NQF #2473) measure includes Medicare FFS 
beneficiaries, aged 65 years or older, discharged from non-federal 
acute care hospitals with a principal discharge diagnosis of AMI. 
Eligible hospitalizations are defined using the following ICD-10-CM 
codes: I2109, I2111, I2119, I2129, I214, and I213.
    Hospital performance for the Hybrid AMI Mortality (NQF #2473) 
measure will not be publicly reported. However, AMI model participants 
will receive hospital-specific reports for each performance year with 
information about the success of their voluntary submission of EHR 
data.

[[Page 50898]]

(d) Inclusion and Exclusion Criteria
    We propose that an index admission is the hospitalization to which 
the mortality outcome is attributed. The Hybrid AMI mortality (NQF 
#2473) measure includes the following index admissions for patients:
     Having a principal discharge diagnosis of AMI.
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Not transferred from another acute care facility.
     Enrolled in Medicare Part A and Part B for the 12 months 
prior to the date of index admission, and enrolled in Part A during the 
index admission.
    This measure excludes the following index admissions for patients:
     Discharged alive on the day of admission or the following 
day who were not transferred to another acute care facility.
     With inconsistent or unknown vital status or other 
unreliable demographic (age & gender) data.
     Enrolled in the Medicare hospice program any time in the 
12 months prior to the index admission, including the first day of the 
index admission.
     Discharged AMA.
     Without at least 30 days of post-discharge enrollment in 
FFS Medicare as the 30-day mortality outcome cannot be assessed for 
these patients.
    Finally, for the purpose of this measure, only one index admission 
per patient for AMI is randomly selected for inclusion in the cohort.
(e) Risk-Adjustment
    We note that this measure is aligned with the methodology approach 
adopted for the MORT-30-AMI (NQF #0230) measure under the HIQR Program 
in accordance with section 1886(b)(3)(B)(viii)(VIII) of the Act, as 
finalized in FY 2008 IPPS/LTCH final rule (2008 IPPS/LTCH final rule 71 
FR 67960). The Hybrid AMI Mortality (NQF #2473) measure uses EHR data 
and not administrative claims data to adjust for differences across 
hospitals in how at-risk their patients are for death, relative to 
patients cared for by other hospitals. The risk model was developed 
with input from the literature, clinical and EHR experts, and Health 
Information Technology vendors. In order to be included as risk 
variables, clinical data elements had to be--(1) consistently obtained 
in the target population (Medicare FFS AMI patients) based on current 
clinical practice; (2) captured with a standard definition and recorded 
in a standard format within the EHR; and (3) entered in structured 
fields that are feasibly retrieved from current EHR systems. The final 
measure includes five variables that meet these feasibility criteria, 
are present for most patients at the time of clinical presentation to 
the hospital, are clinically relevant to patients with AMI, and 
demonstrate a strong statistical association with 30-day mortality. 
Hospitals will submit the first-captured data values of each of the 
five core clinical data elements upon patient presentation to the 
hospital. They are: Age; the first-captured heart rate and systolic 
blood pressure measured within 2 hours of a patient presenting to the 
hospital; and the first captured troponin and creatinine values within 
24 hours of a patient presenting to the hospital. Although EHRs likely 
will ultimately link across clinical episodes of care and contain 
historical patient data, given the EHR environment at the time of 
measure development and inability to reliably obtain data from the 
outpatient setting prior to admission, we only considered for inclusion 
those measure variables that would be available and consistently 
collected at first presentation to the hospital.
    The overall performance of the model was comparable with or better 
than that of current publicly reported outcome measures.\81\ We tested 
measure score validity by correlating the RSMR with that of the 
previously validated, publicly reported, administrative claims-based 
MORT-30-AMI (NQF #0230) measure. For more detailed information on the 
model performance, we refer readers to the CMS Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \81\ AMI Mortality Hybrid Measure methodology report. https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

(f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    We calculate hospital 30-day, all-cause, risk-standardized 
mortality rates consistent with the methodology used to risk 
standardize all readmission and mortality measures used in CMS hospital 
quality programs. Using an HLM statistical methodology for risk 
adjustment, we calculate the hospital-level risk-standardized mortality 
rate following AMI hospitalizations by producing a ratio of the number 
of ``predicted'' deaths (that is, the adjusted number of deaths at a 
specific hospital) to the number of ``expected'' deaths (that is, the 
number of deaths if an average quality hospital treated the same 
patients) for each hospital and then multiplying the ratio by the 
national observed mortality rate.
    We propose defining AMI model performance years as outlined in 
section III.E.5. of this proposed rule. A performance period for the 
voluntary data submission are those timeframes in which a hospital 
discharge occurs for an eligible AMI index hospitalization. For 
performance year 1 of the AMI model, participants voluntarily 
submitting data will only be asked to submit data for a 2-month period. 
The 2-month period for AMI voluntary data reporting was identified due 
to data processing and coordination with other proposed timelines for 
this model. Data submitted for the first year would be for cases that 
fulfill the measure specifications described in section III.E.4.a.(3) 
of this proposed rule, and would be restricted to the data elements 
from eligible AMI index hospitalizations with discharges occurring 
between July 1, 2017 and August 31, 2017.
    For performance year 2 of the AMI model, AMI voluntary data 
reporting would be 10 months of data for discharges from eligible AMI 
hospitalizations occurring between September 1, 2017 and June 30, 2018. 
For subsequent years of the model, the performance periods for 
submission of voluntary data will consist of discharges within 
calendar-year 12-month time periods from July 1 through June 30. The 
proposed performance periods would enable AMI model participants to 
receive points toward the AMI model composite quality score for data 
submission starting in performance year 1. We seek comment on our 
proposal for defining the data reporting period for performance year 1 
episodes for an AMI model participant as eligible AMI index 
hospitalizations with discharges occurring between July 1, 2017 and 
August 31, 2017, and for performance year 2 as eligible AMI 
hospitalizations with discharges occurring between September 1, 2017 
and June 30, 2018, with subsequent performance year data reporting 
periods each being calendar-year 12 month periods and starting every 
July 1st. Refer to Table 30 for summary of proposed performance 
periods.
(g) Requirements for Successful Submission of AMI Voluntary Data
    In order for CMS to assess if AMI model participants that submit 
the AMI voluntary data are eligible for points toward the hospital's 
AMI model composite quality score, we propose to use the following 
criteria to determine if a participant has successfully submitted AMI 
voluntary data:

[[Page 50899]]

Submission of the first-captured data values for the five core clinical 
data elements (age; first-captured heart rate and systolic blood 
pressure measured within 2 hours of a patient presenting to the 
hospital; and first-captured troponin and creatinine values measured 
within 24 hours of a patient presenting to the hospitals), and six 
linking variables required to merge with the CMS claims data CCN, HIC 
Number, date of birth, sex, admission date, and discharge date).
    All of these data elements must be submitted for each qualifying 
AMI hospitalization as described in section III.E.5. of this proposed 
rule. If troponin was not measured in the patient within 24 hours of 
presentation to the hospital, the hospital will still receive credit 
for successful data submission if all other clinical data elements 
(age, heart rate, systolic blood pressure, and creatinine) as well as 
the six linking variables are all reported in the submission. We 
recognize that some patients may have clinical signs or symptoms that 
require emergent treatment; and that in such cases treatment might 
proceed without first obtaining a troponin level. However hospitals are 
required to report troponin values on all patients in whom a troponin 
test was performed within the first 24 hours of presenting to the 
hospital and to indicate in their data submission each instance in 
which a troponin value was not measured and therefore not available for 
a patient.
    AMI voluntary data submission must occur within 60 days of the end 
of the most recent data collection period as described in the listing 
of reporting periods for all 5 model performance years in section 
III.E.5. of this proposed rule.
    To fulfill AMI voluntary data collection criteria for model 
performance year 1, hospitals must submit valid data on 50 percent of 
qualifying AMI hospitalizations (identified by the denominator in the 
measure authorizing tool (MAT) output). To successfully submit AMI 
voluntary data for performance years 2 through 5, hospitals must submit 
valid data for all five core clinical data elements on over 90 percent 
of qualifying AMI patients (with the exception for troponin values 
described in this section). Further details on scoring of the voluntary 
data submission are discussed in section III.E.3.e.(1) of this proposed 
rule.
    Each year, AMI model participants voluntarily submitting data for 
this measure will receive hospital-specific reports that detail 
submission results from the most recent performance period. The reports 
will include the match rate between the hospital's submitted EHR data 
and corresponding claims data, as well as the proportion of patient 
data submitted relative to all qualifying AMI admissions with all five 
core clinical data elements. As the initiative seeks to test and reward 
hospitals' ability to submit data, hospitals will not be penalized for 
missing troponin values for patients in whom these values were not 
measured at the time clinical treatment was provided. If hospitals 
successfully submit the remaining four clinical data elements and all 
of the linking variables, a missing troponin value which is due to 
troponin having not been measured in that patient will not result in an 
unsuccessful submission as long as hospitals indicate that the troponin 
value was not measured and therefore not available for that patient. 
Hospitals will still be rewarded for successfully submitting data in 
these cases.
    We previously described a qualifying AMI patient in section 
III.E.4.a.(3)(iii) of this proposed rule. This description is 
important, as these patients are those for whom we seek submission of 
voluntary data from AMI model participants. We selected the requirement 
of submitting 90 percent of qualifying AMI patients' data for 
performance years 2 through 5 because this volume of cases will result 
in a high probability that we will have a national sample of AMI 
patient data representative of each hospital's patient case mix. Having 
90 percent of the data for qualifying AMI patients in performance years 
2 through 5 will enable an accurate and reliable assessment of the 
potential implementation of a Hybrid AMI mortality (NQF #2473) measure 
that utilizes EHR data. In addition, the testing we have performed in 
hospitals' EHR data indicate that these data elements are captured in 
over 90 percent of Medicare FFS patients who are 65 years or older and 
admitted to acute care hospitals for treatment of AMI.
    We seek public comment on the proposed requirements to determine 
successful voluntary submission of AMI data, including the proposal to 
give hospitals credit for data submission if they submit all troponin 
values that were actually measured, each of the other four data 
elements, and all of the linking variables; to not penalize hospitals 
for failure to submit a troponin value if it was not measured during 
the admission; and the proposal on the specific minimum percentage 
requirements for data on the qualifying AMI patients.
b. CABG Model-Specific Measure
(1) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
Following Coronary Artery Bypass Graft (CABG) Surgery (NQF #2558)(MORT-
30-CABG)
    (a) Background
    CABG is a common procedure associated with considerable morbidity, 
mortality, and healthcare spending. In 2010, the National Hospital 
Discharge Survey (NHDS) estimated that 219,000 patients underwent a 
total of 397,000 CABG procedures. Among Medicare FFS beneficiaries, 
there were 139,133 hospitalizations for isolated CABG surgery between 
July 2012 and June 2015. CABG surgeries are costly procedures that 
account for the majority of major cardiac surgeries performed 
nationally. In FY 2009, isolated CABG surgeries accounted for almost 
half (47.6 percent) of all cardiac surgery hospital admissions in 
Massachusetts. This provides an example of the frequency in which a 
CABG is performed for a patient admitted for cardiac surgery. In 2008, 
the average Medicare IPPS payment was $30,546 for CABG without valve 
replacement and $47,669 for CABG with valve replacement surgeries.
    The proposed Hospital-level 30-Day Risk-Standardized Mortality Rate 
(RSMR) following Coronary Artery Bypass Graft (CABG) Surgery (MORT-30-
CABG) (NQF #2558) measure developed by CMS and currently implemented in 
the HIQR program, assesses hospitals' 30-day, all-cause risk-
standardized rate of mortality, which is rate of death after admission 
for a CABG procedure for patients 65 and older during a 30-day period 
that begins with the date of the index admission for the specific 
hospital; an index admission is the hospitalization to which the 
mortality outcome is attributed. The data indicate that the median 
hospital-level risk-standardized mortality rate for 2016 public 
reporting on Hospital Compare was 3.2 percent, with a range of 1.4 
percent to 8.3 percent among hospitals. The variation in these rates 
suggests that important differences in the quality of care delivered 
across hospitals exist, and that there is room for improvement.
    More details about the measure can be found in the 2016 Annual 
Updates and Specifications Report for CABG Mortality posted on the CMS 
Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The proposed MORT-30-CABG (NQF #2558) measure was endorsed by the 
NQF in November 2014. This measure

[[Page 50900]]

has been publicly reported on Hospital Compare since FY 2015 and was 
incorporated into the HIQR Program for FY 2017 (FY 2015 IPPS/LTCH final 
rule 79 FR 50227).
(b) Data Source
    Measure results for CABG model participants are calculated using 
Medicare Part A and Part B FFS claims submitted by all non-federal 
short-term acute care hospitals for the MORT-30-CABG (NQF #2558) 
measure. Index admission diagnoses and in-hospital comorbidities are 
assessed using Medicare Part A claims. Additional comorbidities prior 
to the index admission are assessed as Part A inpatient, outpatient, 
and Part B office visit Medicare claims in the 12 months prior to the 
index (initial) admission. Enrollment and post-discharge mortality 
status are obtained from Medicare's enrollment database which contains 
beneficiary demographic, benefits/coverage, and vital status 
information.
(c) Cohort
    The MORT-30-CABG (NQF #2558) measure includes Medicare FFS 
beneficiaries, aged 65 years and older, discharged from a non-federal 
short-term acute care hospitals (including Indian Health Services 
hospitals) and critical access hospitals, who received a qualifying 
CABG procedure, and with a complete claims history for the 12 months 
prior to admission and through 30 days post-procedure.
    We propose that the measure will include index admissions to all 
non-federal acute care hospitals, which includes all hospitals in the 
CABG model. Hospital performance will only be publically reported for 
hospitals with 25 or more index admissions in the 3-year measurement 
period. The CABG model cohort would differ from the hospital cohort 
that is currently captured in the measure through the HIQR Program. 
Although performance on the measure will not be publicly reported for 
hospitals with fewer than 25 cases, such hospitals will receive 
information about their performance. We refer readers to section 
III.B.5. of this proposed rule for a discussion of CABG model 
participant selection. For eligible hospitalizations defined using ICD-
9-CM codes, we refer readers to the CMS Web site at: https://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    In order to include a clinically coherent set of patients in the 
measure, we sought input from clinical experts regarding the inclusion 
of other concomitant cardiac and non-cardiac procedures, such as valve 
replacement and carotid endarterectomy. Adverse clinical outcomes 
following such procedures are higher than those following ``isolated'' 
CABG procedures, that is, CABG procedures performed without concomitant 
high-risk cardiac and non-cardiac procedures. Limiting the measure 
cohort to ``isolated'' CABG patients is consistent with published 
reports of CABG outcomes; therefore, the measure cohort considers only 
patients undergoing isolated CABG as eligible for inclusion in the 
measure. We defined isolated CABG patients as those undergoing CABG 
procedures without concomitant valve or other major cardiac, vascular 
or thoracic procedures. In addition, our clinical experts, consultants, 
and Technical Expert Panel (TEP) members agreed that an isolated CABG 
cohort is a clinically coherent cohort for quality measurement. For 
detailed information on the cohort definition, we refer readers to the 
2016 Annual Updates and Specifications Report for CABG Mortality on the 
CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(d) Inclusion and Exclusion Criteria
    We propose that an index admission is the hospitalization to which 
the mortality outcome is attributed. The measure includes the following 
index admissions for patients:
     Having a qualifying isolated CABG surgery during the index 
admission;
     Enrolled in Medicare FFS Part A and Part B for the 12 
months prior to the date of the index admission, and enrolled in Part A 
during the index admission; and,
     Aged 65 or over.
    Isolated CABG surgeries are defined as those CABG procedures 
performed without the following concomitant valve or other major 
cardiac, vascular, or thoracic procedures:
     Valve procedures.
     Atrial and/or ventricular septal defects.
     Congenital anomalies.
     Other open cardiac procedures.
     Heart transplants.
     Aorta or other non-cardiac arterial bypass procedures.
     Head, neck, intracranial vascular procedures.
     Other chest and thoracic procedures.
    This measure excludes the following index admissions for patients:
     With inconsistent or unknown vital status or other 
unreliable demographic (age and gender) data.
     Discharged AMA.
     For patients with more than one qualifying CABG surgery 
admission in the measurement period, the first CABG admission is 
selected for inclusion in the measure and the subsequent CABG 
admission(s) are excluded from the cohort.
(e) Risk-Adjustment
    We note that this measure is aligned with the risk-adjustment 
methodologies adopted for the other mortality measures developed by CMS 
and implemented under the HIQR Program in accordance with section 
1886(b)(3)(B)(viii)(VIII) of the Act, as finalized in FY 2008 IPPS/LTCH 
final rule (2008 IPPS/LTCH final rule 71 FR 67960). We also note that 
the measure risk adjustment takes into account patient age, sex, and 
comorbidities to allow a fair assessment of hospital performance. The 
measure defines the patient risk factors for mortality using diagnosis 
codes collected from all patient claims 1 year prior to patient index 
hospitalization for CABG surgery. ICD-10-CM diagnosis codes on Parts A 
and B administrative claims are used to inform the risk prediction for 
each patient; diagnostic codes from post-acute care 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. Use of Parts A and B data 
does not mean the measure is applicable to post-acute care settings, 
only that it uses comprehensive data to predict the risk of the outcome 
and adjust for hospital patient case mix. We note that the patient 
diagnosis codes are grouped using HCCs. 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.
    In summary, age, sex, and comorbidities present at the time of 
admission are adjusted for differences in hospital case mix (patient 
risk factors). The measure uses the HLM statistical methodology for 
risk adjustment.
(f) Calculating the Risk-Standardized Mortality Ratio (RSMR) and 
Performance Period
    We propose to calculate hospital 30-day, all-cause, risk-
standardized mortality rates (RSMR) consistent with the methodology 
used to risk standardize all readmission and mortality measures used in 
CMS hospital quality programs. Using HLM, we calculate the hospital-
level risk-

[[Page 50901]]

standardized mortality rate following AMI hospitalization by producing 
a ratio of the number of ``predicted'' deaths (that is, the adjusted 
number of deaths at a specific hospital) to the number of ``expected'' 
deaths (that is, the number of deaths if an average quality hospital 
treated the same patients) for each hospital and then multiplying the 
ratio by the national raw mortality rate. The RSMR is a point 
estimate--the best estimate of a hospital's mortality rate based on the 
hospital's case mix. For more detailed information on the calculation 
methodology we refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    A 3-year rolling performance period would be consistent with that 
used for the HIQR Program (FY 2015 IPPS/LTCH final rule 79 FR 50227). 
Section III.E.5. of this proposed rule, Form, Manner, and Timing of 
Quality Measure Data Submission, summarizes the proposed measure 
performance periods for CABG model performance years 1 through 5. We 
note that improvement on the MORT-CABG-30 (NQF #2558) measure would be 
determined from the 3-year rolling performance period available for the 
year preceding the CABG model performance year as explained in Table 
30.
    We seek comment on this proposal to include Hospital-level 30-Day, 
All-Cause, Risk-Standardized Mortality Rate (RSMR) following CABG 
Surgery (NQF #0230) measure in the CABG model to assess quality 
performance.
    The EPM episodes are structured as 90-day periods with the hospital 
as the primary accountable entity, because we believe 90 days is a 
period over which hospitals have substantial ability to influence the 
quality and efficiency of the care that patients receive. We believe 
that there could be significant benefits for the quality of patient 
care from using quality measures that examine patient outcomes over a 
period that extends at least as long as the EPM episode (that is, 90 
days after discharge). In particular, we believe that this approach 
could help ensure that hospitals are held fully accountable for the 
quality of the care they deliver during the period covered by the 
bundle.
    However, as discussed in section III.E. of this proposed rule, 
several of the outcome measures we are proposing for these EPMs (MORT-
30-AMI (NQF #0230), AMI excess days, and MORT-30-CABG (NQF #2558)) 
assess outcomes over a 30-day period following discharge. We are 
proposing to use these existing 30-day measures, at least initially, 
because they are in wide use and have gained acceptance among hospitals 
and because the mortality measures have been reviewed and endorsed by 
the National Quality Forum.
    Nevertheless, we believe that it is appropriate to seek to adapt 
these measures or to develop new related measures to assess outcomes 
over a longer timeframe, including timeframes at least as long as the 
EPM episodes. In developing measures that use a longer timeframe, CMS 
would perform empirical analyses to ensure that such measures are 
scientifically robust and to identify appropriate risk-adjustment 
approaches. Once such measures were available, CMS would consider when 
and how to incorporate these measures into the EPM quality payment 
methodology. We invite public comment on refining the existing 30-day 
measures to extend the period of outcome assessment following admission 
for AMI or CABG surgery, including the length of the period that should 
be examined by an extended measure, any important considerations in 
developing the refined measures, and any factors CMS should consider in 
incorporating these measures into the EPM quality payment 
methodologies.
c. SHFFT Model-Specific Measures
(1) Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1550) (Hip/Knee Complications)
(a) Background
    THA and TKA are commonly performed procedures for the Medicare 
population that improve quality of life. 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.\82\ The post-operation complications of these procedures are 
high considering these are elective procedures, and usually, the 
complications are devastating to patients. For example, rates for 
periprosthetic joint infection, a rare but devastating complication, 
have been reported at 2.3 percent for THA/TKA patients with rheumatoid 
arthritis after 1 year of follow-up \83\ and 1.6 percent in Medicare 
patients undergoing TKA after 2 years of follow up.\84\ Two studies 
reported 90-day death rates following THA at 0.7 percent \85\ and 2.7 
percent, respectively.\86\ Reported rates for pulmonary embolism 
following TKA range from 0.5 percent to 0.9 percent.87 88 89 
Reported rates for septicemia range from 0.1 percent, during the index 
admission \90\ to 0.3 percent, 90-days following discharge for primary 
TKA.\91\ Rates for bleeding and hematoma following TKA have been 
reported at 0.94 percent \92\ to 1.7 percent.\93\ Combined, THA and TKA 
procedures account for the largest payments for procedures under

[[Page 50902]]

Medicare.\94\ Both hip and knee arthroplasty procedures improve the 
function and quality of life of patients with disabling arthritis, and 
the volume and cost associated with these procedures are very high. We 
believe it is important to assess the quality of care provided to 
Medicare beneficiaries who undergo one or both of these procedures.
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    \82\ 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.
    \83\ 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.
    \84\ 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.
    \85\ 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.
    \86\ 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. 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.
    \87\ 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.
    \88\ 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.
    \89\ 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.
    \90\ 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.
    \91\ 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.
    \92\ 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.
    \93\ 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.
    \94\ 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 proposed measure developed by CMS, and currently implemented 
the HIQR and HVBP Programs and the CJR model, assesses a hospital's 
risk standardized complication rate, which is the rate of complications 
occurring after elective primary THA and TKA surgery. The measure 
outcome is the rate of complications occurring after THA and TKA during 
a 90-day period that begins with the date of the index admission for a 
specific hospital; an index admission is the hospitalization to which 
the complications outcome is attributed. The following outcomes (either 
one or more) 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. The data 
indicated that the median hospital-level risk-standardized complication 
rate for 2008 was 4.2 percent, with a range from 2.2 percent to 8.9 
percent in hospitals. The variation in complication rates suggests that 
there are important differences in the quality of care delivered across 
hospitals, and that there is room for quality improvement.
    In 2010, we developed the proposed measure of hospital-level risk-
standardized complication rate (RSCR) following elective primary THA 
and TKA surgery, which was later endorsed by the NQF (NQF #1550). In 
its Pre-Rulemaking Report for 2012,\95\ the Measure Application 
Partnership (MAP) also recommended the inclusion of this measure in the 
HIQR Program; we have not submitted this measure for use in post-acute 
care settings as the measure was developed for the acute care hospital 
setting. This measure has been publicly reported on Hospital Compare 
since FY 2014 and in the HIQR Program since FY 2015 (FY 2015 IPPS/LTCH 
final rule 79 FR 50062). Finally, we note a comparison of the median 
hospital-level risk-standardized complication rates for hospitals 
between April 1, 2011 and March 31, 2014 illustrates 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.\96\
---------------------------------------------------------------------------

    \95\ 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.
    \96\ 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.
---------------------------------------------------------------------------

(b) Data Sources
    Measure results are calculated using Medicare Part A and Part B FFS 
claims submitted by all non-federal acute care hospitals. Index 
admission diagnoses and in-hospital comorbidities are assessed using 
Medicare Part A claims. 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. Enrollment and post-discharge mortality status are 
obtained from Medicare's enrollment database which contains beneficiary 
demographic, benefits/coverage, and vital status information.
(c) Cohort
    The Hip/Knee Complications (NQF #1550) measure includes Medicare 
FFS beneficiaries, aged 65 years or older, admitted to non-federal 
acute care hospitals for elective primary THA or TKA. THA and TKA 
procedures eligible for inclusion are defined using ICD-9-CM codes 
81.51 and 81.54, respectively. The following 24 codes in ICD-10 
correspond to these two ICD-9-CM codes.
     ICD-9 code 81.51 (Total Hip Replacement) = ICD-10 codes 
0SR90J9, 0SR90JA, 0SR90JZ, 0SRB0J9, 0SRB0JA, 0SRB0JZ.
     ICD-9 code 81.54 (Total Knee Replacement) = ICD-10 codes 
0SRC07Z, 0SRC0JZ, 0SRC0KZ, 0SRD07Z, 0SRD0JZ, 0SRD0KZ, 0SRT07Z, 0SRT0JZ, 
0SRT0KZ, 0SRU07Z, 0SRU0JZ, 0SRU0KZ, 0SRV07Z, 0SRV0JZ, 0SRV0KZ, 0SRW07Z, 
0SRW0JZ, 0SRW0KZ.
    We propose that the measure will include index admissions to all 
non-federal acute care hospitals, which includes all hospitals included 
in the SHFFT model. Hospital performance will only be publicly reported 
for hospitals with 25 or more index admissions in the 3-year 
measurement period. The SHFFT model participant hospital cohort would 
differ from the hospital cohort that is currently captured in the 
measure through the HIQR Program. Although performance on the measure 
will not be publicly reported for hospitals with fewer than 25 cases, 
such hospital will receive information about their performance. We 
refer readers to section III.B.5. of this proposed rule for discussion 
of the selection of participants for the SHFFT model.
(d) Inclusion and Exclusion Criteria
    An index admission is the hospitalization to which the complication 
outcome is attributed. We note that for purposes of the EPMs where we 
need to identify episodes that are included in the EPMs, we use the 
terms anchor and chained anchor hospitalization to identify 
hospitalizations that initiate EPM episodes for beneficiaries whose 
care is included in the EPMs. In describing the quality measures 
themselves in detail in section III.E.4. of this proposed rule, we use 
the term index hospitalization to identify hospitalizations of 
beneficiaries whose outcomes are included in the measures. Thus, anchor 
hospitalizations and index hospitalizations would have varying degrees 
of overlap depending on the specific quality measure. The MS-DRGs for 
the anchor or chained hospitalizations included in the SHFFT model will 
identify beneficiaries that do not overlap with the index 
hospitalizations used in the SHFFT model measures, since the SHFFT 
model measures use the elective THA/TKA cases as proxies for hip or 
femur fracture cases. The measure includes 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.
     Have 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.
     ++Partial hip arthroplasty (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.

[[Page 50903]]

     ++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.
    The following admissions would be excluded from the measure:
     Admissions for patients discharged 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.
    After applying these exclusion criteria, 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 admission from being 
mutually independent. Therefore only one index admission is selected to 
maintain measure integrity.
    We note that the Hip/Knee Complications (NQF #1550) measure does 
not capture patients undergoing partial hip arthroplasty procedures. We 
excluded partial hip arthroplasty procedures primarily because partial 
hip arthroplasty procedures are done for hip fractures. Therefore, they 
are not elective procedures. Also, partial hip arthroplasty procedures 
are typically performed on patients who are older, frailer, and have 
more comorbid conditions. Although this exclusion is not fully 
harmonized with MS-DRGs 469 and 470, which includes partial hip 
arthroplasty procedures, use of this measure will still provide strong 
incentives for improving and maintaining care quality across joint 
replacement patients as hospitals typically develop protocols for lower 
extremity joint arthroplasty that will address peri-operative and post-
operative care for both total and partial hip arthroplasty procedures. 
Fiscal year 2014 claims data indicate that among inpatient claims with 
MS-DRG 469 or 470, partial hip arthroplasty (ICD-9-CM procedure code: 
81.52) accounted for 12 percent, while Total Hip Replacement (ICD-9 
code: 81.51) and total knee replacement (ICD-9 code: 81.54) accounted 
for 87 percent (80 FR 73300 and 73474). We also note that the same 
surgeons and care teams frequently perform both procedures. Therefore, 
quality improvement efforts initiated in response to the Hip/Knee 
Complications (NQF #1550) measure are likely to benefit patients 
undergoing similar elective procedures, such as partial hip 
arthroplasty and revision THA/TKA procedures, and possibly even non-
elective lower extremity hip fracture surgery as described in section 
III.E.2.d. of this proposed rule.
(e) Risk-Adjustment
    We note that this measure is aligned with the risk-adjustment 
methodologies adopted for the HIQR Program and 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 note that the risk-adjustment takes into 
account the patient case-mix to assess hospital performance. The 
patient risk factors are defined using the HCCs.\97\ The HCCs 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=1228772782693). We note that the measure uses ICD-9-CM diagnosis codes on Parts 
A and B administrative claims for the year prior to and including the 
index admission. The ICD-9-CM codes are used to inform the risk 
prediction for each patient. Diagnostic codes from post-acute care 
settings are utilized for the measure calculation, 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. Use of 
the administrative claims data does not mean the measures are 
applicable to post-acute care settings, only that they use 
comprehensive data to predict the risk of the outcome and adjust for 
hospital patient case mix. 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. The decision on the 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 post the date of index admission. We 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.
---------------------------------------------------------------------------

    \97\ 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.
---------------------------------------------------------------------------

(f) Calculating the Risk-Standardized Complication Rate and Performance 
Period
    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 calculate the hospital risk-standardized 
complication rate 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. 
The 3-year rolling performance period would be consistent with that 
used for HIQR Program (FY 2015 IPPS/LTCH final rule 79 FR 50208 and 
50209). Section III.E.5. of this proposed rule summarizes measure 
performance periods for SHFFT model years 1 through 5. We note that 
improvement on the Hip/Knee Complications (NQF #1550) measure would be 
determined from the immediate 3-year rolling performance period 
available for the year preceding the SHFFT model performance year as 
explained in Table 33.
    We seek comment on this proposal to assess quality performance for 
SHFFT model participants 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.

[[Page 50904]]

(2) Hospital-Level Performance Measure(s) of Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty
(a) Background
    As part of our goal to move towards outcome measures that assess 
patient-reported outcomes, we have begun development on a measure to 
assess improvement in patient-reported outcomes following THA/TKA 
procedures. 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. 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 measured in a scientifically sound way and 
are also influenced by a range of improvements in care.\98 99 100\ We 
also note 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. Patient-reported outcomes would be assessed separately for 
THA and TKA procedures, though these results may be combined into a 
single composite measure for reporting. Therefore, we will refer to a 
single measure, but acknowledge the possibility of two measures, one 
for THA patients and one for TKA patients.
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    \98\ 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.
    \99\ 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.
    \100\ 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.
---------------------------------------------------------------------------

    During measure development, we discovered 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. The rationale for requesting access to a national THA and 
TKA inpatient surgical procedures patient-reported data source are 
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 believe access to such data would allow for completion 
and testing of the current measure under development that can be 
appropriately used for nationwide hospital performance evaluation. We 
implemented the initial data collection for this measure initially in 
the CJR model in order to test and resolve these measurement 
development issues through the collection of THA and TKA patient-
reported outcome data. We propose to test SHFFT model episodes in 
mainly the same hospitals as the CJR model as discussed in section 
III.B.4. of this proposed rule. We note that approximately 50 hospitals 
currently excluded from CJR model participation because they are 
testing BPCI LEJR episodes would be included in the SHFFT model. Access 
to this data through the SHFFT and CJR models 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.
    In summary, the voluntary data collection that is already underway 
in most SHFFT model participants who are also participants in the CJR 
model would provide data from the patient's perspective that is 
necessary to finalize and test the measure specifications, including 
the risk model. Access to this nationally 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.
    In order to encourage participation with voluntary data submission 
of patient-reported outcome data, we are proposing to seek and reward 
voluntary participation in submission of THA/TKA patient-reported 
outcome-based measure data as outlined in section III.E.4.c.(2)(viii) 
of this proposed rule. We note that we would not publicly report the 
THA/TKA voluntary data.
    Finally, we intend to use a fully tested and completed THA/TKA 
patient-reported outcome-based measure in CMS models or programs when 
appropriate. If there is a decision to implement the fully developed 
THA/TKA patient-reported outcome-based measure, we would propose to 
adopt the measure through notice and comment rulemaking. We refer 
reviewers to 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.
(b) Data Sources
    As previously discussed, this measure is under development, and we 
propose to reward SHFFT model participants that volunteer to submit 
provider- and patient-level data elements. We note that there is 
currently 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

[[Page 50905]]

procedures. In the voluntary data submission for the THA/TKA patient-
reported outcome-based measure, we are trying 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). 
Furthermore, in order to minimize provider and hospital burden 
associated with data collection and submission of provider- and 
hospital-level data elements, we propose using a variety of data 
sources for measure development. We anticipate using the following data 
sources are:
     Patient-reported data.
     Administrative claims-based data.
     One or both physician-reported and electronic health 
record data.
    Through this voluntary data submission proposal, we hope to 
identify a uniform set of provider- and patient-level data elements 
while also identifying data sources that are the least burdensome for 
the patients, providers, and hospitals. We propose to request that 
SHFFT model participants provide administrative claims-based data 
whenever possible, in order to minimize burden on patients, providers, 
and hospitals. Additionally, we propose to request that SHFFT model 
participants submit either hospital documentation, chart abstraction, 
or abstraction from the electronic health records. We propose to 
request submission of the following data elements as finalized in the 
CJR model final rule (80 FR 73494 through 73495):
     Pre-operative Assessments (to be collected between 90 and 
0 days prior to THA/TKA procedure):
    ++ Date of Birth.
    ++ Race and Ethnicity.
    ++ Date of admission to anchor hospitalization.
    ++ Date of eligible THA/TKA procedure.
    ++ Unique Identifier (Medicare Health Insurance Claim Number).
    ++ Hip-specific PROM Instrument for THA Procedures.
    Either VR-12 or PROMIS-Global [collected pre-operatively (90 to 0 
days prior to 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 
pre-operatively (90 to 0 days prior to 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 
pre-operatively (90 to 0 days prior to the THA procedure).
    ++ Knee-specific PROM instrument for TKA procedures.
    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].
    ++ Body Mass Index (or height in cm and weight in kg).
    ++ Pre-operative use of narcotics.
    ++ Patient-Reported Pain in Non-operative Lower Extremity Joint.
    ++ Patient-Reported Back Pain (Oswestry Index question).
    ++ Patient-Reported Health Literacy
     Post-operative Assessments (To be collected between 270 
and 365 days following THA/TKA procedure):
    ++ Date of admission to anchor hospitalization.
    ++ Date of eligible THA/TKA procedure.
    ++ Medicare Health Insurance Claim Number (Unique Identifier).
    ++ Generic PROM Instrument for THA and TKA Procedures.
    ++ Knee-Specific PROM Instrument for TKA Procedures.
    Either VR-12 or PROMIS-Global [collected post-operatively (270 to 
365 days after the TKA procedure)], AND either (A) the KOOS Jr. (7 
items total) [collected 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 post-operatively (270 to 365 days after the TKA procedure)].
    ++ Hip-Specific PROM Instrument for THA Procedures.
    Either VR-12 or PROMIS-Global [collected 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 
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 
post-operatively (270 to 365 days after the THA procedure)].
    Finally, we note that as the measure continues to undergo 
development that the list of data elements may be simplified. As stated 
earlier in this section, 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).
    In accordance with, and to the extent permitted by, the HIPAA 
Privacy Rule and other applicable law, we propose to request that 
participants 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 propose 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 successful submission determination for use in 
assigning the SHFFT composite quality score as described in section 
III.E.3.e.(3). of this proposed rule (or validated subscales or 
abbreviated versions of these instruments). We believe that voluntary 
participation in the submission of THA/TKA patient-reported outcome-
based measure data will provide the minimum information we would need 
that would inform us on how to continuously improve the currently 
specified measure in development.
    We note that some of these data elements are closely aligned with 
data elements in e-clinical 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 
believe it is

[[Page 50906]]

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 SHFFT model participants to voluntarily 
submit.
(c) Cohort
    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 would exclude from the cohort patients 
with fractures and mechanical complications or those undergoing 
revision procedures. The THA/TKA patient-reported outcome-based measure 
cohort is harmonized with the Hip/Knee Complications (NQF #1550) 
measure and with the cohort definition in the CJR model final rule (80 
FR 73477). THA and TKA patient-reported outcomes will be assessed 
separately but may be combined into a single composite measure for 
reporting.
(d) Inclusion and Exclusion Criteria
    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 infeasible 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.
(e) Outcome
    The measure will assess change between pre- and post-operative 
patient-reported outcomes for THA and TKA separately or as a composite 
measure for both procedures. 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 TEP 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. 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.
(f) Risk-Adjustment (if Applicable)
    We note that the measure's risk model has yet to be developed. 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. To the extent 
feasible, the risk model methodology will adhere to established 
statistical recommendations.\101\
---------------------------------------------------------------------------

    \101\ 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/Hospital 
Quality Inits/Downloads/Statistical-Issues-in-Assessing-Hospital-
Performance.pdf . Accessed on April 15, 2015.
---------------------------------------------------------------------------

(g) Calculating the Risk-Standardized Rate
    We note that the approach to reporting this measure(s) has yet to 
be developed. 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 (270-365 days following 
the elective primary THA/TKA procedure) periods.
(h) Performance Period for Successful Submission of THA/TKA Patient-
Reported-Outcome-Based Voluntary Data
    We propose defining data reporting performance periods for each 
performance year of the SHFFT model as outlined in Table 29. 
Performance periods for voluntary reporting of THA/TKA patient-reported 
outcome-based measure data are those timeframes in which a hospital 
admission occurs for an eligible THA/TKA voluntary data submission 
procedure. Data submitted for the first SHFFT model performance year 
would be for cases that fulfill the measure specifications described in 
section III.E.4.c.(2)(i) of this proposed rule, and would be restricted 
to the pre-operative data elements on cases performed between September 
1, 2016 and June 30, 2017. We note that SHFFT model participants 
generally would have the opportunity for voluntary data submission on 
cases performed in this timeframe through the hospitals' participation 
in the CJR model, which uses the same timeframe for voluntary 
submission of pre-operative data elements on cases. 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. For SHFFT model performance 
year 2, THA/TKA voluntary data reporting would be 10 months of post-
operative data for cases performed between September 1, 2016 and June 
30, 2017, and 12 months of pre-operative data for cases performed 
between July 1, 2017 and June 30, 2018. For SHFFT model performance 
year 3 and subsequent years of the model, the performance periods for 
submission of voluntary data will consist of 12- month time periods.

[[Page 50907]]



     Table 29--Duration of Performance Periods for Pre- and Post-Operative THA/TKA Voluntary Data Submission
----------------------------------------------------------------------------------------------------------------
                                                               Patient population
                                           Duration of        eligible for THA/TKA   Requirements for successful
    SHFFT model performance year       performance period        voluntary data         THA/TKA voluntary data
                                                                   submission                submission *
----------------------------------------------------------------------------------------------------------------
2017 Performance Year 1............  10 months.............  All patients             Submit PRE-
                                                              undergoing elective     operative data on primary
                                                              primary THA/TKA         elective THA/TKA
                                                              procedures performed    procedures for >=60% or
                                                              between September 1,    >=75 procedures performed
                                                              2016 and June 30,       between September 1, 2016
                                                              2017.                   and June 30, 2017.
2018 Performance Year 2............  10 months.............  All patients             Submit POST-
                                                              undergoing elective     operative data on primary
                                                              primary THA/TKA         elective THA/TKA
                                                              procedures performed    procedures for >=60% or
                                                              between September 1,    >=75 procedures performed
                                                              2016 and June 30,       between September 1, 2016
                                                              2018.                   and June 30, 2017.
                                                                                      Submit PRE-
                                                                                      operative data on primary
                                                                                      elective THA/TKA
                                                                                      procedures for >=70% or
                                                                                      >=100 procedures performed
                                                                                      between July 1, 2017 and
                                                                                      June 30, 2018.
2019 Performance Year 3............  24 months.............  All patients             Submit POST-
                                                              undergoing elective     operative data on primary
                                                              primary THA/TKA         elective THA/TKA
                                                              procedures performed    procedures for >=70% or
                                                              between July 1, 2017    >=100 procedures performed
                                                              and June 30, 2019.      between July 1, 2017 and
                                                                                      June 30, 2018.
                                                                                      Submit PRE-
                                                                                      operative data on primary
                                                                                      elective THA/TKA
                                                                                      procedures for >=80% or
                                                                                      >=200 procedures performed
                                                                                      between July 1, 2018 and
                                                                                      June 30, 2019.
2020 Performance Year 4............  24 months.............  All patients             Submit POST-
                                                              undergoing elective     operative data on primary
                                                              primary THA/TKA         elective THA/TKA
                                                              procedures performed    procedures for >=80% or
                                                              between July 1, 2018    >=200 procedures performed
                                                              and June 30, 2020.      between July 1, 2018 and
                                                                                      June 30, 2019.
                                                                                      Submit PRE-
                                                                                      operative data on primary
                                                                                      elective THA/TKA
                                                                                      procedures for >=80% or
                                                                                      >=200 procedures performed
                                                                                      between July 1, 2019 and
                                                                                      June 30, 2020.
2021 Performance Year 5............  24 months.............  All patients             Submit POST-
                                                              undergoing elective     operative data on primary
                                                              primary THA/TKA         elective THA/TKA
                                                              procedures performed    procedures for >=80% or
                                                              between July 1, 2019    >=200 procedures performed
                                                              and June 30, 2021.      between July 1, 2019 and
                                                                                      June 30, 2020.
                                                                                      Submit PRE-
                                                                                      operative data on primary
                                                                                      elective THA/TKA
                                                                                      procedures for >=80% or
                                                                                      >=200 procedures performed
                                                                                      between July 1, 2020 and
                                                                                      June 30, 2021.
----------------------------------------------------------------------------------------------------------------

    The proposed performance periods would enable SHFFT model 
participants to receive points toward the SHFFT model composite quality 
score starting in performance year 1, 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 1 year after surgery. We emphasize that SHFFT model 
participants that are also participating in the CJR model do not need 
to submit data twice to satisfy the successful submission requirements 
of both models. If those hospitals successfully submit voluntary data 
for the CJR model they will be credited with successful submission 
under the SHFFT model.
    We seek comment on our proposed measure reporting periods for the 
performance years of the SHFFT model.
(i) Requirements for Successful Submission of THA/TKA Patient-Reported-
Outcome-Based Voluntary Data
    In order for CMS to assign points in the SHFFT model composite 
quality score for successful participant submission of THA/TKA 
voluntary data, requirements to determine if the submitted data will 
inform measure development have been identified.
    We believe that the following criteria should be used to determine 
if a participant has successfully submitted THA/TKA voluntary data. We 
note that successful THA/TKA voluntary data submission requires 
completion of all of the following:
     Submission of the data elements listed in section 
III.E.4.c.(2)(ii) of this proposed rule.
     Data elements listed in section III.E.4.c.(2)(ii) of this 
proposed rule must be submitted on at least 80 percent of their 
eligible elective primary THA/TKA patients.
     THA/TKA voluntary data submission must occur within 60 
days of the end of the most recent data collection period.
    To successfully submit THA/TKA voluntary data for performance years 
1 through 5, SHFFT model hospitals must submit both pre-operative and 
post-operative patient reported outcome data on an increasing 
proportion of eligible elective primary THA/TKA patients over the 
performance years as described in Table 29 of this proposed rule. 
Performance periods for which we propose to have THA/TKA voluntary data 
submitted are displayed in Table 29 of this proposed rule. Table 29 
also summarizes the performance periods for pre-operative and post-
operative THA/TKA voluntary data. Finally, SHFFT model 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 are not 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 previously described a THA/TKA eligible patient in section 
III.E.4.c.(2)(iii) of this proposed rule. This description is important 
as these patients are those in which we seek submission of voluntary 
data. We also selected the requirement of submitting an increasing 
percent of eligible elective primary THA/TKA patients' data starting at 
60

[[Page 50908]]

percent in performance year 1 and reaching 80 percent by performance 
years 4 and 5 because this volume of cases would result in a high 
probability that we will have a have a national sample of THA/TKA 
patient data representative of each hospital's patient case mix. Having 
at least 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 note 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. 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 set the requirement in SHFFT model performance year 4 and 
beyond at 80 percent of the eligible elective primary THA/TKA patients. 
We believe acquisition of 80 percent of the eligible elective primary 
THA/TKA patients will provide representative data for measure 
development while decreasing patient, provider and hospital burden.
    The proposal for voluntary submission of THA/TKA data is included 
in Sec.  512.413(b). We seek public comment of these requirements to 
determine successful voluntary submission of THA/TKA data. We also seek 
comment specifically on the requirement for data collection on an 
increasing percentage of eligible patients starting with at least 60 
percent in SHFFT model performance year 1 and increasing to 80 percent 
of the eligible elective primary THA/TKA patients by SHFFT model 
performance year 4.
d. Measure Used for All EPMs
(1) Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) Survey (NQF #0166)
(a) Background
    The HCAHPS Survey (NQF #0166) is a CMS survey and a national, 
standardized, publicly reported survey of patients' experience of 
hospital care. The HCAHPS Survey is endorsed by the NQF (#0166); CMS is 
the measure steward. The HCAHPS Survey, also known as CAHPS[supreg] 
Hospital Survey, is a survey instrument and data collection methodology 
for measuring patients' perceptions of their hospital experience. The 
HCAHPS Survey asks recently discharged patients 32 questions about 
aspects of their hospital experience that they are uniquely suited to 
address. The core of the survey contains 21 items that ask ``how 
often'' or whether patients experienced a critical aspect of hospital 
care. 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 
(77 FR 53513 through 53515). Eleven HCAHPS measures (seven composite 
measures, two individual items, and two global items) are currently 
publicly reported on the Hospital Compare Web site for each hospital 
participating in the HIQR Program (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 propose to adopt a 
measure in the EPMs that uses HCAHPS survey data to assess quality 
performance and capture patient experience of care.
(b) Data Sources
    The HCAHPS Survey is administered to a random sample of adult 
inpatients between 48 hours and 6 weeks after discharge. The HCAHPS 
survey data is collected on inpatient experience, is not limited to 
Medicare beneficiaries, and does not distinguish between types of 
Medicare beneficiaries. Patients admitted in the medical, surgical, and 
maternity care service lines are eligible for the survey; the survey is 
not restricted to Medicare beneficiaries. 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). 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).
    Regardless of the mode used, hospitals are required to make 
multiple attempts to contact patients. Hospitals may use the HCAHPS 
Survey alone, or include additional questions after the 21 core items 
discussed previously. Hospitals must survey patients throughout each 
month of the year, and 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 as set for publicly reported 
HCAHPS scores (see 79 FR 50259). 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.)
(c) Cohort
    Hospitals, or their survey vendors, submit HCAHPS data in calendar 
quarters (3 months). Consistent with other quality reporting programs, 
we propose that HCAHPS scores would be publicly reported on Hospital 
Compare 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).
(d) Inclusion and Exclusion Criteria
    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 1 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.

[[Page 50909]]

     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 skilled nursing 
facilities.
    The HCAHPS Survey is intended for short-term, acute care hospitals. 
Both IPPS and Critical Access Hospitals participate in the survey; 
specialty hospitals, psychiatric hospitals and children's hospitals do 
not.
(e) Case-Mix Adjustment
    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, 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:
     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.
     Age by service line interaction.
     Language other than English spoken at home.
    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). 
Information on patient-mix adjustment (risk adjustment) and survey mode 
adjustment of HCAHPS scores can be found at https://www.hcahpsonline.org/modeadjustment.aspx.
(f) HCAHPS Scoring
    Regarding the HCAHPS Survey (NQF #0166) measure, we identified the 
methodology used to assess hospitals in the HIQR Program as reasonable 
for use in the EPMs since this is a survey that many hospitals and 
patients are familiar with. In determining HCAHPS performance, we 
propose to utilize the HCAHPS Linear Mean Roll-up (HLMR) score. The 
HLMR summarizes performance across 10 of the 11 publicly reported 
HCAHPS measures for IPPS hospitals with 100 or more completed HCAHPS 
surveys in a 4-quarter period. All of the publicly reported measures 
are included except for how well hospital staff helps patients manage 
pain since revisions are under consideration for that measure. The HLMR 
is calculated by taking the average of the linear mean scores (LMS) for 
each of the 10 publicly reported HCAHPS measures. We note that the HLMR 
is not current publicly reported but may be calculated using the LMS, 
which are publicly reported in the Patient Survey Results in the 
Hospital Compare downloadable database found on Data.Medicare.gov at 
https://data.medicare.gov/data/hospital-compare?sort=relevance&tag=patient%20survey%20results. 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 propose that EPM participants must have at least 100 completed 
HCAHPS surveys over a given 4-quarter period to be evaluated on HCAHPS 
for the EPMs. The responses to the survey items used in each of the 10 
HCAHPS measures described previously are combined and converted to a 0 
to 100 linear-scaled score as follows:
     ``Never'' = 0; ``Sometimes'' = 331/3; ``Usually'' = 662/3; 
and ``Always'' = 100 (For HCAHPS Survey items 1-9, 11, 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 item 21).
     ``Definitely No'' = 0; ``Probably No'' = 331/3; ``Probably 
Yes'' = 662/3; and ``Definitely Yes'' = 100 (For item 22).
     ``Strongly Disagree'' = 0; ``Disagree'' = 331/3; ``Agree'' 
= 662/3; and ``Strongly Agree'' = 100 (For items 23, 24, and 25).
    The linear-scaled scores are then adjusted for patient mix, survey 
mode, and quarterly weighting to create the LMS, see https://www.hcahpsonline.org/files/HCAHPS_Stars_Tech_Notes_Apr2015.pdf.
    The HLMR summarizes performance across the 10 HCAHPS measures by 
taking an average of each of the LMS of the 10 HCAHPS measures, using a 
weight of 1.0 for each of the 6 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 an EPM participant, the hospital's percentile of 
performance can be determined by applying the aforementioned methods to 
the linear mean scores for all IPPS hospitals with 100 or more 
completed surveys in a 4-quarter period. As previously noted, linear 
mean scores are publicly reported, but HLMRs are not. An EPM model 
participant can estimate the national distribution of HLMRs and the 
performance percentiles by using the Patient Survey Results in the 
Hospital Compare downloadable database found on Data.Medicare.gov, 
https://data.medicare.gov/data/hospital-compare?sort=relevance&tag=patient%20survey%20results, to calculate the 
HLMRs for all IPPS hospitals with 100 or more completed surveys in a 4-
quarter period.
(g) Calculating the Rate and Performance Period
    We propose to be consistent with the HIQR Program, which uses 4 
quarters of data for HCAHPS (79 FR 50259). For the EPMs, we propose to 
use the most recently available HCAHPS 4-quarter roll-up to calculate 
the HLMR score for the initial year of the EPMs. The proposed measure 
performance period is discussed in section III.E.5. of this proposed 
rule, and summarizes measure performance periods for performance years 
1 through 5 of the EPM performance years. We note that improvement on 
the HCAHPS Survey (#0166) measure would be determined from the measure 
performance period available for the year immediately preceding the EPM 
model performance year. We seek comment on this proposal to include the 
HCAHPS Survey (NQF #0166) measure in the EPMs to assess quality 
performance and capture patient experience of care.
e. Potential Future Measures
    CMS recognizes that there remain gaps in quality measures targeting 
AMI, CABG, and hip fracture care.

[[Page 50910]]

Specifically with regard to hip fracture care, examples of potential 
measures suitable for consideration for inclusion in the SHFFT model in 
future performance years include: (1) Claims-based or hybrid risk-
standardized hospital-level mortality, complication, and/or readmission 
measures intended for assessing hospital or provider performance for 
patients with hip fracture; and (2) patient-reported outcome data-based 
measures of functional status, symptom burden, number of days at home 
and/or return to home and/or independent living suitable for patients 
with hip fractures and/or patients undergoing total hip or knee 
arthroplasty as referred to in 79 FR 50259. Additionally we would 
consider including measures of all-cause harm across the models in 
future years and appropriateness of procedures. CMS also recognizes 
that care for patients with AMI, CABG, and hip fractures extends across 
care settings and providers, and includes care provided by a multitude 
of clinicians and possible post-acute care facilities (for example, 
inpatient rehabilitation facilities, intermediate care facilities, and/
or home health services). CMS welcomes comments on measure concepts for 
future measures that potentially could be included in the AMI, CABG, 
and SHFFT models, including measures that are attributable to acute 
care and post-acute care facilities and clinicians. CMS also welcomes 
information about existing patient-centered outcomes measures that 
address quality gaps relevant to the AMI, CABG, and SHFFT models. Any 
changes to the measures included in the AMI, CABG, and SHFFT models 
would be subject to future rulemaking.
5. Form, Manner, and Timing of Quality Measure Data Submission
    We believe 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 propose that data 
submission for Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF 
#0230)(MORT-30-AMI); Excess Days in Acute Care after Hospitalization 
for an Acute Myocardial Infarction (AMI Excess Days); Hospital 30-Day, 
All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary 
Artery Bypass Graft (CABG) Surgery (NQF #2558) (MORT-30-CABG); and 
Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1550) (Hip/Knee Complications) be accomplished 
through the existing HIQR Program processes. Since these measures are 
claims-based measures, hospitals will not need to submit data.
    We propose that the same mechanisms used in the HIQR Program to 
collect HCAHPS Survey (NQF #0166) measure data also be used in the AMI, 
CABG, and SHFFT models (79 FR 50259). For the hospitals that 
voluntarily submit data for the Hybrid AMI mortality measure, we 
anticipate, if it is technically feasible, for data submission 
processes to be broadly similar to those summarized for the HIQR 
Program for electronic clinical quality measures. We propose to allow 
hospitals to submit the data elements using either QRDA-1 or to submit 
to data elements using a simpler spreadsheet in performance year 1. We 
propose to require hospitals to submit data elements using only QRDA-1 
in performance years 2 through 5. We would create a template for data 
reporting, provide a secure portal for data submission, and provide 
education and outreach on how to use these mechanisms for data 
collection and where to submit the hybrid AMI voluntary data. We 
describe processes for voluntary data collection in section 
III.E.4.c.(2)(ii) of this proposed rule. The use of QRDA for reporting 
of EHR data is aligned with requirements used by the HIQR Program for 
electronic clinical quality measures. We seek comment on the proposal 
to collect EHR data through either QRDA-1 or through a simple 
spreadsheet in performance year 1 and to collect EHR data through only 
QRDA-1 in performance years 2 through 5.
    The proposed quality measure performance periods for required and 
voluntary reporting measures by the performance year of the AMI, CABG, 
and SHFFT models are displayed in Tables 30, 31, 32, 33, and 34.

                               Table 30--Summary of Proposed Quality Measure Performance Periods by Year of the AMI Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Model performance year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
MORT[dash]30[dash]AMI *............  July 1, 2014-June 30,   July 1, 2015-June 30,   July 1, 2016-June 30,  July 1, 2017-June 30,  July 1, 2018-June 30,
                                      2017.                   2018.                   2019.                  2020.                  2021.
AMI Excess Days....................  July 1, 2014-June 30,   July 1, 2015-June 30,   July 1, 2016-June 30,  July 1, 2017-June 30,  July 1, 2018-June 30,
                                      2017.                   2018.                   2019.                  2020.                  2021.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #0230) (MORT-30-AMI).
** Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction (AMI Excess Days).


                               Table 31--Summary of Proposed Quality Measure Performance Periods by Year of the CABG Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Model year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
MORT[dash]30[dash]CABG *...........  July 1, 2014-June 30,   July 1, 2015-June 30,   July 1, 2016-June 30,  July 1, 2017-June 30,  July 1, 2018-June 30,
                                      2017.                   2018.                   2019.                  2020.                  2021.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF #2558) (MORT-30-CABG).


[[Page 50911]]


                       Table 32--Summary of Proposed Quality Measure Performance Periods by Year of the Voluntary Data Submission
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Model performance year
                                    --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
Submission of EHR data elements for  July 1, 2017-August     September 1 2017-June   July 1, 2018-June 30,  July 1, 2019-June 30,  July 1, 2020 -June
 the Hybrid AMI Mortality Measure.    31, 2017.               30, 2018.               2019.                  2020.                  30, 2021.
Submission of functional status      September 1, 2016-June  July 1, 2017-June 30,   July 1, 2018-June 30,  July 1, 2019-June 30,  July 1, 2020-June 30,
 data for elective primary THA/TKA    30, 2017.               2018.                   2019.                  2020.                  2021.
 procedures.
--------------------------------------------------------------------------------------------------------------------------------------------------------


                              Table 33--Summary of Proposed Quality Measure Performance Periods by Year of the Shfft Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Model performance year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hip/Knee Complications *...........  April 1, 2014-March     April 1, 2015-March     April 1, 2016-March    April 1, 2017- March   April 1, 2018-March
                                      31, 2017.               31, 2018.               31, 2019.              31, 2020.              31, 2021.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA)
  (NQF #1550) (Hip/Knee Complications).


                      Table 34--Summary of Proposed Quality Measure Performance Periods by Year for Required Measures for All EPMS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Model performance year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCAHPS *...........................  July 1, 2016-June 30,   July 1, 2017-June 30,   July 1, 2018-June 30,  July 1, 2019-June 30,  July 1, 2020-June 30,
                                      2017.                   2018.                   2019.                  2020.                  2021.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey (NQF #0166).

6. Display of Quality Measures and Availability of Information for the 
Public From the AMI, CABG, and SHFFT Models
    We believe that the display of measure results is an important way 
to educate the public on hospital performance and increase the 
transparency of the model. We propose to display quality measure 
results on the Hospital Compare Web site (https://www.hospitalcompare.hhs.gov). We believe that the public and hospitals 
are familiar with this Web site and how the information is displayed. 
The proposed measures have been displayed on Hospital Compare over the 
past few years. Finally, we believe that the public and hospitals' 
familiarity with the Hospital Compare Web site will make it simpler to 
access data. We seek comment on this proposal.

III. Provisions of the Proposed Regulations

F. Compliance Enforcement and Termination of an Episode Payment Model
1. Overview and Background
    We must have certain mechanisms to enforce compliance with the 
requirements of the EPMs. The following discussion details the 
enforcement mechanisms we propose to make available to CMS for the EPMs 
when an EPM participant or certain other individuals and entities fails 
to comply with the requirements of these models.
    Section 510.410 established that CMS will enforce the CJR model 
requirements against CJR participant hospitals, and will hold such 
hospital responsible for its own and its CJR collaborators' compliance 
with CJR model requirements. Given that CJR participant hospitals may 
receive reconciliation payments, and choose to distribute or share 
those payments with its CJR collaborators, CMS believed that enhanced 
scrutiny and monitoring of CJR participant hospitals was necessary and 
appropriate. We also noted in the CJR final rule that by making the CJR 
participant hospitals responsible for compliance with the model, CMS 
indirectly will be accounting for CJR collaborators' compliance, in 
addition to any direct monitoring of such CJR collaborators that HHS 
(including CMS and OIG) conducts. Further, Sec.  510.410 established 
that upon discovering an instance of CJR collaborator noncompliance 
with the CJR model, CMS, HHS, or a respective designee may take 
remedial action against the CJR participant hospital, including 
requiring such hospital to terminate a sharing arrangement with a CJR 
collaborator and to prohibit further engagement in the CJR model by 
such collaborator, and CMS may also increase a participant hospital's 
repayment. Section 510.410 as well as the Section 1115A of the Social 
Security Act authorizes CMS to reduce or eliminate a participant 
hospital's reconciliation payment as well as increase a participant 
hospital's repayment amount. We propose an enforcement structure that 
would be consistent with the CJR model, as we believe the CJR model and 
the EPMs share many of the same policy characteristics.
2. Proposed Compliance Enforcement for EPMs
    We propose that CMS would have the remedial actions detailed in 
section Sec.  512.460(b)(2) available for use against any EPM 
participant where such EPM participant or its EPM collaborator, 
collaboration agent or downstream collaboration agent is not compliant 
with applicable requirements in any of the ways listed in Sec.  
512.460(b)(1). These mechanisms will support CMS's goal for EPMs to 
maintain or improve quality of

[[Page 50912]]

care, reduce program expenditures, safeguard program integrity, protect 
against fraud and abuse and deter noncompliance of EPM requirements. 
Further, preventing EPM participants from avoiding the high cost and 
high severity patients or from targeting low cost and low severity 
patients will further CMS's goal under the CR incentive payment to 
reduce cardiovascular mortality, improve health-related quality of 
life, and reduce the risk of hospital admission. Additionally, these 
mechanisms will support CMS's goal for EPMs to provide beneficiaries 
with complete and accurate information, including notices which promote 
increasing consumer engagement and freedom of choice. Given that EPM 
participants may choose to gainshare with their EPM collaborators, and 
those EPM collaborators may have distribution arrangements with any 
collaboration agent, and those collaboration agents may have downstream 
distribution arrangements with any downstream collaboration agent, we 
believe that enhanced scrutiny and monitoring of EPM participants and 
their EPM collaborators, collaboration agents, and downstream 
collaboration agents is necessary and appropriate. Similar to the CJR 
model, we propose to hold the EPM participant responsible for its own 
and its EPM collaborators' compliance with the EPM requirements. In 
this proposed rule, we are adding EPM participant responsibility for 
the other individuals and entities with financial arrangements under 
the EPM requirements as well. This is based in part on the addition of 
ACOs and hospitals, including CAHs, as EPM collaborators. Specifically, 
we believe that because we are allowing additional entities and 
individuals to be EPM collaborators, collaboration agents, or 
downstream collaboration agents, we must ensure that such entities and 
individuals comply with all requirements of the EPMs, such as notifying 
beneficiaries of the model and maintaining access to care. Overall, we 
have concluded that EPM participants should ensure that any entity or 
individual participating in the model should only be permitted to enter 
into certain financial arrangements that comply with model requirements 
and safeguard program integrity. Upon discovering an instance of 
noncompliance by an EPM collaborator, collaboration agent, or any 
downstream collaboration agent with the requirements of the EPM, CMS, 
HHS, or a designee of such Agencies may take remedial action against 
the EPM participant, including requiring such EPM participant to 
terminate a sharing arrangement with an EPM collaborator and prohibit 
further engagement by the EPM participant in sharing arrangements with 
the EPM collaborator. Where a participant is terminated from an EPM, we 
propose that the EPM participant would remain liable for all negative 
NPRA generated from episodes of care that occurred prior to 
termination. Any information collected by CMS in relation to 
termination of a participant from the model would be shared with our 
program-integrity colleagues at HHS, the Department of Justice, and 
their respective designees. Should such participant, or one of its EPM 
collaborators, collaboration agents, or downstream collaboration 
agents, be noncompliant with the requirements of the EPMs or engage in 
unlawful behavior related to participation in the EPMs, we note that 
such information could be used in proceedings unrelated to the 
enforcement mechanisms in this section.
    These remedial actions are necessary to safeguard program integrity 
and protect against abuse or fraud. Further, we believe the proposed 
remedial actions would deter noncompliance of EPM requirements.
    In summary, we propose in Sec.  512.460 that EPM participants must 
comply with all requirements outlined in part 512. Except as 
specifically noted in this part, the regulations under this part must 
not be construed to affect the applicable payment, coverage, program 
integrity, or other requirements under this chapter (such as those in 
parts 412 and 482).
    Further, we propose in Sec.  512.460 that CMS may take the remedial 
actions later discussed in this section, if an EPM participant or its 
related EPM collaborators, collaboration agents or downstream 
collaboration agents--
     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 applicable model, including but not 
limited to--
    ++ Avoiding potentially high cost or high severity patients;
    ++ Targeting potentially low cost or low severity patients;
    ++ Failing to provide medically appropriate services or 
systematically engaging in the over or under delivery of appropriate 
care;
    ++ Failing to provide beneficiaries with complete and accurate 
information, including required notices;
    ++ Failing to allow beneficiary choice of medically-necessary 
options, including non-surgical options; or
    ++ Failing to follow the requirements related to sharing 
arrangements.
     Has signed a sharing arrangement, distribution 
arrangement, or downstream distribution arrangement that is 
noncompliant with the requirements of this part;
     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;
     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 of this part;
     Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the applicable episode payment 
model, or fails to take any action that CMS determines for program 
integrity reasons should have been taken to further the best interests 
of EPM;
     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
     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 EPM.
    We propose the remedial actions to include the following:
     Issuing a warning letter to the EPM participant.
     Requiring the EPM participant to develop a corrective 
action plan, commonly referred to as a CAP.
     Reducing or eliminating the EPM participant's 
reconciliation payment.
     Reducing or eliminating the EPM participant's CR incentive 
payment.
     Requiring the EPM participant to terminate a sharing 
arrangement with an EPM collaborator and prohibit further engagement by 
the EPM participant in sharing arrangements with the EPM collaborator.
     Terminating the EPM participant's in the EPM. Where a 
participant is terminated from an EPM, the EPM participant will remain 
liable for all negative NPRA generated from episodes of care that 
occurred prior to termination.
    Further we propose that CMS may add 25 percent to a repayment 
amount

[[Page 50913]]

on an EPM participant's reconciliation report if all of the following 
conditions are true:
     CMS has required a corrective action plan from the EPM 
participant.
     The EPM participant owes a repayment amount to CMS.
     The EPM participant fails to timely comply with the 
corrective action plan or is noncompliant with the EPM's requirements.
    The proposals for compliance enforcement are included in Sec.  
512.460. We seek comment on our proposals.
3. Proposed Termination of an Episode Payment Model
    We further propose under Sec.  512.900, CMS may terminate any 
episode payment model for reasons including but not limited to the 
following::
     CMS no longer has the funds to support the applicable 
model.
     CMS terminates the applicable 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.
G. Monitoring and Beneficiary Protection
1. Introduction and Summary
    With the AMI, CABG, and SHFFT models, we are proposing to expand 
upon the CJR model implemented in 2016, as we believe the proposed EPMs 
represent additional opportunities to improve beneficiary access, 
patient outcomes, and overall quality of care across a broader spectrum 
of clinical conditions. EPM policies are intended to support making 
care more easily-accessible to consumers when and where they need it, 
increasing consumer engagement and thereby informing consumer choices. 
Given the similarity between the CJR model and the proposed EPMs, we 
are proposing to extend some waivers to these EPMs that initially were 
offered under the CJR model and that we believe are clinically-
appropriate for the proposed episodes. These waivers would offer AMI 
model, CABG model, and SHFFT model participants additional 
flexibilities with respect to furnishing telehealth services and post-
discharge home visits and waiving the 3-day stay requirement for 
covered SNF services when clinically-appropriate and are discussed 
further in section III.J. of this proposed rule.
    We believe that the proposed EPMs will improve beneficiary access 
and outcomes, but 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. Therefore, 
we direct readers to section III.D of this proposed rule for discussion 
of the methodology for incorporating quality into the payment structure 
and the measures utilized for these models, which we believe can help 
identify and mitigate these possibilities.
2. Beneficiary Choice
    As with the CJR model, we propose that participation in the 
proposed EPMs by hospitals would be mandatory in the selected 
geographic areas covered under each EPM. An individual beneficiary 
would not be able to opt out of an EPM episode of care provided by an 
EPM participant in the applicable model. We do not believe that it is 
appropriate or consistent with other Medicare programs to allow a 
patient 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. Moreover, we do not believe that an ability to 
opt out of a payment system is a factor in upholding beneficiary choice 
or is otherwise advantageous to beneficiaries or even germane to 
beneficiary decisions, given that the proposed EPMs would not increase 
beneficiary cost-sharing. However, we also believe that full 
notification and disclosure of the EPMs and their possible implications 
is critical for beneficiary understanding and protection. Further, it 
is important to create safeguards for beneficiaries to ensure that care 
recommendations are based on clinical needs and not inappropriate cost 
savings. This is particularly important when one entity is held 
accountable for payments across multiple provider settings as will be 
done in the proposed EPMs. It also is important for beneficiaries to 
know that they can raise any concerns with their physicians, with 1-
800-Medicare, or with their local Quality Improvement Organizations.
    As with the CJR model and other episode-based payment models, the 
proposed EPMs would not limit a beneficiary's ability to choose among 
Medicare providers or the range of services that would be available to 
them. Beneficiaries would continue to choose any Medicare participating 
provider, or any provider that has opted out of Medicare, with the same 
costs, copayments and responsibilities as they have with other Medicare 
services. Although the proposed EPMs would allow EPM participants to 
enter into sharing arrangements with certain providers and may 
recommend to beneficiaries such preferred providers within the 
constraints of current law, hospitals may not restrict beneficiaries to 
a list of preferred or recommended providers that surpass any 
restrictions that already exist under current statutes and regulations. 
Moreover, an EPM participant may not charge any EPM collaborator a fee 
to be included on a list of preferred providers or suppliers, nor may 
such EPM participant accept such payments, which would be considered to 
be outside the realm of risk-sharing arrangements. Although the 
emergent nature of some of the services covered under the proposed 
EPMs' episodes may limit beneficiaries' abilities to plan where they 
will be treated for these services, such constraint should be no 
different than it would be in the absence of the EPMs. Thus, these 
proposed EPMs would not create any new restriction of beneficiary 
freedom to choose providers, including surgeons, hospitals, post-acute 
care, or any other providers or suppliers.
3. Beneficiary Notification
    We believe that beneficiary notification and engagement is 
essential because under the proposed EPMs, there would be a change in 
the way EPM participants are paid, which could affect the care 
beneficiaries receive. While we believe that existing Medicare 
provisions can be effective in protecting beneficiary freedom of choice 
and access to appropriate care, we also believe that the additional 
safeguards implemented with the CJR model would also be appropriate 
under the proposed EPMs. We believe that appropriate beneficiary 
notification should--(1) explain the model; (2) advise beneficiaries 
and their families or caregivers of the beneficiaries' clinical needs 
and care-delivery choices; and (3) clearly specify that any non-
hospital provider holding a risk-sharing arrangement with the EPM 
participant should be identified to the beneficiary as a financial 
partner of such EPM participant for the purposes of services covered 
under the proposed EPMs' episodes. Through these policies, we seek to 
enhance beneficiaries' understanding of their care, improve their 
abilities to share in the decision-making, and give them the 
opportunity to consider competing benefits even as they are presented 
with cost-saving recommendations. We believe that appropriate 
beneficiary notification should do all of the following:
     Explain the model and how it may or may not impact their 
care.

[[Page 50914]]

     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 
care-givers to their Blue Button[supreg] electronic health information.
     Advise patients that all standard Medicare beneficiary 
protections remain in place, including the ability to report concerns 
of substandard care to Quality Improvement Organizations (QIO) and 1-
800-MEDICARE.
    However, we acknowledge that because of the emergent nature of 
admissions related to services covered under the proposed EPMs, in 
particular the AMI and SHFFT models, many patients initially admitted 
for such episodes may not, at the time of admission, be capable of 
receiving appropriate notification. In addition, there may be 
situations in which it is not determined until after an admission that 
the patient would be covered under an EPM's episode of care. In such 
situations, because the decision to admit may not be made in advance, 
it would be appropriate that the notifying entity be the EPM 
participant. Nonetheless, consistent with CJR policy, we are proposing 
that EPM participants must: (1) Require all providers and suppliers 
that execute EPM sharing arrangements with such EPM participants to 
share with beneficiaries or beneficiary representatives certain 
notification materials, to be developed or approved by CMS, that detail 
the applicable EPM; and (2) where feasible, provide such information in 
advance of admissions for services covered under EPM episodes. When, 
due to the emergent nature of the admission, it is not feasible to 
provide such notification in advance of admissions, we propose that the 
EPM participant would be responsible for providing such notifications 
as soon as reasonably practicable but no later than discharge from the 
hospital accountable for the episode. Under our proposal, EPM 
participants would be required to provide such notifications as a 
condition of any EPM sharing arrangements. Where an EPM participant 
does not have such sharing arrangements with providers or suppliers 
that furnish services to beneficiaries during EPM episodes of care, or 
where admissions for covered episodes of care are ordered by physicians 
who do not have such EPM sharing arrangements, we propose that the EPM 
participant must provide such beneficiary-notification materials at the 
earliest time that is reasonably practicable but no later than 
discharge from the hospital accountable for the episode. Further, we 
propose that participants of an ACO that has entered into a sharing 
arrangement with the EPM participant provide written notice to any EPM 
beneficiary of the applicable EPM's structure and the existence of the 
ACO's sharing arrangement with the EPM participant. Under this 
proposal, the ACO must require any ACO participants with which such ACO 
has relevant distribution arrangements, to provide the written 
notification. We propose the ACO must provide such beneficiary 
notification no later than the time at which the beneficiary first 
receives services from such ACO's participant and/or an ACO PGP member 
collaboration agent during the EPM episode. We understand that various 
providers and suppliers, including hospitals, may be ACO participants; 
therefore, if, due to the emergent nature of a particular admission, it 
is not feasible to provide such notification in advance of such 
admission, the ACO participant would be responsible for providing such 
notification as soon as reasonably practicable but no later than 
discharge from the hospital accountable for the episode. The purpose of 
this proposed policy is to ensure that all beneficiaries who initiate 
EPM episodes and/or their designated representatives receive the 
beneficiary notification materials as early as possible. We believe 
that this proposal targets beneficiaries for whom information is 
relevant, and increases the likelihood that patients will become 
engaged and seek to understand the applicable EPMs and their potential 
impact on their care.
    We propose that all providers and suppliers that are required to 
provide notice to beneficiaries of the EPM model (participant and 
collaborator hospitals, PGPs, physicians, non-physician practitioners, 
post-acute care providers and suppliers, and ACOs) must be able to, 
upon request by CMS, indicate compliance with the beneficiary 
notification requirements outlined in this section and in the final 
rule. The participant hospital or collaborator should be able to 
generate a list of beneficiaries that received such notification and 
when the notification was received and provide it to CMS or its 
designee upon request. We note that the method employed to document 
beneficiary notification may vary; for example, some hospitals and 
collaborators may retain a list of all beneficiaries that received the 
notification, document in the medical record that the beneficiary 
received the beneficiary notification, add a barcode to the 
notification form to be scanned into the medical record, or employ 
another method of recordkeeping. Regardless of the method used for 
recordkeeping, the entity must be able to provide CMS or its designee 
with a list of all beneficiaries that received the notification 
materials in a specified time period. This requirement will aid CMS in 
monitoring participant hospital and collaborator compliance with the 
final rule.
    We note that Medicare beneficiaries are accustomed to receiving 
similar notices of rights and obligations from healthcare providers 
prior to the start of inpatient care, or, as appropriate, under 
emergency conditions. In following the same guidelines established for 
the CJR model, we aim to limit confusion and to provide consistent 
direction to hospitals which may be participating in both the CJR model 
and EPMs. We invite comment on ways in which the timing and source of 
beneficiary notification might be modified to best serve the needs of 
beneficiaries without creating unnecessary administrative work for 
providers.
4. Monitoring for Access to Care
    Given that an EPM participant would receive a reconciliation 
payment when such participant reduces average costs per case and meets 
quality thresholds, such EPM participant could have an incentive to 
avoid complex, high-cost cases by not admitting patients at all or by 
transferring patients to nearby facilities or specialty referral 
centers that would be outside of the model. We intend to monitor the 
EPM participants' claims data--for example, to compare each EPM 
participant's case mix relative to a pre-model historical baseline to 
determine whether complex patients are being systematically excluded. 
We propose to publish these data as part of the EPMs' evaluations to 
promote transparency and an understanding of the EPMs' effects. We also 
propose to continue to review and audit EPM participants if we have 
reason to believe that they are compromising beneficiary access to 
care. For example, we would review claims data to determine whether 
there is an unusual pattern of referral to regional hospitals located 
outside of the applicable EPM's catchment area or a clinically-
unexplained increase or decrease in CABGs or rates of other related 
surgical procedures not covered under the EPMs.
5. Monitoring for 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 higher-cost services at the expense

[[Page 50915]]

of better outcomes and higher quality. However, we believe that 
professionalism, the quality measures proposed for the applicable EPM, 
and clinical standards can be effective in preventing denials of 
medically-necessary care in both the inpatient and post-acute care 
settings during the 90 days post-discharge. Accordingly, we believe 
that the potential for the denial of medically-necessary care within 
EPMs will not be greater than that which currently exists under the 
IPPS. However, we also believe that we have the authority and 
responsibility to audit EPM participants' and their EPM collaborators' 
medical records and claims to verify that beneficiaries receive 
medically-necessary services, and we propose to perform such auditing 
activities as we deem appropriate. We also propose to monitor 
arrangements between EPM participants and their EPM collaborators to 
ensure that such arrangements do not result in the denial of medically-
necessary care or other programmatic or patient abuses. This is 
consistent with the policy that has been established for the CJR model.
    With respect to post-acute care, we believe that requiring EPM 
participants to engage patients in shared decision-making is the most 
important safeguard to prevent inappropriate recommendations for lower-
cost care, and that such a requirement can be best effected by 
requiring EPM participants to make shared decision making a condition 
of any EPM sharing arrangements with practitioners who provide these 
services. We also believe the 90-day episode is sufficiently long so as 
to create financial accountability and to encourage the provision of 
high-quality care that minimizes the risk of complications and 
readmissions that typically could occur within such time period. 
Clinical standards of care also constrain physician patterns of 
practice, 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. Therefore, we are proposing to require that, 
similar to CJR participant hospitals, EPM participants must, as part of 
discharge planning, account for potential financial bias by providing 
each patient with a complete list of all available post-acute care 
options in the applicable service area consistent with medical need, 
including beneficiary cost-sharing and quality information (where 
available and as applicable). We expect that the treating physician as 
well as all other treating practitioners continue to identify and 
discuss all medically-appropriate options with the beneficiary, and 
that the EPM participant will discuss the various facilities and 
providers available to meet the clinically-identified needs. These 
proposed requirements for EPM participants would supplement the 
discharge-planning requirements under existing conditions of 
participation (CoPs). We also specifically note that neither the CoPs 
nor this proposed transparency requirement preclude EPM participants 
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 EPMs. We invite 
comment on this proposal, including additional opportunities to ensure 
high-quality care.
6. Monitoring for Delayed Care
    We are proposing the EPMs in part to incent EPM participants to 
create efficiencies in the delivery of care within a 90-day episode 
following an acute clinical event. Theoretically, such EPMs also could 
create incentives for EPM participants or their EPM collaborators to 
delay services until after such 90-day window has closed. Consistent 
with the CJR model, we believe that existing Medicare safeguards are 
sufficient to protect beneficiaries in the EPMs.
    First, our experience with other episode-based payment models such 
as the BPCI initiative has shown that providers focus first on 
appropriate care and then on efficiencies only as obtainable in the 
setting of appropriate care. We believe that a 90-day post-discharge 
episode is sufficient to minimize the risk that EPM participants and 
their EPM collaborators would compromise services furnished in relation 
to a beneficiary's care. While we recognize that ongoing care for 
underlying conditions may be required after the 90-day episode of care, 
we believe that EPM participants would be unlikely to postpone key 
services beyond a 90-day period because the consequences of delaying 
care beyond such episode duration would be contrary to usual standards 
of care.
    However, we also note that additional monitoring would occur as a 
function of the proposed EPMs. As with the CJR model, we propose as 
part of the payment definition (see section III.D.7. of this 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 including such a payment 
adjustment would create an additional deterrent to delaying care beyond 
the episode duration. In addition, we believe the data collection and 
calculations used to determine such adjustment would provide a 
mechanism to check whether providers are inappropriately delaying care. 
Finally, we note that the proposed quality measures create additional 
safeguards as such measures are used to monitor and influence clinical 
care at the institutional level.
    In accordance with section 1115A of the Act, we are proposing to 
codify these proposals in regulation in the proposed 42 CFR part 512. 
We invite public comment on our proposed requirements for notification 
of beneficiaries and our proposed methods for monitoring participants' 
actions and compliance as well as on other methods to safeguard 
delivery of high-quality, clinically-appropriate care.
H. Access to EPM Records and Record Retention
    Consistent with the Shared Savings Program, the BPCI initiative, 
CJR model, and other Innovation Center models, we propose specific 
access to EPM records and record retention requirements for individuals 
and entities involved with the EPM. For the CJR model, the record 
access and retention requirements were originally located in Subpart F 
(Financial Arrangements and Beneficiary Incentives). However, we 
propose to include them in Subpart B (Episode Payment Model 
Participants) for the EPM and move them to Subpart B for the CJR model 
as discussed in section V.L. of this proposed rule, so that these 
requirements can be applied to categories of information that are 
broader than those solely related to financial arrangements and 
beneficiary incentives, as discussed later in this section.
    We propose that EPM participants, EPM collaborators, collaboration 
agents, downstream collaboration agents, and any other individuals or 
entities performing EPM activities must allow both scheduled and 
unscheduled access to all books, contracts, records, documents, and 
other evidence (including data related to utilization and payments, 
quality of care criteria, billings, lists of EPM collaborators, sharing 
arrangements, distribution arrangements, downstream distribution 
arrangements, and the documentation required under Sec.  512.500(d) and 
Sec.  512.525(d)) sufficient to enable the audit, evaluation, 
inspection, or investigation of six categories of information. We 
further propose that all such books, contracts, records, documents, and 
other evidence be

[[Page 50916]]

maintained for a period of 10 years from the last day of the EPM 
participant's participation in the EPM or from the date of completion 
of any audit, evaluation, inspection, or investigation, whichever is 
later, unless CMS determines a particular record or group of records 
should be retained for a longer period and notifies the EPM participant 
at least 30 calendar days before the disposition date; or there has 
been a dispute or allegation of fraud or similar fault against the EPM 
participant, EPM collaborator, collaboration agent, downstream 
collaboration agents, or any other individual or entity performing EPM 
activities in which case the records must be maintained for 6 years 
from the date of any resulting final resolution of the dispute or 
allegation of fraud or similar fault.
    In the CJR model, we applied these record access and retention 
obligations only to participant hospitals and CJR collaborators (80 FR 
73432 through 73433). However, because we propose additional types of 
EPM collaborators and types of financial arrangements in section III.I. 
of this proposed rule for the EPM, as well as define EPM activities as 
those related to promoting accountability for the quality, cost, and 
overall care for EPM beneficiaries, we propose to apply the record 
access and retention obligations to EPM participants and all 
individuals and entities with EPM financial arrangements where payments 
are substantially based on quality of care and the provision of EPM 
activities, as well as to other individuals and entities providing EPM 
activities. While this proposal is an expansion of the current record 
access and retention obligations under the CJR model to additional 
categories of individuals and entities, we believe the expansion is 
necessary and appropriate for the six categories of information to 
which we propose that the access and retention requirements would 
apply. Access to this information from those individuals and entities 
providing EPM activities that are the basis of care redesign in the EPM 
provides an important program safeguard by allowing monitoring for 
compliance with EPM requirements. The alternative of limiting the 
requirements solely to EPM participants and EPM collaborators as we 
finalized for the CJR model would result in no record access and 
retention obligation for certain individuals and entities that have 
financial arrangements under the EPM and engage in EPM activities, 
thereby limiting the Government's ability to audit, evaluate, inspect, 
or investigate compliance with EPM requirements. We similarly propose 
changes to the individuals and entities subject to record access and 
retention obligations under the CJR model as discussed in section V.L. 
of this proposed rule.
    We have identified six categories of information related to key EPM 
parameters for which we propose that the record access and retention 
requirements would apply. Like the CJR model, we propose that one 
category of information consists of those documents related to the 
individual's or entity's compliance with EPM requirements. Given the 
individuals and entities who must comply with the requirements of the 
EPM either directly or through their arrangements, including EPM 
participants, EPM collaborators, collaboration agents, and downstream 
collaboration agents, an important program safeguard is record access 
and retention that allow compliance with the EPM requirements to be 
monitored and assessed.
    Additionally, similar to the CJR model, we propose that a second 
category of information consists of documents related to the 
calculation, distribution, receipt, or recoupment of gainsharing 
payments, alignment payments, distribution payments, and downstream 
distribution payments. This list includes all types of payments 
proposed under EPM financial arrangements as discussed in section 
III.I. of this proposed rule and is different from the current CJR 
model requirement to the extent that we propose additional types of EPM 
financial arrangements in view of our proposal that ACOs can be EPM 
collaborators. Because of the proposed EPM requirements for these types 
of payments that are designed to ensure that all financial arrangements 
are for the sole purpose of aligning the financial incentives of 
individuals and entities with the goals of the EPM participant to 
improve the quality and efficiency of EPM episode care, we believe that 
these records of all the individuals and entities who enter such 
arrangements should be accessible and retained to allow compliance with 
the EPM requirements for the payments to be monitored and assessed. We 
propose similar changes to this category of information under the CJR 
model as discussed in section V.L. of this proposed rule.
    The third category of information for which we propose to require 
record access and retention is related to an EPM participant's 
obligation to repay to CMS any reconciliation payment or CR incentive 
payments owed. The CR incentive payment has been added to this 
provision which otherwise applied to the CJR model because we propose a 
CR incentive payment in section VI. of this proposed rule for AMI and 
CABG model participants in selected MSAs, while the CJR model does not 
include this payment. Requiring record access and retention about 
repayment obligations under the EPM provides an important program 
integrity safeguard for repayments to CMS.
    We propose to require record access and retention on the quality of 
the services furnished to an EPM beneficiary during an EPM episode as 
the fourth category of information. While the CJR model specified the 
quality of services furnished without further limitation in the record 
access and retention requirements, given our EPM proposals that require 
gainsharing, distribution, and downstream distribution payments to be 
substantially based on quality of care and EPM activities, we believe 
that it is appropriate to specify that the record access and retention 
requirements apply specifically to the services furnished to an EPM 
beneficiary during an EPM episode. The quality of services furnished 
without further limitation could result in an overly broad record 
access and retention requirement for services that are delivered 
outside of EPM episodes, where these services are not subject to EPM 
requirements. Services furnished to EPM beneficiaries during EPM 
episodes are the services for which we will also be monitoring for 
access to care, delayed care, and quality of care, important activities 
to safeguard the program and Medicare beneficiaries, so access to 
documents to support this monitoring is necessary. We propose similar 
changes to this category of information under the CJR model as 
discussed in section V.L. of this proposed rule.
    Given the beneficiary notification requirements that we propose for 
the EPM in section III.G. of this proposed rule, we propose to require 
access to records and record retention about the sufficiency of EPM 
beneficiary notifications. The beneficiary notification requirement is 
an important beneficiary protection under the EPM, and the access to 
records and record retention requirements provide a program integrity 
safeguard to monitor for compliance with this requirement. We propose 
to add this same category of information for the CJR model as discussed 
in section V.L. of this proposed rule.
    Finally, we propose to establish CEHRT use attestation for EPM 
participants so that an EPM participant

[[Page 50917]]

could be in a Track 1 EPM that meets the proposed requirements in the 
Quality Payment Program proposed rule to be an Advanced APM as 
discussed in section III.A.2 of this proposed rule. Thus, we propose to 
require access to records and record retention about the accuracy of 
each Track 1 EPM participant's submissions under CEHRT use 
requirements. Specifically, attestation to CEHRT use and submission of 
clinician financial arrangements lists are key requirements for Track 1 
EPMs that are Advanced APMs, and the access to records and record 
retention requirements provide a program integrity safeguard by 
allowing us to assess the completeness and accuracy of the EPM 
participant's compliance with the requirements for those submissions. 
We propose to add this same category of information for the CJR model 
as discussed in section V.L. of this proposed rule.
    We believe the proposed requirements regarding access to EPM 
records and record retention are necessary to safeguard program 
integrity and protect against abuse, in view of the EPM design and 
requirements as discussed throughout this proposed rule that would lead 
to achieving the EPM goals of improved EPM episode quality and 
efficiency. We also believe that by providing access to EPM records, we 
promote transparency of activities under the EPM. Furthermore, we 
believe the proposed access to records and record retention 
requirements would promote the compliance of EPM participants, EPM 
collaborators, collaboration agents, downstream collaboration agents, 
and any other individuals or entities providing EPM activities with EPM 
requirements by ensuring that compliance with these requirements can be 
monitored and assessed. Finally, these records may be necessary in the 
event that an EPM participant appeals any matter that is subject to 
dispute resolution through CMS. As such, CMS would have the resources 
necessary to prepare and respond to any such appeal.
    The proposals for access to records and record retention are 
included in Sec.  512.110. We seek comment on our proposals, including 
whether it is necessary, reasonable and appropriate to impose these 
access and retention obligations on all of the proposed categories of 
individuals and entities for all the proposed categories of information 
to be retained and made accessible. In addition, we seek comment on 
whether additional or different safeguards would be needed to ensure 
program integrity, protect against abuse, and ensure that the goals of 
the EPM are met.
I. Financial Arrangements Under the EPM
1. Background
    In November, 2015 we finalized regulations for financial 
arrangements for the CJR model (80 FR 73550 through 73553), an episode 
payment model that is similar to the three new proposed EPMs. In this 
rulemaking, we propose three new episode payments models that fall 
under the overarching term EPM, specifically the AMI model, CABG model, 
and SHFFT model. Both the CJR model and the three proposed EPMs place 
financial responsibility for the episode on the hospital where the 
episode begins with a hospitalization and require participation of 
hospitals in the selected MSAs for the models. Like LEJR episodes under 
the CJR model, the AMI, CABG, and SHFFT episodes in the proposed EPMs 
would be broadly defined to include most Part A and Part B services and 
extend 90 days following discharge from the hospitalization that 
initiates the EPM episode. During the design of the EPMs, we considered 
proposing the same CJR financial arrangements that were finalized 
through notice and comment rulemaking because the EPMs have a similar 
design to the CJR model with the same goals of improving the quality 
and efficiency of model episodes. We expect that the types of financial 
arrangements needed to align the financial incentives of CJR 
participants and EPM participants with other providers and suppliers 
caring for CJR beneficiaries or EPM beneficiaries during episodes to 
improve episode quality and efficiency would be similar. We also 
believe that program integrity safeguards that would provide 
protections against abuse under the financial relationships permitted 
for the EPMs should be comparable to those for the CJR model. However, 
we believe that it is possible to improve on the current regulatory 
structure for financial relationships that we established for the CJR 
model in our proposals for the EPMs. Our EPM proposals reflect changes 
from the current CJR model regulations that generally fall into the 
following four categories:
     Removing duplication of requirements in similar 
provisions.
     Streamlining and reorganizing the provisions for clarity 
and consistency.
     Providing additional flexibility in response to feedback 
from CJR participant hospitals and other stakeholders.
     Expanding the scope of financial arrangements under the 
EPM.
    We note that in section V.J. of this proposed rule, we propose 
changes to the CJR model financial arrangements regulations in Part 510 
to parallel those we propose for the EPMs. These proposals would result 
in the same provisions and requirements for CJR model and EPM financial 
arrangements when the first performance year of the EPMs begins on July 
1, 2017.
2. Overview of EPM Financial Arrangements
    For purposes of this section, the term ``EPM'' refers to one model 
specifically among the AMI model, CABG model, or SHFFT model and should 
be read throughout Subpart F--Financial Arrangements and Beneficiary 
Incentives (Sec. Sec.  512.500 through 512.525) of the proposed 
regulations as a single one of these three proposed EPMs. For example, 
when reading the proposed regulations for the CABG model, Sec.  
512.500(b)(6), the provision would read as, ``The board or other 
governing body of the [CABG model] participant must have responsibility 
for overseeing the [CABG model] participant's participation in the 
[CABG model], its arrangements with [CABG model] collaborators, its 
payment of gainsharing payments, its receipt of alignment payments, and 
its use of beneficiary incentives in the [CABG model].'' We use this 
approach because we mean for the proposed requirements to apply to 
every participant in the EPM regardless of whether the EPM is the AMI, 
CABG, or SHFFT model.
    As discussed in section III.D.2.b. of this proposed rule, we 
propose that each EPM would be a retrospective episode payment model, 
under which Medicare payments for items and services included in an EPM 
episode would continue to be made to all providers and suppliers under 
the existing FFS payment systems, and episode payment would be based on 
later reconciliation of actual spending for an EPM episode under the 
FFS payment systems to the EPM episode's quality-adjusted target price. 
If the actual episode spending is less than the quality-adjusted target 
price, the EPM participant financially responsible for the EPM episode 
would receive a reconciliation payment, assuming the EPM composite 
quality score for the EPM participant is in the ``acceptable,'' 
``good,'' or ``excellent'' quality category. If an EPM episode's actual 
spending exceeds the quality-adjusted target price, then, beginning in 
performance year 2, the EPM participant would begin to repay the 
difference to Medicare up to the stop-loss threshold.
    Similar to the CJR model (80 FR 73412), we believe that EPM 
participants may wish to enter into financial arrangements with 
providers and suppliers caring for EPM

[[Page 50918]]

beneficiaries to share financial risks and rewards under the EPM, in 
order to align the financial incentives of those providers and 
suppliers with the EPM goals of improving the quality and efficiency of 
EPM episodes. We further believe that EPM participants may wish to 
enter into financial arrangements with ACOs that participate in EPM 
care redesign and EPM beneficiary care management and whose ACO 
participants and ACO providers/suppliers care for EPM beneficiaries. We 
expect that EPM participants would identify key providers and suppliers 
caring for EPM beneficiaries, as well as ACOs to which EPM 
beneficiaries are aligned, in their communities and referral regions. 
The EPM participants then could establish close partnerships with these 
individuals and entities to promote accountability for the quality, 
cost, and overall care for EPM beneficiaries, including managing and 
coordinating care; encouraging investment in infrastructure, enabling 
technologies, and redesigned care processes for high quality and 
efficient service delivery; the provision of items and services during 
an EPM episode in a manner that reduces costs and improves quality; and 
carrying out other obligations or duties under the EPM. These 
providers, suppliers, and ACOs may invest substantial time and other 
resources in these activities, yet they would neither be the direct 
recipients of any reconciliation payments from Medicare, nor directly 
responsible for repaying Medicare for excess episode spending. 
Therefore, we believe it is possible that an EPM participant that may 
receive a reconciliation payment from Medicare or may need to repay 
Medicare may want to enter into financial arrangements with other 
providers, suppliers, or ACOs to share risks and rewards under the EPM. 
We expect that all financial relationships established between EPM 
participants and providers, suppliers, or ACOs for purposes of the EPM 
would be those permitted only under applicable law and regulations, 
including the applicable fraud and abuse laws and all applicable 
payment and coverage requirements.
    In addition to providers, suppliers, and ACOs with which the EPM 
participant may want to enter into financial arrangements to share 
risks and rewards under the proposed EPMs, we expect that EPM 
participants 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; beneficiary care 
coordination and management; monitoring EPM participants' compliance 
with the EPM's terms and conditions; or other EPM-related activities. 
Such organizations may play important roles in an EPM participant's 
plans to implement an EPM based on the experience these organizations 
may bring, such as prior experience with bundled payment initiatives, 
care coordination expertise, familiarity with a particular local 
community, or knowledge of Medicare claims data. We expect that all 
relationships established between EPM participants and these 
organizations for purposes of the EPM would be those permitted only 
under existing law and regulation, including any relationships that 
would include the EPM participant's sharing of EPM risks and rewards 
with such organizations. We also expect that all of these relationships 
solely would be based on the level of engagement of the organization's 
resources to directly support the participants' EPM implementation.
    Finally, because the proposed broadly defined EPM episodes would 
extend 90 days post-discharge from their respective anchor or chained 
anchor hospitalizations, similar to the CJR model (80 FR 73433), we 
believe that EPM participants caring for EPM beneficiaries may want to 
offer beneficiary engagement incentives to encourage adherence to 
recommended treatment and active patient engagement in recovery. Such 
incentives should be closely related to the provision of high quality 
EPM care and advance a clinical goal for an EPM beneficiary, and should 
not serve as inducements for beneficiaries to seek care from the EPM 
participants or other specific suppliers and providers. The incentives 
may help an EPM participant reach their quality and efficiency goals 
for EPM episodes, while also benefitting beneficiaries' health and the 
Medicare Trust Fund if the EPM participant improves the quality and 
efficiency of episodes through care redesign that results in EPM 
beneficiary reductions in hospital readmissions, complications, days in 
acute care, and mortality, while recovery continues uninterrupted or 
accelerates.
3. EPM Collaborators
    Given the financial incentives of episode payment under the EPM, an 
EPM participant may want to engage in financial arrangements with 
individuals and entities making contributions to the EPM participant's 
episode performance on spending or quality. Such arrangements would 
allow the EPM participant to share all or some of the reconciliation 
payments they may be eligible to receive from CMS, or the EPM 
participant's internal cost savings that result from care for 
beneficiaries during EPM episodes. Likewise, such arrangements could 
allow the EPM participant to share the responsibility for the funds 
needed to repay Medicare with individuals and entities engaged in 
providing care to EPM beneficiaries, if those individuals and entities 
have a role in the EPM participant's episode spending or quality 
performance. We propose to use the term ``EPM collaborator'' to refer 
to these individuals and entities.
    Since each proposed EPM's episode duration is 90 days following 
discharge from the anchor or chained anchor hospitalization and such 
episodes are broadly defined as discussed in section III.C.3.b. of this 
proposed rule, many providers and suppliers other than the EPM 
participant will furnish related services to beneficiaries during EPM 
episodes. Those providers and suppliers may include SNFs, HHAs, LTCHs, 
IRFs, physicians, nonphysician practitioners, providers or suppliers of 
outpatient therapy services, PGPs, hospitals, and critical access 
hospitals (CAHs). In addition, ACOs may be actively involved in 
coordinating the care of beneficiaries during EPM episodes. The 
proposed definition of EPM collaborator includes each of these 
categories of individuals and entities as eligible to be an EPM 
collaborator. The proposed list of types of EPM collaborators is the 
same list as CJR collaborators, but with the addition of hospitals, 
CAHs, and ACOs.
    We expect that hospitals and CAHs that are not EPM participants may 
frequently play roles in care delivered to EPM beneficiaries during a 
chained anchor hospitalization as discussed in section III.C.4.a.(5) of 
this proposed rule or following discharge from an anchor or chained 
anchor hospitalization that initiates an EPM episode. For example, an 
AMI model participant without cardiac surgery or interventional 
cardiology capacity may need to transfer certain AMI model 
beneficiaries after initial admission to transfer hospitals or transfer 
CAHs for revascularization through PCI or through CABG. A transfer 
hospital may, itself, be participating in the AMI and CABG models (a 
CAH cannot be an AMI or CABG model participant), but the AMI model 
episode would be the responsibility of the AMI model participant that 
first admitted the beneficiary. In addition, hospital or CAH 
readmission during the proposed

[[Page 50919]]

EPM episodes would be common for beneficiaries post-anchor or post-
chained anchor hospitalization discharge for AMI, CABG, and SHFFT model 
beneficiaries, and, because care for these clinical conditions may 
sometimes be provided at transfer hospitals that initiate EPM episodes 
as EPM participants, we expect that readmissions during such episodes 
may sometimes be to other hospitals or CAHs that are not EPM 
participants near beneficiaries' home communities. Thus, we believe it 
is important to allow EPM participants to enter into financial 
arrangements with other hospitals and CAHs that care for EPM 
beneficiaries, in order to align the financial incentives of such other 
hospitals and CAHs with the EPM goals of improving the quality and 
efficiency of EPM episodes.
    Many accountable care organizations and other stakeholders have 
expressed strong interest in being collaborators in episode payment 
models generally, including sharing potential financial risks and 
rewards with model participants. Multiple commenters on the CJR 
proposed rule stated that robust accountable care organizations have 
proven track records of providing Medicare providers and suppliers with 
care redesign and care management assistance for Medicare 
beneficiaries, as well as managing the overall care of accountable care 
organization-aligned beneficiaries to improve the quality and 
efficiency of care (80 FR 73417). They reasoned that accountable care 
organizations might be able to provide CJR participant hospitals with 
care coordination assistance at reduced cost due to economies of scale 
and existing accountable care organization resources, as well as 
potentially assume a percentage of downside risk, in order to mitigate 
that risk to CJR participant hospitals. In the CJR Final Rule (80 FR 
73417), we did not adopt accountable care organizations as CJR 
collaborators, responding that we decided to limit the testing of 
gainsharing relationships to solely those between hospitals and 
providers and suppliers enrolled in Medicare because we expected 
enrolled providers and suppliers to be most directly and specifically 
engaged with the CJR participant hospitals in care redesign and episode 
care for CJR beneficiaries who had surgeries at those hospitals. We 
also noted that a number of scenarios discussed by commenters to 
support their request to allow accountable care organizations to be CJR 
collaborators could be achieved outside of the context of gainsharing 
relationships between the CJR participant hospitals and those 
organizations.
    With the steady growth in the number of accountable care 
organizations and accountable care organization-aligned beneficiaries, 
we have further considered the potential for accountable care 
organizations to be EPM collaborators. Our current proposed EPMs 
include beneficiaries with cardiovascular disease as well as 
beneficiaries with hip fracture who commonly are older with multiple 
comorbidities, and accountable care organizations have expertise in 
care coordination and accountability for the quality and expenditures 
for health care for accountable care organization-aligned beneficiaries 
over an annual period.
    While we propose to exclude certain accountable care organization-
aligned beneficiaries from EPM episodes, we note that the challenges of 
attributing savings and changes in the quality of care for 
beneficiaries simultaneously in EPMs and total cost-of-care models or 
programs, such as accountable care organizations, remain under 
consideration without full resolution, as discussed further in section 
III.D.6. of this proposed rule. Local relationships between providers, 
suppliers, and accountable care organizations vary in the care of 
beneficiaries, and it would be difficult for CMS at this time to 
provide standard program or model rules that would fairly distribute 
savings among different models and programs for overlapping periods of 
beneficiary care, when variable local arrangements determine which 
entity provides the resources for coordinating and managing a 
particular beneficiary's care over time. Finally, we note that 
accountable care organizations are groups of physicians, hospitals, and 
other health care providers and suppliers that come together to furnish 
coordinated, high quality care to their aligned Medicare beneficiaries 
to ensure that these beneficiaries, especially the chronically ill, get 
the right care at the right time, while avoiding unnecessary 
duplication of services and preventing medical errors. Accountable care 
organizations' goals of delivering high quality care and spending 
health care dollars more wisely are the same as those of hospitals that 
would participate in the EPMs. Therefore, we believe it is especially 
important to further encourage collaborative partnerships between 
accountable care organizations and EPM participants that maximize their 
organizational efficiency and effectiveness, given their shared goals.
    In considering the accountable care organizations that could be EPM 
collaborators engaged in collaborative relationships with EPM 
participants, we limited our consideration to accountable care 
organizations under Medicare because the EPM is an episode payment 
model for Medicare FFS beneficiaries. We note that in section III.D.6. 
of this proposed rule, we propose to exclude from the proposed EPM 
episodes beneficiaries who are aligned to the Next Generation ACO model 
or tracks of the Comprehensive ESRD Care Model incorporating downside 
risk for financial losses. Downside risk for financial losses and 
prospective alignment of beneficiaries are important criteria in 
selection of these models and tracks of models for this proposed 
exclusion. We also seek comment in that section on extending this 
exclusion proposal to Track 3 of the Shared Savings Program. Because we 
propose to allow financial arrangements under the EPM only with those 
entities that are involved in the delivery of care to EPM beneficiaries 
with goals of improving the quality and efficiency of EPM episodes, we 
do not believe it would be appropriate to permit Next Generation ACOs 
to be EPM collaborators because their aligned beneficiaries would be 
excluded from the EPM. Similarly, because we propose that beneficiaries 
eligible for Medicare on the basis of ESRD be excluded from the EPM as 
discussed in section III.C.4.a. of this proposed rule, we do not 
believe that participants in the Comprehensive ESRD Care initiative 
which predominantly include beneficiaries eligible for Medicare on the 
basis of ESRD should be permitted to be EPM collaborators. Finally, we 
note that the Pioneer ACO model ends in CY 2016, so that model will not 
overlap with the EPM which is proposed to begin on July 1, 2017.
    Thus, we propose that ``ACOs,'' meaning those ACOs as defined at 
Sec.  425.20 of regulations that are participating in the Shared 
Savings Program, be permitted to be EPM collaborators. This proposal 
would allow locally variable financial arrangements that could account 
for the way care in EPM episodes is coordinated and managed in 
communities, and ensure that entities with appropriate skills and 
experience are permitted to share the proposed EPM's risks and rewards 
with EPM participants. Medicare has a close relationship with such 
ACOs, which are regulated by CMS, so we can verify that these ACOs meet 
current Shared Savings Program requirements that could make them 
suitable for a role as EPM collaborators. Finally, in this way,

[[Page 50920]]

ACO participants and ACO providers/suppliers may be engaged in EPM care 
redesign directly through their ACO, instead of bypassing the ACO to 
become involved directly in the EPM through the EPM participant. We are 
limiting our proposal of entities that are not providers or suppliers 
but that are permitted to be EPM collaborators to ACOs alone. We 
propose to allow financial arrangements under the EPM only with those 
entities that are involved in the delivery of care to EPM 
beneficiaries.
    We propose in Sec.  512.2 that ACOs and the following types of 
providers and suppliers may be EPM collaborators:
     SNF.
     HHA.
     LTCH.
     IRF.
     Physician.
     Nonphysician practitioner.
     Provider or supplier of outpatient therapy services.
     PGP.
     Hospital.
     CAH.
     ACO.
    We seek comment on the proposed definition of EPM collaborators. In 
addition to general comment, we are specifically interested in comment 
on the proposal to include hospitals, CAHs, and ACOs in the definition 
of EPM collaborators. Furthermore, we seek comment specifically on the 
accountable care organizations that we propose to include in the 
definition of ACO and which accountable care organizations should be 
included and excluded from the definition of ACO that may be EPM 
collaborators to best advance the goals of the EPM and program 
generally. Finally, we also seek comment on the regulatory and 
practical implications of establishing that ACOs may be EPM 
collaborators under the EPM, including without limitation how the 
requirements under the EPM would relate to how financial arrangements 
within ACOs are currently regulated under the Medicare Shared Savings 
Program.
4. Sharing Arrangements Under the EPM
a. General
    Similar to the CJR model (80 FR 73430), we propose that certain 
financial arrangements between an EPM participant and an EPM 
collaborator be termed ``sharing arrangements.'' A sharing arrangement 
would be a financial arrangement to share only--(1) EPM reconciliation 
payments; (2) the EPM participant's internal cost savings; and (3) the 
EPM participant's repayment amount. Where a payment from an EPM 
participant to an EPM collaborator is made pursuant to a sharing 
arrangement, we define that payment as a ``gainsharing payment.'' A 
gainsharing payment may be composed only of--(1) EPM reconciliation 
payments; (2) the EPM participant's internal cost savings; or (3) both. 
A ``reconciliation payment'' is defined as a payment made by CMS to an 
EPM participant as determined in accordance with Sec.  512.305(d) and 
as discussed in section III.D.5. of this proposed rule. ``Internal cost 
savings'' are the measurable, actual, and verifiable cost savings 
realized by the EPM participant resulting from care redesign undertaken 
by such participant in connection with providing items and services to 
beneficiaries within specific EPM episodes. Internal cost savings does 
not include savings realized by any individual or entity that is not 
the EPM participant. Where a payment from an EPM collaborator to an EPM 
participant is made pursuant to an EPM sharing arrangement, we define 
that payment as an ``alignment payment.'' An alignment payment may 
consist only of a portion of the ``repayment amount,'' which is the 
amount owed by an EPM participant to CMS, as reflected on a 
reconciliation report. An EPM participant must not make a gainsharing 
payment or receive an alignment payment except in accordance with a 
sharing arrangement. We propose that a sharing arrangement must comply 
with the provisions of Sec.  512.500 and all other applicable laws and 
regulations, including the applicable fraud and abuse laws and all 
applicable payment and coverage requirements.
    We propose that the EPM participant must develop, maintain, and use 
a set of written policies for selecting individuals and entities to be 
EPM collaborators, and that the selection criteria must include the 
quality of care delivered by the potential EPM collaborator. The 
selection criteria cannot be based directly or indirectly on the volume 
or value of past or anticipated referrals or business otherwise 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent. With the exception of adding ``past or anticipated'' to the 
selection criteria for EPM collaborators, these proposed criteria are 
similar to the existing requirements of the CJR model (80 FR 73430). By 
adding this language, all previous and future referrals between or 
among the EPM participant, any EPM collaborator, any collaboration 
agent, any downstream collaboration agent, or any individual or entity 
affiliated with an EPM participant, EPM collaborator, collaboration 
agent, or downstream collaboration agent are encompassed. We do not 
believe it would be appropriate for sharing arrangements to be based on 
criteria that include the volume or value of past or anticipated 
referrals because the sole purpose of sharing arrangements is to create 
financial alignment between EPM participants and EPM collaborators 
toward the EPM goals of improving the quality and efficiency of episode 
care. Thus, we proposed to require EPM participants to select EPM 
collaborators based on criteria that include the quality of care 
furnished by the potential EPM collaborator to ensure that the 
selection of EPM collaborators takes into consideration the likelihood 
of their future performance in improving the quality of episode care. 
In addition, requiring that selection criteria include quality of care 
furnished by the potential EPM collaborator provides a safeguard 
against abuse.
    Finally, we propose that if an EPM participant enters into a 
sharing arrangement, its compliance program must include oversight of 
sharing arrangements and compliance with the applicable requirements of 
the EPM. Requiring oversight of sharing arrangements to be include in 
the compliance program provides a program integrity safeguard.
    The proposals for the general provisions for sharing arrangements 
under the EPM are included in Sec.  512.500(a). We seek comment about 
all of the provisions 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 EPM are met.
b. Requirements
    We propose a number of specific requirements for sharing 
arrangements to help ensure that their sole purpose is to create 
financial alignment between EPM participants and EPM collaborators 
toward the goals of the EPM through program integrity safeguards. We 
propose that the sharing arrangement must be in writing, signed by the 
parties, and entered into before care is furnished to EPM beneficiaries 
under the sharing arrangement. In addition, participation in a sharing 
arrangement must be voluntary and without penalty for nonparticipation. 
It is important that providers, suppliers, and ACOs with

[[Page 50921]]

ACO participants and ACO providers/suppliers rendering items and 
services to EPM beneficiaries during EPM episodes have the freedom to 
provide medically necessary items and services to EPM beneficiaries 
without any requirement that they participate in a sharing arrangement, 
in order to safeguard beneficiary freedom of choice, access to care, 
and quality of care. Similarly, we believe that if a provider, 
supplier, or ACO enters into a sharing arrangement with an EPM 
participant, that sharing arrangement must precede the provision of 
care to the EPM beneficiary under the sharing arrangement. We expect 
the sharing arrangement to set out the mutually agreeable terms for the 
financial arrangement between the parties to guide and reward EPM care 
redesign for future EPM episodes, rather than reflect the quality and 
financial results of EPM episodes that have already occurred and where 
the financial outcome of the sharing arrangement terms would be known 
before signing.
    We propose that the sharing arrangement must require the EPM 
collaborator and its employees, contractors, and subcontractors to 
comply with certain requirements that are important for program 
integrity under the arrangement. We note that the terms contractors and 
subcontractors, respectively, include collaboration agents and 
downstream collaboration agents as defined later in this section. The 
sharing arrangement must require all of the individuals and entities in 
this group to comply with the applicable provisions of Part 512, 
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, because these individuals and entities all would play a 
role in EPM care redesign and be part of financial arrangements under 
the EPM. The sharing arrangement must also require all individuals and 
entities in the group to comply with the applicable Medicare provider 
enrollment requirement at Sec.  424.500, including having a valid and 
active TIN or NPI, during the term of the sharing arrangement. This is 
to ensure that the individuals and entities have the required 
enrollment relationship with CMS under the Medicare program, although 
we note that they are not responsible for complying with requirements 
that do not apply to them. Finally, the sharing arrangement must 
require individuals and entities to comply with all other applicable 
laws and regulations.
    We propose that the sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care 
so that financial relationships between EPM participants and EPM 
collaborators do not negatively impact beneficiary protections under 
the EPM. The sharing arrangement must require the EPM collaborator to 
have a compliance program that includes oversight of the sharing 
arrangement and compliance with the requirements of the EPM, just as we 
require EPM participants to have a compliance program for this purpose 
as a program integrity safeguard. We understand that some stakeholders 
may have interpreted the substantially similar requirement in the CJR 
model as obligating CJR collaborators to adopt specific compliance 
programs components (for example, an externally staffed hotline to 
receive complaints) and the perceived cost of adopting those components 
may be a disincentive for certain individuals and entities to be CJR 
collaborators in the CJR model. However, we note that the CJR 
compliance program requirement does not mandate that a CJR 
collaborator's compliance program take a particular form or include 
particular components. OIG has repeatedly and consistently emphasized 
that there is no ''one size fits all'' compliance program (for example, 
refer to OIG compliance program guidance for Individual and Small Group 
Physician Practices, 65 FR 59434, 59434-52 (October 5, 2000)). Like 
OIG, we understand the variances and complexities within the industry 
and appreciate differences in the size and resources of different 
providers and suppliers, particularly the financial constraints on 
individual physicians and nonphysician practitioners and small PGPs. 
Accordingly, we do not believe that the compliance program requirement 
for CJR collaborators as properly understood should be a disincentive 
for individuals or small PGPs to become CJR collaborators. Thus, we 
propose to adopt a substantially similar requirement for the EPM. We 
seek comment on the anticipated effect of the proposed compliance 
program requirement for EPM collaborators, particularly with regard to 
individual physicians and nonphysician practitioners and small PGPs, 
and whether alternative compliance program requirements for all or a 
subset of EPM collaborators should be adopted to mitigate any effect of 
the proposal that could make participation as an EPM collaborator 
infeasible for any provider, supplier, or other entity on the proposed 
list of types of EPM collaborators.
    It is necessary that EPM participants have adequate oversight over 
sharing arrangements to ensure that all arrangements meet the 
requirements of this section and provide program integrity protections. 
Therefore, we propose that the board or other governing body of the EPM 
participant have responsibility for overseeing the EPM participant's 
participation in the EPM, its arrangements with EPM collaborators, its 
payment of gainsharing payments, its receipt of alignment payments, and 
its use of beneficiary incentives in the EPM.
    For purposes of financial arrangements under the EPM, we propose to 
define activities related to promoting accountability for the quality, 
cost, and overall care for EPM beneficiaries, including managing and 
coordinating care; encouraging investment in infrastructure and 
redesigned care processes for high quality and efficient service 
delivery; the provision of items and services during an EPM episode in 
a manner that reduces costs and improves quality; or carrying out any 
other obligation or duty under the EPM as ``EPM activities.'' In 
addition to the quality of care provided during episodes, we believe 
the activities that would fall under this proposed definition encompass 
the totality of activities upon which it would be appropriate for 
certain financial arrangements under the EPM to be based in order to 
value the contributions of providers, suppliers, and other entities 
toward meeting the EPM goals of improving the quality and efficiency of 
episodes. We seek comment on the proposed definition of EPM activities 
as an inclusive and comprehensive framework for capturing direct care 
and care redesign for EPM episodes that contribute to improving the 
quality and efficiency of these episodes. We propose to use the term 
EPM activities in identifying certain obligations of parties in a 
sharing arrangement that are described as ``changes in care 
coordination or delivery'' in the CJR regulations governing the 
contents of the written agreement memorializing the sharing 
arrangement. We note that as discussed in section V.J. of this proposed 
rule, we propose to define and use the term CJR activities in the CJR 
regulations just as we propose to define and use the term EPM 
activities in the EPM regulations.
    We propose that the written agreement memorializing a sharing 
arrangement must specify a number of parameters of the arrangement, 
including the following:

[[Page 50922]]

     The purpose and scope of the sharing arrangement.
     The identities and obligations of the parties, including 
specified EPM activities and other services to be performed by the 
parties under the sharing arrangement.
     The date of the sharing arrangement.
     Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out EPM activities.
     The financial or economic terms for payment, including the 
following:
    ++ Eligibility criteria for a gainsharing payment.
    ++ Eligibility criteria for an alignment payment.
    ++ Frequency of gainsharing or alignment payment.
    ++ Methodology and accounting formula for determining the amount of 
a gainsharing payment that is substantially based on quality of care 
and the provision of EPM activities.
    ++ Methodology and accounting formula for determining the amount of 
an alignment payment.
    Finally, we propose to require that the terms of the sharing 
arrangement must not induce the EPM participant, EPM collaborator, or 
any employees, contractors, or subcontractors of the EPM participant or 
EPM collaborator to reduce or limit medically necessary services to any 
Medicare beneficiary or restrict the ability of an EPM collaborator to 
make decisions in the best interests of its patients, including the 
selection of devices, supplies, and treatments. These requirements are 
to ensure that the quality of care for EPM beneficiaries is not 
negatively affected by sharing arrangements under the EPM.
    The proposals for the requirements for sharing arrangements under 
the EPM are included in Sec.  512.500(b). We seek comment 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 EPM 
are met.
c. Gainsharing Payment, Alignment Payment, and Internal Cost Savings 
Conditions and Restrictions
    We propose a number of conditions and limitations for gainsharing 
payments, alignment payments, and internal cost savings as program 
integrity protections for the payments to and from EPM collaborators. 
We propose to require that gainsharing payments be derived solely from 
reconciliation payments, internal costs savings, or both; that they be 
distributed on an annual basis, not more than once per calendar year; 
that they not be a loan, advance payment, or payment for referrals or 
other business; and that they be clearly identified as a gainsharing 
payment at the time they are paid.
    We believe that gainsharing payment eligibility for EPM 
collaborators should be conditioned on two requirements--(1) meeting 
quality of care criteria; and (2) rendering items and services to EPM 
beneficiaries during EPM episodes--as safeguards to ensure that 
eligibility for gainsharing payments is solely based on aligning 
financial incentives for EPM collaborators with the EPM goals of 
improving EPM episode quality and efficiency. The second requirement, 
which is discussed later in this section, would also apply to 
eligibility of an EPM collaborator to make an alignment payment. With 
respect to the first requirement, we propose that to be eligible to 
receive a gainsharing payment, an EPM collaborator must meet quality of 
care criteria for the performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment. The quality of care criteria 
that are established by the EPM participant must be directly related to 
EPM episodes. With regard to the second requirement, to be eligible to 
receive a gainsharing payment, or to be required to make an alignment 
payment, an EPM collaborator other than a PGP or an ACO must have 
directly furnished a billable item or service to an EPM beneficiary 
during an EPM episode that occurred in the same performance year for 
which the EPM participant accrued the internal cost savings or earned 
the reconciliation payment that comprises the gainsharing payment or 
was assessed a repayment amount. For purposes of this requirement, we 
consider a hospital, CAH or post-acute care provider to have ``directly 
furnished'' a billable service if one of these entities billed for an 
item or service for an EPM beneficiary during an EPM episode that 
occurred in the same performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount. The phrase ``performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount'' does not mean the year in which the gainsharing payment was 
made. These requirements ensure that there is a required relationship 
between eligibility for a gainsharing payment and the quality of direct 
care for EPM beneficiaries during EPM episodes for these EPM 
collaborators. We believe the provision of direct care is essential to 
the implementation of effective care redesign, and the requirement 
provides a safeguard against payments to EPM collaborators other than a 
PGP or an ACO that are unrelated to direct care for EPM beneficiaries 
during EPM episodes.
    We propose to establish similar requirements for PGPs and ACOs that 
vary because these entities do not themselves directly furnish billable 
services. To be eligible to receive a gainsharing payment or required 
to make an alignment payment, a PGP must have billed for an item or 
service that was rendered by one or more members of the PGP to an EPM 
beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment or was assessed a repayment amount. To be eligible 
to receive a gainsharing payment or required to make an alignment 
payment, an ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to an EPM beneficiary during an EPM episode that 
occurred during the same performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount. With respect to ACOs, an ``ACO participant'' and ``ACO 
provider/supplier'' have the meaning set forth in Sec.  425.20 of 
regulations. Like the proposal for EPM collaborators that are not PGPs 
or ACOs, these proposals also require a linkage between the EPM 
collaborator that is the PGP or ACO and the provision of items and 
services to EPM beneficiaries during EPM episodes by PGP members or ACO 
participants or ACO providers/suppliers, respectively.
    Moreover, we further propose that because PGPs and ACOs do not 
directly furnish items and services to beneficiaries, in order to be 
eligible to receive a gainsharing payment or be required to make an 
alignment payment, the PGP or ACO must have contributed to EPM 
activities and been clinically involved in the care of EPM 
beneficiaries during the same performance year for which the EPM 
participant accrued the internal cost savings or earned the 
reconciliation

[[Page 50923]]

payment that comprises the gainsharing payment or was assessed a 
repayment amount. For example, a PGP or ACO might have been clinically 
involved in the care of EPM beneficiaries by providing care 
coordination services to EPM beneficiaries during and/or after 
inpatient admission; engaging with an EPM participant in care redesign 
strategies, and actually performing a role in implementing such 
strategies that are designed to improve the quality of care for EPM 
episodes and reduce EPM episode spending; or in coordination with 
providers and suppliers (such as members of the PGP, ACO participants, 
ACO providers/suppliers, the EPM participant, and post-acute care 
providers), implementing strategies designed to address and manage the 
comorbidities of EPM beneficiaries.
    Because internal cost savings may be shared through gainsharing 
payments with EPM collaborators, we propose certain requirements for 
their calculation as a safeguard against fraud and abuse. First, the 
methodology for accruing, calculating and verifying internal cost 
savings must be transparent, measurable, and verifiable in accordance 
with generally accepted accounting principles (GAAP) and Government 
Auditing Standards (The Yellow Book). Second, because we believe it is 
necessary that the internal cost savings reflect care redesign under 
the EPM in order to be eligible to be shared through gainsharing 
payments, the methodology used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the EPM 
participant through the documented implementation of EPM activities 
identified by the EPM participant and must exclude any savings realized 
by any individual or entity that is not the EPM participant and 
``paper'' savings from accounting conventions or past investment in 
fixed costs. We note that unlike the current CJR model policy where we 
require that sharing arrangements document the 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 collaborator (80 
FR 73431), we do not propose to require in the EPM that the calculation 
of internal cost savings be tied to the activities of any specific EPM 
collaborator. Rather, we believe it is appropriate for EPM participants 
to calculate internal cost savings based on the implementation of EPM 
activities and then provide gainsharing payments to EPM collaborators 
that may include internal cost savings, reconciliation payments, or 
both based on a methodology that meets the requirements described later 
in this section. We propose this same change to the internal cost 
savings calculation requirements for the CJR model in section V.J. of 
this proposed rule.
    We propose to limit the total amount of gainsharing payments for a 
performance year to EPM collaborators that are physicians, nonphysician 
practitioners, or PGPs. For EPM collaborators that are physicians or 
nonphysician practitioners, that limit is 50 percent of the Medicare-
approved amounts under the PFS for items and services furnished by that 
physician or nonphysician practitioner to the EPM participant's EPM 
beneficiaries during EPM episodes that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being made. For EPM collaborators that are PGPs, 
that limit is 50 percent of the Medicare-approved amounts under the PFS 
for items and services billed by the PGP and furnished to the EPM 
participant's EPM beneficiaries by members of the PGP during EPM 
episodes that occurred during the same performance year for which the 
EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment being 
made. These limits are consistent with those in the CJR model (80 FR 
73430).
    We propose that the amount of any gainsharing payments must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision of EPM activities. The methodology 
may take into account the amount of such EPM activities provided by an 
EPM collaborator relative to other EPM collaborators. While we 
emphasize that financial arrangements may not be conditioned directly 
or indirectly on the volume or value of past or anticipated referrals 
or business otherwise generated by, between or among the EPM 
participant, any EPM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with an EPM participant, EPM collaborator, collaboration agent, or 
downstream collaboration agent so that their sole purpose is to align 
the financial incentives of the EPM participant and EPM collaborators 
toward the EPM goals of improved EPM episode care quality and 
efficiency, we believe that accounting for the relative amount of EPM 
activities by EPM collaborators in the determination of gainsharing 
payments does not undermine this objective. Rather, the proposed 
requirement allows flexibility in the determination of gainsharing 
payments where the amount of an EPM collaborator's provision of EPM 
activities (including direct care) to EPM beneficiaries during EPM 
episodes may contribute to both the internal cost savings and EPM 
participant's reconciliation payment that may be available for making a 
gainsharing payment. Greater contributions of EPM activities by one EPM 
collaborator versus another EPM collaborator that result in greater 
differences in the funds available for gainsharing payments may be 
appropriately valued in the methodology used to make gainsharing 
payments to those EPM collaborators in order to reflect these 
differences in EPM activities among EPM collaborators. For example, a 
physician who is an EPM collaborator who treats 100 EPM beneficiaries 
during EPM episodes that result in high quality, less costly care could 
receive a larger gainsharing payment than a physician who is an EPM 
collaborator who treats 10 EPM beneficiaries during episodes that 
similarly result in high quality, less costly care.
    However, we do not believe it would be appropriate to allow the 
selection of EPM collaborators or the opportunity to make or receive a 
gainsharing payment or an alignment payment to take into the account 
the amount of EPM activities provided by a potential or actual EPM 
collaborator relative to other potential or actual EPM collaborators 
because these financial relationships are not to be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the EPM participant, 
any EPM collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with an EPM 
participant, EPM collaborator, collaboration agent, or downstream 
collaboration agent. Specifically, with respect to the selection of EPM 
collaborators or the opportunity to make or receive a gainsharing 
payment or an alignment payment, we do not believe that the amount of 
EPM activities provided by a potential or actual EPM collaborator 
relative to other potential or actual EPM collaborators could be taken 
into consideration by the EPM participant without a significant risk 
that the financial arrangement in those instances could be based 
directly or indirectly on the volume or value of past or anticipated 
referrals or business

[[Page 50924]]

generated by, between or among the parties. Similarly, if the 
methodology for determining alignment payments was allowed to take into 
the account the amount of EPM activities provided by an EPM 
collaborator relative to other EPM collaborators there would be a 
significant risk that the financial arrangement could directly account 
for the volume or value of past or anticipated referrals or business 
generated by, between or among the parties and, therefore, we propose 
that the methodology for determining alignment payments may not 
directly take into account the volume or value of past or anticipated 
referrals or business generated by, between or among the parties.
    We propose a change to this same standard for gainsharing payments 
under the CJR model as discussed in section V.J. of this proposed rule. 
We seek comment on this proposal for gainsharing payments, where the 
methodology could take into account the amount of EPM activities 
provided by an EPM collaborator relative to other EPM collaborators. We 
are particularly interested in comments about whether this standard 
would provide sufficient additional flexibility in the gainsharing 
payment methodology to allow the financial reward of EPM collaborators 
commensurate with their level of effort that achieves improvements in 
EPM episode quality and efficiency. In addition we are interested in 
comment on whether additional safeguards or a different standard is 
needed to allow for greater flexibility to provide certain performance-
based payments consistent with the goals of program integrity, 
protecting against abuse and ensuring the goals of the EPM are met.
    We propose that for a performance year, the aggregate amount of all 
gainsharing payments that are derived from a reconciliation payment 
must not exceed the amount of the reconciliation payment the EPM 
participant receives from CMS. In accordance with the prior discussion, 
no entity or individual, whether a party to a sharing arrangement 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 past or anticipated referrals or business otherwise generated 
by, between or among the EPM participant, any EPM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with an EPM participant, EPM 
collaborator, collaboration agent, or downstream collaboration agent. 
We propose that an EPM participant must not make a gainsharing payment 
to an EPM 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 EPM episodes or other integrity problems. Finally, 
the sharing arrangement must require the EPM participant to recoup any 
gainsharing payment that contained funds derived from a CMS overpayment 
on a reconciliation report or was based on the submission of false or 
fraudulent data. These requirements provide program integrity 
safeguards for gainsharing under sharing arrangements.
    With respect to alignment payments, we propose that alignment 
payments from an EPM collaborator to an EPM participant may be made at 
any interval that is agreed upon by both parties. They must not be 
issued, distributed, or paid prior to the calculation by CMS of a 
repayment amount reflected in a reconciliation report; loans, advance 
payments, or payments for referrals or other business; or assessed by 
an EPM participant if it does not owe a repayment amount. The EPM 
participant must not receive any amounts under a sharing arrangement 
from an EPM collaborator that are not alignment payments.
    We also propose certain limitations on alignment payments that are 
consistent with the CJR model (80 FR 73430). For a performance year, 
the aggregate amount of all alignment payments received by the EPM 
participant must not exceed 50 percent of the EPM participant's 
repayment amount. Given that the EPM participant would be responsible 
for developing and coordinating care redesign strategies in response to 
its EPM participation, we believe it is important that the participant 
retain a significant portion of its responsibility for repayment to 
CMS. For example, upon receipt of a reconciliation report indicating 
that the EPM participant owes $100 to CMS, the EPM participant would be 
permitted to receive no more than $50 in alignment payments, in the 
aggregate, from its EPM collaborators. In addition, the aggregate 
amount of all alignment payments from an EPM collaborator to the EPM 
participant may not be greater than 25 percent of the EPM participant's 
repayment amount for an EPM collaborator that is not an ACO and 50 
percent of the EPM participant's repayment amount for an EPM 
collaborator that is an ACO. We propose to allow a higher percentage of 
the EPM participant's repayment amount to be paid by an ACO than by EPM 
collaborators that are not ACOs in recognition that some ACOs are 
sizable organizations with significant financial and other resources. 
In addition, their expertise in managing the cost and quality of care 
for Medicare beneficiaries over a period of time may make some ACOs 
uniquely capable of sharing a higher percentage of downside risk under 
the EPM with the EPM participant under a sharing arrangement between 
the ACO and EPM participant that meets all requirements for such 
arrangements, including that participation in the sharing arrangement 
must be voluntary and without penalty for nonparticipation as discussed 
previously. We seek comment on our proposed aggregate and individual 
EPM collaborator limitations on alignment payments, and particularly on 
the proposed limitation that would apply to ACOs that are EPM 
collaborators.
    The following examples illustrate the effects of the proposed 
limitations on alignment payments. In one scenario, upon receipt of a 
reconciliation report indicating that the EPM participant owes $100 to 
CMS, the EPM participant would be permitted to receive no more than $25 
in an alignment payment from a single entity or individual that is one 
of the EPM participant's EPM collaborators that is not an ACO. In the 
second scenario where an ACO is an EPM collaborator, upon receipt of 
that same reconciliation report, the EPM participant would be permitted 
to receive no more than $50 in an alignment payment from the ACO. 
Finally, in accordance with the prior discussion, the methodology for 
determining alignment payments must not directly account for the volume 
or value of past or anticipated referrals or business otherwise 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent.
    We propose that all gainsharing payments and any alignment payments 
must be administered by the EPM participant in accordance with GAAP and 
Government Auditing Standards (The Yellow Book). Additionally, we 
propose that all gainsharing payments and alignment payments must be 
made by check, electronic funds transfer, or another traceable cash 
transaction. While the CJR model required gainsharing payments and 
alignment payments to be made by electronic funds transfer (EFT) (80 FR 
73431), we propose a different requirement for the EPM to provide 
additional flexibility for entities making gainsharing payments and 
alignment payments. We make this

[[Page 50925]]

proposal to mitigate the administrative burden that the EFT requirement 
would place on the financial arrangements between certain EPM 
participants and EPM collaborators, especially individual physicians 
and nonphysician practitioners and small PGPs, which could discourage 
participation of those suppliers as EPM collaborators. We propose a 
change to this same standard under the CJR model as discussed in 
section V.J. of this proposed rule. We seek comment on the effect of 
this proposal on reducing the administrative barriers to individual 
physician and nonphysician practitioner and small PGP participation in 
the EPM as EPM collaborators.
    The proposals for the conditions and restrictions on gainsharing 
payments, alignment payments, and internal cost savings under the EPM 
are included in Sec.  512.500(c). We seek comment about all of the 
conditions and restrictions set out in the preceding discussion, 
including the feasibility of implementing the proposed safeguards in 
the context of the current regulatory framework applicable to ACOs and 
whether additional or different safeguards would be needed to ensure 
program integrity, protect against abuse, and ensure that the goals of 
the EPM are met.
d. Documentation Requirements
    To ensure the integrity of the sharing arrangements, we propose 
that EPM participants must meet a variety of documentation requirements 
for these arrangements. Specifically, the EPM participant must--
     Document the sharing arrangement contemporaneously with 
the establishment of the arrangement;
     Maintain accurate current and historical lists of all EPM 
collaborators, including EPM collaborator names and addresses; update 
such lists on at least a quarterly basis; and publicly report the 
current and historical lists of EPM collaborators on a Web page on the 
EPM participant's Web site; and
     Maintain and require each EPM collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
the--
    ++ Nature of the payment (gainsharing payment or alignment 
payment);
    ++ Identity of the parties making and receiving the payment;
    ++ Date of the payment;
    ++ Amount of the payment;
    ++ Date and amount of any recoupment of all or a portion of an EPM 
collaborator's gainsharing payment; and
    ++ Explanation for each recoupment, such as whether the EPM 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment on a reconciliation report, or was based 
on the submission of false or fraudulent data.
    In addition, we propose that the EPM participant must keep records 
for all of the following:
     Its process for determining and verifying its potential 
and current EPM collaborators' eligibility to participate in Medicare.
     Its 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; and
     Its plan to track gainsharing payments and alignment 
payments.
    Finally, we propose that the EPM participant must retain and 
provide access to, and must require each EPM collaborator to retain and 
provide access to, the required documentation in accordance with Sec.  
512.110.
    The proposals for the requirements for documentation of sharing 
arrangements under the EPM are included in Sec.  512.500(c). We seek 
comment 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 EPM are met.
5. Distribution Arrangements Under the EPM
a. General
    Similar to the CJR model, we propose that certain financial 
arrangements between EPM collaborators and other individuals or 
entities called ``collaboration agents'' be termed ``distribution 
arrangements.'' A distribution arrangement is a financial arrangement 
between an EPM collaborator that is an ACO or PGP and a collaboration 
agent for the sole purpose of sharing a gainsharing payment received by 
the ACO or PGP. A collaboration agent is an individual or entity that 
is not an EPM collaborator and that is either a PGP member that has 
entered into a distribution arrangement with the same PGP in which he 
or she is an owner or employee or an ACO participant or ACO provider/
supplier that has entered into a distribution arrangement with the same 
ACO in which it is participating. Where a payment from an EPM 
collaborator to a collaboration agent is made pursuant to an EPM 
distribution arrangement, we define that payment as a ``distribution 
payment.'' A collaboration agent may only make a distribution payment 
in accordance with a distribution arrangement which complies with the 
provisions of Sec.  512.505 and all other applicable laws and 
regulations, including the fraud and abuse laws.
    The proposals for the general provisions for distribution 
arrangements under the EPM are included in Sec.  512.505(a). We seek 
comment about all of the provisions 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 EPM are met.
b. Requirements
    We propose a number of specific requirements for distribution 
arrangements as a program integrity safeguard to help ensure that their 
sole purpose is to create financial alignment between EPM collaborators 
and collaboration agents toward the goals of the EPM to improve the 
quality and efficiency of EPM episodes. These requirements largely 
parallel those proposed in Sec.  512.500(b) and (c) for sharing 
arrangements and gainsharing payments based on similar reasoning for 
these two types of arrangements and payments. We propose that all 
distribution arrangements must be in writing and signed by the parties, 
contain the date of the agreement, and be entered into before care is 
furnished to EPM beneficiaries under the distribution arrangement. 
Furthermore, we propose that participation must be voluntary and 
without penalty for nonparticipation, and the distribution arrangement 
must require the collaboration agent to comply with all applicable laws 
and regulations.
    Like our proposal for gainsharing payments, we propose that the 
opportunity to make or receive a distribution payment must not be 
conditioned directly or indirectly on the volume or value of past or 
anticipated referrals or business otherwise generated by, between or 
among the EPM participant, any EPM collaborator, any collaboration 
agent, any downstream collaboration agent, or any individual or entity 
affiliated with an EPM participant, EPM collaborator, collaboration 
agent, or downstream collaboration agent. We propose more flexible 
standards for the determination

[[Page 50926]]

of the amount of distribution payments from ACOs and PGPs for the same 
reasons we propose this standard for the determination of gainsharing 
payments. Specifically, for ACOs we propose that the amount of any 
distribution payments must be determined in accordance with a 
methodology that is substantially based on quality of care and the 
provision of EPM activities and that may take into account the amount 
of such EPM activities provided by a collaboration agent relative to 
other collaboration agents. We believe that the amount of a 
collaboration agent's provision of EPM activities (including direct 
care) to EPM beneficiaries during EPM episodes may contribute to the 
EPM participant's internal cost savings and reconciliation payment that 
may be available for making a gainsharing payment to the EPM 
collaborator with which the collaboration agent has a distribution 
arrangement. Greater contributions of EPM activities by one 
collaboration agent versus another collaboration agent that result in 
different contributions to the gainsharing payment made to the EPM 
collaborator with which those collaboration agents both have a 
distribution arrangement may be appropriately valued in the methodology 
used to make distribution payments to those collaboration agents. 
Accordingly, we believe this is the appropriate standard for 
determining the amount of distribution payments from an ACO to its 
collaboration agents.
    We note that for distribution payments made by a PGP to PGP 
members, the requirement that the amount of any distribution payments 
must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision of EPM 
activities may be more limiting in how a PGP pays its members than is 
allowed under existing law. Therefore, to retain existing flexibility 
for distribution payments by a PGP to PGP members, we propose that the 
amount of the distribution payment from a PGP to PGP members must be 
determined either using the methodology previously described for 
distribution payments from an ACO or in a manner that complies with 
Sec.  411.352(g). We note that the proposed option to allow the amount 
of the distribution payment from a PGP to a PGP member to be determined 
in a manner that complies with Sec.  411.352(g) is not currently 
permitted under the CJR model, although we propose this change for the 
CJR model in section V.J. of this proposed rule. This proposal would 
allow a PGP the choice either to comply with the general standard that 
the amount of a distribution payment must be substantially based on 
quality of care and the provision of EPM activities or to provide its 
members a financial benefit through the EPM without consideration of 
the PGP member's individual quality of care. In the latter case, PGP 
members who are not collaboration agents (including those who furnished 
no services to EPM beneficiaries) would be able receive a share of the 
profits from their PGP that includes the monies contained in a 
gainsharing payment. We believe this is an appropriate exception to the 
general standard for determining the amount of distribution payment 
under the EPM from a PGP to a PGP member because CMS has determined 
under the physician self-referral law that payments from a group 
practice as defined under Sec.  411.352 to its members that comply with 
Sec.  411.352(g) are appropriate.
    We seek comment on this proposal and specifically whether there are 
additional safeguards or a different standard is needed to allow for 
greater flexibility in calculating the amount of distribution payments 
that would avoid program integrity risks and whether additional or 
different safeguards are reasonable, necessary, or appropriate for the 
amount of distribution payments from a PGP to its members.
    Similar to our proposed requirements for sharing arrangements for 
those EPM collaborators that furnish or bill for items and services, 
except for a distribution payment from a PGP to a PGP member that 
complies with Sec.  411.352(g), we propose that a collaboration agent 
is eligible to receive a distribution payment only if the collaboration 
agent furnished or billed for an item or service rendered to an EPM 
beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being distributed. We note that all individuals and 
entities that fall within our proposed definition of collaboration 
agent may either directly furnish or bill for items and services 
rendered to EPM beneficiaries. This proposal ensures that, absent the 
alternative safeguards afforded by a PGP's distribution payments in 
compliance with Sec.  411.352(g), there is the same required 
relationship between direct care for EPM beneficiaries during EPM 
episodes and distribution payment eligibility that we require for 
gainsharing payment eligibility. We believe this requirement provides a 
safeguard against payments to collaboration agents that are unrelated 
to direct care for EPM beneficiaries during EPM episodes when the 
amount of the distribution payment is not determined in a manner that 
complies with Sec.  411.352(g).
    Except for a distribution payment from a PGP to a PGP member that 
complies with Sec.  411.352(g), we propose the same limitations on the 
total amount of distribution payments to physicians, nonphysician 
practitioners, and PGPs as we propose for gainsharing payments. In the 
case of a collaboration agent that is physician or nonphysician 
practitioner, we propose to limit the total amount of distribution 
payments paid for a performance year to the collaboration agent to 50 
percent of the total Medicare-approved amounts under the PFS for items 
and services furnished by the collaboration agent to the EPM 
participant's EPM beneficiaries during EPM episodes that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed. In the case of a 
collaboration agent that is a PGP, we propose that the limit would be 
50 percent of the total Medicare-approved amounts under the PFS for 
items and services billed by the PGP for items and services furnished 
by members of the PGP to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment being 
distributed. We believe that, absent the alternative safeguards 
afforded by a PGP's distribution payments in compliance with Sec.  
411.352(g), these proposed limitations on distribution payments, which 
are the same as those for gainsharing payments to physicians, 
nonphysician practitioners, and PGPs, are necessary to eliminate any 
financial incentives for these individuals or entities to engage in a 
financial arrangement as an EPM collaborator versus as a collaboration 
agent. Furthermore, we believe that PGPs should be able to choose 
whether to engage in financial arrangements directly with EPM 
participants as EPM collaborators or in distribution arrangements with 
the ACO in which they are an ACO participant if that ACO plays a role 
in EPM care redesign as an EPM collaborator, without having a different 
limit on their maximum financial gain from one arrangement versus 
another.

[[Page 50927]]

    We further propose that with respect to the distribution of any 
gainsharing payment received by a PGP or ACO, the total amount of all 
distribution payments must not exceed the amount of the gainsharing 
payment received by the EPM collaborator from the EPM participant. Like 
gainsharing and alignment payments, we propose that all distribution 
payments must be made by check, electronic funds transfer, or another 
traceable cash transaction. The collaboration agent must retain the 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments. Finally, 
the distribution arrangement must not induce the collaboration agent to 
reduce or limit medically necessary items and services to any Medicare 
beneficiary or reward the provision of items and services that are 
medically unnecessary.
    We propose that the EPM collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  512.110, including:
     The relevant written agreements;
     The date and amount of any distribution payment(s);
     The identity of each collaboration agent that received a 
distribution payment; and
     A description of the methodology and accounting formula 
for determining the amount of any distribution payment.
    We propose that the EPM collaborator may not enter into a 
distribution arrangement with any individual or entity that has a 
sharing arrangement with the same EPM participant. This proposal 
ensures that the proposed separate limitations on the total amount of 
gainsharing payment and distribution payment to PGPs, physicians, and 
nonphysician practitioners that are substantially based on quality of 
care and the provision of EPM activities are not exceeded in absolute 
dollars by a PGP, physician, or nonphysician practitioner's 
participation in both a sharing arrangement and distribution 
arrangement for the care of the same EPM beneficiaries during EPM 
episodes. Allowing both types of arrangements for the same individual 
or entity for care of the same EPM beneficiaries during EPM episodes 
could also allow for duplicate counting of the individual or entity's 
same quality of care and provision of EPM activities in the 
methodologies for both gainsharing and distribution payments, leading 
to financial gain that is disproportionate to the quality of care and 
provision of EPM activities by that individual or entity. Finally, we 
propose that the EPM collaborator must retain and provide access to, 
and must require collaboration agents to retain and provide access to, 
the required documentation in accordance with Sec.  512.110.
    The proposals for requirements for distribution arrangements under 
the EPM are included in Sec.  512.505(b). We seek comment 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 EPM 
are met. In addition, we seek comment on how the regulation of the 
financial arrangements under this proposal may interact with how these 
or similar financial arrangements are regulated under the Medicare 
Shared Savings Program.
6. Downstream Distribution Arrangements Under the EPM
a. General
    We propose that the EPM allow for certain financial arrangements 
within an ACO between a PGP and its members. Specifically, we propose 
that certain financial arrangements between a collaboration agent that 
is both a PGP and an ACO participant and other individuals termed 
``downstream collaboration agents'' be termed a ``downstream 
distribution arrangement.'' A downstream distribution arrangement is a 
financial arrangement between a collaboration agent that is both a PGP 
and an ACO participant and a downstream collaboration agent for the 
sole purpose of sharing a distribution payment received by the PGP. A 
downstream collaboration agent is an individual who is not an EPM 
collaborator or a collaboration agent and who is a PGP member that has 
entered into a downstream distribution arrangement with the same PGP in 
which he or she is an owner or employee, and where the PGP is a 
collaboration agent. Where a payment from a collaboration agent to a 
downstream collaboration agent is made pursuant to a downstream 
distribution arrangement, we define that payment as a ``downstream 
distribution payment.'' A collaboration agent may only make a 
downstream distribution payment in accordance with a downstream 
distribution arrangement which complies with the requirements of this 
section and all other applicable laws and regulations, including the 
fraud and abuse laws.
    The proposals for the general provisions for downstream 
distribution arrangements under the EPM are included in Sec.  
512.510(a). We seek comment about all of the provisions 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 EPM are met.
b. Requirements
    We propose a number of specific requirements for downstream 
distribution arrangements as a program integrity safeguard to help 
ensure that their sole purpose is to create financial alignment between 
collaboration agents that are PGPs which are also ACO participants and 
downstream collaboration agents toward the goals of the EPM to improve 
the quality and efficiency of EPM episodes. These requirements largely 
parallel those proposed in Sec.  512.500(b) and (c) and Sec.  
512.505(b) for sharing and distribution arrangements and gainsharing 
and distribution payments based on similar reasoning for these three 
types of arrangements and payments. We propose that all downstream 
distribution arrangements must be in writing and signed by the parties, 
contain the date of the agreement, and entered into before care is 
furnished to EPM beneficiaries under the downstream distribution 
arrangement. Furthermore, we propose that participation must be 
voluntary and without penalty for nonparticipation, and the downstream 
distribution arrangement must require the downstream collaboration 
agent to comply with all applicable laws and regulations.
    Like our proposals for gainsharing and distribution payments, we 
propose that the opportunity to make or receive a downstream 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent. We propose the more flexible standard for the determination of 
the amount of downstream distribution payments for the same reasons we 
propose this standard for the determination of distribution payments by 
a PGP to PGP members. Specifically, the amount of any downstream 
distribution payments must be determined either in a manner that 
complies with Sec.  411.352(g) or in accordance with a methodology that 
is substantially based on quality of care and the provision of EPM 
activities and

[[Page 50928]]

that may take into account the amount of such EPM activities provided 
by a downstream collaboration agent relative to other downstream 
collaboration agents. We believe that the amount of a downstream 
collaboration agent's provision of EPM activities (including direct 
care) to EPM beneficiaries during EPM episodes may contribute to the 
EPM participant's internal cost savings and reconciliation payment that 
may be available for making a gainsharing payment to the EPM 
collaborator that is then shared through a distribution payment to the 
collaboration agent with which the downstream collaboration agent has a 
downstream distribution arrangement. Greater contributions of EPM 
activities by one downstream collaboration agent versus another 
downstream collaboration agent that result in different contributions 
to the distribution payment made to the collaboration agent with which 
the downstream collaboration agents both have a downstream distribution 
arrangement may be appropriately valued in the methodology used to make 
downstream distribution payments to those downstream collaboration 
agents. Just as we propose an alternative to a methodology that is 
substantially based on quality of care and the provision of EPM 
activities for determining the amount of a distribution payment from a 
PGP to a PGP member, we similarly propose an alternative that the 
amount of a downstream distribution payment from a PGP to a PGP member 
may be determined in a manner that complies with Sec.  411.352(g)
    Similar to our proposed requirements for distribution arrangements 
for those EPM collaborators that are PGPs, we propose that, except for 
a downstream distribution arrangement that complies with Sec.  
411.352(g), a downstream collaboration agent is eligible to receive a 
downstream distribution payment only if the PGP billed for an item or 
service furnished by the downstream collaboration agent to an EPM 
beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprise the 
gainsharing payment from which the ACO made the distribution payment to 
the PGP that is an ACO participant. This proposal ensures that, absent 
the alternative safeguards afforded by a PGP's downstream distribution 
payments in compliance with Sec.  411.352(g), there is the same 
required relationship between direct care for EPM beneficiaries during 
EPM episodes and downstream distribution payment eligibility that we 
require for gainsharing and distribution payment eligibility. We 
believe this requirement provides a safeguard against payments to 
downstream collaboration agents that are unrelated to direct care for 
EPM beneficiaries during EPM episodes when the amount of the downstream 
distribution payment is not determined in a manner that complies with 
Sec.  411.352(g).
    We propose the same limitations on downstream distribution payments 
to downstream collaboration agents as we propose for distribution 
payments by EPM collaborators that are PGPs. We propose that, absent 
the alternative safeguards afforded by compliance with Sec.  
411.352(g), the total amount of downstream distribution payments paid 
for a performance year to the downstream collaboration agent would be 
limited to 50 percent of the total Medicare-approved amounts under the 
PFS for services billed by the PGP and furnished by the downstream 
collaboration agent to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment from 
which the ACO made the distribution payment to the PGP. We believe 
that, absent the alternative safeguards afforded by a PGP's downstream 
distribution payments in compliance with Sec.  411.352(g), this 
proposed limitation on downstream distribution payments that is the 
same as those for distribution payments to physicians and nonphysician 
practitioners is necessary to eliminate any financial incentives for a 
PGP member to engage in a specific financial arrangement as a 
collaboration agent versus a downstream collaboration payment.
    We further propose that the total amount of all downstream 
distribution payments made to downstream collaboration agents must not 
exceed the amount of the distribution payment received by the 
collaboration agent (that is, the PGP that is an ACO participant) from 
the ACO that is an EPM collaborator. Like gainsharing, alignment, and 
distribution payments, we propose that all downstream distribution 
payments must be made by check, electronic funds transfer, or another 
traceable cash transaction. The downstream collaboration agent must 
retain the 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 downstream collaboration 
agent to reduce or limit medically necessary items and services to any 
Medicare beneficiary or reward the provision of items and services that 
are medically unnecessary.
    We propose that the PGP must maintain contemporaneous documentation 
regarding downstream distribution arrangements in accordance with Sec.  
512.110, including all of the following:
     The relevant written agreements.
     The date and amount of any downstream distribution 
payment(s).
     The identity of each downstream collaboration agent that 
received a downstream distribution payment.
     A description of the methodology and accounting formula 
for determining the amount of any downstream distribution payment.
    We propose that the PGP may not enter into a downstream 
distribution arrangement with any PGP member who has a sharing 
arrangement with an EPM participant or distribution arrangement with 
the ACO the PGP is a participant in. This proposal ensures that the 
proposed separate limitations on the total amount of gainsharing 
payment, distribution payment, and downstream distribution payment to 
PGP members that are substantially based on quality of care and the 
provision of EPM activities are not exceeded in absolute dollars by a 
PGP member's participation in more than one type of arrangement for the 
care of the same EPM beneficiaries during EPM episodes. Allowing more 
than one arrangement for the same PGP member for the care of the same 
EPM beneficiaries during EPM episodes could also allow for duplicate 
counting of the PGP member's same quality of care and provision of EPM 
activities in the methodologies for the different payments. Finally, we 
propose that the PGP must retain and provide access to, and must 
require downstream collaboration agents to retain and provide access 
to, the required documentation in accordance with Sec.  512.110.
    The proposals for requirements for downstream distribution 
arrangements under the EPM are included in Sec.  512.510(b). We seek 
comment 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 EPM are met.

[[Page 50929]]

7. Summary of Proposals for Sharing, Distribution, and Downstream 
Distribution Arrangements Under the EPM
    Figure 2 summarizes the proposals for the defined terms and 
financial arrangements discussed in sections III.I.4. through 6. of 
this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP02AU16.023

8. Enforcement Authority
    OIG authority is not limited or restricted by the provisions of the 
EPM, including the authority to audit, evaluate, investigate, or 
inspect the EPM participant, EPM collaborators, collaboration agents, 
or any other person or entity or their records, data, or information, 
without limitations. Additionally, no EPM provisions limit or restrict 
the authority of any other Government Agency to do the same.
    The proposals for enforcement authority under the EPM are included 
in Sec.  512.520. We seek comment 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 EPM are met.
9. Beneficiary Engagement Incentives Under the EPM
a. General
    Similar to our reasoning for the CJR model (80 FR 73433 through 
73437), we believe that the EPM would incentivize EPM participants to 
furnish directly and otherwise coordinate items and services throughout 
the EPM episodes that lead to higher quality care for EPM beneficiaries 
and lower EPM episode spending. We believe that one mechanism that may 
be useful to EPM participants in achieving these goals is the provision 
of certain items and services as in-kind patient engagement incentives 
to the EPM beneficiary during the EPM episode. Under such an approach, 
the costs of the patient engagement incentives would be borne by the 
EPM participant. However, we believe that certain conditions on these 
incentives are necessary to ensure that their provision is solely for 
the purpose of achieving the EPM goals of improving episode quality and 
efficiency.
    We propose that the incentive must be provided directly by the EPM

[[Page 50930]]

participant or by an agent of the EPM participant under the EPM 
participant's direction and control to the EPM beneficiary during an 
EPM episode. We considered whether this policy on beneficiary 
incentives should extend to providers and suppliers other than the EPM 
participant that furnish services during the EPM episode, or to other 
entities altogether, such as ACOs that are EPM collaborators. However, 
as discussed in section III.B.3. of this proposed rule, given our 
belief that the EPM participant is best positioned to coordinate the 
care of beneficiaries in the EPM, we believe that EPM participants are 
also better suited than other individuals and entities to provide 
beneficiary incentives.
    We propose that the item or service provided as an incentive must 
be reasonably connected to medical care provided to an EPM beneficiary 
during an EPM episode. For example, EPM participants could provide 
incentives such as post-surgical or cardiac monitoring equipment to 
track patient weight and vital signs for post-surgical or post-AMI 
patients discharged directly to home, but could not provide theater 
tickets, which would bear no reasonable connection to the patient's 
medical care. Similarly, EPM participants might provide cardiac or 
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-hospital discharge care, 
such as a smartphone. 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 inappropriately induce 
beneficiaries to receive other medical care that is not included in the 
episode. We also propose that the incentive must be a preventive care 
item or service or an item or service that advances a clinical goal, as 
described later in this section, for a beneficiary in an EPM episode by 
engaging the beneficiary in better managing his or her own health.
    We further propose that the item or service provided as an 
incentive must not be tied to the receipt of items or services outside 
the EPM episode and that the item or service must not be tied to the 
receipt of items or services from a particular provider or supplier. 
These provisions provide safeguards against the provision of in-kind 
patient engagement incentives to steer beneficiaries toward certain 
providers or suppliers for care.
    We propose that the availability of the items or services provided 
as incentives 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. This condition provides a safeguard against the advertisement of 
in-kind patient engagement incentives to certain beneficiaries that 
could increase an EPM participant's number of EPM episodes and shift 
the patient severity for an EPM participant compared to historical EPM 
episodes by encouraging more beneficiaries with less severe clinical 
conditions in the EPM to seek care at the EPM participant. Such changes 
could produce financial gain for the EPM participant that is not 
related to improvements in EPM quality and efficiency by resulting in 
the EPM participant's quality-adjusted target prices for EPM episodes 
being higher than would be appropriate based on the lower average 
patient severity during the EPM performance years. We do not intend for 
any of the financial arrangements proposed for the EPM, including 
beneficiary incentives, to alter an EPM participant's market share of 
care for a clinical condition in the EPM, nor do we intend for these 
arrangements to shift the patient severity for an EPM participant or 
cause access problems for Medicare beneficiaries. Finally, we propose 
that 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.
    Our proposals for the general provisions for beneficiary incentives 
are included in Sec.  512.525(a). We seek comment on our proposed 
general provisions for beneficiary incentives and welcome comment on 
additional or alternative program integrity safeguards.
b. Technology Provided to an EPM Beneficiary
    In some cases, items or services involving technology may be useful 
as beneficiary engagement incentives that can advance a clinical goal 
of the EPM by engaging a beneficiary in managing his or health during 
the 90 days following discharge from the anchor or chained anchor 
hospitalization. However, we believe specific enhanced safeguards are 
necessary for these items and services to prevent abuse, and our 
proposals are consistent with the CJR model policies (80 FR 73437). 
Specifically, we propose that items or services involving technology 
provided to a beneficiary may not exceed $1,000 in retail value for any 
one beneficiary in any one EPM episode, and that items or services 
involving technology provided to a beneficiary must be the minimum 
necessary to advance a clinical goal as discussed in this section for a 
beneficiary in an EPM episode.
    We propose additional enhanced requirements for items of technology 
exceeding $100 in retail value as an additional safeguard against 
misuse of these items as beneficiary engagement incentives. 
Specifically, we propose that these items of technology remain the 
property of the EPM participant and be retrieved from the beneficiary 
at the end of the EPM episode. The EPM participant must document all 
retrieval attempts, including the ultimate date of retrieval. However, 
because we understand that EPM participants may not always be able to 
retrieve these items after the EPM episode ends, such as when a 
beneficiary dies or moves to another geographic area, documented, 
diligent, good faith attempts to retrieve items of technology will be 
deemed to meet the retrieval requirement.
    Our proposals for enhanced requirements for technology provided to 
EPM beneficiaries as beneficiary engagement incentives under the EPM 
are included in Sec.  512.525(b). We seek comment on our proposed 
requirements for beneficiary engagement incentives that involve 
technology and welcome comment on additional or alternative program 
integrity safeguards for this type of beneficiary engagement incentive, 
including whether the financial thresholds proposed in this section are 
reasonable, necessary, and appropriate.
c. Clinical Goals of the EPM
    As discussed in section III.C.3. of this proposed rule, the 
proposed EPMs are broadly defined to include most Part A and Part B 
items and services furnished during EPM episodes that extend 90 days 
following discharge from the anchor or chained anchor hospitalization 
that begins the episode, excluding only those Part A and Part B 
services that are unrelated to the EPM episode based on hospital 
readmissions or diagnoses for which care is unrelated to the EPM 
episode diagnosis and procedures based on clinical rationale. 
Therefore, we believe that in-kind patient engagement incentives may 
appropriately be provided for managing acute conditions arising from 
EPM episodes, as well as chronic conditions if the condition is likely 
to have been affected by care during the EPM episode or when 
substantial services are likely to be provided for the chronic 
condition during the EPM episode.
    We propose that the following are the clinical goals of the EPM, 
which may be advanced through beneficiary incentives:

[[Page 50931]]

     Beneficiary adherence to drug regimens.
     Beneficiary adherence to a care plan.
     Reduction of readmissions and complications resulting from 
treatment for the EPM clinical condition.
     Management of chronic diseases and conditions that may be 
affected by treatment for the EPM clinical condition.
    Our proposals for the clinical goals of the EPM that a beneficiary 
engagement incentive that is not a preventive care item or service must 
be intended to advance are included in Sec.  512.525(c). We seek 
comment on our proposed clinical goals of the EPM, as well as whether 
the advancement of additional or different clinical goals through 
beneficiary engagement incentives may better advance the overarching 
goals of the EPM while maintaining appropriate program integrity 
safeguards.
d. Documentation of Beneficiary Engagement Incentives
    As a program safeguard against misuse of beneficiary engagement 
incentives under the EPM, we propose that EPM participants must 
maintain documentation of items and services furnished as beneficiary 
engagement incentives that exceed $25 in retail value. In addition, we 
propose to require that the documentation established contemporaneously 
with the provision of the items and services must include at least the 
following:
     The date the incentive is provided.
     The identity of the beneficiary to whom the item or 
service was provided. We further propose that the documentation 
regarding items of technology exceeding $100 in retail that are 
required to be retrieved from the beneficiary at the end of an EPM 
episode must also include contemporaneous documentation of any attempt 
to retrieve technology. We reiterate that documented, diligent, good 
faith attempts to retrieve items of technology will be deemed to meet 
the retrieval requirement. Finally, we propose that the EPM participant 
must retain and provide access to the required documentation in 
accordance with Sec.  512.110.
    Our proposals for the documentation requirements for beneficiary 
engagement incentives under the EPM are included in Sec.  512.525(c). 
We seek comment on our proposed documentation requirements, including 
whether additional or different documentation requirements may provide 
better program integrity safeguards.
10. Compliance With Fraud and Abuse Laws
    Certain arrangements between and among EPM participants and third 
parties or beneficiaries may implicate civil monetary penalty (CMP) law 
(subsections 1128A(a)(5), (b)(1), and (b)(2) of the Act), the Federal 
Anti-kickback statute (subsections 1128B(b)(1) and (2) of the Act), or 
the physician self-referral law (section 1877 of the Act). In many 
cases, arrangements that implicate these laws can be structured to 
comply with them by using existing safe harbors and exceptions. Section 
1115A(d)(1) of the Act authorizes the Secretary to waive certain 
specified fraud and abuse laws as may be necessary solely for purposes 
of testing of payment models under section 1115A(b) of the Act. A 
waiver is not needed for an arrangement that does not implicate the 
fraud and abuse laws or that implicates the fraud and abuse laws but 
either fits within an existing exception or safe harbor, as applicable, 
or does not otherwise violate the law. Accordingly, pursuant to section 
1115A(d)(1) of the Act, the Secretary will consider whether waivers of 
certain fraud and abuse laws are necessary to test the EPM as such 
models develop. Such waivers, if any, would be promulgated separately 
from this proposed regulation by OIG (as to sections 1128A and 1128B of 
the Act) and CMS (as to section 1877 of the Act), to which the 
respective authorities have been delegated.
    Requirements for the EPM will bear on the need for and scope of any 
fraud and abuse waivers that might be granted for the EPM. Because of 
the close nexus between the regulations governing the structure and 
operations of the EPM and the development of any fraud and abuse 
waivers necessary to carry out the provisions of the EPM, CMS and OIG 
may, when considering the need for or scope of any waivers, consider 
comments submitted in response to this proposed rule and provisions of 
the EPM's final rule.
J. Proposed Waivers of Medicare Program Requirements
1. Overview
    Under the CJR model, we stated that it may be necessary and 
appropriate to provide additional flexibilities to hospitals 
participating in the CJR model, as well as other providers that furnish 
services to beneficiaries in CJR episodes. The purpose of such 
flexibilities is to increase CJR-episode quality and decrease episode 
spending or internal costs or both of providers and suppliers that 
results in better, more coordinated care for beneficiaries and improved 
financial efficiencies for Medicare, providers, and beneficiaries. 
These additional flexibilities were implemented through our waiver 
authority under section 1115A of the Act, which affords broad authority 
for the Secretary to waive statutory Medicare program requirements as 
necessary to carry out the provisions of section 1115A.
    In proposing to test the EPMs described in this proposed rule, we 
continue to believe that certain program waivers, similar to those 
adopted under the CJR model, will offer providers and suppliers more 
flexibility so that they may increase coordination of care and 
management of beneficiaries in EPM episodes. However, before adopting 
the same waivers as we adopted in the CJR model for the proposed EPMs, 
we believe further examination is necessary to determine if doing so 
increases financial vulnerability for the Medicare program or creates 
inappropriate clinical incentives that may reduce the quality of 
beneficiary care.
    Based on our analysis of data available from current models being 
tested and other available clinical data, specific program requirements 
for which we propose waivers under the AMI, CABG, and SHFFT models and 
for which we invite comments are included in the sections that follow. 
In addition, for providers or suppliers of cardiac rehabilitation and 
intensive cardiac rehabilitation services furnished to EPM 
beneficiaries during an AMI and CABG episode, we are proposing to waive 
the physician definition to allow a qualified nonphysician practitioner 
to perform specific physician functions.
    We propose that these waivers of program requirements would apply 
to the care of beneficiaries who are in the proposed AMI, CABG, or 
SHFFT episodes at the time when such waivers would be used to bill for 
services furnished to the beneficiary, even if the episode is later 
cancelled as described in section III.C.4.b. of this proposed rule. 
Thus, it may have been appropriate for the hospital to have used a 
waiver if there was a reasonable expectation that the beneficiary was 
in the model at the time the waiver was used. However, if a service is 
found to have been billed and paid by Medicare under circumstances 
allowed only by a program requirement waiver for a beneficiary not in 
the proposed AMI, CABG, or SHFFT models at the time the service was 
furnished, CMS would recoup payment for that service from the provider 
or supplier who was paid, and require that provider or supplier to

[[Page 50932]]

repay the beneficiary for any coinsurance previously collected.
    We also generally seek comment on any additional Medicare program 
requirements that may be necessary to waive using our authority under 
section 1115A of the Act in order to effectively test the proposed EPMs 
that we could consider in the context of our early model implementation 
experience to inform any future proposals we may make. While we cannot 
finalize program requirement waivers that we have not specifically 
proposed, we will continually monitor the use of program waivers in 
each EPM to ensure that the appropriate outcomes in provider/supplier 
financial incentives and patient care are achieved.
2. Summary of Waivers Adopted Under the CJR Model
    As part of the CJR model implemented in 2016, we issued regulatory 
waivers of the following Medicare program requirements:
     Section 510.600 of the regulations waives the direct 
supervision requirement to allow clinical staff to furnish certain 
post-discharge home visits under the general, rather than direct, 
supervision of a physician or nonphysician practitioners. This waiver 
allows a CJR beneficiary who does not qualify for home health benefits 
to receive up to 9 post-discharge visits in his or her home or place of 
residence any time during the episode. All other Medicare rules for 
coverage and payment of services incident to a physician's service 
continue to apply.
     Section 510.615 waives current Medicare billing rules to 
allow the separate billing of these post-discharge home visits for CJR 
beneficiaries during a 90-day post-operative global surgical period. 
All other Medicare rules for global-surgery billing during the 90-day 
post-operative period continue to apply.
     Section 510.605 of the regulations allows a Medicare-
approved telehealth service to be furnished to a CJR beneficiary 
regardless of the beneficiary's geographic location, and in his or her 
home or place of residence. CMS also waives certain telehealth payment 
provisions. Specifically, Medicare will not pay the originating site 
facility fee if the service originates in the beneficiary's home or 
place or residence, and the telehealth home visits will be paid using 
unique HCPCS codes with payment based on comparable office visits, less 
the practice expense portion of the payment paid for these comparable 
visits when furnished in-person. All other requirements for Medicare 
coverage and payment of telehealth services continue to apply.
     Section 510.610 of the regulations waives the 3-day 
hospital stay requirement before a beneficiary may be discharged from a 
hospital to a qualified SNF, which CMS define as SNFs that are rated an 
overall of 3 stars or better on the Nursing Home Compare Web site. This 
waiver applies to episodes being tested under the CJR model for 
specific performance years. For example, under CJR, the waiver applies 
beginning in performance year 2 (as hospitals are not bearing risk in 
their first year). All other Medicare rules for coverage and payment of 
Part A-covered SNF services continue to apply.
     Section 510.620 of the regulations waives the deductible 
and coinsurance statutory requirements to the extent necessary to make 
reconciliation payments or receive repayments based on the episodic 
payment methodology under the final payment model for CJR participant 
hospitals. The reconciliation or repayments do not affect the 
beneficiary's cost sharing amounts for services furnished under the CJR 
model.
3. Analysis of Current Model Data
    We believe that before we adopt the same regulatory waivers offered 
under the CJR model, we must determine if doing so would: (1) Be 
clinically-appropriate; (2) not introduce financial vulnerabilities to 
the Medicare program; and, more importantly, (3) not decrease desired 
outcomes of patient care. To make this determination, we analyzed 
waiver usage data and post-acute care usage from Medicare claims data 
current being tested in other EPMs. In addition, we analyzed the latest 
arithmetic and geometric means for the MS-DRGs associated with the 
proposed AMI, CABG, and SHFFT models published as Table 5 in the IPPS 
FY 2016 Correction Notice to the Final Rule (CMS-1632-CN; 80 FR 60055). 
The following summarizes the available data.
a. Analysis of Waiver Usage
    Waiver usage data is currently not available from the CJR model, 
thus we reviewed waiver usage data from the BPCI model. Waivers were 
offered for all 48 episodes under the BPCI model. However, we note that 
such waivers were significantly different from those adopted under the 
CJR model. For example, many BPCI model awardees were concerned about 
the difficulties in accurately identifying beneficiaries in BPCI 
episodes, which we believe might have been a disincentive to using the 
waiver of the SNF 3-day hospital stay. For the CJR model, we attempted 
to address this by codifying that the SNF stay would be covered if the 
beneficiary was in the episode at the time that the SNF waiver was 
utilized. With respect to the home visit, the BPCI model only allows 3 
visits in a 90-day period (less if the episode is shorter), and 
awardees might not consider it worth the effort to incorporate this 
limited number of visits into their care design for episode 
beneficiaries. For the CJR model, we increased this allowance to 9 
post-discharge visits in a 90-day period to allow for one visit a week 
for the two thirds of the 90-days post-discharge when the beneficiary 
was not receiving post-acute care. Finally, in the BPCI model we waived 
the geographic restrictions for telehealth visits, whereas for the CJR 
model we allow telehealth visits originating in the home, regardless of 
geographic location.
    Given that the waivers offered under the BPCI model differ from the 
waivers in the CJR model, and presumably for the waivers that we 
propose in this proposed rule, the BPCI model data shows--
     The use of the home visit and telehealth waiver is 
minimal; and
     The waiver of the SNF 3-day rule may be getting the most 
use.
b. Analysis of Discharge Destination--Post-Acute Care Usage
    The following Table 35 shows the discharge destination and post-
acute care usage for the cardiac related episodes (CABG, PCI, and AMI) 
in the BPCI model.

[[Page 50933]]



                          Table 35--Discharge Destination for BPCI Cardiac Diagnoses *
                                         [Source: Medicare Claims Data]
----------------------------------------------------------------------------------------------------------------
                                                          Discharge destination (in rounded percentages)
                                                 ---------------------------------------------------------------
            MS-DRG                MS-DRG Title     Home w/o home  Home with home
                                                      health          health            SNF            Other
----------------------------------------------------------------------------------------------------------------
                                                      CABG
----------------------------------------------------------------------------------------------------------------
231...........................  W PTCA W MCC....              14              30              43              13
232...........................  W PTCA W/O MCC..              28              49              15               8
233...........................  W CARDIAC CATH W              12              34              40              14
                                 MCC.
234...........................  W CARDIAC CATH W/             20              46              27               7
                                 O MCC.
235...........................  W/O CARDIAC CATH              13              34              36              17
                                 W MCC.
236...........................  W/O CARDIAC CATH              23              50              19               8
                                 W/O MCC.
----------------------------------------------------------------------------------------------------------------
                                                       PCI
----------------------------------------------------------------------------------------------------------------
246...........................  W DES W MCC OR                66              18              13               3
                                 4+ VES/STENTS.
247...........................  W DES STENT W/O               89               8               3               0
                                 MCC.
248...........................  W NON DES W MCC               68              17              12               3
                                 OR 4+ VES/
                                 STENTS.
249...........................  W NON[dash]DES W/             85              10               5               0
                                 O MCC.
250...........................  W/O CAS W MCC...              63              25               8               4
251...........................  W/O CAS W/O MCC.              86              10               4               0
----------------------------------------------------------------------------------------------------------------
                                                       AMI
----------------------------------------------------------------------------------------------------------------
280...........................  DISCHARGED ALIVE              42              22              34               2
                                 W MCC.
281...........................  DISCHARGED ALIVE              57              20              22               1
                                 W CC.
282...........................  DISCHARGED ALIVE              71              17              10               2
                                 W/O CC/MCC.
----------------------------------------------------------------------------------------------------------------
* ABBREVIATIONS:
PTCA--Percutaneous Transluminal Coronary Angioplasty.
CC--Complications.
MCC--Major Complications.
DES--Drug-Eluting Stent.
CAS--Coronary Artery Stent.
VES--Vessels.

    Analysis of the data in Table 35 shows--
     Patients with CABG have high post-acute care usage;
     Patients with PCI have very little post-acute care usage; 
and
     Patients with AMI have average post-acute care usage 
compared to patients with PCI and CABG.
    Analysis of the CJR model data shows post-acute care usage of about 
30 days for MS-DRGs associated with the CJR model.
c. Analysis of Hospital Mean Length of Stay Data
    Table 36 shows the geometric and arithmetic mean length of stay 
(LOS) for MS-DRGs associated with the proposed CABG, AMI (including 
PCI) and SHFFT models.

          Table 36--Geometric and Arithmetic Mean Length of Stay for BPCI Cardiac Diagnoses and SHFFT *
                               [Source: FY 2016 IPPS Correction Notice; Table 5] *
----------------------------------------------------------------------------------------------------------------
                                                                                  Geometric mean    Arithmetic
                    MS-DRG                                MS-DRG Title                  LOS          mean LOS
----------------------------------------------------------------------------------------------------------------
                                                      CABG
----------------------------------------------------------------------------------------------------------------
231...........................................  W PTCA W MCC....................             9.9            11.7
232...........................................  W PTCA W/O MCC..................             7.9             8.6
233...........................................  W CARDIAC CATH W MCC............            11.6            13.0
234...........................................  W CARDIAC CATH W/O MCC..........             8.0             8.6
235...........................................  W/O CARDIAC CATH W MCC..........             8.9            10.3
236...........................................  W/O CARDIAC CATH W/O MCC........             6.0             6.5
----------------------------------------------------------------------------------------------------------------
                                                       PCI
----------------------------------------------------------------------------------------------------------------
246...........................................  W DES W MCC OR 4+ VES/STENTS....             4.1             5.5
247...........................................  W DES STENT W/O MCC.............             2.2             2.7
248...........................................  W NON DES W MCC OR 4+ VES/STENTS             4.8             6.3
249...........................................  W NON-DES W/O MCC...............             2.5             3.1
250...........................................  W/O CAS W MCC...................             4.2             5.7

[[Page 50934]]

 
251...........................................  W/O CAS W/O MCC.................             2.4             2.9
----------------------------------------------------------------------------------------------------------------
                                                       AMI
----------------------------------------------------------------------------------------------------------------
280...........................................  DISCHARGED ALIVE W MCC..........             4.5             5.8
281...........................................  DISCHARGED ALIVE W CC...........             2.9             3.6
282...........................................  DISCHARGED ALIVE W/O CC/MCC.....             2.0             2.4
----------------------------------------------------------------------------------------------------------------
                                                      SHFFT
----------------------------------------------------------------------------------------------------------------
480...........................................  HIP & FEMUR PROCEDURES EXCEPT                6.7             7.9
                                                 MAJOR JOINT W MCC.
481...........................................  HIP & FEMUR PROCEDURES EXCEPT                4.6             5.0
                                                 MAJOR JOINT W CC.
482...........................................  HIP & FEMUR PROCEDURES EXCEPT                3.7             4.0
                                                 MAJOR JOINT W/O CC/MCC.
----------------------------------------------------------------------------------------------------------------
* ABBREVIATIONS:
PTCA--Percutaneous Transluminal Coronary Angioplasty.
CC--Complications.
MCC--Major Complications.
DES--Drug-Eluting Stent.
CAS--Coronary Artery Stent.
VES--Vessels.

    Analysis of data in Table 36 shows--
     Patients under all CABG MS-DRGs have a mean LOS of 6 days 
up to 11-13 days;
     Patients under all PCI MS-DRGs have a mean LOS of about 2 
days up to about 6 days;
     Patients under all AMI MS-DRGs have a mean LOS of about 2 
days up to about 6 days; and
     Patients under all SHFFT MS-DRGs have a mean LOS of about 
4 days up to about 8 days.
    Analysis of the CJR model data shows the mean LOS for MS-DRGs 
associated with the CJR model of about 3 days up to about 7 days.
    Based on our analysis of the available data, we believe that 
minimal program and patient outcome vulnerabilities exist with 
proposing to adopt the same CJR regulatory waivers to the following 
program requirements for EPMs:
     The direct supervision requirement for certain post-
discharge home visits and the Medicare billing requirement that will 
allow the separate billing of these post-discharge home visits for EPM 
beneficiaries during a 90-day post-operative global surgical period.
     The telehealth geographic site requirement and the 
requirement that will allow in-home telehealth visits.
     The deductible and coinsurance statutory requirements to 
the extent necessary to make reconciliation payments or receive 
repayments based on the episodic payment methodology under the final 
payment model for EPM participants.
    Therefore, as discussed in the sections that follow, we will be 
proposing to adopt waivers for these program requirements for EPMs.
    In addition, based on our analysis of the available data, we 
believe some program and patient outcome vulnerabilities may exist with 
proposing to adopt the same CJR regulatory waivers for the following 
program requirements for some EPMs:
     The SNF 3-day rule, for episodes beginning on or after 
April 1, 2018.
     The number of post-discharge home visits allowed during 
the model episode.
    Therefore, as discussed in the sections that follow, we are 
proposing to adopt model-specific limits to the number of post-
discharge home visits and to offer the waiver of the SNF 3-day rule on 
a model-specific basis.
4. Post-Discharge Home Visits
    As with the LEJR episodes, we expect that the broadly-defined EPM 
episodes with a duration of 90 days following hospital discharge as we 
propose in section III.A.1. of this proposed rule will result in EPM 
participants redesigning care by increasing care coordination and 
management of beneficiaries following surgeries. We believe that 
beneficiaries might have substantial mobility limitations during EPM 
episodes following discharge to their homes or places 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 
post-acute care setting will also be important to high-quality episode 
care. Scientific evidence exists to support the use of home nursing 
visits among Medicare beneficiaries in improving care coordination 
following hospital discharge.\102\ In addition, we believe the 
financial incentives in the EPMs will encourage hospitals to closely 
examine the most appropriate post-acute care settings for beneficiaries 
so that the clinically-appropriate setting of the lowest acuity is 
recommended following discharge from the anchor hospitalization. We 
expect that all these considerations will lead to greater interest on 
the part of hospitals and other providers and suppliers caring for EPM 
beneficiaries in furnishing services to beneficiaries in their homes or 
places of residence. Such services could include visits by licensed 
clinical staff other than physicians and nonphysician practitioners.
---------------------------------------------------------------------------

    \102\ Naylor MD, Brooten D, Campbell R, Jacobsen BS, Mezey MD, 
Pauly MV, Schwartz JS. JAMA. 1999:281(7):613-620. doi:10/1001/
jama.281.7.613.
---------------------------------------------------------------------------

    In order for Medicare to pay for home health services, a 
beneficiary must be determined to be ``homebound.'' 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

[[Page 50935]]

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 
typically could 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 less-costly 
outpatient settings. 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 AMI, CABG and SHFFT models, 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 are not proposing to waive the homebound requirement 
under the proposed EPMs for several reasons. Based on the typical 
clinical course of beneficiaries after procedures in the proposed EPMs, 
we believe that many beneficiaries would meet the homebound requirement 
for home health services immediately following discharge from the 
anchor hospitalizations or following discharge to their home or place 
of residence from a SNF that furnished post-acute care 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 
episode or who are discharged during the episode. For those EPM 
beneficiaries who could benefit from home visits by licensed clinical 
staff for purposes of assessment and monitoring of their clinical 
conditions, care coordination, and improving adherence with treatment 
but who are not homebound, we do 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 the BPCI initiative and the CJR model, we have not waived the 
homebound requirement for home health services.
    For EPMs, we propose to adopt program requirement waivers similar 
to the post-discharge home visit waivers implemented for the CJR model. 
We propose to waive the ``incident to'' rule set forth in Sec.  
410.26(b)(5), to allow an EPM 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 to beneficiaries who would qualify for home health services under 
the Medicare program, as set forth under Sec.  409.42. Therefore, these 
visits would not be billed for such beneficiaries. Under the proposed 
waiver, we would allow licensed clinical staff, 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 would allow services furnished under the 
waiver to be billed under the PFS by the physician or nonphysician 
practitioner or by the hospital to which the supervising physician has 
reassigned his or her benefits. In the latter scenario, we note that 
the post-discharge home visit services will not be ``hospital 
services,'' even when furnished by clinical staff of the hospital.
    Under the CJR model, we allow up to 9 post-discharge home visits to 
be billed and paid during each 90-day post-anchor hospitalization CJR 
episode. This limit on the number of visits is based on the average 
post-acute care LOS of approximately 30 to 45 days for CJR episodes and 
the incentives under CJR to improve efficiency, which may shorten post-
acute care stays. Thus, 9 visits 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 post-acute care 
in an efficient episode.
    Since current model data shows that the average post-acute care LOS 
may vary or in some case post-acute care may not be used at all, for 
EPMs, we are proposing to use model-specific limits on post-discharge 
home visits as follows:
a. AMI Model
    Current model data show that most beneficiaries with AMI diagnoses, 
regardless of AMI medical treatment or PCI treatment for AMI, are not 
discharged to post-acute care. Based on no post-acute care usage, we 
are proposing that a beneficiary in the AMI model could receive up to 
13 home visits, which represents a home visit on average of once per 
week for the entire 90-day AMI episode.
b. CABG Model
    Current model data show that most beneficiaries with CABG diagnoses 
are discharged to SNFs or to home health. Assuming an average post-
acute care LOS of 30 days, we are proposing that a beneficiary in the 
CABG model could receive up to 9 home visits, which represents a home 
visit on average of once per week for 60 days, or two-thirds of a 90-
day CABG episode.
c. SHFFT Model
    Current model data show that most beneficiaries with SHFFT 
diagnoses are discharged to SNFs with average post-acute care LOSs of 
30 days. Thus, we are proposing that a beneficiary in the SHFFT model 
could receive up to 9 home visits, which represents a home visit on 
average of once per week for 60 days, or two-thirds of a 90-day SHFFT 
episode.

[[Page 50936]]

    We believe that a home visit of once a week to a non-homebound 
beneficiary who has concluded or has not used post-acute care 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 nonphysician practitioner as proposed in the 
next section, should be sufficient to allow comprehensive assessment 
and management of the beneficiary throughout the AMI, CABG, or SHFFT 
episode.
    Similar to the CJR model, we propose that the service be billed 
with HCPCS code GXXXX (EPM-AMI, CABG, or SHFFT model home visit for 
patient assessment 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-approved EPM-AMI, CABG, or SHFFT model; 
may not be billed for a 30-day period covered by a transitional care 
management code) and paid at approximately $50 under the PFS. The 
standard PFS rate setting methodologies establish relative value units 
(RVUs) based on the resources required to furnish the typical service. 
Final RVUs under the CY 2017 PFS for the proposed new HCPCS code for 
AMI, CABG, and SHFFT home visits will be included in the EPM Final 
Rule. In addition, we propose to update the values each year to 
correspond to final values established under the PFS.
    The waiver would not apply with respect to an AMI, CABG, or SHFFT 
beneficiary who has qualified, or would qualify, for home health 
services when the visit was furnished. We expect that the visits by 
licensed 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 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 believe 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 EPM 
participants.
    We also propose to waive current Medicare billing rules in order to 
allow the separate reporting of these post-discharge home visits during 
surgical global periods. The PFS 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 or, 
unless there is a transfer of care, by another practitioner. The 
current construction of the global packages included in PFS payments 
reflects a narrow view of surgical follow-up care that does not 
encompass broader, more comprehensive models of post-operative care, 
such as an episode payment model like the proposed AMI, CABG, and SHFFT 
models. 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 do not 
believe that the AMI, CABG, and SHFFT 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 PFS. Instead, we anticipate that the work of these post-discharge 
visits will be similar to the work furnished by the physician 
coordinating the patient's overall episode care. Therefore, we propose 
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.
    We plan to monitor utilization patterns of post-discharge home 
visits under EPMs to monitor for overutilization and significant 
reductions in medical home health services. We seek comments on the 
proposed waiver of the ``incident to'' rule to pay for a maximum number 
of post-discharge home visits to beneficiaries who do not qualify for 
home health services by licensed clinical staff under the general 
supervision of a physician.
5. Billing and Payment for Telehealth Services
    As discussed in the previous section, we expect that the EPMs' 
design features will lead to greater interest on the part of hospitals 
and other providers and suppliers caring for EPM beneficiaries in 
furnishing services to beneficiaries in their homes or places of 
residence, including physicians' professional services. While 
physicians may furnish and be paid by Medicare for home visits under 
the PFS, few visits actually are furnished to Medicare beneficiaries 
because of the significant physician resources required for such visits 
and the general structure of most office-based physician practices. For 
example, in 2014, only 2.6 million physician or nonphysician 
practitioner home visits were furnished to Medicare beneficiaries, in 
contrast to almost 250 million office or other outpatient evaluation 
and management visits furnished by physicians or nonphysician 
practitioners. EPMs 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 understand that 
EPM participants may want to engage physicians in furnishing timely 
visits to homebound or non-homebound EPM beneficiaries in their homes 
or places of residence to address concerning symptoms or observations 
raised by beneficiaries themselves, clinicians furnishing home health 
services, or licensed clinical staff furnishing post-discharge home 
visits, while physicians committed to the proposed AMI, CABG, and SHFFT 
care redesign may not be able to revise their practice patterns to meet 
this home visit need for EPM 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 sections 
1834(m)(4)(C)(i)(I) through (III) of the Act. Generally, for Medicare 
payment to be made for telehealth services under the PFS several 
conditions must be met, as set forth under Sec.  410.78(b). 
Specifically, for a service to be eligible for payment, the individual 
receiving the services must be in an eligible

[[Page 50937]]

originating site, and the service must be--
     On the Medicare list of telehealth services; \103\
---------------------------------------------------------------------------

    \103\ For the list of approved Medicare telehealth services, see 
the CMS Web site at https://www.cms.gov/Medicare/Medicare-General-information/telehealth/.
---------------------------------------------------------------------------

     Furnished via an interactive telecommunications system; 
and
     Furnished to a telehealth-eligible individual.
    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.
    Under section 1834(m)(4)(F)(ii) of the Act, CMS has 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.\104\ In 
these 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 note 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.
---------------------------------------------------------------------------

    \104\ Telehealth in an Evolving Health Care Environment: 
Workshop Summary (2012). Available at https://www.ic4n.org/wp-content/uploads/2014/06/IoM-Telehealth-2012-Workshop-Summary.pdf. 
Accessed on June 7, 2015.
---------------------------------------------------------------------------

    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.
    In other CMS episode-based payment models, such as BPCI Models 2 
and 3 and the CJR model, we determined it was necessary to waive the 
geographic-site requirements of sections 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 the proposed EPMs--AMI, 
CABG, and SHFFT--we propose a waiver of this same provision as well as 
waiver of the requirement that the eligible telehealth individual be in 
an originating site when an 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 EPM 
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. We believe that these waivers are essential to 
maximize the opportunity to improve the quality of care and efficiency 
for the proposed EPMs' episodes.
    Specifically, like the telehealth waiver for the BPCI and CJR 
models, we propose to waive the geographic-site requirements of 
sections 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 to be 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-9 principal 
diagnosis code that is not excluded from the proposed EPMs episode 
definition (see section III.C. of this proposed rule) could be 
furnished to an EPM beneficiary, regardless of the beneficiary's 
geographic location. Under the proposed EPMs, this waiver would support 
care coordination and increasing timely access to high quality care for 
all EPM beneficiaries, regardless of geography. Additionally, we 
propose, only for the purpose of testing the proposed EPMs, waiving the 
originating site requirements of section 1834(m)(4)(C)(ii)(I)-(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 propose to 
waive the requirement only when telehealth services are being furnished 
in the EPM 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-9 principal diagnosis code that is not 
excluded from the applicable EPM's episode definition (see section 
III.C. of this proposed rule) could be furnished to an EPM 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 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 payment 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, we do 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 unspecified. Therefore, in 
order to create a mechanism to report E/M services accurately under the 
EPMs, we propose to create a specific set of HCPCS G-codes to describe 
the E/M services furnished to EPM beneficiaries in their homes via 
telehealth. Among the existing E/M visit services, we envision these 
services would be most similar to those described by the office and 
other outpatient E/M codes. Therefore, we propose 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 propose to create a 
parallel structure and set of descriptors currently used to report

[[Page 50938]]

office or other outpatient E/M services, (CPT codes 99201-99205 for new 
patient visits and CPT codes 99212-99215 for established patient 
visits). For example, the proposed G-code for a level 3 E/M visit for 
an established patient would be a remote in-home visit for the 
evaluation and management of an established patient, which requires at 
least two of the following three 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.
    We note that we are not proposing a 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 qualified 
health professional. We also believe this would duplicate the home 
visits for non-homebound beneficiaries previously proposed in this 
section.
    We propose 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 propose 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, we believe that 
the efficiencies of virtual presentation generally limit resource costs 
other than those related to the professional time, intensity, and 
malpractice risk to marginal levels. Therefore, we propose to adopt 
work and malpractice (MP) RVUs associated with the corresponding level 
of office/outpatient codes as the typical service because the 
practitioner's time and intensity and malpractice liabilities when 
conducting a visit via telehealth are comparable to the office visit.
    We will include final RVUs under the CY 2016 PFS when we finalize 
the rules for EPMs. Additionally, we propose to update these values 
each year to correspond to final values established under the PFS. We 
considered whether each level of visit typically would warrant support 
by auxiliary licensed clinical staff within the context of the proposed 
EPMs. The cost of such staff and any associated supplies, for example, 
would be incorporated in the practice expense (PE) RVUs under the PFS. 
For the lower-level visits (levels 1-3 for new visits and levels 2 and 
3 for established visits), we did not believe that visits necessarily 
would require auxiliary medical staff to be available in patients' 
homes. We anticipate these lower-level visits would be the most-
commonly furnished and would serve as mechanisms for patients to 
consult quickly with practitioners for concerns that patients can 
easily describe and explain. We do not propose to include PE RVUs for 
these services, since we do not believe that virtual visits envisioned 
for EPMs typically incur the kinds of costs included in the PE RVUs 
under the PFS. 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 for 
the complete service to be furnished. We believe 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 beneficiaries in the proposed 
EPMs' episodes without licensed clinical staff support in the home.
    However, we also note that the proposed EPMs already include 
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 
section of this proposed rule. Therefore, although we consider support 
by auxiliary clinical staff to be typical for levels 4 or 5 E/M visits 
furnished to EPM beneficiaries in the home via telehealth, we do not 
propose to incorporate these costs through PE RVUs. Given the 
anticipated complexity of these visits, we would expect to observe 
levels 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 propose 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 note that because the services described by the proposed G-
codes, 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 note that because 
these home telehealth services are E/M services, all other coverage and 
payment rules regarding E/M services would continue to apply.
    Under the proposed EPMs, 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.
    With respect to home health services paid under the home health 
prospective payment system (HH PPS), we emphasize 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 cannot be furnished for EPM 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, can be 
furnished for EPM 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 nonphysician practitioner 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 post-acute care setting (from which the 
patient was directly admitted to home health) or an allowed 
nonphysician practitioner working in collaboration with or under

[[Page 50939]]

the supervision of the acute or post-acute care 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 are not proposing 
that the waiver of the telehealth geographic site requirement for 
telehealth services and the originating site requirement for telehealth 
services furnished in the EPM 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 
is used to meet the requirement for home health certification, the 
usual Medicare telehealth rules apply with respect to geography and 
eligibility of the originating site. We expect that this policy will 
not limit EPM beneficiaries' access to medically-necessary home health 
services because beneficiaries receiving home health services during a 
proposed EPM episode will have had a face-to-face encounter with either 
the physician or an allowed nonphysician practitioner during their 
anchor hospitalization or a physician or allowed nonphysician 
practitioner during a post-acute facility stay prior to discharge 
directly to home health services.
    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 EPM 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 pursuant 
to the telehealth waivers only during the proposed EPM episode.
    We plan to monitor patterns of utilization of telehealth services 
under the proposed EPMs to monitor for overutilization or reductions in 
medically-necessary care, and significant reductions in face-to-face 
visits with physicians and nonphysician practitioners. We plan to 
specifically monitor the distribution of new telehealth home visits 
that we are proposing, as we anticipate greater use of lower level 
visits. Given our concern that auxiliary licensed clinical staff be 
present for level 4 and 5 visits, we will monitor our proposed 
requirement that these visits be billed on the same claim with the same 
date of service as a home nursing visit, during a period authorized 
home health care, or that the physician document the presence of 
auxiliary licensed clinical staff in the home or an explanation as to 
the specific circumstances precluding the need for auxiliary staff for 
the specific visit. We seek comments on the proposed waivers with 
respect to telehealth services, and the proposed creation of the home 
visit telehealth codes.
6. SNF 3-Day Rule
a. Waiver of SNF 3-Day Rule
    Pursuant to section 1861(i) of the Act, a beneficiary must have a 
prior inpatient hospital stays 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 for Medicare SNF coverage under other episode payment 
models, including BPCI Model 2 and the CJR model. BPCI Model 2 awardees 
that request and are approved for the waiver can discharge Model 2 
beneficiaries in fewer 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. Under the 
CJR model, we adopted a waiver of the SNF 3-day rule that applies 
beginning in performance year 2 as hospitals are not bearing risk in 
their first year. As discussed in section V.N. of this proposed rule 
with comment period, we are proposing to revise the effective date of 
the waiver of the SNF 3-day rule for the CJR model, and we are 
proposing that participant hospitals may begin using the waiver for 
episodes that begin on or after January 1, 2017.
    We are proposing EPM payment policies, similar to CJR payment 
policies, in section III.D. of this proposed rule, which would require 
participating EPM hospitals to repay Medicare for excess episode 
spending beginning in performance year 2. Episode payment models like 
BPCI, CJR and those being proposed in this proposed rule 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 EPM lays the 
groundwork for offering EPM participants greater flexibility around the 
parameters that determine SNF stay coverage. BPCI participants 
considering the early discharge of a beneficiary pursuant to 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 episode-based payment models such as BPCI, the 
CJR model, or the EPMs in this proposed rule.
    Because of the potential benefits we see for participating EPM 
hospitals, their provider partners, and beneficiaries, we propose to 
waive in certain instances, where it is clinically-appropriate, the SNF 
3-day rule for coverage of a SNF stay following the anchor 
hospitalization under EPM for episodes that begin on or after April 1, 
2018. While our intent is to align the effective date of the 
availability of this program waiver with performance year 2 (DR) of the 
model, when repayment responsibility for actual episode spending that 
exceeds the target price begins, we believe that an effective date 
based on the start of the episode will be clearer to participant 
hospitals, SNFs, and others in determining whether the waiver is 
available for an EPM beneficiary. We believe that clarity regarding 
whether a waiver applies to SNF services furnished to a particular 
beneficiary is important to help ensure compliance with the conditions 
of the waiver and also improve our ability to monitor waivers for 
misuse. We propose

[[Page 50940]]

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 EPM episode. We believe this 
waiver is necessary to the model test so that EPM participants can 
redesign care throughout the episode continuum of care extending to 90 
days post-discharge from the anchor hospital stay in order to maximize 
quality and hospital financial efficiency, as well as reduce episode 
spending under Medicare. However, we are not proposing to waive this 
requirement in performance year 1, when EPM participants are not 
responsible for excess actual episode spending. We believe that there 
is some potential for early hospital discharge followed by a SNF stay 
to increase actual episode spending over historical patterns unless EPM 
participants are particularly mindful of this potential unintended 
consequence. Without participant repayment responsibility in 
performance year 1, we are 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. 
For EPM episodes beginning on or after April 1, 2018, we propose to 
waive the SNF 3-day rule, where clinically-appropriate, because 
participants will bear partial or full responsibility (capped at the 
proposed stop-loss limit described in section III.D.7.b. of this 
proposed rule) for excess episode actual spending, thereby providing a 
strong incentive in those years for participants 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 EPM beneficiaries in all performance years of the 
model.
    In addition, for those proposed EPMs in this proposed rule and for 
future EPMs where this waiver is clinically-appropriate and the average 
LOS for Medicare beneficiaries hospitalized for certain EPM procedures 
without major complications or comorbidities may be already relatively 
short at 3 days we believe that we should protect immediate EPM 
beneficiary safety and optimizing health outcomes. Therefore, we 
propose to require that participants may only discharge an EPM 
beneficiary under this proposed waiver of the SNF 3-day rule to a SNF 
rated an overall 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 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 gives each SNF an overall rating of between 1 and 
5 stars.\105\ Those SNFs with 5 stars are considered to have much above 
average quality, and SNFs with 1 star are considered to have quality 
much below average. 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 an EPM 
episode, especially if that discharge occurs after fewer than 3 days in 
the hospital. Because of the potential greater risks following early 
inpatient hospital discharge, we believe it is appropriate that all EPM 
beneficiaries discharged from the EPM participant to a SNF in fewer 
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 believe such a SNF 
would need to provide care of at least average overall quality, which 
would be represented by an overall SNF 3-star or better rating.
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    \105\ www.medicare.gov/NursingHomeCompare/.
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    As discussed in the CJR final rule (80 FR 73457 through 73459), 
commenters expressed concern about the variation in the number of SNFs 
across the participating MSAs rated an overall 3 stars or better that 
would qualify for the SNF 3-day rule waiver under CJR. While we 
appreciate the variation in qualifying SNFs across the participating 
MSAs, we continue to believe that 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 note that all 294 MSAs 
that are eligible for selection for the AMI and CABG models under this 
proposed rule have at least one SNF that passed the 3 star requirement 
from June 2015 to May 2016 and would therefore qualify for the waiver 
under our proposal. Therefore, all EPM 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 proposed EPM waiver.
    Thus, the participating hospital must discharge the beneficiary to 
a SNF that is qualified under the SNF 3-day rule waiver. We are 
proposing that to be qualified under the SNF 3-day rule waiver a SNF 
must be included in the most recent calendar year quarter Five-Star 
Quality Rating System listing for SNFs on the Nursing Home Compare Web 
site for the date of the beneficiary's admission to the SNF. The 
qualified SNF must be rated an overall 3 stars or better for at least 7 
of the 12 months based on a review of the most recent rolling 12 months 
of overall star ratings. We propose to post on the CMS Web site the 
list of qualified SNFs in advance of the calendar quarter.
    For the CJR model, we justified the waiver of the SNF 3-day rule by 
reviewing data specific to the characteristics of CJR beneficiaries, 
such as, the geometric mean hospital LOS for the MS-DRGs associated 
with lower extremity joint replacement (3 to 7 days) and the frequency 
and length of SNF usage (typically 30 days) for CJR beneficiaries. We 
stated in the CJR Final Rule that we believe this waiver is necessary 
to the model test so that CJR participant hospitals could redesign care 
throughout the episode continuum of care extending to 90 days post-
discharge from the anchor hospital stay in order to maximize quality 
and hospital financial efficiency, as well as reduce episode spending 
under Medicare. However, the waiver does not apply in performance year 
1, when CJR participant hospitals are not responsible for excess actual 
episode spending.
    Based on our analysis of data discussed in section III.J.3. of this 
proposed rule, we believe some program and patient outcome 
vulnerabilities may exist with proposing to adopt the waiver of the SNF 
3-day rule for the proposed AMI, CABG, and SHFFT models or under future 
EPMs. To mitigate these possible vulnerabilities, we believe it will be 
necessary to determine if this waiver applies to EPMs on a model-
specific basis as follows:
     AMI Model--AMI beneficiaries have geometric mean hospital 
LOSs that are similar to CJR beneficiaries, 2.0-4.5 days (see Table 
35). Most AMI beneficiaries, regardless of AMI medical treatment or PCI 
treatment for AMI, are

[[Page 50941]]

not discharged to post-acute care. There is no research that shows 
increased mortality associated with the hospital LOS. Therefore, we 
believe that is may be clinically-appropriate to propose to waive the 
SNF 3-day rule for the AMI model for episodes beginning on or after 
April 1, 2018, as participant hospitals are not bearing risk in their 
first performance year or performance year 2 (NDR).
    We propose that the waiver be available for the AMI 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 
AMI model participant, as the SNF would need to be in close 
communication with the EPM participant to ensure that the beneficiary 
is in the model at the time the waiver is used. We propose that where 
the beneficiary would be eligible for inclusion in an AMI 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. A beneficiary 
would be eligible to receive services furnished under the 3-day rule 
waiver only during the AMI episode.
     CABG Model--CABG beneficiaries have a geometric mean 
hospital LOS of 6.0 to 11.6 days (see Table 35), much longer than the 
CJR model's mean LOS. While most CABG beneficiaries are discharged to 
SNFs, a mean hospital LOS well above 3 days indicates that it would not 
be clinically-appropriate for early discharges provided with this 
waiver. Therefore, we are not proposing to waive the SNF 3-day rule for 
the CABG model.
     SHFFT Model--SHFFT beneficiaries have a geometric mean 
hospital LOS of 3.7-6.7 days (see Table 35), somewhat close to the CJR 
model's mean LOS. However, studies show that shorter than average 
hospital LOSs for hip fracture are associated with higher 
mortality.\106\ While most SHFFT beneficiaries are discharged to SNFs, 
a mean hospital LOS above 3 days along with a higher mortality rates 
associated with shorter than average hospital LOSs indicates that it 
would not be clinically-appropriate for early discharges provided with 
this waiver. Therefore, we are proposing not to waive the SNF 3-day 
rule for the SHFFT model.
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    \106\ https://www.ncbi.nlm.nih.gov/pubmed/19817664.
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    We plan to monitor patterns of SNF utilization under the EPM, 
particularly with respect to hospital discharge in fewer 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 seek comment on our proposal to 
waive the SNF 3-day stay rule for stays in SNFs rated overall as 3 
stars or better following discharge from the anchor hospitalization in 
EPM episodes.
b. Additional Beneficiary Protections Under the SNF 3-Day Stay Rule 
Waiver
    For those specific proposed EPMs, where we propose to allow the SNF 
3-day rule waiver, we believe that it will be necessary to propose 
beneficiary protections against financial liability in addition to the 
beneficiary protections discussed elsewhere in this proposed rule. In 
proposing additional beneficiary protections that may be necessary to 
ensure proper use of the SNF 3-day rule waiver under the proposed EPMs, 
we note that there are existing, well-established payment and coverage 
policies for SNF services based on sections 1861(i), 1862(a)(1), and 
1879 of the Act that include protections for beneficiaries from 
liability for certain non-covered SNF charges. These existing payment 
and coverage policies for SNF services continue to apply under the 
EPMs, including SNF services furnished pursuant to the SNF 3-day 
waiver. (For example, see section 70 in the Medicare Claims Processing 
Manual, Chapter 30--Financial Liability Protections on the CMS Web site 
at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c30.pdf; and Medicare Coverage of Skilled Nursing 
Facility Care at https://www.medicare.gov/Pubs/pdf/10153.pdf; Medicare 
Benefit Policy Manual, Chapter 8--Coverage of Extended Care (SNF) 
Services Under Hospital Insurance at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c08.odf). In general, CMS 
requires that the SNF inform a beneficiary in writing about services 
and fees before the beneficiary is discharged to the SNF (Sec.  
483.10(b)(6)); a beneficiary cannot be required to request extra 
services as a condition of continued stay (Sec.  483.10(c)(8)(iii)(B)); 
and the SNF must inform a beneficiary that requests an item or service 
for which a charge will be made that there will be a charge for the 
item or service and what the charge will be (Sec.  
483.10(c)(8)(iii)(C)). (See also Chapter 6 of Medicare Coverage of 
Skills Nursing Facility Care at https://www.medicare.gov/Pubs/pdf/10153.pdf.)
    As discussed in the CJR final rule, commenters expressed concern 
regarding the lag between a CJR beneficiary's Medicare eligibility 
status change and a participant hospital's awareness of that change. 
There may be cases in which a SNF waiver is used by a participant 
hospital because the participant hospital believes that the beneficiary 
meets the criteria, based on the information available to the hospital 
and SNF at the time of the beneficiary's admission to the SNF, but in 
fact the beneficiary's Medicare eligibility status has changed and the 
hospital was unaware of it based on available information. We recognize 
that despite good faith efforts by participant hospitals and SNFs to 
determine a beneficiary's Medicare status for the model, it may occur 
that a beneficiary is not eligible to be included in the CJR model at 
the time the SNF waiver is used. In these cases, we will cover services 
furnished under the waiver when the information available to the 
provider at the time the services under the waiver were furnished 
indicated that the beneficiary was included in the model.
    In addition, as discussed in the CJR final rule, we noted that we 
would continue to evaluate the waiver of the SNF 3-day rule, including 
further lessons learned from Innovation Center models in which a waiver 
of the SNF 3-day rule is being tested. We indicated that in the event 
we determine that additional safeguards or protections for 
beneficiaries or other changes were necessary, such as to incorporate 
additional protections for beneficiaries, we would propose the 
necessary changes through future rulemaking. In section V of this 
proposed rule, we are proposing to add certain beneficiary protection 
requirements under the CJR model in Sec.  510.610.
    We have continued to learn from implementation of the SNF 3-day 
rule waiver in the CJR model, other models, and the Shared Savings 
Program. Based on these experiences, we believe there are situations 
where it would be appropriate to require additional beneficiary 
financial protections under the SNF 3-day rule waiver for the 
applicable proposed EPMs. Specifically, we are concerned about 
potential beneficiary financial liability for non-covered Part A SNF 
services that might be directly related to use of the SNF 3-day waiver 
under the applicable EPMs. For instance, we are concerned that a 
beneficiary could be charged for non-covered SNF services if an EPM 
participant hospital discharges a beneficiary to a SNF that does not 
meet the quality requirement (3 stars or

[[Page 50942]]

higher in 7 of the last 12 months), and the beneficiary is not provided 
a discharge planning notice, as described in proposed Sec.  512.450(b). 
Another scenario would be where the EPM participant hospital applies 
the SNF 3-day rule waiver for episodes that begin prior to April 1, 
2018, when this waiver is not applicable, and payment to the qualified 
SNF for furnishing Medicare covered SNF services is denied. A third 
scenario would be if an EPM participant hospital applies the SNF 3-day 
rule waiver for a specific proposed EPM where the waiver is not 
allowed, such as proposed for the CABG and SHFFT models in this 
proposed rule. In any of these circumstances, we assume the participant 
EPM hospital's intent was to rely upon the SNF 3-day rule waiver, but 
the waiver requirements were not met. When this occurs, we are 
concerned that once the claim is rejected, the beneficiary may not be 
protected from financial liability under existing Medicare rules 
because the waiver would not be available, and the beneficiary would 
not have had a qualifying inpatient hospital stay. Thus, the EPM 
beneficiary could be charged by the SNF for non-covered SNF services 
that were a result of an inappropriate attempt to use the waiver. In 
these cases, Medicare would deny payment of the SNF claim, and the 
beneficiary could potentially be charged by the SNF for these non-
covered SNF services, potentially subjecting such beneficiaries to 
significant financial liability. We believe that the rejection of the 
claim, in these cases, could easily have been avoided if the hospital 
had confirmed that the requirements for applying of the SNF 3-day 
waiver were satisfied.
    Other models have addressed similar issues in which the beneficiary 
may be subject to financial liability for non-covered SNF services 
related to the waiver. The Next Generation ACO Model generally places 
the risk on the SNF, where the SNF did not qualify under the waiver or 
otherwise knew or reasonably could be expected to have known that 
payment would not be made for the non-covered SNF services. In such 
cases, CMS makes no payment for the services, and the SNF may not 
charge the beneficiary for the services and must return any monies 
collected from the beneficiary. Additionally, under the Next Generation 
ACO Model, the ACO must indemnify and hold the beneficiary harmless for 
the services. We believe it is appropriate to propose to adopt a 
similar policy under the EPMs. In contrast to the Next Generation ACO 
Model, however, we believe it is most appropriate to hold the EPM 
participant hospitals financially responsible for misusing the waiver 
in situations where waiver requirements are not met, because EPM 
participant hospitals are required to be aware of the 3-day waiver 
requirements. EPM participant hospitals are the entities financially 
responsible for episode spending under the proposed EPMs and will make 
the decision as to whether it is appropriate to discharge a beneficiary 
without a 3-day stay. In addition, we will clearly lay out the 
requirements for use of the SNF waiver in the EPM final rule. As we are 
proposing, EPM participant hospitals may begin using this waiver only 
for specific episodes beginning on or after April 1, 2018, and may only 
utilize the waiver to discharge a beneficiary to a SNF that meets the 
quality requirements. EPM participant hospitals are required to ensure 
the waiver requirements of proposed Sec.  512.610 (a) and (b) are met. 
Therefore, we believe it is reasonable that the ultimate responsibility 
and liability for a non-covered SNF stay should rest with the EPM 
participant hospital. We considered holding the SNF responsible but 
decided that since hospitals, not SNFs, are the EPM participants, they 
therefore should be held responsible for complying with the SNF 3-day 
rule waiver conditions for the reasons stated previously.
    To protect EPM beneficiaries from being charged for non-covered SNF 
charges in instances when the waiver was used inappropriately, we are 
proposing to add certain beneficiary protection requirements in 
proposed Sec.  512.610. These requirements would apply for SNF services 
that would otherwise have been covered except for lack of a qualifying 
3-day hospital stay. Specifically, we propose if, subsequent to an EPM 
participant hospital applying the SNF 3-day rule waiver, we determine 
that the following waiver requirements were not met then the EPM 
participant hospital will be financially liable for the SNF stay:
     The EPM participant hospital discharges a beneficiary that 
is in a specific EPM where the SNF 3-day rule waiver does not apply.
     The EPM participant hospital discharges a beneficiary 
prior to April 1, 2018, where the SNF 3-day rule waiver does not apply.
     The EPM participant hospital discharges a beneficiary to a 
SNF that does not meet the quality requirement (3 stars or higher in 7 
of the last 12 months) and does not provide a discharge planning 
notice, as described in proposed Sec.  512.450(b), to the beneficiary 
alerting them of potential financial liability.
    In these preceding instances, we propose to apply the following 
rules:
     CMS shall make no payment to the SNF for such services.
     The SNF shall not charge the beneficiary for the expenses 
incurred for such services. and the SNF shall return to the beneficiary 
any monies collected for such services.
     The hospital shall be responsible for the cost of the 
uncovered SNF services furnished during the SNF stay.
    In addition, if the EPM hospital discharges a beneficiary to a SNF 
that does not meet the quality requirement (3 stars or higher in 7 of 
the last 12 months) and a discharge planning notice, as described in 
proposed Sec.  512.450(b), is provided to the beneficiary alerting them 
of potential financial liability then the hospital will not be 
financially liable for the cost of the SNF stay and the normal Medicare 
FFS rules for coverage of SNF services will apply.
    The discharge notice absolves the hospital of liability. However, 
we are requiring hospitals to keep a record of discharge planning 
notice distribution to EPM beneficiaries. We will monitor participant 
hospitals' use of discharge notification letters to protect EPM 
beneficiaries from potential abuse of the waiver. Nevertheless, we 
recognize there are some situations in which a beneficiary may wish to 
be discharged before a qualifying 3-day stay and may accept financial 
liability for a non-qualifying stay, in which case the participant 
hospital will not be held financially liable for the SNF stay. 
Therefore, when the EPM participant hospital has discharged a 
beneficiary to a SNF that does not qualify under the conditions of the 
waiver, we believe it is reasonable that the ultimate responsibility 
and financial liability for a non-covered SNF stay should rest with the 
EPM participant hospital. We will communicate with hospitals and SNFs 
about how a hospital would pay SNFs for non-qualifying services 
provided.
    We seek comment on these proposals. Specifically, we seek comment 
on whether it is reasonable to: (a) Cover services furnished under the 
SNF waiver based on the EPM participant hospital's knowledge of 
beneficiary eligibility for the applicable proposed EPMs, as determined 
by Medicare status, at the time the services under the waiver were 
furnished; and (b) to hold the EPM participant hospital financially 
responsible for rejected SNF claims as a result of lack of a qualifying 
inpatient hospital stay in cases where the EPM participant hospital 
discharge a

[[Page 50943]]

beneficiary to a SNF that did not qualify for waiver use and did not 
provide the beneficiary with a discharge planning notice. We seek 
comment on whether SNFs instead of, or in addition to, the EPM 
participant hospital should be held liable for such claims and under 
what circumstances. Finally, we seek comment on any other related 
issues that we should consider in connection with these proposal to 
protect beneficiaries from significant financial liability for non-
covered SNF services related to the waiver of the SNF 3-day rule under 
the proposed EPMs. We may address those issues through future notice 
and comment rulemaking.
7. Waivers of Medicare Program Rules To Allow Reconciliation Payment or 
Repayment Actions Resulting From the Net Payment Reconciliation Amount
    In order to make a reconciliation payment to or carry out 
recoupment from a participant that results from the NPRA calculation 
for each performance year as discussed in section III.D.5. of this 
proposed rule, we believe we would need to waive certain Medicare 
program rules. Therefore, in accordance with the authority in section 
1115A(d)(1) of the Act, we propose 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 this 
proposed payment model for EPM participants selected in accordance with 
CMS's proposed selection methodology. In addition, our proposals on 
reconciliation payments or repayments would 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. We therefore would 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 an EPM participant. We seek 
comment on our proposed waivers related to repayment and recoupment 
actions as a result of the NRPA calculated.
8. New Waiver for Providers and Suppliers of Cardiac Rehabilitation and 
Intensive Cardiac Rehabilitation Services Furnished to EPM 
Beneficiaries During an AMI or CABG Episode
    A cardiac rehabilitation (CR) program, as defined in Sec.  
410.49(a) of the regulations, means a physician-supervised program that 
furnishes physician prescribed exercise, cardiac risk factor 
modification, psychosocial assessment, and outcomes assessment. An 
intensive cardiac rehabilitation (ICR) program, as defined in Sec.  
410.49(a) of the regulations, means a physician-supervised program that 
furnishes cardiac rehabilitation and has shown, in peer-reviewed 
published research, that it improves patients' cardiovascular disease 
through specific outcome measurements described in Sec.  410.49(c).
    Services provided under CR and ICR programs may be furnished to EPM 
beneficiaries during the proposed AMI and CABG episodes. We note that 
all EPM beneficiaries in an AMI or CABG episode would meet CMS's 
coverage criteria for CR and ICR services.
    Section 410.49(f) describes the limitations of coverage of cardiac 
rehabilitation programs. The coverage requirements of CR limits the 
number of cardiac rehabilitation program sessions to a maximum of 2 
one-hour sessions per day for up to 36 sessions over a period up to 36 
weeks with the option for an additional 36 sessions over an extended 
period of time if approved by the MAC under section 1862(a)(1)(A) of 
the Act. Intensive cardiac rehabilitation program sessions are limited 
to 72 one-hour sessions (as defined in section 1848(b)(5) of the Act), 
up to 6 sessions per day, over a period of up to 18 weeks. In section 
VI of this proposed rule, we are proposing to make a payment adjustment 
under the AMI and CABG models to account for and possibly incentivize 
the provision of CR and ICR services beyond what has historically been 
provided during AMI and CABG episodes. In addition, we believe that 
waiving certain CR/ICR program requirements may also increase the use 
of these beneficial services under the AMI and CABG models.
    We reviewed the following physician functions required under Sec.  
410.49 in furnishing CR/ICR services:
     Medical director--defined at Sec.  410.49(a) as a 
physician that oversees or supervises the cardiac rehabilitation or 
intensive rehabilitation program at a particular site.
     Supervising physician--defined at Sec.  410.49(a) as a 
physician that is immediately available and accessible for medical 
consultations and medical emergencies at all times items and services 
are being furnished to individuals under cardiac rehabilitation and 
intensive cardiac rehabilitation programs.
     Physician-prescribed exercise--defined at Sec.  410.49(a) 
as aerobic exercise combined with other types of exercise (that is, 
strengthening, stretching) as determined to be appropriate for 
individual patients by a physician.
     Individualized treatment plan--defined at Sec.  410.49(a) 
as a written plan tailored to each individual patient that, under Sec.  
410.49(b)(2)(v), must be established, reviewed, and signed by a 
physician every 30 days.
    Under Sec.  410.49(a), and Sec.  1861(r)(1) of the Act, a physician 
is defined as a doctor of medicine or osteopathy. Section 410.49(b)(3) 
states that Medicare Part B pays for CR/ICR in a physician's office or 
in a hospital outpatient setting. All settings must have a physician 
immediately available and accessible for medical consultations and 
emergencies at all times when items and services are being furnished 
under the program. This provision is satisfied if the physician meets 
the requirements for direct supervision for physician office services, 
at Sec.  410.26 of this subpart; and for hospital outpatient services 
at Sec.  410.27 of this subpart.
    To provide greater program flexibility that might increase the 
availability of CR and ICR services furnished to EPM beneficiaries in 
AMI and CABG episodes, we are proposing to provide a waiver to the 
definition of a physician to include a nonphysician practitioner 
(defined for the purposes of this waiver as a physician assistant, 
nurse practitioner, or clinical nurse specialist as authorized under 
sections 1861(s)(2)(K)(i) and (ii) of the Act and defined in section 
1861(aa)(5) of the Act, or in Sec. Sec.  410.74, 410.75, and 410.76 of 
the regulations). Thus, this waiver will allow, in addition to a 
physician, a nonphysician practitioner to perform the functions of 
supervisory physician, prescribing exercise, and establishing, 
reviewing, and signing an individualized treatment plan for a provider 
or supplier of CR and ICR services furnished to an EPM beneficiary 
during an AMI or CABG episode. We do not believe a nonphysician 
practitioner is qualified to act in the capacity of a medical director. 
Thus, we are specifically excluding the medical director function from 
this proposed waiver. In addition, all other definitions and 
requirements related to a physician or supervising physician under 
Sec.  410.49 continue to apply. This proposed waiver is codified at 
proposed Sec.  512.630.
    For an EPM beneficiary in an AMI or CABG episode, this proposed 
waiver will apply to any provider or supplier that furnishes CR and ICR 
services to that beneficiary. We anticipate monitoring outcomes of care 
for EPM beneficiaries that receive CR and ICR services under this 
proposed waiver during an AMI or CABG episode. The

[[Page 50944]]

monitoring may involve an analysis of all or a sample of claims, 
medical records, or other clinical data for AMI and CABG EPM 
beneficiaries and providers or suppliers of CR and ICR services. We are 
soliciting comments on approaches we may take to monitor this waiver to 
ensure this program flexibility does not have a negative effect on how 
beneficiaries receive CR and ICR services which then may affect the 
outcome of the EPM beneficiary's care.
    We also reviewed other program requirements, such as waiving 
beneficiary cost-sharing, allowing home nursing visits/home monitoring, 
and allowing telehealth visits in the home under the AMI and CABG 
models. We did not find clinical data and literature that we believed 
sufficient to support proposing any additional waivers to the CR/ICR 
program requirements in this proposed rule. We are soliciting comments 
on the proposed CR/ICR waiver to allow nonphysician practitioners to 
perform the aforementioned physician functions specified for the 
provision of CR/ICR services, as well as comments on possible other CR/
ICR program requirement waive.
K. Data Sharing
1. Overview
    In section III.D.2.of this proposed rule, we propose models similar 
to the CJR model, to financially incentivize EPM participants 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. Consistent with the CJR model, we are proposing 
retrospective bundled payment models that provide financial incentives 
for EPM participants to work with other health care providers and 
suppliers to improve the quality and efficiency of care for Medicare 
beneficiaries by paying EPM participants or holding them responsible 
for repaying Medicare based on EPM participants' performance with 
respect to the quality and spending for AMI, CABG, and SHFFT episodes.
    In addition to the CJR model, we have experience with a range of 
efforts designed to improve care coordination for Medicare 
beneficiaries through financial incentives similar to those currently 
proposed, including the Shared Savings Program, the Pioneer ACO model 
and the BPCI initiative, all of which make certain data available to 
participants to better enable them to achieve their goals. For example, 
participants in the 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 ACOs receive certain beneficiary-identifiable claims 
information in accordance with our regulations. As noted in the June 9, 
2015 Medicare Shared Savings Program final rule (80 FR 32733), ACOs 
participating in the Shared Savings Program have reported that the 
beneficiary-identifiable claims data that they receive from CMS are 
being used effectively to better understand the FFS beneficiaries that 
are receiving services from their providers. As stated in that rule, 
these data give ACOs valuable insight into patterns of care for their 
beneficiary population and enable them to improve care coordination 
among and across providers and suppliers and sites of care. 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 claims 
data regarding their own patients, both for the historical period 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 post-acute care spending for 
beneficiaries that could have initiated an episode of care at that BPCI 
participant.
    Based on our experience with these efforts, we believe that making 
certain data available to EPM participants can have a salutary effect 
on their performance and is necessary for them to, among other things, 
adequately structure their care pathways, coordinate care for 
beneficiaries, make practice changes supported under the models, 
identify services furnished to beneficiaries receiving services under 
the models, and estimate spending across provider types within EPM 
episodes. Further, we believe that providing EPM participants with 
certain claims and summary information on beneficiaries in accordance 
with applicable privacy and security laws and established privacy and 
security protections would improve their ability to monitor their 
performance and understand the totality of care provided during an 
episode of care. With this greater awareness and understanding, we 
anticipate that EPM participants would be better equipped to evaluate 
and modify their practice patterns and actively manage care delivery so 
that care for beneficiaries is better coordinated, quality and 
efficiency are improved, and payments are aligned more appropriately to 
the medically necessary services beneficiaries have a right to receive.
    Accordingly, we propose to provide EPM participants in the proposed 
AMI, CABG, and SHFFT models with beneficiary-level claims data for the 
historical period used to calculate their episode benchmark and 
quality-adjusted target prices as well as with ongoing quarterly 
beneficiary-identifiable claims data in response to their request for 
such data in accordance with our regulations. Given that we are also 
proposing to incorporate regional pricing in the calculation of 
benchmark and quality-adjusted target prices, we also propose to 
provide EPM participants with aggregate regional data. Our proposal to 
make these data available to EPM participants is included in Sec.  
512.350. We note that, consistent with CJR, the EPM participant with 
whom we would share data is the acute care hospital that is held 
accountable for spending during the episode of care. We believe our 
proposal to share data as we do under the CJR model would be the most 
effective approach under the proposed AMI, CABG, and SHFFT models, and 
that proposing different processes for these models would increase 
administrative complexity for CMS and model participants as well as 
create confusion, especially given that we are proposing in section 
III.B. that some of the hospitals participating in CJR will also 
participate in the proposed EPMs. We request comments on these 
proposals, particularly regarding possible ways, if any, to further 
align our proposed policies with those finalized under the CJR model, 
as well as any appropriate bases for treating these models differently.
2. Beneficiary Claims Data
    Based on our experience with BPCI and CJR participants, we 
recognize that EPM participants could vary with respect to the kinds of 
beneficiary claims information that would be most helpful. For example, 
we believe that while many EPM participants might have the ability to 
analyze raw claims

[[Page 50945]]

data, other EPM participants could find it more useful to have a 
summary of these data. Given this, we propose to make beneficiary 
claims information for AMI, CABG, and SHFFT episodes available through 
two formats both for the baseline period and on an ongoing basis during 
their participation in the model as we do for CJR.
    First, for EPM participants that lack the capacity to analyze raw 
claims data, we propose to provide summary beneficiary claims data 
reports on beneficiaries' use of health care services during the 
baseline and performance periods upon request and in accordance with 
applicable privacy and security laws and established privacy and 
security protections. Such summary reports would 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 EPM participant reflects that, relative to their peers, a 
certain provider is associated with significantly higher rates of 
inpatient readmissions than the rates experienced by other 
beneficiaries with similar care needs, that may be evidence that the 
EPM participant could consider, among other things, the appropriateness 
of 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.
    Such reports would allow EPM participants to assess summary data on 
their relevant beneficiary population without requiring a more 
complicated analysis of raw claims data. Therefore, for both the 
baseline period and on a quarterly basis during an EPM participant's 
performance period, we propose to provide EPM participants with an 
opportunity to request summary claims data that would encompass the 
total expenditures and claims for episodes under the proposed AMI, 
CABG, and SHFFT models in which they are participating, including the 
procedure, inpatient stay, and all related care covered under Medicare 
Parts A and B within the 90 days after discharge, including hospital 
care, post-acute care, and physician services for the EPM participant's 
beneficiaries with an anchor diagnosis at discharge that is included 
under one of the proposed AMI, CABG, or SHFFT models.
    We also propose that these summary claims data reports, at a 
minimum, would also contain payment information, based upon the 
following categories for each episode initiated under the models:
     Inpatient.
     Outpatient.
     Skilled Nursing Facility.
     Home Health.
     Hospice.
     Carrier/Part-B.
     Durable Medical Equipment.
    These files would provide summary spending data such as episode 
counts, total average spending for each episode, and a breakdown of the 
episode counts and spending averages by each of the most common 
categories listed previously (for example, Inpatient, Outpatient, 
etc.). These reports should allow participants to assess summary data 
on their relevant beneficiary population without requiring analysis of 
raw claims data.
    Alternatively, for EPM participants with the capacity to analyze 
raw claims data, we propose to make more detailed beneficiary-level 
information available upon request and in accordance with applicable 
privacy and security laws and established privacy and security 
protections. These files would be much more detailed and include all 
beneficiary-level raw claims for all of the categories listed for each 
episode payment model episode. In addition, they would include episode 
summaries, indicators for excluded episodes, diagnosis and procedure 
codes, and enrollment and dual eligibility information for 
beneficiaries that initiate AMI, CABG, and SHFFT episodes. Through 
analysis, these detailed claims data would provide EPM participants 
with information to improve their ability to coordinate and target care 
strategies as well as to monitor, understand, and manage utilization 
and expenditure patterns. Such data would also aid them in developing, 
targeting, and implementing quality improvement programs and 
initiatives. We propose that the data files would be packaged and sent 
to a data portal (to which the EPM participants must request and be 
granted access) in a ``flat'' or binary format for the EPM participant 
to retrieve. We would also note that, for both the summary and more 
detailed claims data, information that is subject to the regulations 
governing the confidentiality of alcohol and drug abuse patient records 
(42 CFR part 2) would be excluded from the data shared with an EPM 
participant. Our proposal to make available to EPM participants, 
through the most appropriate means, data that CMS determines may be 
useful to EPM participants to determine appropriate ways to increase 
the coordination of care, improve quality, enhance efficiencies in the 
delivery system, and otherwise achieve the goals of the proposed 
episode payment models is included in Sec.  512.350. Further, CMS will 
make beneficiary-identifiable data available to an EPM participant in 
accordance with applicable privacy and security laws and only in 
response to the EPM participant's request for such data for a 
beneficiary who has been furnished a billable service by the 
participant corresponding to the episode definitions for AMI, CABG, and 
SHFFT episodes.
    We request comments on this proposal.
3. Aggregate Regional Data
    As discussed in section III.D. of this proposed rule, we propose to 
incorporate regional pricing data when establishing target prices for 
EPM participants as we do in the CJR model pricing methodology. As 
indicated in the CJR final rule (80 FR 73510), we finalized our 
proposal to share regional pricing data with CJR participants because 
it was a factor affecting target prices. Given the similarities between 
the CJR model and the EPMs proposed in this proposed rule, particularly 
our proposal to incorporate regional pricing data when establishing 
target prices under the model, we propose to provide aggregate 
expenditure data available for all claims associated with AMI, CABG, 
and SHFFT episodes for the U.S. Census Division in which the EPM 
participant is located, as we similarly provide to hospitals 
participating in the CJR model.
    Specifically, we propose to provide EPM participants with aggregate 
data on the total expenditures during an acute inpatient stay and 90-
day post-discharge period for all Medicare FFS beneficiaries who would 
have initiated an episode under our proposed episode definitions in 
section III.C. of this proposed rule. This data will be provided at the 
regional level; that is, we propose that an EPM participant would 
receive, if requested from CMS, aggregate regional data for potential 
episode payment model AMI, CABG, and/or SHFFT episodes initiated in the 
U.S. Census Division where the EPM participant is located.
    These regional data would be in a format similar to the proposed 
summary claims data reports and would provide summary information on 
the average episode spending for AMI, CABG, and SHFFT episodes in the 
U.S. Census Division in which the EPM participant is located. Our 
proposal to provide aggregate regional data is included in Sec.  
512.350. We seek comments on our proposal to provide these data to EPM 
participants.

[[Page 50946]]

4. Timing and Period of Baseline Data
    We recognize that providing the ability to request certain baseline 
data will be important for EPM participants to be able to estimate 
episode spending, coordinate care, and identify areas for practice 
transformation, and that early release of this data can facilitate 
their efforts to do so. Also, as discussed in section III.D. of this 
proposed rule, episode benchmark and quality-adjusted target prices 
will be calculated using an EPM participant's historical episode 
spending during their baseline period. Further, we believe that EPM 
participants will view the episode payment model effort as one 
involving continuous improvement. As a result, changes initially 
contemplated by an EPM participant could be subsequently revised based 
on updated information and experiences.
    Therefore, as with CJR and BPCI, we propose to make 3 years of 
baseline data available to EPM participants and intend to make these 
data available upon request prior to the start of the first episode 
payment model performance year and in accordance with applicable 
privacy and security laws and established privacy and security 
protections. We believe that 3 years of baseline data is sufficient to 
reflect both an EPM participant's most recent performance and recent 
performance trends. Moreover, making data available for a 3-year period 
aligns with our proposal to set a target price based on a 3-year period 
of baseline data in section III.D. of this proposed rule. We believe 
that if an EPM participant has access to baseline data for the 3-year 
period used to set its episode benchmark and quality-adjusted target 
prices, then it would be better able to assess its practice patterns, 
identify cost drivers, and ultimately redesign its care practices to 
improve efficiency and quality.
    Therefore, we propose that the 3-year period utilized for the 
baseline period match the baseline data used to create EPM participants 
episode benchmark and quality-adjusted target prices, as discussed in 
section III.D. Specifically, we propose that the baseline beneficiary-
level and summary data (both EPM participant-level and regional summary 
data) would be available for episodes that began January 1, 2013 
through December 31, 2015. We request comments on these proposals.
5. Frequency and Period of Claims Data Updates for Sharing Beneficiary-
Identifiable Claims Data During the Performance Period
    In addition to baseline data, we believe that the availability of 
periodically updated beneficiary-identifiable claims data (both summary 
and beneficiary-level) will assist EPM participants in the proposed 
AMI, CABG, and SHFFT models to identify areas where they might wish to 
change their care practice patterns, as well as monitor the effects of 
any such changes. With respect to these purposes, we have considered 
what would be the most appropriate period and frequency for making 
updated claims information available to EPM participants, while 
complying with the HIPAA Privacy Rule's ``minimum necessary'' standard.
    We believe that, as is the case with CJR, making 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, would be representative of total spending 
and useful to hospitals as they consider long-term practice changes. We 
note that we intend for the data for this model to be consistent with 
our proposed performance year of January 1 through December 31 (July 1 
through December 31 for performance year 1). To accomplish this for the 
first year of the models (2017), we propose to provide, upon request 
and in accordance with the HIPAA Privacy Rule, claims data from July 1, 
2017 to June 30, 2018 on as frequently as a running quarterly basis, as 
claims were available. For each quarter and extending through June 30, 
2018, we propose that participants during that first year would receive 
data for up to the current quarter and all of the previous quarters 
going back to July 1, 2017. These data sets would contain all claims 
for all potential episodes that were initiated on or after July 1, 2017 
and capture a sufficient amount of time for relevant claims to have 
been processed. We note 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.
    Accordingly, we propose to make updated claims data available to 
EPM participants, representing up to 6 quarters of data, upon receipt 
of a request for such information that meets CMS's requirements to 
ensure the applicable HIPAA conditions for disclosure have been met. 
Also, consistent with our procedures for CJR, we propose to make these 
data available as frequently as on a quarterly basis. Given that we 
have received requests in other initiatives to make data available on a 
more frequent basis, we also propose to eventually make these data 
available on as frequently as a monthly basis if practicable. In 
addition, we propose that for an EPM participant to receive data on 
episode spending, they will only need to make a single initial request 
rather than multiple periodic requests for data. CMS would make data 
available to the EPM participant for the duration of their 
participation or until they notify CMS that they no longer wish to 
receive these data.
    Our proposal to make the minimum data necessary for EPM 
participants to conduct quality assessment and improvement activities 
and effectively coordinate care of its patient population as frequently 
as on a quarterly basis throughout the EPM participant's participation 
or until they notify CMS that they no longer wish to receive these data 
is included at Sec.  512.350(b)(2). We seek comments on this proposal.
6. Legal Permission To Share Beneficiary-Identifiable Data
    As we have stated previously (see 80 FR 73513), 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. Here, the HIPAA Privacy Rule allows for the proposed 
disclosure of individually identifiable health information by CMS.
    In this proposed rule, we propose to make EPM participants 
financially responsible for services that may have occurred outside of 
the hospital during the 90-day post-discharge period. Although we 
expect EPM participants to be actively engaged in post-discharge 
planning and other care during the 90-day post-discharge period for 
beneficiaries receiving services under the proposed AMI, CABG, and 
SHFFT models, we believe that it is necessary for the purposes of these 
models to provide EPM participants 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

[[Page 50947]]

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 for episodes included under 
the proposed models 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, EPM participants would be using the data on 
their patients to evaluate the performance of the participant 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 an EPM participant 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 
to a ``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 EPM's 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.
    We note that, as is the case with CJR, in this proposed rule, we 
propose to disclose beneficiary-identifiable data to only the hospitals 
that are bearing risk for an AMI, CABG, or SHFFT episode and not with 
their collaborators. As stated in the final CJR rule (80 FR 73515), we 
believe that the hospitals that are specifically held financially 
responsible for an episode should make the determination as to which 
data are needed to manage care and care processes with their 
collaborators as well as which data they might want to re-disclose, if 
any, to their collaborators provided they are in compliance with the 
HIPAA Privacy Rule. We note that beneficiaries have the right to 
request restrictions on the use of their data in accordance with the 
HIPAA Privacy Rule, but covered entities are not required to agree to 
such requests.
    We believe our data sharing proposals are permitted by and are 
consistent with the authorities and protections available under the 
aforementioned statutes and regulations. We seek comments on our 
proposals regarding the authority to share beneficiary-identifiable 
data.
7. Data Considerations With Respect to EPM and CJR Collaborators
    As noted earlier in this section and as is the case with CJR (80 FR 
73515), we propose to disclose beneficiary-identifiable data to only 
the EPM participants that are bearing risk for an AMI, CABG, or SHFFT 
episode and not with their collaborators because we believe that the 
EPM participants that are specifically held financially responsible for 
an episode should make the determination as to which data are needed to 
manage care and care processes with their collaborators as well as 
which data they might re-disclose in accordance with applicable privacy 
and security laws. Based on our experience in implementing the CJR, 
however, we understand that some CJR collaborators under that model 
believe that not having comparable data poses challenges to their 
ability to assess their own performance in the context of the model and 
the region in which they operate. As such, these collaborators believe 
that it would helpful to have additional data with which they could 
better assess their own performance, including information about care 
patterns within their region.
    We are considering ways in which to address the concerns raised by 
these CJR collaborators and potentially similar future concerns that 
could arise among EPM collaborators as well as what additional data 
might be helpful for

[[Page 50948]]

these purposes and which could be disclosed in accordance with existing 
statutory and regulatory requirements. As previously discussed, EPM 
participants, like CJR participants, may share data with their EPM (or 
CJR) collaborators provided they are ``business associates'' in 
compliance with the HIPAA Privacy Rule, and we encourage them to make 
data available to their EPM collaborators to the extent they deem it 
appropriate and in compliance with these strictures.
    In addition, given our view that the HIPAA Privacy Rule limits our 
ability to share beneficiary-identifiable data with non-EPM (or non-
CJR) participants, we are considering whether it would be feasible and 
appropriate to make additional non-beneficiary-identifiable aggregate 
data publicly available through some means. For example, we are 
exploring whether it would be helpful to make available aggregate 
summary data organized by anchor MS-DRG, provider type, and region for 
care that would be included in episodes that would meet the criteria 
for inclusion in the regional component of EPM (or CJR) episode 
benchmark prices as described in section III.D.4.b. of this proposed 
rule (or 80 FR 73337 with respect to CJR), assuming all IPPS hospitals 
nationally were EPM (or CJR) participants. We will refer to these 
episodes as simulated episodes later in this section. We are interested 
in whether information such as the following would be helpful to EPM 
(or CJR) collaborators:
     Number of simulated episodes and number of hospitals with 
each anchor MS-DRG at discharge in the simulated episodes.
     For AMI model anchor MS-DRGs, the number of simulated 
episodes with chained anchor admissions by the price MS-DRG that would 
have been assigned to the simulated episode.
     For AMI model anchor MS-DRGs, the number of simulated 
episodes with readmissions resulting in discharge under a CABG MS-DRG 
by the CABG MS-DRG.
     Average (mean and median) and standard deviation of total 
spending on those simulated episodes.
     Number of simulated episodes with and mean acute care 
payments for the anchor hospitalization and readmission.
     Number of simulated episodes with and mean Part B 
payments.
     Number of simulated episodes with and mean inpatient 
rehabilitation facility payments.
     Number of simulated episodes with and mean skilled nursing 
facility payments.
     Number of simulated episodes with and mean home health 
payments.
     Proportion of total simulated episode spending 
attributable to acute care payments for the anchor hospitalization and 
readmissions.
     Proportion of total simulated episode spending 
attributable to Part B payments.
     Proportion of total simulated episode spending 
attributable to inpatient rehabilitation facility payments.
     Proportion of total simulated episode spending 
attributable to skilled nursing facility payments.
     Proportion of total simulated episode spending 
attributable to home health payments.
    To assist us as we consider future options for potentially 
increasing the availability of data to collaborators under the EPMs or 
similar models such as CJR, we seek comments on what kinds of actions 
and data would be most helpful to EPM, or similar model (such as CJR) 
collaborators, and which could be disclosed in accordance with the 
existing statutory and regulatory requirements for sharing data.

L. 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 proposed EPMs are intended to enable CMS to better understand 
the effects of episode payments approaches on a broader range of 
Medicare providers and suppliers than would choose to participate in a 
voluntary model such as is currently being tested under BPCI. Obtaining 
information that is representative of a wide and diverse group of 
episode initiators will best inform us on how such a payment model 
might function were it to be more fully integrated within the Medicare 
program. The proposed CR incentive model is intended to enable CMS to 
assess whether the proposed incentive improves patient quality and 
access to this covered benefit without increasing overall payments. All 
CMS models, which would include the proposed EPMs and CR incentive 
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. Outlined in the following section are the proposed design and 
evaluation methods, the data collection methods, key evaluation 
research questions, and the evaluation period and anticipated reports 
for the proposed EPMs.

B. Design and Evaluation Methods

    Our evaluation methodology for the EPMs and CR incentive model 
would be consistent with the standard Innovation Center evaluation 
approaches we have taken in other projects such as the BPCI initiative, 
the Continuous Care for Joint Replacement (CJR) model,\107\ the Acute 
Care Episode (ACE) Demonstration, Pioneer ACO model, and other 
Innovation Center models. Specifically, the evaluation design and 
methodology would be designed to allow for a comparison of historic 
patterns of care among the participant to any changes made in these 
patterns in response to the proposed models. In addition, the overall 
design would include a comparison of participants in EPM or CR areas 
with a matched comparison group in areas not participating in a 
specific episode to help us discern simultaneous and competing provider 
and market level forces that could influence our findings. Comparison 
group members for the EPMs would be selected based on how well they 
match the EPM participants along a variety of measurable dimensions, 
such as size, expenditures, and other provider characteristics and 
market characteristics. The random method of selection for 
participating MSAs will allow the evaluation to observe the operation 
of the model in a variety of circumstances and among providers and 
suppliers who may not otherwise choose to participate in a voluntary 
payment model.
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    \107\ https://innovation.cms.gov/initiatives/cjr.
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    We plan to use a range of analytic methods, including regression 
and other multivariate methods, and difference-in-differences methods 
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. With these 
methodologies, we would be able to examine the experience over time 
relative to those in the comparison groups controlling for as many of 
the relevant confounding factors as is possible. 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 
proposed models at the geographic unit level, the

[[Page 50949]]

hospital level, and at the patient level. We are also considering 
various statistical methods to address factors that could confound or 
bias our results. For example, we would use 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. Thus, in our 
analysis, if 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 biased estimates and mistaken inferences. Finally, we plan to 
use various statistical techniques to examine the effects of the 
proposed models while also taking into account the effects of other 
ongoing interventions such as BPCI, Pioneer ACOs, and the Shared 
Savings Program. For example, we are considering additional regression 
techniques to help identify and evaluate the incremental effects of 
adding the EPMs 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 proposed EPM and CR Incentive models. We expect to base much of 
our analysis on secondary data sources such as the Medicare FFS claims. 
The beneficiary claims data would provide information such as use of 
CR, expenditures in total and by type of provider and service as well 
as whether or not there was an inpatient hospital readmission or a 
subsequent AMI. In conjunction with the secondary data sources 
mentioned previously, we are considering a CMS-administered survey of 
beneficiaries who received a qualifying procedure during the 
performance period in the EPM evaluation. This survey would be 
administered to beneficiaries who were in the EPM qualifying episode or 
similar patients selected as part of a control group. The primary focus 
of this survey would be to obtain information on the beneficiary's 
experience in EPMs' episodes relative to usual care. The administration 
of this beneficiary survey would be coordinated with administration of 
the HCAHPS survey so as to not conflict with or compromise HCAHPS 
efforts. For the evaluation of both the EPMs and the CR incentive 
model, we are considering a survey administered by CMS and guided 
interviews conducted by CMS with providers and suppliers including, but 
not limited to, initiating and transfer hospitals, physicians, and 
post-acute care providers participating in the proposed models. These 
surveys would provide insight on providers' experience under the model 
and further information on the care redesign strategies undertaken.
    In addition, we are considering CMS evaluation contractor 
administered site visits and focus groups with selected hospitals, 
physicians, and post-acute care providers in EPM and CR evaluation 
efforts. We believe that these qualitative methods would provide 
contextual information that would help us better understand the 
dynamics and interactions occurring among participants. 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 program nuances as well 
as identify factors that are associated with successful interventions 
and distinguish the effects of multiple interventions that may be 
occurring, such as simultaneous ACO and bundled payment participation.
    We anticipate that secondary data sources will be the source of 
most if not all data collection for the FFS-non CR control group; 
however, we may initiate some data collection from primary data sources 
for this group if warranted.

D. Key Evaluation Research Questions

    Our evaluation would assess the impact of the proposed models 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, quality, and 
access. Our key evaluation questions would include, but would not be 
limited to, the following:
     PAYMENT. Is there a reduction in Medicare expenditures in 
absolute terms? By subcategories? Do the participants reduce or 
eliminate variations in utilization and/or expenditures 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 and for specific types of services? How do these 
patterns compare to matched comparators, 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? For 
example, in the AMI and CABG episodes, what changes to hospital 
transfer patterns, if any, could be seen under the models? Has there 
been any changes to utilization of cardiac rehabilitation services and 
does this appear to be associated with access to the cardiac 
rehabilitation incentive payment, participation in the cardiac EPMs or 
a combination of the two?
     REFERRAL PATTERNS AND MARKET IMPACT. How has the behavior 
in the selected MSAs changed under the models? Have the referral 
patterns of type and specific providers changed?
     OUTCOMES/QUALITY. Is there either a negative or positive 
impact on quality of care and/or better patient experiences of care? 
Did the incidence of relevant clinical outcomes including but not 
limited to complications, mortality, readmissions and other subsequent 
clinically relevant events, and beneficiary pain, functioning, and 
independence experiences remain constant or decrease? Were there 
changes in beneficiary outcomes under the models compared to 
appropriate comparison groups? Was there an impact on quality during 
the episode/CR care period or in the period immediately preceding or 
following the episode/CR care period? Was there an impact on measures 
of relevant long term quality such as mortality at one year after the 
initiating event?
     UNINTENDED CONSEQUENCES. Did the proposed models result in 
any unintended consequences, including adverse selection of patients, 
access problems, cost shifting beyond the episode/CR care period, 
evidence of delay or stinting of appropriate care, anti-competitive 
effects on local health care markets, or 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 and how did this compare to regional and 
national patient populations? What were the characteristics of impacted 
markets, providers, and patients and to what extent were they 
reflective of the national sample? Were EPMs and/or the CR incentive 
model more successful in reducing payments and improving quality in 
certain types of markets, providers, or patients? To what extent would 
the results be able to be extrapolated to similar markets and/or 
nationally?
     EXPLANATIONS FOR VARIATIONS IN IMPACT. What factors are 
associated with the pattern of results

[[Page 50950]]

stated previously? Specifically, are they related to--
    ++ Characteristics of the administrative features of the models 
including variations by year and factors such as presence of downside 
risk;
    ++ The EPM or CR participant's specific features and structure, 
including such factors as the number of relevant cases, whether they 
have ability to handle complex cases, profit status, proportion of 
dually eligibility patients served, and other considerations;
    ++ The EPM or CR participant's care redesign or other interventions 
and their ability to carry out their proposed intervention;
    ++ The characteristics of the providers and suppliers serving 
patients during the entirety of the episode or CR care period and the 
nature of the interaction of these providers and suppliers with the EPM 
or CR participants;
    ++ The characteristics of the markets and MSAs, and
    ++ The clinical and socio-demographic characteristics associated 
with the patient populations served.

E. Evaluation Period and Anticipated Reports

    As discussed in section III.B, the proposed models have a 5-year 
performance period. The evaluation periods would encompass this entire 
5-year period and up to 2 years after. We plan to evaluate the proposed 
models on an annual basis. We recognize, however, that interim results 
are subject to issues such as sample size and random fluctuations in 
practice patterns. Hence, while CMS intends to have internal periodic 
summaries to offer useful insight during the course of the effort, a 
final analysis after the end of the 5-year performance period will be 
important for ultimately synthesizing and validating results.
    We seek comments on our design, evaluation, data collection 
methods, and research questions.

V. Comprehensive Care for Joint Replacement Model

A. Participant Hospitals in the CJR Model

    In the CJR proposed rule (80 FR 41207), we proposed to require that 
all hospitals paid under the IPPS that are physically located in a 
county in an MSA selected for participation in the CJR model would be 
required to participate. In the final rule (80 FR 73288), we finalized 
this proposal, noting that we would use the primary physical address 
associated with a hospital's CCN to identify whether or not a given 
hospital was physically located in an MSA selected for participation. 
In response to a commenter's inquiry as to whether all hospitals under 
a CCN would be required to participate in CJR if a CCN included 
multiple hospital campuses and some of these campuses were physically 
located in the MSA while others were not, we stated that since CMS 
tracks and identifies hospitals using the CCN, all hospital locations 
associated with that CCN would be required to participate in the model. 
In order to identify hospitals located in the MSAs selected to 
participate in the CJR model, we utilize the primary physical address 
associated with the CCN. In cases where a CCN is associated with 
multiple hospital campuses, if the primary CCN address is located in a 
selected MSAs, all hospital campuses associated with that CCN would be 
required to participate in CJR unless otherwise excluded. We also noted 
that our initial analysis of the acute care hospitals in the MSAs 
selected to participate in CJR indicated that none of the CCNs in the 
MSAs selected for CJR included multiple campuses crossing MSA 
boundaries. That is, none of the CCNs with a primary physical address 
in one of the selected MSAs had multiple campuses physically located in 
different MSAs that would result in inclusion of a hospital campus not 
physically located in a selected MSA.
    We are not aware of any participant hospitals currently in the CJR 
model that are not physically located in one of the 67 MSAs chosen to 
participate in CJR. However, given the comments we received from the 
public on the CJR proposed rule (80 FR 41207) and questions from 
stakeholders during our implementation of the CJR model, we note here 
that if a hospital that is not physically located in one of the 67 MSAs 
participating in CJR bills under a CCN with a primary address in one of 
the 67 CJR MSAs, whether through a merger or other organizational 
change, that hospital will be considered a CJR participant as of the 
date in which the hospital began to bill under the CCN address located 
within the 67 MSAs. This policy has been in effect since the start of 
the CJR model on April 1, 2016 and is laid out at 42 CFR 510.2 
(definition of participant hospital).

B. Inclusion of Reconciliation and Repayment Amounts When Updating Data 
for Quality-Adjusted Target Prices

    In response to the CJR proposed rule, commenters encouraged us to 
include reconciliation payments in updated historical episode spending 
totals when calculating quality-adjusted target prices for performance 
years 3 and 4 (based on spending for episodes beginning in years 2014 
through 2016) and performance year 5 (based on spending for episodes 
beginning in 2016 through 2018). (Note that we propose to replace the 
term ``target price'' with the term ``quality-adjusted target price,'' 
as described further in section V.C.) Commenters were concerned that if 
we excluded those payments, we would not account for care coordination 
services that are not paid for under Medicare FFS, but that participant 
hospitals paid for using reconciliation payments. As a result, we would 
underestimate hospital costs and prices by not accounting for care 
coordination services paid for with reconciliation payments. We 
finalized our proposal to exclude reconciliation payments from 
expenditure data, noting our view that including reconciliation 
payments would result in Medicare paying participant hospitals their 
quality-adjusted target price, regardless of whether the participant 
hospital's expenditures were above or below that price. We also noted 
that we had not proposed an alternative in our proposed rule, and that 
we might consider including reconciliation payments in updating the set 
of historical years used to calculate quality-adjusted target prices 
through future rulemaking (80 FR 73332).
    Based upon our further consideration, we propose to include both 
reconciliation payments and repayments in our calculations when 
updating quality-adjusted target prices for performance years 3 and 4 
and performance year 5. We want to encourage hospitals to invest in 
novel ways of coordinating care and improving quality, and we recognize 
that such activities are not directly reimbursed by Medicare. We agree 
that including reconciliation payments would more fully recognize the 
total costs of care under an episode payment model than would excluding 
those payments. The number of comments we previously received on this 
topic indicates that excluding reconciliation payments could discourage 
such investment, due to concerns that quality-adjusted target prices 
would underestimate the true cost of care. Although including the 
entire reconciliation payment in our updated quality-adjusted target 
price calculations could result in overpaying for care coordination 
services, the impact of including these payments on quality-adjusted 
target prices will decrease as we move to regional pricing. In 
addition, we believe our proposal to also include repayment amounts 
when

[[Page 50951]]

updating historical data used to calculate quality-adjusted target 
prices would mitigate any potential overpayment for care coordination 
services.
    In addition, we propose to include in regional historical episode 
payments any reconciliation payments and repayment amounts from 
historical BPCI LEJR episodes initiated at regional hospitals in order 
to most fully capture the total costs of care under episode payment 
models. If we included reconciliation payments and repayment amounts 
for CJR episodes but not BPCI LEJR episodes, we would likely 
underestimate the regional total costs of care to hospitals, which 
would result in artificially lowered quality-adjusted target prices for 
participant hospitals, in effect penalizing participant hospitals. By 
including these amounts from both initiatives we will avoid distorting 
the regional component of historical LEJR episode spending, which will 
be especially important once we move to setting prices based on 100 
percent regional episode data in performance year 4 of the model. This 
policy mirrors our proposal to include these reconciliation payments 
and repayment amounts when updating the historical periods used for EPM 
quality-adjusted target prices; we refer readers to section III.D.3.e. 
of this proposed rule for further discussion of our rationale for 
proposing this approach.
    We propose to amend our regulations to add a new subsection Sec.  
510.3(b)(8) to reflect this proposal. We seek comment on our proposal.

C. Quality-Adjusted Target Price

    We propose to change the term we use to refer to a CJR participant 
hospital's episode benchmark price incorporating the effective discount 
factor based on the participant hospital's quality category to 
``quality-adjusted target price.'' This term will replace our prior 
term, ``episode target price,'' which referred to the episode benchmark 
price with a 3 percent discount applied. The term quality-adjusted 
target price would represent the price used at reconciliation to 
determine whether a CJR participant hospital is eligible for a 
reconciliation payment or repayment, and the amount of the 
reconciliation payment or repayment. To clarify, this change would be a 
change of terminology to more accurately reflect the impact of quality 
scores on the reconciliation process, and would not change the actual 
data that hospitals receive. In addition, our proposal to replace the 
term ``episode target price'' with ``quality-adjusted target price'' 
mirrors the terminology for the proposed EPMs and would reduce 
confusion for hospitals participating in more than one model.
    In accordance with 42 CFR 510.300(b)(7), CMS provides prospective 
prices to CJR participant hospitals prior to the performance period in 
which they apply, incorporating the 3 percent discount that would apply 
if the hospital is eligible for a reconciliation payment and achieves 
an ``Acceptable'' composite quality score category. As discussed in the 
CJR final rule, a hospital's effective discount percentage may be 
reduced at reconciliation to account for quality performance (80 FR 
73378). At the conclusion of a performance year, CMS will calculate a 
composite quality score for each hospital, which determines the 
effective discount percentage at reconciliation. The CJR final rule 
outlines the relationship between the composite quality score and the 
effective discount percentage (80 FR 73365). That is, a participant 
hospital may be eligible to earn a greater reconciliation payment or 
have a lower repayment amount as a result of its quality performance 
under the model (80 FR 73378). Hospitals are therefore aware that a 
different effective discount factor, and thus different quality-
adjusted target price, may be utilized at reconciliation to reflect 
their quality performance under the model, and they could easily 
estimate the range of potential quality-adjusted target prices that 
could apply at reconciliation.
    We also wish to clarify the terminology we use to describe the 
discount factor included in the quality-adjusted target price. The 
discount factor included in the quality-adjusted target price based on 
the quality score is referred to as the ``effective discount factor.'' 
In contrast, the discount factor used to determine repayment amounts in 
performance years 2 and 3, during which repayment responsibility is 
being phased in and a lower discount factor applies for purposes of 
calculating repayment amounts will be referred to as the ``applicable 
discount factor.'' In performance years 2 and 3, the effective discount 
factor would continue to apply for hospitals that qualify for and earn 
a reconciliation payment; the applicable discount factor would only be 
applied in those cases where a hospital exceeded expected episode 
spending and would be responsible for repayment.
    We propose to implement these terminology changes in all 
communications with participant hospitals 60 days after the change is 
finalized. We propose to establish these definitions in the regulations 
at Sec.  510.2 and update our regulations at Sec.  510.300 and Sec.  
510.315 to reflect our use of the term ``quality-adjusted target 
price'' in lieu of ``episode target price'' and our use of the term 
``applicable discount factor.''
D. Reconciliation
1. Hospital Responsibility for Increased Post-Episode Payments
    As discussed in the CJR final rule, participant hospitals will be 
responsible for repaying Medicare for post-episode spending that 
exceeds 3 standard deviations from the regional mean (80 FR 73408). We 
refer readers to the CJR final rule (80 FR 73407) for further 
discussion of our rationale for holding participant hospitals 
financially accountable for significant increases in Medicare Parts A 
and B spending during the 30 days after a CJR episode ends. We also 
finalized a policy to include the result of our post-episode spending 
calculation (the amount exceeding 3 standard deviations above the 
regional mean) in a participant hospital's NPRA for a given performance 
year; as a result, a hospital's financial responsibility for post-
episode spending would be subject to the stop-loss and stop-gain limits 
we finalized for the CJR model (80 FR 73398).
    We propose to modify our policy to hold hospitals responsible for 
post-episode payments that exceed 3 standard deviations from the 
regional mean. First, we propose to calculate post-episode payments 
using the same timeframes we use for the subsequent reconciliation 
calculation, not when we conduct the initial reconciliation for a 
performance year (80 FR 73383). Given that we will begin reconciliation 
calculations 2 months after the conclusion of a performance year, we do 
not believe there would be sufficient time for claims run-out in order 
to set a reliable regional threshold for determining post-episode 
spending. Since in all cases any responsibility for post-episode 
payments would decrease a participant hospital's reconciliation payment 
or increase its repayment amount, our proposed change would more 
accurately and fairly hold hospitals accountable for increased post-
episode spending. We believe instances in which a CJR participant 
hospital is responsible for post-episode spending repayment will be 
rare, given our belief that hospitals in the CJR model will focus on 
care redesign during the LEJR episode and our other monitoring efforts 
under the CJR model. Our intent is to prevent hospitals from delaying 
services or care until the conclusion of a CJR episode by

[[Page 50952]]

monitoring for cases in which hospitals have significantly increased 
spending in the 30 days following the episode. Assessing post-episode 
spending when we have more complete claims information would allow a 
more accurate assessment of hospitals' behavior under the model and 
prevent potentially high fluctuations in results that may occur if we 
calculate regional thresholds and hold hospitals responsible for post-
episode spending beginning 2 months after the conclusion of a 
performance year. We propose that this modified timeline would be 
applied to our reconciliation of the first CJR performance year and all 
performance years thereafter. That is, we would assess post-episode 
spending for the first performance year (episodes beginning and ending 
between April 1, 2016 and December 31, 2016) when we conduct the 
reconciliation for the second CJR performance year (2017) in early 
2018.
    We also propose that hospital responsibility for post-episode 
spending will not be subject to the stop-loss and stop-gain limits. 
Although we believe, as noted previously, that hospital responsibility 
for post-episode spending will be rare, we also believe that in those 
cases where a hospital has financial responsibility for post-episode 
spending, such hospitals should be responsible in full for these 
amounts. The CJR model includes stop-loss limits, including more 
generous limits for certain types of hospitals (80 FR 73403), which are 
designed to limit a participant hospital's responsibility for episode 
spending above the quality-adjusted target price during the anchor 
hospitalization and 90-day post-discharge period. The stop-loss limits 
are not intended to protect hospitals that engage in inappropriate 
behavior or shifting of care beyond the episode from financial 
responsibility for such actions.
    We propose to implement this policy change when we conduct the 
subsequent reconciliation calculation for performance year 1 of the 
model in the first 2 quarters of 2018 and for all performance years 
thereafter. That is, when we conduct the reconciliation for performance 
year 1 in early 2017, we would not assess post-episode spending for 
performance year 1 at that time. Although hospitals would not have been 
aware of these proposed changes to our reconciliation process during 
performance year 1 of the model, the proposed changes will not impact 
the performance year 1 NPRA.
    We propose to amend our regulations at Sec.  510.305(e), Sec.  
510.305(h)(6), and add a new paragraph Sec.  510.305(j)(2) to reflect 
these proposals. We seek comment on our proposal.
2. ACO Overlap and Subsequent Reconciliation Calculation
    In the CJR final rule, we finalized a policy to account for overlap 
in situations where a portion of the CJR discount percentage is paid 
out as savings to an ACO participating in the Shared Savings Program or 
specified ACO models. We refer readers to the CJR final rule for 
further discussion of this policy and our rationale for this approach 
(80 FR 73395-73398). We propose a modification to how we will account 
for such cases of overlap in the CJR model at reconciliation. In the 
final CJR rule, we specified that the results of this overlap 
calculation would be included in the subsequent reconciliation 
calculation that occurs 14 months after the conclusion of a performance 
year (80 FR 73383). We propose that the subsequent reconciliation 
calculation not include the results of this ACO overlap calculation; 
that is, the subsequent reconciliation calculation will only include 
calculating the prior performance year's episode spending a second time 
with more complete claims data and comparing it to the quality-adjusted 
target price. The ACO overlap calculation will be a separate 
calculation from the subsequent reconciliation (although both 
calculations will occur concurrently) and added with the NPRA, 
subsequent reconciliation calculation, and post-episode spending 
calculation to determine the reconciliation payment or repayment amount 
at reconciliation. The effect of this proposal will be that these 
overlap amounts will not be subject to the stop-loss or stop-gain 
limits that apply to the calculation of the NPRA and subsequent 
reconciliation calculation. We believe this change is appropriate 
because the subsequent reconciliation calculation is intended to 
account for claims run-out and canceled episodes, and to reassess CJR 
episode spending during the model performance years. The stop-loss 
limit, therefore, is intended to ensure that participant hospitals that 
do not reduce actual episode payments below the quality-adjusted target 
price have a limit on the amount they must repay Medicare due to 
spending during CJR episodes. The stop-gain limit, conversely, is 
intended to place judicious limits on the degree to which hospitals can 
be rewarded based on responsible stewardship of CMS resources. In 
contrast, the ACO overlap calculation is intended to account for cases 
in which a portion of the CJR discount percentage is paid out to an ACO 
as shared savings, and does not hinge upon a participant hospital's 
performance in the CJR model. If ACO overlap amounts are included in 
calculations of the stop-loss limit, CMS could in some cases pay twice 
for the same cost-reducing activities, thereby skewing the model 
results. We believe the stop-loss and stop-gains should provide limits 
on the amount a hospital could earn or lose due to episode spending, 
not limit CMS's ability to adjust for overlap between models. For these 
reasons, we do not believe our policy to avoid paying out savings twice 
for the same beneficiary during the same period should be subject to 
the stop-loss or stop-gain limits. More details on how this proposed 
modification will impact the steps involved in the reconciliation 
process are provided further in this section.
    We propose to implement this proposed policy change when we conduct 
the subsequent reconciliation calculation for performance year 1 of the 
model in the first 2 quarters of 2018 and for all performance years 
thereafter. Although hospitals would not have been aware of these 
proposed changes to our reconciliation process during performance year 
1 of the model, we believe this timeframe is reasonable for the 
following reasons. First, if CMS must recoup a portion of the CJR 
discount percentage paid out as shared savings, this calculation must 
occur during the same timeframe as the subsequent reconciliation 
calculation for a given performance year to ensure that the ACO models 
and program have already completed their financial reconciliation for a 
given performance year. Second, this policy change (that is, not 
including the ACO overlap calculation in assessing whether a hospital 
has met the stop-loss or stop-gain limit for a given year) will not 
impact the performance year 1 NPRA.
    We propose to add a new paragraph to our regulations at Sec.  
510.305(i). We seek comment on our proposal.
3. Stop-Loss and Stop-Gain Limits
    In the CJR final rule, we finalized our proposal to limit the 
amount a CJR participant hospital will be required to repay Medicare or 
could earn as a reconciliation payment under the CJR model. 
Specifically, we stated that CJR participant hospitals would be subject 
to the following stop-loss limits: 5 percent in performance year 2, 10 
percent in performance year 3, and 20 percent in performance years 4 
and 5. Similarly, we finalized symmetrical stop-gain limits: 5 percent 
in performance years 1 and 2, 10 percent in performance year 3, and 20 
percent

[[Page 50953]]

in performance years 4 and 5 (80 FR 73401 through 73402). We finalized 
separate limits to provide additional financial protections for rural 
hospitals, Medicare-dependent hospitals, rural referral centers, and 
sole community hospitals (80 FR 73406). These limits are intended to 
provide financial protections for CJR participant hospitals, who may 
have varying levels of experience with episode payment models. We 
finalized symmetrical stop-gain limits to ensure hospitals do not have 
an incentive to excessively reduce services provided during episodes or 
shift services outside the CJR episode (80 FR 73398). As noted 
previously in this section, we are proposing a modification to our 
application of the stop-loss and stop-gain limits for the CJR model by 
excluding the post-episode spending amount and situations in which the 
CJR discount percentage is paid out to an ACO as shared savings.
    In light of our proposal to exclude the ACO overlap and post-
episode spending adjustments from the stop-loss and stop-gain limits, 
to calculate the stop-loss and stop-gain limits, we would use a 
hospital's quality-adjusted target price at reconciliation. For 
example, a hospital with benchmark episode spending of $30,000 and a 
composite quality score of ``excellent,'' would have an effective 
discount percentage of 1.5 percent and a quality-adjusted target price 
of $29,550 at reconciliation. The hospital's stop-loss and stop-gain 
limits for year 2 (assuming for simplicity that the hospital has only 1 
episode) would be 5 percent of the quality-adjusted target price, or 
$1,477.50. This is consistent with our proposed calculation of stop-
loss and stop-gain limits for the proposed EPMs described in section 
III.C. of this proposed rule. This approach is also consistent with our 
regulations at Sec.  510.305(e)(1)(v)(A) and Sec.  510.305(e)(1)(v)(B) 
to calculate stop-loss and stop-gain based on the effective discount 
factor at reconciliation.
    In order to determine whether a participant hospital has reached 
the stop-loss or stop-gain limits, we would compare actual episode 
payments during the performance year to the quality-adjusted target 
price to calculate the NPRA. In the example previously noted, if the 
participant hospital had actual episode spending of $35,000 during 
performance year 2, this would be compared against its quality-adjusted 
target price of $29,550. The difference between the quality-adjusted 
target price and actual episode spending is $5,450, but since the 
applicable stop-loss limit is $1,477.50, the hospital would need to 
repay Medicare $1,477.50. In this example, any post-episode spending 
amount or adjustment for ACO overlap from the prior performance year 
(performance year 1 in this example) would not be included in 
determining whether a hospital has met the stop-loss or stop-gain limit 
for a performance year, but rather would be added, unadjusted, to the 
performance year 2 NPRA in order to calculate the reconciliation 
payment or repayment amount. Therefore, if the hospital in this example 
owed $1,000 due to post-episode spending in performance year 1, and we 
determined that $2000 represented the CJR discount percentage that was 
paid out as shared savings for performance year 1, the full $3000 would 
be added to the hospital's performance year 2 NPRA regardless of stop-
loss, resulting in a repayment of $4,477.50. In addition, when 
performing the subsequent reconciliation calculation for performance 
year 2, which would be done simultaneously with the calculation of NPRA 
for performance year 3, we would apply the results of the performance 
year 2 subsequent reconciliation calculation to the year 2 stop-loss 
limit of $1,477.50 to ensure that, aggregated across all episodes in 
the performance year, the participant hospital is not responsible for 
repaying Medicare more for episode spending above the quality-adjusted 
target price than the stop-loss limit for that performance year. Thus, 
if the subsequent reconciliation calculation determined that the 
hospital in our example had actually spent $36,000 during performance 
year 2, resulting in a larger difference between actual spending and 
the quality-adjusted target price, the higher amount of $6,450 would 
still be subject to the stop-loss limit of $1,477.50, so the hospital 
would not be responsible for the additional $1,000 of episode spending 
beyond the quality-adjusted target price.
    As discussed previously in this section, we are proposing to 
implement these changes to our reconciliation process beginning with 
the reconciliation for performance year 1.
    We are proposing to amend our regulations at Sec.  510.305(e), 
Sec.  510.305(f), and add a new paragraph (j) to reflect these 
proposals. We also propose to streamline Sec.  510.305(i)(2) for 
clarity.
    We seek comment on our proposal.
4. Proposed Modifications to Reconciliation Process
    As previously discussed in this section, we are proposing several 
modifications to how we conduct the reconciliation process for 
participant hospitals in the CJR model for all performance years. We 
propose here how these steps would modify the CJR reconciliation 
process we finalized in the CJR final rule (80 FR 73383).
    The following example illustrates our proposed modifications to the 
reconciliation process, reflecting our proposals to compare actual 
episode payments to the quality-adjusted target price; calculate post-
episode spending beginning 14 months after the conclusion of a 
performance year; calculate post-episode spending amounts and the ACO 
overlap calculation separately from the NPRA and subsequent 
reconciliation calculation; and apply the stop-loss and stop-gain 
limits only to calculations of NPRA and the subsequent reconciliation 
calculation (that is, exclude post-episode spending amounts and the ACO 
overlap calculation) for a given performance year:
    Beginning 2 months after the conclusion of performance year 2, CMS 
would compare actual episode payments to the quality-adjusted target 
prices for the episodes at a CJR participant hospital. The quality-
adjusted target price that applies at reconciliation would be based on 
a participant hospital's composite quality score for performance year 
2. We would aggregate episodes at each CJR participant hospital and 
calculate the hospital's NPRA. The NPRA would be the difference between 
the quality-adjusted target price times the number of episodes and 
actual episode payments times the number of episodes during the 
performance year. We would apply the stop-gain and stop-loss limits of 
5 percent of the quality-adjusted target price to determine if a 
hospital reached the limit.
    We would simultaneously perform the subsequent reconciliation 
calculation for performance year 1, to account for claims run-out and 
canceled episodes from performance year 1. At this time, we would 
reapply the stop-gain limit for performance year 1, by summing the 
result of the subsequent reconciliation calculation for performance 
year 1 and the performance year 1 NPRA (which was calculated during the 
prior reconciliation). For example, if the participant hospital's NPRA 
for performance year 1 was greater than the stop-gain limit and the 
result of the subsequent reconciliation calculation for performance 
year 1 was positive, the subsequent reconciliation calculation would 
not be added to the reconciliation payment made to the participant 
hospital in the second quarter of 2018, because the stop-gain limit had 
already been reached for performance year 1.

[[Page 50954]]

    Concurrently with our subsequent reconciliation calculation, we 
would also determine if a participant hospital is responsible for post-
episode spending from performance year 1, as well as determine any 
potential amount of the CJR discount percentage that was paid out as 
savings to an ACO entity as previously described in this section during 
performance year 1. In this example, the results of all three 
calculations (the subsequent reconciliation calculation for performance 
year 1--subject to the stop-loss and stop-gain limits--and the post-
episode spending calculation and ACO overlap calculation) would be 
added to the NPRA calculated for performance year 2 in order to create 
the reconciliation payment or repayment amount. (The exception to this 
pattern will be performance year 5, as the subsequent reconciliation, 
post-episode spending, and ACO overlap calculations will occur in 2022 
without a concurrent NPRA calculation.)
    We note that this approach mirrors the reconciliation process we 
are proposing for the AMI, CABG, and SHFFT models at III.D.5. of this 
proposed rule. We refer readers to that section for additional 
discussion of our approach.
E. Use of Quality Measures and the Composite Quality Score
1. Hospitals Included in Quality Performance Distribution
    As finalized in the CJR final rule, 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. We propose to compute 
quality performance points for each quality measure based on the 
participant hospital's performance relative to the distribution of 
performance of all ``subsection (d)'' hospitals reporting the measure 
that are eligible for payment under IPPS and meet the minimum patient 
case or survey count for that measure. This approach is similar to the 
methodologies of other CMS programs, such as the HVBP Program. In 
addition, comparing CJR participant hospitals' quality performance to 
IPPS-eligible subsection (d) hospitals' quality performance on the same 
measures is a fairer comparison of quality performance, as CJR 
participant hospitals are all IPPS-eligible subsection (d) hospitals. 
Defining and limiting the relative distribution in this way will 
minimize variability due to factors that are unrelated to quality, 
thereby increasing the validity of the quality performance score.
    We propose to amend the regulations at Sec.  510.315(c) to reflect 
this change. We are also proposing a technical change to the 
regulations to renumber certain subparagraphs. We seek comment on our 
proposals.
2. Quality Improvement Points
    As finalized in the CJR final rule, quality improvement points for 
each measure are added to the composite quality score if the hospital's 
score on that quality measure increases by at least 3 deciles on the 
performance percentile scale compared to the previous performance year. 
We propose to clarify that, for performance year 1, we will compare the 
hospital's performance percentile with the corresponding time period in 
the previous year, not the previous performance year. We are proposing 
this clarification because there is no performance year preceding 
performance year 1. For performance years 2 through 5, we will still 
compare the hospital's performance percentile with the previous 
performance year. We also propose to modify this policy to define 
quality measure improvement as an increase of at least 2 deciles on the 
performance percentile scale compared to the previous performance year. 
Reducing the threshold for improvement from 3 deciles to 2 deciles will 
increase the number of CJR participant hospitals eligible for quality 
improvement points and provide CJR participant hospitals at all current 
levels of quality performance, including those historically lagging, 
with significant incentives to achieve improvement in the quality of 
care. Quality improvement points can contribute up to 1.8 points toward 
a CJR participant hospital's composite quality score, so increasing the 
number of CJR participant hospitals that are eligible for these points 
may also increase the number of CJR participant hospitals that are 
eligible for a reduced quality-adjusted target price. As defined in 
section V.C. of this proposed rule, the quality-adjusted target price 
is the price used at reconciliation to determine whether a CJR 
participant hospital is eligible for a reconciliation payment or 
repayment and the amount of the reconciliation payment or repayment. 
This mirrors the approach we are proposing for the proposed EPMs at 
III.E.3.c. of this proposed rule.
    We propose to amend our regulations at Sec.  510.315(d) to reflect 
these changes. We seek comment on our proposal.
3. Relationship of Composite Quality Score to Quality Categories
    As finalized in the CJR final rule, CMS will place participant 
hospitals into one of four quality categories to determine 
reconciliation payment eligibility and, if applicable, the value of the 
effective discount percentage at reconciliation. We refer readers to 
the CJR final rule for a full discussion of our approach (80 CFR 73363-
73381). We describe here a technical correction to our composite 
quality scores that will determine reconciliation payment eligibility 
and the effective discount percentage at reconciliation. We note that 
this technical correction does not affect our estimation of savings due 
to the CJR model, because the measure distribution used for such 
calculations in the CJR final rule was the correct one we describe 
here.
    Participant hospitals will be required to achieve a minimum 
composite quality score of greater than or equal to 5.0 to be eligible 
for a reconciliation payment if actual episode spending is less than 
the target price. Participant hospitals with a composite quality score 
less than 5.0 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. Participant 
hospitals with a composite quality score greater than or equal to 5.0 
and less than 6.9 will be assigned to the ``Acceptable'' quality 
category and will be eligible for a reconciliation payment if actual 
episode spending is less than the target price. Participant hospitals 
in the ``Acceptable'' quality category will not be eligible to receive 
a reduced effective discount percentage at reconciliation. Participant 
hospitals with a composite quality score greater than or equal to 6.9 
and less or equal to 15.0 will be assigned to the ``Good'' quality 
category and will be eligible for a reconciliation payment if actual 
episode spending is less than the target price. Participant hospitals 
in the ``Good'' quality category will be eligible to receive a reduced 
effective discount percentage (80 FR 73378). Participant hospitals with 
a composite quality score greater than 15.0 will be assigned to the 
``Excellent'' quality category and will be eligible for a 
reconciliation payment if actual episode spending is less than the 
target price. Participant hospitals in the ``Excellent'' quality 
category will be eligible to receive a reduced effective discount 
percentage (80 FR 73378).
4. Maximum Composite Quality Score
    As finalized in the CJR final rule, a participant hospital could be 
awarded a

[[Page 50955]]

maximum composite quality score of 21.8 if the hospital received 
maximum quality performance points for each quality measure, maximum 
quality improvement points for each quality measure, and successfully 
submitted voluntary patient-reported outcomes and limited risk variable 
data. We propose to award up to 10 percent of the maximum measure 
performance score on the THA/TKA Complications and HCAHPS Survey 
measures, and impose a cap on the CJR model composite quality score at 
20 points. This change would bring calculation of the CJR composite 
quality score into greater alignment with existing CMS programs, such 
as the HVBP Program, by reducing the number of participants who receive 
both the highest quality performance score on a measure and the maximum 
points for measure improvement.
    We propose to amend our regulations at Sec.  510.315(d) to reflect 
this change. We seek comment on our proposal.
5. Acknowledgement of Voluntary Data Submission
    Our regulations at 42 CFR 510.400(c)(3) state that although we do 
not publicly report the voluntary patient-reported outcomes and limited 
risk variable data during the CJR model, we do indicate whether a 
hospital has voluntarily submitted such data. We propose to amend Sec.  
510.400(c)(3) to clarify that we would acknowledge only CJR participant 
hospitals that successfully submit voluntary patient-reported outcomes 
and limited risk variable data, in accordance with Sec.  510.400(b). We 
seek comment on our proposal.
6. Calculation of the HCAHPS Linear Mean Roll-Up (HLMR) Score
    We propose to calculate the HCAHPS Linear Mean Roll-up (HLMR) score 
by taking the average of the linear mean scores (LMS) for 10 of the 11 
publicly reported HCAHPS measures for IPPS hospitals with 100 or more 
completed HCAHPS surveys in a 4-quarter period. The HLMR will summarize 
HCAHPS performance on all of the publicly reported measures, except for 
Pain Management. We propose this change because removal of Pain 
Management from the HVBP Program has been proposed in the Hospital 
Outpatient Prospective Payment System and Ambulatory Surgical Center 
Payment System Proposed Rule (81 FR 45603).
    This mirrors the approach we are proposing for the proposed EPMs at 
III.E.4.d.(1)(f) of this proposed rule. Our regulations do not include 
the methods to calculate the HLMR, so we refer readers to 
III.E.4.d.(1)(f) of this proposed rule for additional discussion of our 
approach.
    We propose to implement the proposed changes to hospitals included 
in the quality performance distribution, the maximum number of points 
in the composite quality score, the change from 3 to 2 deciles for 
assessing quality improvement, and calculation of the HLMR score 
starting with the reconciliation for performance year 1 of the CJR 
model, when we calculate each participant hospital's composite quality 
score for year 1.
F. Accounting for Overlap With CMS ACO Models and the Shared Savings 
Program
    The CJR final rule details our policies to address cases of overlap 
in which beneficiaries that are aligned or attributed to an ACO model 
or Shared Savings Program participant are also included in a CJR 
episode. We recognize that there will be circumstances in which a 
Medicare beneficiary in a CJR episode is also aligned or attributed to 
an ACO participating in the Shared Savings Program or a CMS ACO model. 
In the CJR final rule, we finalized an approach to allow for such cases 
of overlap and minimize any double counting of savings through the 
following policies. We will conduct our annual reconciliation prior to 
the ACO reconciliation process, and make our reconciliation payments 
and repayment amounts available for the ACO models and program to take 
into account when performing their reconciliation, as their financial 
methodologies permit. In addition, in cases where a portion of the CJR 
discount percentage is paid out as shared savings to a participant 
hospital that participates in an ACO as a participant or provider/
supplier, we would make an adjustment to the participant hospital's 
reconciliation results. We refer readers to the CJR final rule for a 
full discussion of our approach and the options we considered (80 FR 
73387).
    Given commenters' concerns about our approach, which are summarized 
in the final rule (80 FR 73387) we have continued to consider 
alternative options for accounting for overlap between the ACO models 
and program and the CJR model. Specifically, we have considered, as 
some commenters suggested, attributing savings achieved during CJR 
episodes in which beneficiaries are also aligned or attributed to an 
ACO accepting downside risk to the ACO entity, not the participant 
hospital. We recognize that ACOs are engaged in care management 
activities for beneficiaries across the spectrum of care, which may 
also include care redesign during acute episodes. As a result, we are 
proposing to cancel (or never initiate) a CJR episode for beneficiaries 
that are prospectively aligned to a Next Generation ACO or ESRD 
Seamless Care Organization (ESCO) in the Comprehensive ESRD Care 
initiative in tracks with downside risk for financial losses. While the 
CJR model excludes beneficiaries whose eligibility for Medicare is on 
the basis of end stage renal disease, not all beneficiaries aligned to 
ESCOs meet this criterion. Thus, some beneficiaries aligned to ESCOs 
could be included in the CJR model.
    We propose to implement this policy for episodes beginning on or 
after July 1, 2017, to align with the timeframe for implementation of 
the proposed AMI, CABG, and SHFFT models which propose the same 
exclusion of beneficiaries aligned to Next Generation ACOs and ESCOs in 
downside risk tracks. We propose this change to how we determine 
episodes included in CJR because these ACOs and ESCOs are accepting a 
high level of financial risk for the total cost of care for their 
aligned beneficiaries; for example, Next Generation ACOs are held to as 
much as 80 percent to 100 percent of first dollar losses. In addition, 
beneficiaries are prospectively aligned to ACOs in both initiatives. We 
believe that if we were to implement a policy where we would cancel CJR 
episodes based on a given beneficiary's ACO alignment status, we would 
do so only in those cases where the ACO alignment is prospective and 
does not change during a performance year. In such cases, CJR 
participant hospitals could be aware of a beneficiary's ACO alignment 
status, reducing uncertainty as to whether a given beneficiary is 
included in the CJR model. We note that we are proposing elsewhere in 
this proposed rule to exclude beneficiaries prospectively aligned to a 
Next Generation ACO model participant or an ESCO in the Comprehensive 
ESRD Care Initiative in a downside risk track from the proposed AMI, 
CABG, and SHFFT model episodes because we wish to test this alternative 
approach to ACO overlap. We are not proposing to exclude beneficiaries 
assigned to Shared Savings Program Track 3 ACOs at this time, however, 
because we intend to test the approach of excluding prospectively-
aligned ACO beneficiaries from the CJR model with the limited number of 
beneficiaries assigned to Next Generation ACOs and ESCOs in a downside 
risk track. We do not seek to disrupt the operations of our large,

[[Page 50956]]

permanent ACO program at this time to test this novel approach for 
accounting for overlap. The Shared Savings Program is a national 
program; we do not believe that testing a new approach to addressing 
overlap in a national program would be appropriate at this time prior 
to testing such an approach with a smaller population. However, we seek 
comment on whether we should extend this proposed policy--that is, 
excluding from CJR beneficiaries who are prospectively assigned to an 
ACO--to beneficiaries who are assigned to a Track 3 Shared Savings 
Program ACO. We refer readers to section III.D.6.c. of this proposed 
rule for further discussion of our proposed approach and rationale, 
including details on how we would operationalize such an approach if 
finalized for CJR or the proposed EPMs.
    In cases where a beneficiary is in a CJR episode and also aligned 
to a Pioneer ACO, Medicare Shared Savings Program ACO, or ESCO not 
participating in a downside risk track, we would not cancel the CJR 
episode. The policies we previously finalized for accounting for such 
overlap would continue to apply. We refer readers to the CJR final rule 
(80 FR 73391 through 73398) for additional discussion of our policies. 
Because the Pioneer ACO model ends on December 31, 2016, no adjustments 
are necessary to account for overlap between beneficiaries in the 
proposed AMI, CABG, and SHFFT models and the Pioneer ACO model. 
However, since the first CJR performance year began in April 2016, we 
will make an adjustment for overlap between the two models during the 
first performance year of the CJR model.
    Finally, we note that we are proposing elsewhere in this proposed 
rule to allow ACOs to be CJR collaborators. Our proposal, which is 
discussed in detail in section V.J.1.a. of this proposed rule, would 
allow for gainsharing arrangements between ACOs and CJR participant 
hospitals. This proposal would allow such partnerships in regions where 
such relationships could be mutually beneficial for ACOs and CJR 
participant hospitals. We believe these proposals will mitigate 
concerns about the limited opportunities for collaboration between ACOs 
and CJR participant hospitals that are often caring for the same 
beneficiaries. We refer readers to section V.J.1.a. of this proposed 
rule for additional detail on this proposed policy.
    The proposal for addressing overlap between the CJR model and CMS's 
ACO models and program is included in Sec.  510.305(j)(1). We seek 
comment on our proposal to exclude beneficiaries aligned to a Next 
Generation ACO or ESCO downside risk track from the CJR model beginning 
with episodes that are initiated on or after July 1, 2017.
G. Appeals Process
    The CJR final rule provides that participant hospitals may dispute 
a 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, if the 
hospital wishes to dispute such calculation. Unless the participant 
hospital provides a written notice of the error, the CJR reconciliation 
report is deemed final 45 calendar days after it is issued, and CMS 
will then proceed with the payment or repayment process as applicable. 
In order to further specify our timeline for this process, we propose 
that a timely notice of a calculation error means a notice received by 
CMS within 45 calendar days of CMS issuing a participant hospital's 
reconciliation report.
    In continuing our efforts to be clear and concise, we propose to 
add language to our regulations highlighting the available appeals 
process for a participant hospital that receives a notice of 
termination from the CJR model. We previously described this appeals 
process for notice of termination in the CJR final rule at Sec.  
510.310(c), by using the notice of termination as an example of an 
exception to a participant hospital having to provide CMS with notice 
of calculation error. A notice of calculation error continues not to be 
required by participant hospitals that receive a notice of termination, 
as this matter does not involve an issue contained in, or a calculation 
that contributes to, a CJR reconciliation report. We propose that if a 
participant hospital receives notification that it has been terminated 
from the CJR model and wishes to appeal such termination, it must 
provide a written request for reconsideration to CMS requesting review 
of the termination within 10 calendar days of the notice. Following 
receipt of the participant hospital's timely written request, CMS would 
have 30 days to respond to the participant hospital's request for 
review. If the participant hospital fails to notify CMS, the 
termination would be deemed final.
    We propose to amend the regulations at Sec.  510.310 to reflect 
these proposals, and to correct a technical error in paragraph (d)(6) 
(which would be renumbered (e)(6)). We also propose to delete Sec.  
510.310(a)(3) in the current regulations as it is duplicative with 
Sec.  510.310(a)(1). We seek comment on our proposal.
H. Beneficiary Notification
    Currently, CMS requires participant hospitals and CJR collaborators 
to provide written notice to any Medicare beneficiary that meets 
certain criteria in Sec.  510.205 of his or inclusion in the CJR model 
detailing the structure of the model, existence of providers and 
suppliers with whom the participant hospital has a sharing arrangement, 
and that the beneficiary retains the freedom of choice. We refer 
readers to the CJR final rule (80 FR 73516-73521) for further 
discussion of this requirement. We propose to amend Sec.  510.405 to 
include all CJR collaborators in the requirements for delivery of 
beneficiary notices and streamline our current regulations. We seek 
comments on all aspects of this proposal.
1. Physician, Nonphysician Practitioner, and PGP Provision of Notice
    We propose to amend Sec.  510.405(b)(2), which specifies that a 
physician who is a CJR collaborator must provide notices to CJR 
beneficiaries, to include PGPs. The CJR final rule included a 
requirement that physician collaborators provide notice to 
beneficiaries, but did not include a requirement that PGP collaborators 
or nonphysician practitioners also do so. Since PGPs and nonphysician 
practitioners may also be CJR collaborators, we believe it is important 
for PGPs and nonphysician practitioners to have a distinct notification 
requirement as well as physicians that are CJR collaborators. Requiring 
these collaborators to notify beneficiaries of the CJR model will help 
to ensure that beneficiaries are aware of the model and its potential 
effect on their care.
    We propose to amend our regulations at Sec.  510.405(b)(2) to 
reflect this change. We seek comment on our proposal.
2. Other CJR Collaborators Provision of Notice
    Given that we are proposing in V.J.1.a. of this proposed rule to 
add hospitals, ACOs, and CAHs to our definition of CJR collaborator 
(see section V.J.1 of this proposed rule), we also propose to require 
that all CJR collaborators other than physicians and PGPs (ACOs, CAHs, 
hospitals, and post-acute care providers) provide notice of the model 
to CJR beneficiaries. We propose that in the case of ACOs, the ACO 
would require the ACO participants for which the ACO has an ACO 
distribution arrangement to provide the written notification. We 
propose that a

[[Page 50957]]

participant hospital must require any CJR collaborator to provide 
written notice of the structure of the model and the existence of the 
hospital'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 no later than the time at which 
the beneficiary first receives services from the CJR collaborator or 
their collaboration agent during the CJR episode. We propose to amend 
our regulations at Sec.  510.405(b)(4) to reflect this change.
3. Beneficiary Notification Compliance and Records
    We propose that participant hospitals and CJR collaborators must be 
able to, upon request by CMS, demonstrate compliance with the 
applicable beneficiary notification requirements. The participant 
hospital or CJR collaborator, as applicable, would be required to 
provide CMS or its designee with a list of beneficiaries that have 
received such notification, including the date the notification was 
given. We note that the method employed to document beneficiary 
notification may vary. For example, some hospitals and collaborators 
may retain a list of all beneficiaries that received the notification. 
Others may document in the medical record that the beneficiary received 
the beneficiary notification, add a barcode to the notification form to 
be scanned into the medical record, or employ another method of 
recordkeeping. Regardless of the method used by the individual hospital 
or collaborator for recordkeeping, the entity must be able to provide 
CMS or our designee with a list of all beneficiaries that received the 
notification materials within the time period specified in the request. 
This requirement will aid CMS in monitoring participant hospitals for 
compliance with the CJR requirements.
    We propose to amend our regulations at Sec.  510.405(b)(1) through 
Sec.  510.405(b)(5) and Sec.  510.405(b)(7) to reflect this change. We 
seek comment on our proposal.
4. Compliance With Sec.  510.110
    We propose elsewhere in this rule to consolidate and streamline our 
requirements for record retention (see section V.L. of this proposed 
rule for further details). As part of that proposed change, we also 
propose to require that participant hospitals and CJR collaborators, as 
applicable retain such records as are necessary to demonstrate the 
sufficiency of CJR beneficiary notifications.
I. Compliance Enforcement
    We propose numerous amendments to the regulations in Sec.  510.410. 
The amendments are largely to align terminology so that the CJR model 
regulations mirror the proposed EPM regulations at Sec.  512.460 in 
order to avoid confusion for hospitals that are participating in CJR 
and one or more of the proposed EPMs. Our proposed changes reflect that 
the requirements and rules regarding compliance enforcement under the 
CJR model would stay mostly the same. However, we are proposing the 
following changes in Sec.  510.410 to adapt it to our proposal to amend 
the regulations at Sec.  510.500 and Sec.  510.505, as well as the 
addition of Sec.  510.506. We propose to replace the term `collaborator 
agreement' with the term `sharing arrangement' since we propose further 
in section V.J.1.b. of this proposed rule to consolidate the 
requirements of a collaborator agreement into requirements of a sharing 
arrangement, and to delete the term `collaborator agreement' from part 
510.
1. Failure To Comply
    Currently, CMS may take remedial action against a participant 
hospital if a participant hospital or any of the hospital's CJR 
collaborators are noncompliant with CJR requirements in any of the ways 
listed in Sec.  510.410(b)(1). As discussed in section V.J.1.a. of this 
proposed rule, the proposed addition of ACOs and hospitals, including 
CAHs, as CJR collaborators, and the proposed modification of the 
financial arrangements available under the CJR model, would require 
collaboration agents and downstream collaboration agents to comply with 
the CJR model requirements as well. We believe that because we are 
allowing additional entities and individuals to be CJR collaborators, 
collaboration agents, or downstream collaboration agent, we must ensure 
that all such entities and individuals comply with all requirements of 
the CJR model, such as notifying beneficiaries of the model and 
maintaining access to care. We believe that CJR participant hospitals 
should ensure that their sharing arrangements and the distribution 
arrangements and downstream distribution arrangements of their 
collaborators, collaboration agents, and downstream collaboration 
agents comply with the model requirements and safeguard program 
integrity. Therefore, we propose that CMS may take remedial actions 
against the participant hospital if any collaboration agent of such 
participant hospital's CJR collaborators, or any downstream 
collaboration agent of such CJR collaboration agent is not compliant 
with applicable requirements in any of the ways listed in of Sec.  
510.410(b)(1). Further, we propose that CMS may take remedial actions 
against a participant hospital if a participant hospital or any of the 
participant hospital's CJR collaborators, any collaboration agent of 
such CJR collaborators or any downstream collaboration agent has signed 
a sharing arrangement, distribution arrangement, or downstream 
distribution arrangement that is noncompliant with the requirements of 
part 510.
    We propose to amend the regulations at Sec.  510.410 to include 
these requirements. We seek comment on our proposal.
J. Financial Arrangements Under the CJR Model
    Currently, participant hospitals may engage in financial 
arrangements under the CJR model. The arrangements published in the CJR 
final rule (80 FR 73412 through 73437) allow participant hospitals and 
providers and suppliers caring for CJR beneficiaries to share in the 
financial risks and rewards under the CJR model, to engage in care 
redesign and CJR beneficiary care management, and to establish close 
partnerships with these individuals and entities to promote 
accountability for the quality, cost, and overall care for CJR 
beneficiaries. In order to ensure that goals of the CJR model are met, 
and to ensure program integrity and protect from abuse, the CJR model 
has many requirements for financial arrangements. The sections further 
discuss and propose amendments to these requirements and safeguards, as 
well as amendments to align the CJR model with the proposed regulations 
of the EPMs. We propose a full replacement for the prior CJR 
regulations at Sec.  510.500 and Sec.  510.505 in order to streamline 
and consolidate our regulations in line with the proposed financial 
arrangements for the EPMs at Sec.  512.500 and Sec.  512.505. Our 
proposed changes are largely organizational in nature, not changes to 
policy or requirements. However, in several cases we are proposing new 
financial arrangements policies and/or requirements for the CJR model; 
we discuss these proposed policies in detail later in this section. We 
also refer readers to section III.J. of this proposed rule for further 
discussion and rationale behind our proposed approach.
    We propose that all amendments to regulations discussed in this 
section would be effective beginning July 1, 2017, in order to align 
with the beginning of the first performance year

[[Page 50958]]

of the proposed EPMs. We seek comment on all proposals discussed 
further in this section.
1. Definitions Related to Financial Arrangements
a. Addition to the Definition of CJR Collaborators
    In order to align with the proposed financial arrangements for the 
EPMs and to provide further opportunity for coordination between 
participant hospitals and their partners in care redesign, we propose 
to allow the following entities to be CJR collaborators: ACOs (with the 
limitations discussed later in this section), hospitals, and CAHs. We 
believe this proposal would allow for increased care coordination 
opportunities across the spectrum of care for beneficiaries in CJR 
episodes. Given that our proposals in this section mirror those 
proposed for the EPMs in section III.I.3. of this proposed rule, we 
refer readers to that section for further discussion of our rationale 
for allowing ACOs, hospitals, and CAHs to be collaborators.
    Many ACOs and other stakeholders have expressed strong interest in 
being collaborators in episode payment models such as CJR. In the CJR 
final rule, we did not include ACOs in the definition of CJR 
collaborators, responding that we decided to limit the testing of 
gainsharing relationships to solely those between hospitals and 
providers and suppliers enrolled in Medicare because we expected 
enrolled providers and suppliers to be most directly and specifically 
engaged with the CJR participant hospital in care redesign and episode 
care for beneficiaries who had surgery at the participant hospitals (80 
FR 73417). We also noted that a number of scenarios discussed by 
commenters to support their request to allow ACOs to be CJR 
collaborators could be achieved outside of the context of gainsharing 
relationships between the participant hospital and ACOs. However, with 
the steady growth in the number of ACOs and ACO-attributed 
beneficiaries, we have further considered the potential for ACOs to be 
CJR collaborators, especially given ACO expertise in care coordination 
and accountability for the quality and expenditures for health care for 
ACO-attributed beneficiaries over an annual period. In addition, we 
note that the challenges of attributing savings and changes in the 
quality of care for beneficiaries simultaneously in CJR and total cost-
of-care models or programs, such as ACOs, remain not fully resolved, as 
discussed in section III.D.6. of this proposed rule.
    We propose that ``ACOs,'' meaning accountable care organizations, 
as defined at Sec.  425.20 of regulations of this chapter, that 
participate in the Medicare Shared Savings Program, be permitted to be 
CJR collaborators. This proposal would allow locally variable financial 
arrangements that could account for the way CJR episode care is 
coordinated and managed in communities, and ensure that entities with 
appropriate skills and experience are permitted to share in the risks 
and rewards with participant hospitals. Our proposal would not allow 
any entities that are not providers or suppliers to be CJR 
collaborators other than ACOs. Medicare has a close relationship with 
these ACOs who are regulated by CMS, so we can verify that these ACOs 
meet current Shared Savings Program requirements that could make them 
suitable for a role as CJR collaborators.
    We also propose to allow participant hospitals to enter into 
financial arrangements with other hospitals and CAHs that care for CJR 
beneficiaries. We believe it is important to allow participant 
hospitals to enter into financial arrangements with other hospitals and 
CAHs that care for CJR beneficiaries, in order to align the financial 
incentives of such other hospitals and CAHs with the CJR model's goals 
of improving the quality and efficiency of CJR episodes and to align 
with the proposed financial arrangements for the EPMs.
    In summary, we propose that the following providers, suppliers, and 
other entities be added to the list of permissible CJR collaborators: 
ACOs, hospitals, and CAHs.
    We seek comment on our proposal to include ACOs, hospitals, and 
CAHs in the definition of CJR collaborators.
b. Deletion of Term 'Collaborator Agreements'
    In order to reduce duplicative language in Sec.  510.500 and 
streamline the regulations for financial arrangements between CJR 
participant hospitals and CJR collaborators, we propose to delete the 
term ``collaborator agreement'' in Sec.  510.2 and transition the 
requirements of collaborator agreements to requirements of sharing 
arrangements. Overall, this proposal would allow CMS to align the CJR 
financial arrangements with those of the proposed EPMs, and provide 
consistent regulations to potential parties that may participate in 
both the CJR model and the EPMs.
    We recognize that current participant hospitals and CJR 
collaborators already have existing collaborator agreements. However, 
as noted further in this section, although we propose to change several 
terms, the proposed sharing arrangements policies are largely similar 
to the current policies regarding collaborator agreements.
    We seek to amend the regulations at Sec.  510.2 by deleting the 
term collaborator agreement in Part 510. We seek comment on our 
proposals.
c. Addition of CJR Activities
    We propose to use the term ``CJR activities'' to identify certain 
obligations of parties in a sharing arrangement that are currently 
described as ``changes in care coordination or delivery'' in the CJR 
regulations governing the contents of the written agreement 
memorializing the sharing arrangement. In addition to the quality of 
care provided during episodes, we believe the activities that would 
fall under this proposed definition of CJR activities would encompass 
the totality of activities upon which it would be appropriate for 
certain financial arrangements under the CJR model to be based in order 
to value the contributions of providers, suppliers, and other entities 
toward meeting the CJR model's goals of improving the quality and 
efficiency of episodes. Therefore, for purposes of financial 
arrangements under the CJR model, we propose to define CJR activities 
as activities related to promoting accountability for the quality, 
cost, and overall care for CJR beneficiaries, including managing and 
coordinating care; encouraging investment in infrastructure, enabling 
technologies, and redesigned care processes for high quality and 
efficient service delivery; the provision of items and services during 
a CJR episode in a manner that reduces costs and improves quality; or 
carrying out any other obligation or duty under the CJR models. 
Sections V.J.2. through V.J.4. of this proposed rule further provide 
more detail as to how the addition of CJR activities affect other 
proposals in this part.
    We propose to amend Sec.  510.2 by adding the term `CJR 
activities.' We seek comment on our proposal to add CJR activities as 
an inclusive and comprehensive framework for capturing direct care and 
care redesign for CJR episodes that contribute to improving the quality 
and efficiency of these episodes.
2. Sharing Arrangements
    As discussed previously in this section, we propose to delete the 
term `collaborator agreement' and include all requirements of a 
financial arrangement

[[Page 50959]]

between a participant hospital and a CJR collaborator under sharing 
arrangements. Given the magnitude of this terminology change, we 
propose a complete revision of Sec.  510.500. We believe the proposed 
amendments to this section will provide participant hospitals and CJR 
collaborators with more revised, organized, and streamlined 
regulations.
a. General
    With the exception of adding ``past or anticipated'' to the 
selection criteria for CJR collaborators, and replacing `collaborator 
agreement' with `sharing arrangement' the following proposed criteria 
are similar to the current requirements of the CJR model as finalized 
in prior regulations at Sec.  510.500. We discuss here the proposed 
requirements for sharing arrangements, including our continuation of 
policies we finalized in the CJR final rule, as well as several new 
proposals. We propose that participant hospitals must develop, 
maintain, and use a set of written policies for selecting individuals 
and entities to be CJR collaborators, and that the selection criteria 
must include the quality of care delivered by the potential CJR 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the participant 
hospital, any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent. By adding ``past or anticipated'', all 
previous and future referrals between or among participant hospital, 
any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent would be encompassed. We do not believe 
it would be appropriate for sharing arrangements to be based on 
criteria that include the volume or value of past or anticipated 
referrals because the sole purpose of sharing arrangements is to create 
financial alignment between participant hospitals and CJR collaborators 
toward the CJR model's goals of improving the quality and efficiency of 
episode care. Thus, we continue to require that CJR participant 
hospitals select CJR collaborators based on criteria that include the 
quality of care furnished by the potential CJR collaborator to ensure 
that the selection of CJR collaborators takes into consideration the 
likelihood of their future performance in improving the quality of 
episode care.
    In summary, we propose to amend Sec.  510.500(a) as follows:
     A participant hospital may enter into a sharing 
arrangement with a CJR collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both.
     A participant hospital must not make a gainsharing payment 
or receive an alignment payment except in accordance with a sharing 
arrangement.
     A sharing arrangement must comply with the provisions of 
this section and all other applicable laws and regulations, including 
the applicable fraud and abuse laws and all applicable payment and 
coverage requirements.
     Participant hospitals must develop, maintain, and use a 
set of written policies for selecting individuals and entities to be 
CJR collaborators. These policies must contain criteria related to, and 
inclusive of, the quality of care delivered by the potential CJR 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the participant 
hospital, any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent.
     If a participant hospital enters into a sharing 
arrangement, its compliance program must include oversight of sharing 
arrangements and compliance with the applicable requirements of the CJR 
model.
    We propose to amend the regulations at Sec.  510.500(a). We seek 
comment on our proposal.
b. Requirements
    Currently, there are a number of specific requirements for sharing 
arrangements under the CJR model. However, with our proposal to delete 
the term `collaborator agreement,' the existing requirements under 
collaborator agreements would now be streamlined under sharing 
arrangements. Though many of the proposed requirements under sharing 
arrangements are largely similar to the current requirements under 
collaborator agreements, we discuss these requirements in detail 
further in this section in order to ensure current and future 
participant hospitals and CJR collaborators are aware of all 
requirements.
    We propose that the sharing arrangement must be in writing, signed 
by the parties, and entered into before care is furnished to CJR 
beneficiaries under the sharing arrangement. In addition, participation 
in a sharing arrangement must be voluntary and without penalty for 
nonparticipation. We propose that the sharing arrangement must require 
the CJR collaborator and its employees, contractors, and subcontractors 
to comply with certain requirements that are important for program 
integrity protections under the arrangement. We note that the terms 
contractors and subcontractors, respectively, include collaboration 
agents and downstream collaboration agents as defined later in this 
section.
    The sharing arrangement must require all of the individuals and 
entities in this group to comply with the applicable provisions of Part 
510, 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, because these individuals and entities all would play a 
role in CJR care redesign and be part of financial arrangements under 
the CJR model. The sharing arrangement must also require all 
individuals and entities in the group to comply with the applicable 
Medicare provider enrollment requirement at Sec.  424.500, including 
having a valid and active TIN or NPI, during the term of the sharing 
arrangement. This is to ensure that the individuals and entities have 
the required enrollment relationship with CMS under the Medicare 
program, although we note that they are not responsible for complying 
with requirements that do not apply to them. Finally, the sharing 
arrangement must require individuals and entities to comply with all 
other applicable laws and regulations.
    We propose that the sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care 
so that financial relationships between participant hospitals and CJR 
collaborators do not negatively impact beneficiary protections under 
the CJR.
    Further we propose that sharing arrangements must require the CJR 
collaborator to have a compliance program that includes oversight of 
the sharing arrangement and compliance with the requirements of the 
CJR, just as we would require participant hospitals to have a 
compliance plan for this purpose as a program integrity safeguard. We 
note that the CJR

[[Page 50960]]

compliance program requirement does not mandate that a CJR 
collaborator's compliance program take a particular form or include 
particular components.
    It is necessary that participant hospitals have adequate oversight 
over sharing arrangements to ensure that all arrangements meet the 
requirements of this section and provide program integrity protections. 
Therefore, we propose that the board or other governing body of the CJR 
participant hospital have responsibility for overseeing the participant 
hospital's participation in the CJR model, its arrangements with CJR 
collaborators, its payment of gainsharing payments, its receipt of 
alignment payments, and its use of beneficiary incentives in the CJR. 
We propose that the written agreement memorializing a sharing 
arrangement must specify a number of parameters of the arrangement, 
including the following:
     The purpose and scope of the sharing arrangement.
     The identities and obligations of the parties, including 
specified CJR activities and other services to be performed by the 
parties under the sharing arrangement.;
     Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out CJR activities.
     The date of the sharing arrangement.
     The financial or economic terms for payment, including--
    ++ Eligibility criteria for a gainsharing payment;
    ++ Eligibility criteria for an alignment payment;
    ++ Frequency of gainsharing or alignment payment;
    ++ Methodology and accounting formula for determining the amount of 
a gainsharing payment that is substantially based on quality of care 
and the provision of CJR activities; and
    ++ Methodology and accounting formula for determining the amount of 
an alignment payment.
    Finally, we propose to require that the terms of the sharing 
arrangement must not induce the participant hospital, CJR collaborator, 
or any employees, contractors, or subcontractors of the participant 
hospital or CJR collaborator to reduce or limit medically necessary 
services to any Medicare beneficiary or 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. These 
requirements are to ensure that the quality of care for CJR 
beneficiaries is not negatively affected by sharing arrangements under 
the CJR.
    In summary, we propose the following requirements for sharing 
arrangements:
     A sharing arrangement must be in writing and signed by the 
parties, and entered into before care is furnished to CJR beneficiaries 
under the sharing arrangement.
     Participation in a sharing arrangement must be voluntary 
and without penalty for nonparticipation.
     The sharing arrangement must require the CJR collaborator 
and its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with the following:
    ++ 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).
    ++ All applicable 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 sharing arrangement.
    ++ All other applicable laws and regulations.
     The sharing arrangement must require the CJR collaborator 
to have a compliance program that includes oversight of the sharing 
arrangement and compliance with the requirements of the CJR model.
     The sharing arrangement must not pose a risk to 
beneficiary access, beneficiary freedom of choice, or quality of care.
     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, its receipt of 
alignment payments, and its use of beneficiary incentives in the CJR 
model.
     The written agreement memorializing a sharing arrangement 
must specify the following:
    ++ The purpose and scope of the sharing arrangement.
    ++ The obligations of the parties, including specified CJR 
activities and other services to be performed by the parties under the 
sharing arrangement.
    ++ Management and staffing information, including type of personnel 
or contractors that will be primarily responsible for carrying out CJR 
activities.
    ++ The financial or economic terms for payment, including--

    --Eligibility criteria for a gainsharing payment;
    --Eligibility criteria for an alignment payment;
    --Frequency of gainsharing or alignment payment;
    --Methodology and accounting formula for determining the amount of 
a gainsharing payment or alignment payment.
     The sharing arrangement must not--
    ++ Induce the participant hospital, CJR collaborator, or any 
employees, contractors, or subcontractors of the participant hospital 
or CJR collaborator to reduce or limit medically necessary services to 
any Medicare beneficiary; or
    ++ 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.
    We propose to amend the requirements for sharing arrangements at 
Sec.  510.500(b). We seek comment on our proposals.
c. Gainsharing Payment, Alignment Payment, and Internal Cost Savings 
Conditions and Restrictions
    Under the CJR model, we place a number of conditions and 
limitations on gainsharing payments, alignment payments, and internal 
cost savings. Our proposal to amend these limitations and conditions 
would allow us to reorganize and clarify current policies, account for 
the addition of ACOs, CAHs, and hospitals as CJR collaborators, and 
align the CJR model with the proposed financial arrangements for the 
EPMs. Though many of the proposed requirements under sharing 
arrangements are largely similar to the current requirements under 
gainsharing payments, alignment payments, and internal cost savings 
conditions and restrictions, we discuss these requirements in detail 
further in this section in order to ensure current and future 
participant hospitals and CJR collaborators are aware of such 
requirements, in particular those that we are proposing to change.
    We propose that to be eligible to receive a gainsharing payment, or 
to be required to make an alignment payment, a CJR collaborator other 
than a PGP or an ACO must have directly furnished a billable item or 
service to an CJR beneficiary during an CJR episode that occurred in 
the same performance year for which the participant hospital has 
calculated a gainsharing payment or been assessed a repayment amount. 
For purposes of this requirement, we

[[Page 50961]]

consider a hospital, CAH, or post-acute care provider to have 
``directly furnished'' a billable service if one of these entities 
billed for an item or service for a CJR beneficiary during a CJR 
episode that occurred in the same performance year for which the CJR 
participant hospital accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment or was 
assessed a repayment amount. The phrase ``performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment or was 
assessed a repayment amount'' does not mean the year in which the 
gainsharing payment was made. These requirements ensure that there is a 
required relationship between eligibility for a gainsharing payment and 
the quality of direct care for CJR beneficiaries during CJR episodes 
for these CJR collaborators. We believe the provision of direct care is 
essential to the implementation of effective care redesign, and the 
requirement provides a safeguard against payments to CJR collaborators 
other than a PGP or an ACO that are unrelated to direct care for CJR 
beneficiaries during CJR episodes.
    Further, we propose to establish similar requirements for PGPs and 
ACOs that vary because these entities do not themselves directly 
furnish billable services. To be eligible to receive a gainsharing 
payment or required to make an alignment payment, a 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 an CJR episode that occurred 
during the same performance year for which the participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount. Further, we propose that to be eligible to receive a 
gainsharing payment or required to make an alignment payment, an ACO 
must have had an ACO provider/supplier that directly furnished, or an 
ACO participant that billed for, an item or service that was rendered 
to an CJR beneficiary during a CJR episode that occurred during the 
same performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount. 
With respect to ACOs, an ``ACO participant'' and ``ACO provider/
supplier'' have the meaning set forth in Sec.  425.20 of regulations. 
Like the proposal for CJR collaborators that are not PGPs or ACOs, 
these proposals also require a linkage between the CJR collaborator 
that is the PGP or ACO and the provision of items and services to CJR 
beneficiaries during CJR episodes by PGP members or ACO participants or 
ACO providers/suppliers, respectively.
    Moreover, we further propose that because PGPs and ACOs do not 
directly furnish items and services to beneficiaries, in order to be 
eligible to receive a gainsharing payment or be required to make an 
alignment payment, the PGP or ACO must have contributed to CJR 
activities and been clinically involved in the care of CJR 
beneficiaries during the same performance year for which the 
participant hospital accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment or was 
assessed a repayment amount. For example, a PGP or ACO or might have 
been clinically involved in the care of CJR beneficiaries by providing 
care coordination services to CJR beneficiaries during and/or after 
inpatient admission; engaging with a participant hospital in care 
redesign strategies, and actually performing a role in implementing 
such strategies that are designed to improve the quality of care for 
CJR episodes and reduce CJR episode spending; or in coordination with 
providers and suppliers (such as members of the PGP, ACO participants, 
ACO providers/suppliers, the participant hospital, and post-acute care 
providers), implementing strategies designed to address and manage the 
comorbidities of CJR beneficiaries.
    Because internal cost savings may be shared through gainsharing 
payments with CJR collaborators, we have certain requirements for their 
calculation as a safeguard against fraud and abuse. We propose that the 
internal cost savings reflect care redesign under the CJR in order to 
be eligible to be shared through gainsharing payments, the methodology 
used to calculate internal cost savings must reflect the actual, 
internal cost savings achieved by the participant hospital through the 
documented implementation of CJR activities identified by the 
participant hospital and must exclude any savings realized by any 
individual or entity that is not the participant hospital and ``paper'' 
savings from accounting conventions or past investment in fixed costs. 
Unlike the current CJR model policy where we require that sharing 
arrangements document the 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 collaborator, we are proposing a revised policy to 
not require in the CJR model that the calculation of internal cost 
savings be tied to the activities of any specific CJR collaborator. We 
believe this proposed change would recognize that multiple 
collaborators and collaboration agents contribute to internal cost 
savings and provide participant hospitals with flexibility to focus on 
overall internal cost savings due to model activities, rather than the 
activities of any specific collaborator or collaboration agent. Rather, 
we believe it is appropriate for participant hospitals to calculate 
internal cost savings based on the implementation of CJR activities and 
then provide gainsharing payments to CJR collaborators that may include 
internal cost savings, reconciliation payments, or both, based on a 
methodology that meets the requirements described later in this 
section.
    We propose that the amount of any gainsharing payments must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision of CJR activities. Further, we 
propose the methodology may take into account the amount of such CJR 
activities provided by a CJR collaborator relative to other CJR 
collaborators. While we emphasize that financial arrangements may not 
be conditioned directly or indirectly on the volume or value of past or 
anticipated referrals or business otherwise generated by, between or 
among the participant hospital, any CJR collaborator, any collaboration 
agent, any downstream collaboration agent, or any individual or entity 
affiliated with a participant hospital, CJR collaborator, collaboration 
agent, or downstream collaboration agent, so that their sole purpose is 
to align the financial incentives of the participant hospital and CJR 
collaborators toward the CJR goals of improved CJR episode care quality 
and efficiency, we believe that accounting for the relative amount of 
CJR activities by CJR collaborators in the determination of gainsharing 
payments does not undermine this objective. Rather, this proposed 
requirement allows flexibility in the determination of gainsharing 
payments where the amount of a CJR collaborator's provision of CJR 
activities (including direct care) to CJR beneficiaries during CJR 
episodes may contribute to both the internal cost savings and 
participant hospital's reconciliation payment that may be available for 
making a gainsharing payment. We refer readers to section III.I.4. of 
this proposed rule for additional discussion of our rationale.

[[Page 50962]]

We seek comment on this proposal for gainsharing payments, where the 
methodology could take into account the amount of CJR activities 
provided by a CJR collaborator relative to other CJR collaborators. In 
addition we invite comment on whether additional safeguards or a 
different standard is needed to allow for greater flexibility to 
provide certain performance-based payments consistent with the goals of 
program integrity, protecting against abuse and ensuring the goals of 
the model are met.
    In the CJR model, we continue to have certain limitations on 
alignment payments. Currently for a performance 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. In addition, the aggregate amount of all alignment payments 
from a CJR collaborator to the participant hospital may not be greater 
than 25 percent of the participant hospital's repayment amount for a 
CJR collaborator that is not an ACO and we propose 50 percent of the 
participant hospital's repayment amount for a CJR collaborator that is 
an ACO. We propose to allow a higher percentage of the participant 
hospital's repayment amount to be paid by an ACO than by CJR 
collaborators that are not ACOs in recognition that some ACOs are 
sizable organizations with significant financial and other resources. 
In addition, their expertise in managing the cost and quality of care 
for Medicare beneficiaries over a period of time may make some ACOs 
uniquely capable of sharing a higher percentage of downside risk under 
the CJR with the participant hospital under a sharing arrangement 
between the ACO and CJR participant hospital that meets all 
requirements for such arrangements, including that participation in the 
sharing arrangement must be voluntary and without penalty for 
nonparticipation as discussed previously. We seek comment on the 
proposed limitation that would apply to ACOs that are CJR 
collaborators.
    Additionally, we propose that all gainsharing payments and 
alignment payments must be made by check, electronic funds transfer, or 
another traceable cash transaction. This is different from the current 
CJR model policy which requires gainsharing payments and alignment 
payments to be made by electronic funds transfer. Here, we propose to 
revise this requirement this requirement in the CJR model in order to 
provide additional flexibility for entities making gainsharing payments 
and alignment payments. We believe our proposal would mitigate the 
administrative burden that the EFT requirement would place on the 
financial arrangements between certain participant hospitals and CJR 
collaborators, especially individual physicians and nonphysician 
practitioners and small PGPs, which could discourage participation of 
those suppliers as CJR collaborators. We seek comment on the effect of 
this proposal on reducing the administrative barriers to individual 
physician and nonphysician practitioner and small PGP participation in 
the CJR as CJR collaborators.
    In summary, we propose the following conditions and restrictions on 
gainsharing payments, alignment payments, and internal cost savings:
     Gainsharing payments, if any, must--
    ++ Be derived solely from reconciliation payments, or internal cost 
savings, or both;
    ++ Be distributed on an annual basis (not more than once per 
calendar year);
    ++ Not be a loan, advance payment, or payment for referrals or 
other business; and
    ++ Be clearly identified as a gainsharing payment at the time it is 
paid.
     To be eligible to receive a gainsharing payment, a CJR 
collaborator must meet quality of care criteria for the performance 
year for which the CJR participant hospital accrued the internal cost 
savings or earned the reconciliation payment that comprises the 
gainsharing payment. The quality of care criteria must be established 
by the participant hospital and directly related to the CJR episode.
     To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator other than a 
PGP or an ACO must have directly furnished a billable item or service 
to a CJR beneficiary during a CJR episode that occurred in the same 
performance year for which the CJR participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount.
     To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is a PGP 
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 same performance year for which 
the participant hospital has calculated a gainsharing payment or been 
assessed a repayment amount.
    ++ The PGP must have contributed to CJR activities and been 
clinically involved in the care of CJR beneficiaries during the same 
performance year for which the participant hospital has calculated a 
gainsharing payment or been assessed a repayment amount. For example, a 
PGP might have been clinically involved in the care of CJR 
beneficiaries by--

--Providing care coordination services to beneficiaries during and/or 
after inpatient admission;
--Engaging with a participant hospital in care redesign strategies, and 
actually performing a role in implementing such strategies, that are 
designed to improve the quality of care for CJR episodes and reduce CJR 
episode spending; or
--In coordination with other providers and suppliers (such as members 
of the PGP, the participant hospital, and post-acute care providers), 
implementing strategies designed to address and manage the 
comorbidities of CJR beneficiaries.
     To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is an 
ACO must meet the following criteria:
    ++ The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to a CJR beneficiary during a CJR episode that 
occurred during the same performance year for which the participant 
hospital has calculated a gainsharing payment or been assessed a 
repayment amount.
    ++ The ACO must have contributed to CJR activities and been 
clinically involved in the care of CJR beneficiaries. For example, an 
ACO might be have been clinically involved in the care of CJR 
beneficiaries by--

--Providing care coordination services to CJR beneficiaries during and/
or after inpatient admission;
--Engaging with a participant hospital in care redesign strategies, and 
actually performing a role in implementing such strategies, that are 
designed to improve the quality of care and reduce spending for CJR 
episodes; or
--In coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the participant hospital, and 
post-acute care providers), implementing strategies designed to address 
and manage the comorbidities of CJR beneficiaries.
     The methodology for accruing, calculating and verifying 
internal cost

[[Page 50963]]

savings must be transparent, measurable, and verifiable in accordance 
with generally accepted accounting principles (GAAP) and Government 
Auditing Standards (The Yellow Book).
     The methodology used to calculate internal cost savings 
must reflect the actual, internal cost savings achieved by the 
participant hospital through the documented implementation of CJR 
activities identified by the participant hospital and must exclude--
    ++ Any savings realized by any individual or entity that is not the 
participant hospital; and
    ++ ``Paper'' savings from accounting conventions or past investment 
in fixed costs.
     The total amount of a gainsharing payment for a 
performance year paid to a CJR collaborator must not exceed the 
following:
    ++ In the case of a CJR collaborator who is a physician or 
nonphysician practitioner, 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the participant hospital's CJR 
beneficiaries during CJR episodes that occurred during the same 
performance year in which the participant hospital accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being made.
    ++ In the case of a CJR collaborator that is a PGP, 50 percent of 
the Medicare-approved amounts under the PFS for items and services 
billed by the PGP and furnished to the participant hospital's CJR 
beneficiaries by members of the PGP during CJR episodes that occurred 
during the same performance year in which the participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment being made.
     The amount of any gainsharing payments must be determined 
in accordance with a methodology that is substantially based on quality 
of care and the provision of CJR activities. The methodology may take 
into account the amount of such CJR activities provided by a CJR 
collaborator relative to other CJR collaborators.
     For a performance year, the aggregate amount of all 
gainsharing payments that are derived from a reconciliation payment 
must not exceed the amount of the reconciliation payment the 
participant hospital receives from CMS.
     No entity or individual, whether a party to a sharing 
arrangement 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 past or anticipated referrals or business otherwise 
generated by, between or among the participant hospital, any CJR 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a participant 
hospital, CJR collaborator, collaboration agent, or downstream 
collaboration agent.
     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.
     The sharing arrangement must require the participant 
hospital to recoup any gainsharing payment that contained funds derived 
from a CMS overpayment on a reconciliation report or was based on the 
submission of false or fraudulent data.
     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 by CMS of 
a repayment amount reflected in a reconciliation report;
    ++ Loans, advance payments, or payments for referrals or other 
business; or
    ++ Assessed by a participant hospital if it does not owe a 
repayment amount.
     The participant hospital must not receive any amounts from 
a CJR collaborator under a sharing arrangement that are not alignment 
payments.
     For a performance 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.
     The aggregate amount of all alignment payments from a CJR 
collaborator to the participant hospital may not be greater than--
    ++ With respect to a CJR collaborator other than an ACO, 25 percent 
of the participant hospital's repayment amount; and
    ++ With respect to a CJR collaborator that is an ACO, 50 percent of 
the participant hospital's repayment amount.
     The methodology for determining alignment payments must 
not directly account for the volume or value of past or anticipated 
referrals or business otherwise generated by, between or among the 
participant hospital, any CJR collaborator, any collaboration agent, 
any downstream collaboration agent, or any individual or entity 
affiliated with a participant hospital, CJR collaborator, collaboration 
agent, or downstream collaboration agent.
     All gainsharing payments and any alignment payments must 
be administered by the participant hospital in accordance with 
generally accepted accounting principles.
     All gainsharing payments and alignment payments must be 
made by check, electronic funds transfer, or another traceable cash 
transaction.
    We propose to amend the regulations at Sec.  510.500(c). We seek 
comment on our proposal, including the feasibility of implementing the 
proposed safeguards in the context of the current regulatory framework 
applicable to ACOs and whether additional or different safeguards are 
reasonable, necessary or appropriate to ensure the goals of program 
integrity, protecting against abuse and ensuring the goals of the model 
are met.
d. Documentation
    We propose revisions to Sec.  510.500(d) for organization and 
formatting purposes, and to align with the proposed regulations of the 
EPMs. Besides the proposed definitional changes and our proposal 
related to the determination of qualified practitioners under the 
Quality Payment Program, these revisions would not change any policies 
under the current documentation section of the CJR model.
    In summary we propose the following requirements for documentation:
     Participant hospitals must--
    ++ Document the sharing arrangement contemporaneously with the 
establishment of the arrangement;
    ++ Maintain accurate current and historical lists of all CJR 
collaborators, including collaborator names and addresses; update such 
lists on at least a quarterly basis; and publicly report the current 
and historical lists of CJR collaborators on a Web page on the 
participant hospital's Web site as well as provide such lists to CMS; 
and
    ++ Maintain and require each CJR collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
the--
    --Nature of the payment (gainsharing payment or alignment payment);
    --Identity of the parties making and receiving the payment;
    --Date of the payment;
    --Amount of the payment; and

[[Page 50964]]

    --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 its potential and 
current CJR collaborators' eligibility to participate in Medicare.
    ++ Its 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.
    ++ Its plan to track gainsharing payments and alignment payments.
     The participant hospital must retain and provide access 
to, and must require each CJR collaborator to retain and provide access 
to, the required documentation in accordance with Sec.  510.110.
    In the proposed Sec.  510.500(d)(3), we propose that participant 
hospitals must retain and provide access to the required documentation 
in accordance with Sec.  510.110 and must obligate CJR collaborators to 
do the same. We propose to add a new section, Sec.  510.110, to the CJR 
regulations, which would apply all records access and retention 
requirements under the CJR model, including those for financial 
arrangements as well as beneficiary notifications and beneficiary 
incentives. Because we propose to consolidate all records access and 
retention requirements in one place in the regulations, we propose to 
delete Sec.  510.500(e) from the current CJR regulations. We discuss 
further our proposal to consolidate the requirements under the CJR 
model for access to records and record retention and apply them more 
broadly in the model. This approach mirrors our proposed records 
retention policies for the EPMs, which are discussed in detail in 
section III.H. of this proposed rule. We refer readers to that section 
for further discussion of our proposed policies and rationale.
    We propose to amend these regulations at Sec.  510.500(d). We seek 
comment on our proposals.
3. Distribution Arrangements
    Though we propose a complete revision of the regulations in Sec.  
510.505, these changes are mainly to accommodate our proposals to add 
ACOs as CJR collaborators, add the term `collaboration agent,' 
consolidate the requirements under the previous term `collaborator 
agreement' with sharing arrangements, and to mirror the proposed EPM 
regulations at Sec.  512.505 to avoid confusion for hospitals that are 
participating in CJR as well as one or more of the proposed EPMs. Our 
proposed changes to the regulations reflect that the requirements and 
rules regarding distribution arrangements under the CJR model would 
stay largely the same.
a. General
    We propose that certain financial arrangements between CJR 
collaborators and other individuals or entities called ``collaboration 
agents'' be termed ``distribution arrangements.'' A distribution 
arrangement is a financial arrangement between a CJR collaborator that 
is an ACO or PGP and a collaboration agent for the sole purpose of 
sharing a gainsharing payment received by the ACO or PGP. A 
collaboration agent is an individual or entity that is not a CJR 
collaborator and that is either a PGP member that has entered into a 
distribution arrangement with the same PGP in which he or she is an 
owner or employee or an ACO participant or ACO provider/supplier that 
has entered into a distribution arrangement with the same ACO in which 
it is participating. Where a payment from a CJR collaborator to a 
collaboration agent is made pursuant to a distribution arrangement, we 
propose to define that payment as a ``distribution payment.'' A 
collaboration agent may only make a distribution payment in accordance 
with a distribution arrangement which complies with the provisions of 
Sec.  510.505 and all other applicable laws and regulations, including 
the fraud and abuse laws. We solicit comment on whether requirements 
for distribution payments by ACOs under this proposal are reasonable, 
necessary and appropriate to promote program integrity, prevent fraud 
and abuse, and achieve the goals of the model. In addition, we solicit 
comment on how the regulation of the financial arrangements this 
proposal may interact with how these or similar financial arrangements 
are regulated under the Medicare Shared Savings Program.
b. Requirements
    We propose to amend the requirements for distribution payments in 
Sec.  510.505 as discussed in this section.
    We propose the opportunity to make or receive a distribution 
payment must not be conditioned directly or indirectly on the volume or 
value of past or anticipated referrals or business otherwise generated 
by, between or among the participant hospital, any CJR collaborator, 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, collaboration agent, or downstream collaboration agent. 
With the exception of adding ``past or anticipated'', this proposed 
requirement is similar to the existing requirement in the CJR model. By 
adding this language, all previous and future referrals between or 
among the participant hospital, any CJR collaborator, any collaboration 
agent, any downstream collaboration agent, or any individual or entity 
affiliated with a participant hospital, CJR collaborator, collaboration 
agent, or downstream collaboration agent are encompassed.
    Currently, 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, any collaboration agent, any downstream 
collaboration agent, and any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent. We propose to change this requirement 
as follows.
    Like our proposal for gainsharing payments discussed previously, we 
propose a more flexible standard for the determination of the amount of 
distribution payments from ACOs and PGPs for the same reasons we 
propose this standard for the determination of gainsharing payments. 
Specifically, for ACOs we propose that the amount of any distribution 
payments must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision of CJR 
activities and that may take into account the amount of such CJR 
activities provided by a collaboration agent relative to other 
collaboration agents. We believe that the amount of a collaboration 
agent's provision of CJR activities (including direct care) to CJR 
beneficiaries during a CJR episode may contribute to the participant 
hospital's internal cost savings and reconciliation payment that may be 
available for making a gainsharing payment to the CJR collaborator with 
which the collaboration agent has a distribution arrangement. Greater 
contributions of CJR activities by one collaboration agent versus 
another collaboration agent that result in different contributions to 
the gainsharing payment made to the CJR collaborator with which those 
collaboration agents both have a distribution arrangement may be 
appropriately valued in the methodology used to make distribution

[[Page 50965]]

payments to those collaboration agents. Accordingly, we believe this is 
the appropriate standard for determining the amount of distribution 
payments from an ACO to its collaboration agents.
    We note that for distribution payments made by a PGP to PGP 
members, the requirement that the amount of any distribution payments 
must be determined in accordance with a methodology that is 
substantially based on quality of care and the provision of CJR 
activities may be more limiting in how a PGP pays its members than is 
allowed under existing law. Therefore, to retain existing flexibility 
for distribution payments by a PGP to PGP members, we propose that the 
amount of the distribution payment from a PGP to PGP members must be 
determined either using the methodology previously described for 
distribution payments from an ACO or in a manner that complies with 
Sec.  411.352(g). This proposal would allow a PGP the choice either to 
comply with the general standard that the amount of a distribution 
payment must be substantially based on quality of care and the 
provision of CJR activities or to provide its members a financial 
benefit through the CJR without consideration of the PGP member's 
individual quality of care. In the latter case, PGP members who are not 
collaboration agents (including those who furnished no services to CJR 
beneficiaries) would be able receive a share of the profits from their 
PGP that includes the monies contained in a gainsharing payment. We 
believe that our proposal to modify the current CJR regulations to 
allow the amount of the distribution payment from a PGP to a PGP member 
to be determined in a manner that complies with Sec.  411.352(g) is an 
appropriate exception to the general standard for determining the 
amount of distribution payment under the CJR model from a PGP to a PGP 
member. CMS has determined under the physician self-referral law that 
payments from a group practice as defined under Sec.  411.352 to its 
members that comply with Sec.  411.352(g) are appropriate. This 
proposal would allow a PGP the choice either to comply with the general 
standard that the amount of a distribution payment must be 
substantially based on quality of care and the provision of CJR 
activities or to provide its members a financial benefit through the 
CJR model without consideration of the PGP member's individual quality 
of care. This approach mirrors our proposed policies for distribution 
arrangements for the EPMs, which are discussed in detail in section 
III.I.5. of this proposed rule.
    We propose to amend the regulations at Sec.  510.505(b)(4) and 
(b)(5). We seek comment on this proposal and specifically whether 
additional safeguards or a different standard is needed to allow for 
greater flexibility in calculating the amount of distribution payments 
consistent with the goals of promoting program integrity, protecting 
against abuse, and ensuring that the goals of the model are met. In 
addition, we solicit comment on the proposal to allow distribution 
payments by a PGP to its members that comply with Sec.  411.352(g) or 
whether additional/different safeguards are reasonable, necessary, and 
appropriate.
    Except for a distribution payment from a PGP to a PGP member that 
complies with Sec.  411.352(g), we propose to continue the limits in 
the current CJR regulations on the total amount of distribution 
payments to physicians, nonphysician practitioners, and PGPs as we 
propose for gainsharing payments. Specifically, in the case of a 
collaboration agent that is a physician or nonphysician practitioner, 
absent the alternative safeguards afforded by compliance with Sec.  
411.352(g), we would limit the total amount of distribution payments 
paid for a performance year to the collaboration agent to 50 percent of 
the total Medicare-approved amounts under the PFS for items and 
services furnished by the collaboration agent to the CJR participant 
hospital's CJR beneficiaries during CJR episodes that occurred during 
the same performance year for which the CJR participant accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed. In the case of a 
collaboration agent that is a PGP, the limit would continue to be 50 
percent of the total Medicare-approved amounts under the PFS for items 
and services billed by the PGP for items and services furnished by 
members of the PGP to the CJR participant hospital's CJR beneficiaries 
during CJR episodes that occurred during the same performance year for 
which the CJR participant hospital accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment being distributed.
    We propose that all distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction. This 
proposal would provide additional flexibility for entities making 
distribution payments as well as would mitigate the administrative 
burden that the EFT requirement previously placed on the financial 
arrangements between certain participant hospitals and CJR 
collaborators, especially individual physicians and nonphysician 
practitioners and small PGPs, which could discourage participation of 
those suppliers as CJR collaborators.
    We propose to amend the regulations at Sec.  510.505(b)(10). We 
seek comment on this proposal.
    Finally, we propose that CJR collaborators must retain and provide 
access to the required documentation in accordance with Sec.  510.110 
and must require each collaboration agent to do so as well. We discuss 
further our proposal to consolidate the requirements under the CJR 
model for access to records and record retention and apply them more 
broadly in the model. This approach mirrors our proposed records 
retention policies for the EPMs, which are discussed in detail in 
section III.H. of this proposed rule. We refer readers to that section 
for further discussion of our proposed policies and rationale.
    We propose to amend the regulations at Sec.  510.505(b)(14). We 
seek comment on our proposals.
4. Downstream Distribution Arrangements Under the CJR Model
a. General
    We propose that the CJR model allow for certain financial 
arrangements within an ACO between a PGP and its members. We discuss 
here our proposals for downstream distribution arrangements, which 
mirror our proposals for the proposed EPMs described in section 
III.I.6. of this proposed rule. Specifically, we propose that certain 
financial arrangements between a collaboration agent that is both a PGP 
and an ACO participant and other individuals termed ``downstream 
collaboration agents'' be termed a ``downstream distribution 
arrangement.'' A downstream distribution arrangement is a financial 
arrangement between a collaboration agent that is a both a PGP and an 
ACO participant and a downstream collaboration agent for the sole 
purpose of sharing a distribution payment received by the PGP. A 
downstream collaboration agent is an individual who is not a CJR 
collaborator or a collaboration agent and who is a PGP member that has 
entered into a downstream distribution arrangement with the same PGP in 
which he or she is an owner or employee, and where the PGP is a 
collaboration agent. Where a payment from a collaboration agent to a 
downstream collaboration agent is made pursuant to a downstream 
distribution arrangement, we define that payment as

[[Page 50966]]

a ``downstream distribution payment.'' A CJR collaboration agent may 
only make a downstream distribution payment in accordance with a 
downstream distribution arrangement which complies with the 
requirements of this section and all other applicable laws and 
regulations, including the fraud and abuse laws.
    The proposals for the general provisions for downstream 
distribution arrangements under the CJR model are included in Sec.  
510.506. These provisions mirror those proposed for the proposed EPMs 
in Sec.  512.510(a). We seek comment on our proposals for these general 
provisions, as well as any alternatives to this structure.
b. Requirements
    We propose a number of specific requirements for downstream 
distribution arrangements to help ensure that their sole purpose is to 
create financial alignment between collaboration agents that are PGPs 
which are also ACO participants and downstream collaboration agents 
toward the goal of the CJR model to improve the quality and efficiency 
of CJR episodes. We refer readers to section III.I.6.(b) of this 
proposed rule for further discussion of our proposals regarding 
downstream distribution arrangements and our rationale for each 
proposal. Our proposed requirements largely parallel those proposed in 
Sec.  510.510(b) and Sec.  510.505(b) for sharing and distribution 
arrangements and gainsharing and distribution payments based on similar 
reasoning for these three types of arrangements and payments.
    As listed in Sec.  510.506 and described in detail in III.I.6(b) of 
this proposed rule, we propose requirements addressing the agreements 
governing downstream distribution arrangements, eligibility for receipt 
of downstream distribution payments, a cap on the amount of such 
payments, the methodologies used to determine the amount of downstream 
distribution payments, and documentation regarding downstream 
distribution arrangements. Specifically, we propose that all downstream 
distribution arrangements must be in writing and signed by the parties, 
contain the date of the agreement, and entered into before care is 
furnished to CJR beneficiaries under the distribution arrangement. We 
propose that participation must be voluntary and without penalty for 
nonparticipation, and the downstream distribution arrangement must 
require the downstream collaboration agent to comply with all 
applicable laws and regulations.
    As with our proposals for gainsharing and distribution payments, we 
propose that the opportunity to make or receive a downstream 
distribution payment must not be conditioned directly or indirectly on 
the volume or value of past or anticipated referrals or business 
otherwise generated by, between or among the participant hospital, any 
CJR collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a participant 
hospital, CJR collaborator, collaboration agent, or downstream 
collaboration agent. In determining the amount of downstream 
distribution payments we propose a more flexible approach, as we have 
with the proposed EPMs. We propose that the amount of any downstream 
distribution payments must be determined either in a manner that 
complies with Sec.  411.352(g) or that is substantially based on 
quality of care and the provision of CJR activities and that may take 
into account the amount of CJR activities provided by a downstream 
collaboration agent relative to other downstream collaboration agents. 
Just as we propose an alternative to a methodology that is 
substantially based on quality of care and the provision of CJR 
activities for determining the amount of a distribution payment from a 
PGP to a PGP member, we similarly propose an alternative that the 
amount of a downstream distribution payment from a PGP to a PGP member 
may be determined in a manner that complies with Sec.  411.352(g).
    Similar to our proposed requirements for distribution arrangements 
for those EPM collaborators that are PGPs, we propose that, except for 
a downstream distribution arrangement that complies with Sec.  
411.352(g), a downstream collaboration agent is eligible to receive a 
downstream distribution payment only if the PGP billed for an item or 
service furnished by the downstream collaboration agent to a CJR 
beneficiary during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprise the gainsharing payment from which the ACO made the 
distribution payment to the PGP that is an ACO participant. This 
approach mirrors our proposed requirements for distribution 
arrangements between collaborators and collaboration agents, as well as 
the proposed approach for the EPMs.
    With regard to limitations on the amount of downstream distribution 
payments made to downstream collaboration agents, we propose the same 
limit as that proposed for distribution payments by CJR collaborators 
that are PGPs. With the exception of downstream distribution payments 
that comply with Sec.  411.352(g), we propose to limit the total amount 
of downstream distribution payments paid for a performance year to a 
downstream collaboration agent to 50 percent of the total Medicare-
approved amounts under the PFS for services billed by the PGP and 
furnished by the downstream collaboration agent to the participant 
hospital's CJR beneficiaries during CJR episodes that occurred during 
the same performance year in which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment from which the ACO made the 
distribution payment to the PGP. We further propose that the total 
amount of all downstream distribution payments made to downstream 
collaboration agents must not exceed the amount of the distribution 
payment received by the collaboration agent (PGP that is an ACO 
participant) from the ACO that is a CJR collaborator. In addition, all 
downstream distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction, as with our 
proposed approach for gainsharing, alignment, and distribution 
payments. Finally, the distribution arrangement must not induce the 
downstream collaboration agent to reduce or limit medically necessary 
items and services to any Medicare beneficiary or reward the provision 
of items and services that are medically unnecessary.
    We propose that the PGP must maintain contemporaneous documentation 
regarding downstream distribution arrangements in accordance with Sec.  
510.110, including:
     The relevant written agreements;
     The date and amount of any downstream distribution 
payment(s);
     The identity of each downstream collaboration agent that 
received a downstream distribution payment; and
     A description of the methodology and accounting formula 
for determining the amount of any downstream distribution payment.
    We propose that the PGP may not enter into a downstream 
distribution arrangement with any PGP member who has a sharing 
arrangement with a participant hospital or distribution arrangement 
with the ACO in which the PGP is a participant. Finally, we propose 
that the PGP must retain and provide access to, and must require 
downstream collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  510.110.

[[Page 50967]]

    The proposals for downstream distribution arrangement requirements 
are included in Sec.  510.506. We seek comment on our proposals.
5. Summary of Proposals for Sharing, Distribution, and Downstream 
Distribution Arrangements Under the CJR Model.
    Figure 3 summarizes the proposals for the defined terms and 
financial arrangements discussed in section V.J. of this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP02AU16.024

K. Beneficiary Incentives Under the CJR Model
    We propose numerous amendments to the regulations in Sec.  510.515. 
These are mainly for organizational purposes, to more clearly specify 
our policies, and for the CJR model regulations to mirror the proposed 
EPM regulations at Sec.  512.525 to avoid confusion for hospitals that 
are participating in CJR as well as one or more of the proposed EPMs. 
Our proposed changes to the regulations reflect that the requirements 
and rules regarding the use of beneficiary incentives under the CJR 
model would stay largely the same. However, we are proposing several 
changes in order to ensure adequate documentation of beneficiary 
incentives by participant hospitals and to align with our proposed 
requirements for the EPMs.
    First, as a program safeguard against misuse of beneficiary 
incentives under the CJR model, we would clarify our existing 
requirements for documentation of beneficiary incentives. Documentation 
regarding items of technology exceeding $100 in retail value must also 
include contemporaneous documentation of any attempt to retrieve the 
technology at the end of a CJR episode. Documented, diligent, good 
faith attempts to retrieve items of technology will be deemed to meet 
the retrieval requirement.
    We also propose to add as a requirement that participant hospitals 
retain and provide access to required documentation pertaining to 
beneficiary incentives as discussed throughout section V.L. of this 
proposed rule and proposed in Sec.  510.110 of the regulations. 
Participant hospitals retaining and providing access to documentation 
in accordance with Sec.  510.110 would promote parallel record 
retention for all CJR model requirements and further enable successful 
monitoring efforts by CMS. As discussed in section V.L., the proposed 
section Sec.  510.110 would apply to beneficiary incentives as well as 
financial arrangements and beneficiary notification requirements under 
the CJR model; therefore, we are proposing to delete Sec.  510.515(e) 
to avoid duplicative requirements and language and to align the 
applicable CJR model regulations

[[Page 50968]]

with the proposed regulations of the EPMs.
    We propose to include these requirements in the regulations at 
Sec.  510.515(d)(3) and Sec.  510.515(d)(4). We seek comment on our 
proposal. We also seek comment on the proposed additional requirements 
for compliance with proposed section Sec.  510.110 and the deletion of 
Sec.  510.515(e).
L. Access to Records and Record Retention
    We propose to consolidate the requirements under CJR for access to 
records and record retention and apply them more broadly in the model. 
This approach mirrors our proposed records retention policies for the 
EPMs, which are discussed in detail in section III.H. of this proposed 
rule. We refer readers to that section for further discussion of our 
proposed policies and rationale.
    We propose to add Sec.  510.110 to the CJR regulations, which would 
apply to documentation regarding beneficiary notifications, financial 
arrangements, and beneficiary incentives. Because we propose to 
consolidate all of the existing records access and retention 
requirements in one place, we propose to delete Sec.  510.500(e) and 
Sec.  510.515(c). We further propose to require participant hospitals, 
CJR collaborators, collaboration agents, downstream collaboration 
agents and any other individuals or entities performing CJR activities 
to allow the Government, including CMS, OIG, HHS and the Comptroller 
General or their designees, scheduled and unscheduled access to all 
books, contracts, records, documents and other evidence sufficient to 
enable the audit, evaluation, inspection or investigation of the 
individual or entity's compliance with CJR model requirements, the 
calculation, distribution, receipt, or recoupment of gainsharing 
payments, alignment payments, distribution payments, and downstream 
distribution payments, the obligation to repay any reconciliation 
payments owed to CMS, the quality of the services furnished to a CJR 
beneficiary during a CJR episode, and the sufficiency of CJR 
beneficiary notifications.
    In general, we propose that such documents be maintained 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.
    We believe these safeguards regarding access to records and record 
retention are necessary to ensure program integrity and protect against 
abuse, in view of the CJR model's design and requirements. We believe 
that by providing access to CJR records, we promote transparency of 
activities in the CJR model. Further, the proposed access to records 
and record retention requirements would ensure that the compliance of 
participant hospitals, CJR collaborators, collaboration agents, 
downstream collaboration agents, and any other individuals or entities 
performing CJR activities can be monitored and assessed. Also, these 
records may be necessary in the event that a participant hospital 
appeals any matter that is subject to dispute resolution through CMS. 
As such, CMS would have the resources necessary to prepare and respond 
to any such appeal. Finally, we propose to establish CEHRT use 
attestation for CJR participant hospitals so that a CJR participant 
hospital could be in Track 1 of the CJR model that meets the proposed 
requirements in the Quality Payment Program proposed rule to be an 
Advanced APM as discussed in section III.A.2. of this proposed rule. 
Thus, we propose to require access to records and record retention 
about the accuracy of each Track 1 CJR model participant hospital's 
submissions under CEHRT use requirements. Specifically, attestation to 
CEHRT use and submission of clinician financial arrangements lists are 
key requirements for Track 1 of the CJR model that is an Advanced APM, 
and the access to records and record retention requirements provide a 
program integrity safeguard by allowing us to assess the completeness 
and accuracy of the participant hospital's compliance with the 
requirements for those submissions.
    In summary, we propose in Sec.  510.110 that participant hospitals, 
CJR collaborators, collaboration agents, downstream collaboration 
agents, and any other individuals or entities performing providing CJR 
activities must allow the Government, including CMS, OIG, HHS 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, 
distribution arrangements, downstream distribution arrangements and the 
documentation required under Sec.  510.500(d) and Sec.  510.525(c)) 
sufficient to enable the audit, evaluation, inspection or investigation 
of the following:
     Individual's or entity's compliance with CJR model 
requirements.
     The calculation, distribution, receipt, or recoupment of 
gainsharing payments, alignment payments, distribution payments, and 
downstream distribution payments
     The obligation to repay any reconciliation payments owed 
to CMS.
     The quality of the services furnished to a CJR beneficiary 
during a CJR episode.
     The sufficiency of CJR beneficiary notifications.
     The accuracy of the CJR participant hospital's submission 
under CEHRT use requirements.
    Further, we propose that participant hospitals, CJR collaborators, 
collaboration agents, downstream collaboration agents, and any other 
individuals or entities performing providing CJR activities 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 CMS determines a particular record or group of records should be 
retained for a longer period and notifies the participant hospital at 
least 30 calendar days before the disposition date or there has been a 
dispute or allegation of fraud or similar fault against the participant 
hospital, CJR collaborator, collaboration agents, downstream 
collaboration agents, or any other individual or entity performing CJR 
activities related to the CJR model. In this case, the records must be 
maintained for 6 years from the date of any resulting final resolution 
of the dispute or allegation of fraud or similar fault.
    We seek comment on our proposals, including whether additional or 
different requirements are appropriate to promote program integrity, 
prevent fraud and abuse and promote the goals of the model.

M. Waivers of Medicare Program Rules To Allow Reconciliation Payment or 
Repayment Actions Resulting From the Net Payment Reconciliation Amount

    In order to correct a technical error in the CJR final rule (42 CFR 
510.620), we propose to waive the requirements of section 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 proposed this policy in the CJR proposed rule (80 FR 41274) and 
received no comments from the public on our proposal; the proposal was 
finalized in the CJR final rule. We

[[Page 50969]]

refer readers to the CJR final rule (80 FR 73460 and 73461) for further 
discussion.
    We propose to amend our regulations at Sec.  510.620 to reflect 
this change.

N. SNF 3-Day Waiver Beneficiary Protections

    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. Under 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. In the November 2015 final rule (80 FR 73454 
through 73460), we provided hospitals in CJR with additional 
flexibility to attempt to increase quality and decrease costs by 
allowing a waiver of the SNF 3-day rule for beneficiaries in a CJR 
episode beginning on or after January 1, 2017. Program requirements for 
this waiver are codified at Sec.  510.610. Specifically, under Sec.  
510.610, for SNFs that meet all specified requirements, we waive the 
requirement in section 1861(i) of the Act for a 3-day inpatient 
hospital stay prior to a Medicare covered post-hospital extended care 
service for eligible beneficiaries in a CJR episode. The CJR SNF waiver 
will only be available to participant hospitals that are active 
participants in the CJR model. If a participant hospital no longer 
participates in the CJR model, due to a merger or other reason, it 
cannot continue to use the CJR SNF waiver. All other provisions of the 
statute and regulations regarding Medicare Part A post-hospital 
extended care services continue to apply.
    We believe that clarity regarding whether a waiver applies to SNF 
services furnished to a particular beneficiary is important to help 
ensure compliance with the conditions of the waiver and also improve 
our ability to monitor waivers for misuse. Therefore, in the CJR final 
rule (80 FR 73454 through 73460), we discussed how the waiver can be 
utilized when a beneficiary is in a CJR episode at the time when the 
waiver is applied. In addition, at Sec.  510.405 we require participant 
hospitals to provide a discharge planning notice to beneficiaries in 
cases where there is potential beneficiary liability for the SNF stay 
(80 FR 73548 through 73549).
    Based on our experiences under BPCI Model 2, the Pioneer ACO Model, 
and other initiatives, we established certain requirements under Sec.  
510.610 for hospitals and SNFs with respect to the SNF 3-day rule 
waiver under the CJR model. As discussed in the CJR final rule, 
commenters expressed concern about beneficiary liability in cases 
whether the beneficiary's eligibility status has changed but the 
hospital is unaware of the change at the time it uses the waiver. We 
noted that we would continue to evaluate the waiver of the SNF 3-day 
rule, including further lessons learned from Innovation Center models 
in which a waiver of the SNF 3-day rule is being tested. We indicated 
that in the event we determine that additional safeguards or 
protections for beneficiaries or other changes were necessary, such as 
to incorporate additional protections for beneficiaries, we would 
propose the necessary changes through future rulemaking.
    In considering additional beneficiary protections that may be 
necessary to ensure proper use of the SNF 3-day waiver under the CJR 
model, we note that there are existing, well-established payment and 
coverage policies for SNF services based on sections 1861(i), 
1862(a)(1), and 1879 of the Act that include protections for 
beneficiaries from liability for certain non-covered SNF charges. These 
existing payment and coverage policies for SNF services continue to 
apply under the model, including SNF services furnished pursuant to the 
SNF 3-day waiver. (For example, see section 70 in the Medicare Claims 
Processing Manual, Chapter 30--Financial Liability Protections on the 
CMS Web site at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c30.pdf; and Medicare Coverage of Skilled 
Nursing Facility Care at https://www.medicare.gov/Pubs/pdf/10153.pdf; 
Medicare Benefit Policy Manual, Chapter 8--Coverage of Extended Care 
(SNF) Services Under Hospital Insurance at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c08.odf). In 
general, CMS requires that the SNF inform a beneficiary in writing 
about services and fees before the beneficiary is discharged to the SNF 
(Sec.  483.10(b)(6)); the beneficiary cannot be charged by the SNF for 
items or services that were not requested (Sec.  483.10(c)(8)(iii)(A)); 
a beneficiary cannot be required to request extra services as a 
condition of continued stay (Sec.  483.10(c)(8)(iii)(B)); and the SNF 
must inform a beneficiary that requests an item or service for which a 
charge will be made that there will be a charge for the item or service 
and what the charge will be (Sec.  483.10(c)(8)(iii)(C)). (See also 
section 6 of Medicare Coverage of Skilled Nursing Facility Care at 
https://www.medicare.gov/Pubs/pdf/10153.pdf.)
    As we discussed in the CJR final rule (80 FR 73454 through 73460), 
commenters expressed concern regarding the lag between a CJR 
beneficiary's Medicare coverage or eligibility status change and a 
participant hospital's awareness of that change. There may be cases in 
which a SNF waiver is used by a participant hospital because the 
participant hospital believes that the beneficiary meets the inclusion 
criteria, based on the information available to the hospital and SNF at 
the time of the beneficiary's admission to the SNF, but in fact the 
beneficiary's Medicare coverage has changed and the hospital was 
unaware of it based on available information. We recognize that despite 
good faith efforts by participant hospitals and SNFs to determine a 
beneficiary's Medicare status for the model, it may occur that a 
beneficiary is not eligible to be included in the CJR model at the time 
the SNF waiver is used. In these cases, we will cover services 
furnished under the waiver when the information available to the 
provider at the time the services under the waiver were furnished 
indicated that the beneficiary was included in the model.
    Since publication of our final rule, we have continued to learn 
from implementation and refinement of the SNF 3-day waiver in other 
models and the Shared Savings Program. Based on these experiences, we 
believe there are situations where it would be appropriate to require 
additional beneficiary financial protections under the SNF 3-day waiver 
for the CJR model. Specifically, we are concerned about potential 
beneficiary financial liability for non-covered Part A SNF services 
that might be directly related to use of the SNF 3-day waiver under the 
CJR model. We are concerned that there could be scenarios where a 
beneficiary could be charged for non-covered SNF services that were a 
result of a participant hospital's inappropriate use of the SNF waiver. 
Specifically, we are concerned that a beneficiary could be charged for 
non-covered SNF services if a participant hospital discharges a 
beneficiary to a SNF that does not meet the quality requirement (3 
stars or higher in 7 of the last 12 months), and payment for SNF 
services is denied for lack of a qualifying inpatient hospital stay. We 
recognize that requiring a discharge planning notice (Sec.  510.405) 
will help mitigate concerns about beneficiaries' potential financial 
liability for non-covered services. Nevertheless, we are concerned that 
in this scenario, once the claim is rejected, the beneficiary may not 
be protected

[[Page 50970]]

from financial liability under existing Medicare rules because the 
waiver would not be available, and the beneficiary would not have had a 
qualifying inpatient hospital stay. Thus, the CJR beneficiary could be 
charged by the SNF for non-covered SNF services that were a result of 
an inappropriate attempt to use the waiver. In this scenario, Medicare 
would deny payment of the SNF claim, and the beneficiary could 
potentially be charged by the SNF for these non-covered SNF services, 
potentially subjecting such beneficiaries to significant financial 
liability. In this circumstance, we assume the participant hospital's 
intent was to rely upon the SNF 3-day waiver, but the waiver 
requirements were not met. We believe that in this scenario, the 
rejection of the claim could easily have been avoided if the hospital 
had confirmed that the requirements for use of the SNF 3-day waiver 
were satisfied or if the beneficiary had been provided the discharge 
planning notice and elected to go to a SNF that met the quality 
requirement.
    Other models have addressed similar issues in which the beneficiary 
may be subject to financial liability for non-covered SNF services 
related to the waiver. The Next Generation ACO Model generally places 
the risk on the SNF, where the SNF did not qualify under the waiver or 
otherwise knew or reasonably could be expected to have known that 
payment would not be made for the non-covered SNF services. In such 
cases, CMS makes no payment for the services, and the SNF may not 
charge the beneficiary for the services and must return any monies 
collected from the beneficiary. Additionally, under the Next Generation 
ACO Model, the ACO must indemnify and hold the beneficiary harmless for 
the services. We believe it is appropriate to propose to adopt a 
similar policy under the CJR model. In contrast to the Next Generation 
ACO Model, however, we believe it is most appropriate to hold the 
participant hospitals financially responsible for misusing the waiver 
in situations where waiver requirements are not met, because 
participant hospitals are required to be aware of the 3-day waiver 
requirements. Participant hospitals are the entities financially 
responsible for episode spending under the model and will make the 
decision as to whether it is appropriate to discharge a beneficiary 
without a 3-day stay. In addition, we clearly laid out the requirements 
for use of the SNF waiver in the CJR final rule. Participant hospitals 
may begin using the waiver for episodes that begin on or after January 
1, 2017, and may only utilize the waiver to discharge a beneficiary to 
a SNF that meets the quality requirements. CMS will post on the public 
Web site a list of qualifying SNFs (those with a 3-star or higher 
rating for 7 of the last 12 months). Participant hospitals are required 
to consult the published list of SNFs prior to utilizing the SNF 
waiver. As described later in this section, we propose that when the 
hospital provides the beneficiary with the discharge notice in 
accordance with the requirements of 510.405(b)(4), the hospital would 
not have financial liability for non-covered SNF services that result 
from inapplicability of the waiver. In other words, when the 
participant hospital has discharged a beneficiary to a SNF that does 
not qualify under the conditions of the waiver, and has not provided 
the required notice so that the beneficiary is aware that he or she is 
accepting financial liability for non-covered SNF services as a result 
of not having a qualifying inpatient stay, we believe it is reasonable 
that the ultimate responsibility and financial liability for the non-
covered SNF stay should rest with the participant hospital. For this 
reason, we are proposing to require hospitals to keep a record of 
discharge planning notice distribution to CJR beneficiaries. We will 
monitor participant hospitals' use of discharge planning notices to 
assess the potential for their misuse. We also considered holding the 
SNF responsible but decided that since hospitals, not SNFs, are the CJR 
model participants, they therefore should be held responsible for 
complying with the 3-day waiver conditions for the reasons stated 
previously in this section.
    To protect CJR beneficiaries from being charged for non-covered SNF 
charges in instances when the waiver was used inappropriately, we are 
proposing to add certain beneficiary protection requirements in Sec.  
510.610. These requirements would apply for SNF services that would 
otherwise have been covered except for lack of a qualifying hospital 
stay. Specifically, we propose that beginning with episodes that are 
initiated on or after January 1, 2017, when the SNF waiver is 
available, if a participant hospital discharges a beneficiary without a 
qualifying 3-day inpatient stay to a SNF that is not on the published 
list of SNFs that meet the CJR SNF waiver quality requirements as of 
the date of admission to the SNF, the hospital will be financially 
liable for the SNF stay if no discharge planning notice is provided to 
the beneficiary, alerting them of potential financial liability. If the 
participant hospital provides a discharge planning notice in compliance 
with the requirements of Sec.  510.405(b)(4), the participant hospital 
will not be financially liable for the cost of the SNF stay and the 
normal Medicare FFS rules for coverage of SNF services will apply. In 
cases where the participant hospital provides a discharge planning 
notice in compliance with the requirements of Sec.  510.405(b)(4) and 
the beneficiary chooses to obtain care from a non-qualified SNF without 
a qualifying inpatient stay, the beneficiary assumes financial 
liability for services furnished (except those that are covered by 
Medicare Part B during a non-covered inpatient SNF stay).
    In the event a CJR beneficiary is discharged to a SNF without a 
qualifying 3-day inpatient stay, but the SNF is not on the qualified 
list as of the date of admission to the SNF, and the participant 
hospital has failed to provide a discharge planning notice, as 
specified in Sec.  510.405(b)(4), we propose that CMS apply the 
following rules:
     CMS shall make no payment to the SNF for such services.
     The SNF shall not charge the beneficiary for the expenses 
incurred for such services; and the SNF shall return to the beneficiary 
any monies collected for such services.
     The hospital shall be responsible for the cost of the 
uncovered SNF stay.
    In addition, we propose to amend our regulations to clarify that 
the SNF 3-day waiver will be available in performance years 2 through 5 
for those episodes beginning on or after January 1, 2017. In the CJR 
final rule, we discussed how the SNF 3-day waiver will be available 
beginning in performance year 2. We propose to clarify here that the 
waiver does begin in performance year 2, but only for those episodes 
that begin on or after January 1, 2017 when the waiver goes into 
effect.
    We seek comment on these proposals. Specifically, we seek comment 
on whether it is reasonable to--(1) cover services furnished under the 
SNF waiver based on participant hospital knowledge of beneficiary 
eligibility for the CJR model as determined by Medicare coverage status 
at the time the services under the waiver were furnished; and (2) to 
hold the participant hospital financially responsible for rejected SNF 
claims if a CJR beneficiary is discharged to a SNF without a qualifying 
3-day inpatient stay, but the SNF is not on the qualified list as of 
the date of admission to the SNF, and the participant hospital has 
failed to provide a discharge planning notice as specified in Sec.  
510.405(b)(4).

[[Page 50971]]

We seek comment on whether SNFs instead of, or in addition to, the 
participant hospital should be held liable for such claims and under 
what circumstances. Finally, we seek comment on any other related 
issues that we should consider in connection with these proposal to 
protect beneficiaries from significant financial liability for non-
covered SNF services related to the waiver of the SNF 3-day rule under 
the CJR model. We may address those issues through future notice and 
comment rulemaking.
    We propose to amend our regulations at Sec.  510.610 to reflect 
this change. We also propose to clarify the language in Sec.  510.610 
to reflect that the CJR SNF waiver will be available for use for 
episodes that begin on or after January 1, 2017.

O. Advanced Alternative Payment Model Considerations

1. Overview for CJR
    The MACRA created two paths for eligible clinicians to link quality 
to payments: The MIPS and Advanced APMs. These two paths create a 
flexible payment system called the Quality Payment Program as proposed 
by CMS in the Quality Payment Program proposed rule (81 FR 28161 
through 28586).
    As proposed in the Quality Payment Program proposed rule, an APM 
must meet three criteria to be considered an Advanced APM (81 FR 
28298). First, the APM must provide for payment for covered 
professional services based on quality measures comparable to measures 
described under the performance category described in section 
1848(q)(2)(B)(i) of the Act, which is the MIPS quality performance 
category. Under the Quality Payment Program proposed rule, we proposed 
that the quality measures on which the Advanced APM bases payment for 
covered professional services (as that term is defined in section 
1848(k)(3)(A) of the Act) must include at least one of the following 
types of measures, provided that they have an evidence-based focus and 
are reliable and valid (81 FR 28302):
     Any of the quality measures included on the proposed 
annual list of MIPS quality measures.
     Quality measures that are endorsed by a consensus-based 
entity.
     Quality measures developed under section 1848(s) of the 
Act.
     Quality measures submitted in response to the MIPS Call 
for Quality Measures under section 1848(q)(2)(D)(ii) of the Act.
     Any other quality measures that CMS determines to have an 
evidence-based focus and be reliable and valid.
    As we discussed in the Quality Payment Program proposed rule, 
because the statute identifies outcome measures as a priority measure 
type and we wanted to encourage the use of outcome measures for quality 
performance assessment in APMs, we further proposed in that rule, that 
in addition to the general quality measure requirements, an Advanced 
APM must include at least one outcome measure if an appropriate measure 
is available on the MIPS list of measures for that specific QP 
Performance Period, determined at the time when the APM is first 
established (81 FR 28302 through 28303).
    Second, the APM must either require that participating APM Entities 
bear risk for monetary losses of a more than nominal amount under the 
APM or be a Medical Home Model expanded under section 1115A(c) of the 
Act. Except for Medical Home Models, we proposed in the Quality Payment 
Program proposed rule that, for an Advanced APM to meet the nominal 
amount standard, the specific level of marginal risk must be at least 
30 percent of losses in excess of expected expenditures; a minimum loss 
rate, to the extent applicable, must be no greater than 4 percent of 
expected expenditures; and total potential risk must be at least 4 
percent of expected expenditures (81 FR 28306).
    Third, the APM must require participants to use CEHRT (as defined 
in section 1848(o)(4) of the Act), as specified in section 
1833(z)(3)(D)(i)(I) of the Act, to document and communicate clinical 
care with patients and other health care professionals. Specifically, 
where the APM participants are hospitals, the APM must require each 
hospital to use CEHRT (81 FR 28298 through 28299).
    In this proposed rule, we propose to adopt two different tracks for 
CJR--Track 1 in which CJR and its participant hospitals would meet the 
criteria for Advanced APMs as proposed in the Quality Payment Program 
proposed rule, and Track 2 in which CJR and its participant hospitals 
would not meet those proposed criteria. The CJR model incorporates a 
pay-for-performance methodology including quality measures that we 
believe would meet the proposed Advanced APM quality measure 
requirements in the Quality Payment Program proposed rule. Both of the 
required quality measures in the CJR model are NQF-endorsed, have an 
evidence-based focus, and are reliable and valid. We believe they would 
meet the proposed Advanced APM general quality measure requirements.
    The CJR pay-for-performance methodology includes one outcome 
measure that is NQF-endorsed, has an evidence-based focus, and is 
reliable and valid. The pay-for-performance methodology incorporates 
the Hospital-level RSCR following elective primary THA and/or TKA (NQF 
#1550) (Hip/Knee Complications) outcome measure. Thus, we believe the 
CJR model would meet the requirement proposed for Advanced APMs in the 
Quality Payment Program proposed rule for use of an outcome measure 
that also meets the general quality measure requirements.
    In terms of the proposed nominal risk criteria for Advanced APMs, 
beginning in performance year 2 for episodes ending between January 1, 
2017 and December 31, 2017, participant hospitals would begin to bear 
downside risk for excess actual CJR episode spending above the quality-
adjusted target price. The marginal risk for excess actual CJR episode 
spending above the quality-adjusted target price would be 100 percent 
over the range of spending up to the stop-loss limit, which would 
exceed 30 percent marginal risk, and there would be no minimum loss 
rate. As a result, we believe the CJR model would meet the marginal 
risk and minimum loss rate elements of the nominal risk criteria for 
Advanced APMs proposed in the Quality Payment Program proposed rule. 
Total potential risk for most CJR participant hospitals is 5 percent of 
expected expenditures in performance year 2, and increasing in 
subsequent performance years. Therefore, we believe the total potential 
risk applicable to most participant hospitals, with the lowest total 
potential risk being 5 percent for CJR episodes ending on or after 
January 1, 2017 in performance year 2, would meet the total potential 
risk element of the nominal risk amount standard for Advanced APMs 
proposed in the Quality Payment Program proposed rule because it is 
greater than the value of at least 4 percent of expected expenditures.
    We note that participant hospitals that are rural hospitals, sole 
community hospitals (SCHs), Medicare Dependent Hospitals (MDHs) and 
Rural Referral Centers (RRCs) will have a stop-loss limit of 3 percent 
in performance year 2. Because 3 percent is less than the proposed 
threshold of at least 4 percent of expected expenditures for total 
potential risk proposed for Advanced APMs in the Quality Payment 
Program proposed rule, those rural hospitals, SCHs, MDHs, and RRCs that 
are CJR participant hospitals subject to special

[[Page 50972]]

protections would be in Track 2 of the CJR model and would not meet the 
proposed nominal risk standard for Advanced APMs for performance year 
2. We recognize that this proposal might initially limit the ability of 
rural hospitals, SCHs, MDHs, and RRCs to be in an Advanced APM for 
performance year 2. We believe this potential limitation on rural 
hospitals, SCHs, MDHs, and RRCs is appropriate for the following 
reasons: (1) Greater risk protections for these hospitals under the CJR 
model beginning in performance year 2 and subsequent performance years 
compared to other participant hospitals are necessary, regardless of 
their implications regarding Advanced APMs based on the nominal risk 
standard proposed in the Quality Payment Program proposed rule, because 
these hospitals have unique challenges that do not exist for most other 
hospitals, such as being the only source of health care services for 
beneficiaries or certain beneficiaries living in rural areas or being 
located in areas with fewer providers, including fewer physicians and 
post-acute care facilities; and (2) under the CJR risk arrangements, 
these hospitals would not bear an amount of risk in performance year 2 
that we determined to be more than nominal in the Quality Payment 
Program proposed rule. However, we seek comment on whether we should 
allow participant hospitals that are rural hospitals, SCHs, MDHs, or 
RRCs to elect a higher stop-loss limit performance year 2 where 
downside risk applies in order to permit these hospitals to be in Track 
1 of the CJR model for performance year 2. We note that by performance 
year 3, the stop-loss limit for these hospitals with special 
protections under the CJR model would increase to 5 percent under our 
proposal, so these hospitals could be in Track 1 based on the nominal 
risk standard proposed in the Quality Payment Program proposed rule.
    As addressed in the Quality Payment Program proposed rule, it is 
necessary for an APM to require the use of CEHRT in order to meet the 
criteria to be considered to be an Advanced APM. Therefore, according 
to the requirements proposed in the Quality Payment Program proposed 
rule, so that the CJR model may meet the proposed criteria to be an 
Advanced APM, we propose to require participant hospitals to use CEHRT 
(as defined in section 1848(o)(4) of the Act) to participate in Track 1 
of the CJR model. We propose that Track 1 participant hospitals must 
use certified health IT functions, in accordance with the definition of 
CEHRT under our regulation at 42 CFR 414.1305, to document and 
communicate clinical care with patients and other health care 
professionals as proposed in the Quality Payment Program proposed rule 
(81 FR 28299). We believe this proposal would allow Track 1 of CJR to 
be able to meet the proposed criteria to be an Advanced APM.
    Without the collection of identifying information on eligible 
clinicians (physicians, nonphysician practitioners, physical and 
occupational therapists, and qualified speech-language pathologists) 
who would be considered affiliated practitioners as proposed in the 
Quality Payment program proposed rule under the CJR model, CMS would 
not be able to consider participation in the model in making 
determinations as to whom could be considered a QP (81 FR 28320). As 
detailed in the Quality Payment Proposed rule, these determinations are 
based on the whether the eligible clinician meets the QP threshold 
under either the Medicare Option starting in payment year 2019 or the 
All-Payer Combination Option, which is available starting in payment 
year 2021 (81 FR 28165). Thus, we make proposals in the following 
sections to specifically address these issues that might otherwise 
preclude the CJR model from being considered an Advanced APM, or 
prevent us from operationalizing it as an Advanced APM. Based on the 
proposals for Advanced APM criteria in the Quality Payment Program 
proposed rule, we seek to align the design of the CJR model with the 
proposed Advanced APM criteria and enable CMS to have the necessary 
information on eligible clinicians to make the requisite QP 
determinations.
2. CJR Participant Hospital Tracks
    To be considered an Advanced APM, the APM must require participants 
to use CEHRT (as defined in section 1848(o)(4) of the Act), as 
specified in section 1833(z)(3)(D)(i)(I) of the Act. We propose that 
all participant hospitals must choose whether to meet the CEHRT use 
requirement. Participant hospitals that do not meet and attest to the 
CEHRT use requirement would be in Track 2 of the CJR model. Participant 
hospitals selecting to meet the CEHRT use requirement would be in Track 
1 of the CJR model and would be required to attest in a form and manner 
specified by CMS to their use of CEHRT that meets the definition in our 
regulation at section 414.1305 to document and communicate clinical 
care with patients and other health professionals, consistent with the 
proposal in the Quality Payment Program proposed rule for the CEHRT 
requirement for Advanced APMs (81 FR 28299). Participant hospitals 
choosing not to meet and attest to the CEHRT use requirement would not 
be required to submit an attestation.
    We believe that the selection by the participant hospital to meet 
and attest to the CEHRT use requirement would create no significant 
additional administrative burden on participant hospitals. Moreover, 
the choice of whether to meet and attest to the CEHRT use requirement 
would not otherwise change any participant hospital's requirements or 
opportunity under the CJR model. However, to the extent the eligible 
clinicians who enter into financial arrangements related to Track 1 CJR 
participant hospitals are considered to furnish services through an 
Advanced APM, those services could be considered for purposes of 
determining whether the eligible clinicians are QPs.
    The proposals for CEHRT use and attestation for participant 
hospitals are included in Sec.  510.120(a). We seek comment on our 
proposals for CJR tracks and participant hospital requirements.
3. Clinician Financial Arrangements Lists Under the CJR Model
    In order for CMS to make determinations as to eligible clinicians 
who could be considered QPs based on services furnished under the CJR 
model (to the extent the model is determined to be an Advanced APM), we 
require accurate information about eligible clinicians who enter into 
financial arrangements under Track 1 of CJR under which the Affiliated 
Practitioners support the participant hospitals' cost or quality goals 
as discussed in section V.J. of this proposed rule. We note that 
eligible clinicians could be CJR collaborators engaged in sharing 
arrangements with a CJR participant hospital; PGP members who are 
collaboration agents engaged in distribution arrangements with a PGP 
that is a CJR collaborator; or PGP members who are downstream 
collaboration agents engaged in downstream distribution arrangements 
with a PGP that is also an ACO participant in an ACO that is a CJR 
collaborator. These terms as they apply to individuals and entities 
with financial arrangements under CJR are discussed in section V.J. of 
this proposed rule. A list of physicians and nonphysician practitioners 
in one of these three types of arrangements could be considered an 
Affiliated Practitioner List of eligible clinicians who are

[[Page 50973]]

affiliated with and support the Advanced APM Entity in its 
participation in the Advanced APM as proposed in the Quality Payment 
Program proposed rule. Therefore, this list could be used to make 
determinations of who would be considered for a QP determination based 
on services furnished under the CJR model (81 FR 28320).
    Thus, we propose that each participant hospital that chooses to 
meet and attest to the CEHRT use requirement must submit to CMS a 
clinician financial arrangements list in a form and manner specified by 
CMS on a no more than quarterly basis. The list must include the 
following information for the period of the CJR performance year 
specified by CMS:
     For each CJR collaborator who is a physician, nonphysician 
practitioner, or provider of outpatient therapy services during the 
period of the CJR performance year specified by CMS--
    ++ The name, tax identification number (TIN), and national provider 
identifier (NPI) of the CJR collaborator; and
    ++ The start date and, if applicable, end date, for the sharing 
arrangement between the CJR participant hospital and the CJR 
collaborator.
     For each collaboration agent who is a physician or 
nonphysician practitioner of a PGP that is a CJR collaborator during 
the period of the CJR performance year specified by CMS--
    ++ The TIN of the PGP that is the CJR collaborator, and the name 
and NPI of the physician or nonphysician practitioner; and
    ++ The start date and, if applicable, end date, for the 
distribution arrangement between the CJR collaborator that is a PGP and 
the physician or nonphysician practitioner who is a PGP member.
     For each downstream collaboration agent who is a physician 
or nonphysician practitioner member of a PGP that is also an ACO 
participant in an ACO that is a CJR collaborator during the period of 
the CJR performance year specified by CMS--
    ++ The TIN of the PGP that is the ACO participant, and the name and 
NPI of the physician or nonphysician practitioner; and
    ++ The start date and, if applicable, end date, for the downstream 
distribution arrangement between the collaboration agent that is both 
PGP and an ACO participant and the physician or nonphysician 
practitioner who is a PGP member.
     If there are no individuals that meet the requirements to 
be reported as CJR collaborators, collaboration agents, or downstream 
collaboration agents, the participant hospital must attest in a form 
and manner required by CMS that there are no individuals to report on 
the clinician financial arrangements list.
    As discussed in the Quality Payment program proposed rule, those 
physicians or nonphysician practitioners who are included on the 
Affiliated Practitioner List as of December 31 of a performance period 
would be assessed to determine whether they qualify for APM Incentive 
Payments (81 FR 28320).
    While the submission of this required information may create some 
additional administrative requirements for certain participant 
hospitals, we expect that Track 1 participant hospitals could modify 
their contractual relationships with their CJR collaborators and, 
correspondingly, require those collaborators to include similar 
requirements in their contracts with collaboration agents and in the 
contracts of collaboration agents with downstream collaboration agents.
    The proposal for the submission of a clinician financial 
arrangements list by participant hospitals that meet and attest to the 
CEHRT use requirements for the CJR model is included in Sec.  
510.120(b). We seek comments on the proposal for submission of this 
information. We are especially interested in comments about approaches 
to information submission, including the periodicity and method of 
submission to CMS that would minimize the reporting burden on 
participant hospitals while providing CMS with sufficient information 
about eligible clinicians in order to facilitate QP determinations to 
the extent the CJR model is considered to be an Advanced APM.
4. Documentation Requirements
    For each participant hospital that chooses to meet and attest to 
CEHRT use, we propose that the participant hospital must maintain 
documentation of their attestation to CEHRT use and clinician financial 
arrangements lists submitted to CMS. These documents would be necessary 
to assess the completeness and accuracy of materials submitted by a 
participant hospital in Track 1 of CJR and to facilitate monitoring and 
audits. For the same reason, we further propose that the participant 
hospital must retain and provide access to the required documentation 
in accordance with Sec.  510.110.
    The proposal for documentation of attestation to CEHRT use and 
clinician financial arrangements lists submitted to CMS is included in 
Sec.  510.120(c). We seek comment on this proposal for required 
documentation.

VI. Cardiac Rehabilitation Incentive Payment Model

A. Background

    For patients with coronary and other atherosclerotic vascular 
disease, the American Heart Association and the American College of 
Cardiology Foundation's 2011 practice guideline for secondary 
prevention and risk reduction therapy specifically highlights health 
care treatment strategies following AMI or CABG.\108\ These strategies 
include smoking cessation, close monitoring of blood pressure and 
cholesterol, and the use of certain medications.
---------------------------------------------------------------------------

    \108\ Smith SC et al. AHA/ACCF secondary prevention and risk 
reduction therapy for patients with coronary and other 
atherosclerotic vascular disease: 2011 update: A guideline from the 
American Heart Association and American College of Cardiology 
Foundation endorsed by the World Heart Federation and the Preventive 
Cardiovascular Nurses Association. J Am Coll Cardiol. 
2011;58(23):2432-2446.
---------------------------------------------------------------------------

    The medical literature further indicates that cardiac 
rehabilitation (CR) and intensive cardiac rehabilitation (ICR) 
services, which incorporate the strategies discussed previously, are 
capable of achieving significant improvements in long-term patient 
outcomes. A January 2016 Cochrane Database of Systematic Reviews 
article reviewed 63 trials randomizing almost 15,000 patients and found 
that in long-term follow up (median 12 months), exercise-based CR 
services reduced cardiovascular mortality (but not total mortality), 
improved health-related quality of life, and reduced the risk of 
hospital admission.\109\
---------------------------------------------------------------------------

    \109\ Anderson L et al. Exercise-based cardiac rehabilitation 
for coronary heart disease. Cochrane Database Syst Rev. 2016 Jan 
5;1:CD001800.
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    Despite the evidence from multiple studies that CR services improve 
health outcomes, the literature also indicates that these services are 
underutilized, estimating that only about 35 percent of AMI patients 
receive this indicated treatment.\110\ Recent analysis confirms a 
similar pattern of underutilization for Medicare beneficiaries who are 
eligible for and could benefit from CR. This pattern is virtually 
unchanged over the past 2 decades, despite clinical practice guidelines 
for CR that were published in 1995 and subsequently endorsed by a 
number of professional associations and CMS.111 112 113 
Among beneficiaries

[[Page 50974]]

hospitalized with a diagnosis of AMI in 2013, only about 15 percent had 
at least one claim for CR services, and of those who received CR 
services, slightly more than half received 25 or more CR sessions. 
Among beneficiaries hospitalized with an ICD-9-CM procedure code for 
percutaneous transluminal coronary angioplasty or coronary stenting in 
2013, the findings on CR use were similar to those for AMI 
beneficiaries, with only about 23 percent having at least one claim for 
CR services, and of those who received CR services, slightly more than 
half received 25 or more CR sessions. Finally, among beneficiaries 
hospitalized in 2013 with ICD-9-CM procedure codes for coronary artery 
bypass surgery, about 45 percent had at least one claim for CR 
services, and slightly over 60 percent of those beneficiaries received 
25 CR sessions or more, indicating slightly higher rates for 
utilization for these beneficiaries.\114\ Barriers to CR utilization 
include low beneficiary referral rates (particularly of women, older 
adults, and ethnic minorities); lack of strong physician endorsement of 
CR to their patients; lack of awareness of CR; the financial burden on 
beneficiaries due to coinsurance and lost work; lack of accessibility 
of CR program sites; the Medicare CR requirement for physician 
supervision; and inadequate insurance 
reimbursement.115 116 117 118
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    \110\ Receipt of outpatient cardiac rehabilitation among heart 
attack survivors--United States, 2005. MMWR Morbidity and mortality 
weekly report. 2008 Feb 1;57(4):89-94.
    \111\ Suaya JA, Shepard DS, Normand SL, Ades PA, Prottas J, 
Stason WB. Use of cardiac rehabilitation by Medicare beneficiaries 
after myocardial infarction or coronary bypass surgery. Circulation. 
2007;116:1653-1662
    \112\ Wenger N, Froelicher E, Smith L, Wenger N, Froelicher E, 
Smith L, Ades P, Berra K, Blumenthal J, Certo C, Dattilo A, Davis D, 
DeBusk R, Drozda J, Fletcher B, Franklin B, Gaston H, Greenland P, 
McBride P, McGregor C, Oldridge N, Piscatella J, Rogers F. Cardiac 
Rehabilitation as Secondary Prevention: Clinical Practice Guideline, 
No. 17. Rockville, Md: U.S. Dept of Health and Human Services, 
Public Health Service, Agency for Health Care Policy and Research 
and National Heart, Lung, and Blood Institute; 1995. Publication 
AHCPR 96-0673.
    \113\ Centers for Medicare and Medicaid Services (CMS). Cardiac 
rehabilitation programs. In: Medicare National Coverage 
Determinations Manual, chapter 1, part 1, section 20.10.
    \114\ Medicare Part A and B claims from 2013 through 12 month 
follow-up, Chronic Conditions Warehouse.
    \115\ Balady GJ, Ades PA, Bittner VA et al. Referral, 
enrollment, and delivery of cardiac rehabilitation/secondary 
prevention programs at clinical centers and beyond: a presidential 
advisory from the American Heart Association. Circulation. 2011;124: 
2951-2960.
    \116\ Suaya JA, Shepard DS, Normand SL, Ades PA, Prottas J, 
Stason WB. Use of cardiac rehabilitation by Medicare beneficiaries 
after myocardial infarction or coronary bypass surgery. Circulation. 
2007;116:1653-1662
    \117\ Wenger, NK. Current State of Cardiac Rehabilitation. J Am 
Coll Cardiol 2008;51:1619-31
    \118\ Arena, R et al. Increasing Referral and Participation 
Rates to Outpatient Cardiac Rehabilitation: The Valuable Role of 
Healthcare Professionals in the Inpatient and Home Health Settings. 
AHA Scientific Advisory. 2012;125:1321-1329
---------------------------------------------------------------------------

    Moreover, beneficiaries with CAD often receive care in many 
different settings from multiple providers and suppliers over the long-
term and subsequently commonly experience care that is fragmented and 
uncoordinated. For example, inpatient hospitals, physicians, and CR 
programs currently are paid separately for the services they provide, 
with limited financial incentives for providing care management and 
preventive services, limiting overuse of tests and procedures, and 
coordinating across care settings. Lack of coordination, of both care 
and financial incentives, across the continuum of CAD care, results in 
higher than necessary rates of adverse drug events, hospital 
readmissions, diagnostic errors, and other adverse outcomes, as well as 
lower than appropriate utilization of evidence-based treatments.
    Medicare Part B generally covers CR/ICR services for all Medicare 
beneficiaries who are referred by their physician after having an AMI 
or CABG.\119\ As specified in section 1861(eee) of the Act, CR/ICR 
programs must include all of the following: (1) Physician-prescribed 
exercise; (2) cardiac risk factor modification, including education, 
counseling, and behavioral intervention, tailored to the patient's 
individual needs; (3) psychosocial assessment; (4) outcomes assessment; 
and (5) an individualized treatment plan established, reviewed, and 
signed by a physician every 30 days that details how components are 
utilized for each patient. The CR/ICR services must be provided in a 
physician's office or a hospital outpatient setting, and a physician 
must be immediately available and accessible to furnish assistance and 
direction at all times when cardiac rehabilitation services are being 
furnished under the program.\120\
---------------------------------------------------------------------------

    \119\ https://www.medicare.gov/coverage/cardiac-rehab-programs.html.
    \120\ Section 1861(eee)(1) of the Act.
---------------------------------------------------------------------------

    The number of CR program sessions are limited to a maximum of 2 
one-hour sessions per day for up to 36 sessions over up to 36 weeks 
with the option for an additional 36 sessions over an extended period 
of time if approved by the Medicare Administrative Contractor under 
section 1862(a)(1)(A) of the Act.\121\ ICR program sessions are limited 
to 72 one-hour sessions, up to 6 sessions per day, over a period of up 
to 18 weeks.\122\ To be approved as an ICR program, a program must 
demonstrate through peer-reviewed published research that it has 
accomplished at least one of the following: (1) Positively affecting 
the progression of coronary heart disease; (2) reducing the need for 
coronary bypass surgery; or (3) reducing the need for PCI.\123\
---------------------------------------------------------------------------

    \121\ 42 CFR 410.49(b)(1)(vii)
    \122\ Section 1861(eee)(1) of the Act
    \123\ A list of ICR programs, approved through the national 
coverage determination process, is posted to the CMS Web site at 
https://www.cms.gov/Medicare/Medicare-General-Information/MedicareApprovedFacilitie/ICR.html and listed in the Federal 
Register at 42 CFR 410.49(c)(3).
---------------------------------------------------------------------------

B. Overview of the CR Incentive Payment Model

1. Rationale for the CR Incentive Payment Model
    Considering the evidence demonstrating that CR/ICR services improve 
long-term patient outcomes, the room for improvement in CR/ICR service 
utilization for beneficiaries eligible for this benefit, and the need 
for ongoing, chronic treatment for underlying CAD among beneficiaries 
that have had an AMI or a CABG, we believe that there is a need for 
improved long-term care management and care coordination for 
beneficiaries that have had an AMI or a CABG and that incentivizing the 
use of CR/ICR services is an important component of meeting this need. 
We want to reduce barriers to high-value care by testing a financial 
incentive for hospitals that encourages the management of beneficiaries 
that have had an AMI or a CABG in ways that may contribute to long-term 
improvements in quality and reductions in Medicare spending.
    We believe that there are important advantages to proposing such an 
incentive in conjunction with the EPMs that are also proposed in this 
rule. First, we wish to understand whether and how the effects of a 
financial incentive for the use of CR/ICR services differ depending 
upon whether a beneficiary's care is covered under an EPM or the 
Medicare FFS program. The proposed AMI and CABG models could be 
effective launching pads for beneficiaries to receive improved 
coordination, care management, and secondary risk reduction during the 
model episodes through greater use of medically necessary CR/ICR 
services, even if accountability for beneficiary care ultimately 
transitions to other entities, such as ACOs or PCMHs, after the AMI or 
CABG model episode ends. Therefore, the AMI and CABG models could make 
the proposed CR incentive payment more effective (if it is amplified by 
the broader care coordination infrastructure encouraged

[[Page 50975]]

by the EPM in comparison with its effect in the Medicare FFS payment 
methodology) or less effective (if the care coordination infrastructure 
encouraged by the EPM is itself sufficient to ensure appropriate use of 
CR/ICR services such that the CR incentive payment itself has less 
effect than in the Medicare FFS payment methodology). Second, we wish 
to be able to examine each intervention's separate effects on the 
quality and efficiency of the care beneficiaries receive. We believe 
that coordinating the design, implementation, and evaluation of the 
EPMs and the CR incentive payment model is the best way to ensure that 
we accomplish both of these goals.
2. General Design of the CR Incentive Payment Model
    We propose the CR incentive payment model to test the effects on 
quality of care and Medicare expenditures of providing explicit 
financial incentives to hospitals (hereinafter CR participants) for 
beneficiaries hospitalized for treatment of AMI or CABG to encourage 
care coordination and greater utilization of medically necessary CR/ICR 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program. 
Under the EPM, we propose in general that the hospital where the anchor 
hospitalization for AMI or CABG treatment occurs that begins the AMI or 
CABG model episode as discussed in section III.C.4.a. of this proposed 
rule would be financially accountable for the AMI or CABG model 
episode. Thus, we expect that EPM participants would be highly engaged 
in care management of beneficiaries for the 90-day post-discharge 
duration included in the episode and may be able to capitalize on that 
engagement to encourage greater use of medically appropriate CR/ICR 
services if they are also selected for participation in the CR 
incentive payment model. Therefore, under the CR incentive payment 
model, we propose to provide a CR incentive payment specifically to 
selected hospitals with financial responsibility for AMI or CABG model 
episodes (hereinafter EPM-CR participants) because they are already 
engaged in managing the AMI or CABG model beneficiary's overall care 
for a period of time following hospital discharge.
    Similarly, we believe there are opportunities to test the same 
financial incentives for hospitals where the beneficiary's overall care 
is paid under the Medicare FFS program. Thus, we also propose to 
provide a CR incentive payment specifically to selected hospitals that 
are not AMI or CABG model participants (hereinafter FFS-CR 
participants). This design of the CR incentive payment model would 
enable us to test and improve our understanding of the effects of the 
CR incentive payment within the context of an EPM and the Medicare FFS 
program, as well as identify potential interactions between the 
proposed CR incentive payment and the underlying EPM and FFS payment 
methodologies. We understand that there may be providers and suppliers 
other than hospitals caring for beneficiaries with AMI or CABG whose 
care is paid under the Medicare FFS program and that could assume 
responsibility for encouraging greater utilization of CR/ICR services 
under the CR incentive payment model. However, for comparability to the 
roles and responsibilities of the hospitals that are the EPM 
participants selected for CR incentive payment model participation, we 
propose to identify hospitals as the participants in the CR incentive 
payment model for beneficiaries whose care is paid under the Medicare 
FFS program. Hospitals provide over 95 percent of CR/ICR services to 
Medicare beneficiaries and the beneficiaries in the CR incentive 
payment model are identified based on a hospitalization for AMI or 
CABG.\124\ Thus, we believe that hospitals are an appropriate entity to 
take on care coordination responsibility for increasing the utilization 
of medically necessary CR/ICR services for those beneficiaries 
following AMI or CABG who are in the CR incentive payment model but 
that are not in an EPM.
---------------------------------------------------------------------------

    \124\ Analysis of cardiac rehabilitation utilization in care 
periods for AMI and CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule, that 
began in CYs 2012-2014.
---------------------------------------------------------------------------

    To test strategies to encourage CR participants to prioritize 
referring beneficiaries following an AMI or CABG for important CR/ICR 
services, monitoring for beneficiary adherence to the treatment plan, 
and coordinating care, we propose to establish a per-service CR 
incentive amount for beneficiary CR use at two levels that would 
initially incentivize the use of any CR/ICR services and that would 
increase once a beneficiary meets or exceeds the proposed CR/ICR 
service utilization benchmark. We believe that encouraging timely 
referral of beneficiaries that have had an AMI or a CABG to CR/ICR 
programs would promote better adherence to CR/ICR service protocols, an 
expectation that is supported by data showing that patients who are 
referred early to CR were more likely to enroll.\125\
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    \125\ Grace SL et al. Effectiveness of inpatient and outpatient 
strategies in increasing referral and utilization of cardiac 
rehabilitation: a prospective, multi-site study. Implement Sci. 
2012: 7:120.
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    Historical claims data show that more than half of beneficiaries 
who receive one CR session go on to complete at least 25 sessions.\126\ 
Thus, providing a CR incentive payment to reward increased referrals to 
CR/ICR programs, as well as monitoring for beneficiary adherence with 
the referral and participation in the sessions, may encourage better 
CAD-specific care management and care coordination for beneficiaries 
that have had an AMI or a CABG and, ultimately, improve quality and 
reduce spending long-term for these beneficiaries with CAD. CR 
participants that would be eligible for these CR incentive payments 
could further reduce potential beneficiary barriers to CR/ICR services 
by utilizing other flexibilities we propose for the AMI and CABG models 
and the CR incentive payment model, such as beneficiary engagement 
incentives as discussed in sections III.I.9. and VI.F.6. of this 
proposed rule for EPM-CR participants and FFS-CR participants, 
respectively. Furthermore, we refer to section III.J.8. of this 
proposed rule for our proposal to provide greater CR/ICR program 
flexibility that may increase the availability of CR/ICR services for 
AMI and CABG model beneficiaries by providing a waiver of the 
definition of a physician to include a physician or nonphysician 
practitioner (defined for the purposes of this waiver as a physician 
assistant, nurse practitioner, or clinical nurse specialist) in 
performing specific physician functions. We also refer to section 
VI.F.7. of this proposed rule for discussion of our proposal for a 
similar waiver of the physician definition to provide greater CR/ICR 
program flexibility to increase the availability of these services for 
beneficiaries in a FFS-CR participant, as defined later in this 
section.
---------------------------------------------------------------------------

    \126\ Analysis of CR/ICR services utilization in 2013 Medicare 
FFS Parts A and B claims.
---------------------------------------------------------------------------

    While we recognize there are other services focused on secondary 
prevention for beneficiaries with CAD such as diabetes self-management 
training, as well as treatments including drugs for blood pressure and 
cholesterol control, we believe that CR/ICR services are unique as an 
underutilized Medicare benefit with a strong evidence-base of improved 
health outcomes for beneficiaries who have had an AMI or a CABG. 
Therefore, we believe that CR/ICR services are uniquely worthy of CR 
incentive payments to selected AMI and

[[Page 50976]]

CABG model participants as well as selected hospitals that would not be 
participating in these models in order to reward their efforts where we 
observe increased CR/ICR service utilization for CR incentive payment 
model beneficiaries. By proposing to provide CR incentive payments to 
encourage CR/ICR service utilization, we maximize our opportunity to 
positively affect the quality of care and reduce the cost-of-care for 
beneficiaries that have had an AMI or a CABG both within the short- and 
long-term. Like under other Innovation Center models, beneficiaries in 
the CR incentive payment model would retain freedom of choice to choose 
providers and services, although the proposed model provides financial 
incentives to CR participants to specifically encourage and support 
beneficiaries in adhering to a prescribed CR treatment plan following 
AMI or CABG.
    By making CR incentive payments available to selected EPM-CR and 
FFS-CR participants and comparing them to EPM participants and 
hospitals paid under the Medicare FFS program for AMI and CABG care who 
are not CR participants, we would be able to observe the effects of 
these proposed CR incentive payments on utilization of CR/ICR services 
and short-term (within the episode or care period) and longer-term 
outcomes, including mortality, hospitalizations, complications, and 
other clinically relevant events, as well as on Medicare expenditures. 
In testing the effects of a CR incentive payment, we want to account 
for a range of factors and interactions that could potentially affect 
the outcomes we observe. We believe our proposed methodology would 
enable us to test and improve our understanding of the effects of the 
CR incentive payment within the context of an EPM and the Medicare FFS 
program, as well as examine potential interactions between the proposed 
CR incentive payment and the underlying EPM and FFS payment 
methodologies.
C. CR Incentive Payment Model Participants
    The selection of MSAs for participation in the CABG and AMI EPMs is 
described in section III.B.5. of this proposed rule. This selection 
process would identify the 98 EPM MSAs from the 294 MSAs eligible for 
selection for the AMI and CABG models under the proposed rules. We 
propose that 45 MSAs be selected from within the pool of the 98 EPM 
MSAs for the CR incentive payment model (hereinafter EPM-CR MSAs). An 
additional 45 MSAs would be selected for the CR incentive payment model 
from the pool of MSAs who were eligible but not selected for EPM 
(hereinafter FFS-CR MSAs). The approach for both selections in the 
following paragraphs.
    We are interested in identifying control group MSAs that are 
similar to the treatment MSAs in ways that might impact the nature of 
their response to the CR incentive payment model. Having well-matched 
MSAs in the four types of MSAs (FFS-CR, FFS-non CR, EPM-CR and EPM-non 
CR) is important to our ability to assess the specific impact of the CR 
incentive payment while holding other considerations constant. We are 
concerned that a simple random selection of FFS-CR and EPM-CR areas 
would have a large probability of selecting MSAs that are 
insufficiently similar to the EPM-non CR areas due to the small number 
of MSAs from which to choose. As such, CMS proposes the selection of 
the EPM-CR MSAs to balance the incidence of key characteristics between 
the EPM-CR and EPM-non CR MSAs and the selection of FFS-CR MSAs to be 
based on similarity to the randomly selected EPM MSAs.
    The 294 MSAs originally eligible for selection would be classified 
into groups based on combinations of several key dimensions related to 
CR or ICR service provision within the MSA in the reference year 
including--
     Percent Starting CR/ICR services: Percent of eligible 
cases in the MSA who received one or more CR or ICR services in the 
reference year. CMS is considering dividing MSAs through alternative 
cut points of this metric including 20 percent and 30 percent;
     Percent Completing CR/ICR services: Percent of eligible 
cases in the MSA who completed 25 or more CR or ICR services in the 
reference year. CMS is considering dividing MSAs through alternative 
cut points including 50 percent, 60 percent and 70 percent of this 
metric; and.
     Number of CR/ICR providers: The number of providers who 
billed for CR/ICR services in the MSA during the reference year. CMS is 
considering dividing MSAs according to whether they had one hospital 
who billed for CR services or more than one hospital.
    MSAs would be assigned into a group based on combinations of these 
measures. An example of a possible group would be a group of MSAs that 
are ``low starters, high users.'' Such a group might be defined as MSAs 
in which--(1) less than 20 percent of eligible patients start CR/ICR 
services; (2) more than 60 percent of individuals who start CR/ICR 
complete 25 or more sessions; and (3) more than one hospital bills for 
CR services.
    We propose the selection of CR MSAs via a modified stratified 
random selection algorithm in which these groups serve as the selection 
strata. Specifically, we propose that the number of EPM-CR and FFS-CR 
MSAs selected from each group equals the number of EPM MSAs in the 
group multiplied by 0.46. This rate was chosen with the goal of 
selecting 45 EPM-CR MSAs out of 98 EPM MSAs (45/98 is approximately 
equal to 0.46). As an example of this approach to selection, consider a 
hypothetical group with 16 EPM MSAs and 28 FFS MSAs. We would randomly 
select 7 EPM-CR MSAs from the 16 EPM MSAs (7 is equal to 0.46 x 16 with 
rounding). The remaining 9 would be EPM-non CR. We would also randomly 
select 7 FFS-CR MSAs from the 28 FFS MSAs. The remaining 21 MSAs would 
be FFS-non CR MSAs. This approach would ensure balance with respect to 
group membership between EPM-CR MSAs and EPM-non-CR MSAs, as well as 
between EPM-CR MSAs and FFS-CR MSAs; it would not necessarily achieve 
balance with respect to group membership for other comparisons among 
model arms.
    We also considered other approaches to selection. Under one 
alternative approach, we would select a number of EPM-CR MSAs from each 
group equal to the number of EPM MSAs in the group multiplied by 0.46 
and a number of FFS-CR MSAs from each group equal to the number of FFS 
MSAs in the group multiplied by 0.23. As previously discussed, the rate 
0.46 was chosen with the goal of selecting 45 EPM-CR MSAs out of 98 EPM 
MSAs. The rate 0.23 is based on the goal of selecting 45 FFS-CR MSAs 
out of 196 FFS MSAs (45/196 is approximately equal to 0.23). As in our 
proposed approach, the calculated number of MSAs to be selected from 
each group would be rounded to the nearest integer as necessary. This 
approach would ensure balance with respect to group membership between 
EPM-CR MSAs and EPM-non-CR MSAs, as well as between FFS-CR MSAs and 
FFS-non-CR MSAs; it would not necessarily achieve balance with respect 
to group membership for other comparisons among model arms.
    Under another alternative approach, we would use a stratified 
random assignment approach to determine both EPM participation and CR 
participation. Specifically, under this approach, the number of EPM-CRs 
and FFS-CR MSAs selected from each group would each be equal to the 
total number of MSAs in that group multiplied by 0.15, the number of 
EPM-non-CR MSAs selected from each group would be equal to the

[[Page 50977]]

total number of MSAs in the group multiplied by 0.18, and the remaining 
MSAs in each group would be assigned to be FFS-non-CR MSAs. The rate 
0.15 was chosen with the goal of selecting 45 EPM-CR MSAs and 45 FFS-CR 
MSAs out of 294 total MSAs (45/294 is approximately equal to 0.15), and 
the rate 0.18 was chosen with the goal of selecting 53 EPM-non-CR MSAs 
out of 294 total MSAs (53/294 is approximately equal to 0.18). As in 
our proposed approach, the calculated number of MSAs to be selected 
into each arm would be rounded to the nearest integer as necessary. 
This approach would ensure balance with respect to group membership for 
all comparisons across the four arms--EPM-CR, FFS-CR, EPM-non-CR, and 
FFS-non-CR--but would forgo the simplicity of simple random assignment 
for the selection of EPM MSAs.
    For the purposes of being able to evaluate the CR incentive payment 
model as a whole, we propose to implement it in a consistent manner 
between the EPM-CR areas and the FFS-CR areas. As such, we propose to 
use similar approaches to identifying CR participants in each while 
also coordinating with the specifications and requirements of the AMI 
and CABG models. We propose that EPM-CR participants are hospitals that 
are AMI or CABG model participants located in the MSAs selected for the 
EPM-CR participation based on the methodology previously described in 
this section VI.C. of this proposed rule. We similarly propose that 
FFS-CR participants are hospitals located in the MSAs selected for FFS-
CR participation based on the methodology previously described in 
section VI.C of this proposed rule and that meet all provisions in 
sections III.B.2. through III.B.4. of this proposed rule to be an EPM 
participant if the hospital were located in an MSA selected for the AMI 
or CABG model. We believe that requiring FFS-CR participants to meet 
all provisions in sections III.B.2. through III.B.4. of this proposed 
rule would ensure that FFS-CR participants resemble EPM-CR participants 
as closely as possible, which would contribute to our ability to test 
and evaluate the effect of the CR incentive payment and specifically 
whether there are differential effects of the CR incentive payment in 
the underlying EPM and FFS payment methodologies.
    The proposal to select MSAs for the CR incentive payment model and 
to identify CR participants is included in Sec.  512.703. We seek 
comments on our proposed approach to selecting MSAs and identifying CR 
participants.

D. CR/ICR Services That Count Towards CR Incentive Payments

    We propose to identify CR/ICR services that count towards CR 
incentive payments on the basis of the presence of the HCPCS codes on 
PFS and OPPS claims that report CR/ICR services as displayed in Table 
37. These HCPCS codes have been active since prior to 2013 through the 
present. We note that CMS specifies the CR/ICR service HCPCS codes in 
implementing the statutory coverage provisions for CR and ICR programs, 
and we would update this list of HCPCS codes for CR/ICR services for 
the CR incentive payment model in future CR performance years should 
CMS adopt different or additional HCPCS codes for reporting these 
services.127 128
---------------------------------------------------------------------------

    \127\ 42 CFR 410.49
    \128\ MLN Matters[supreg] Number: MM6850 Revised. Related Change 
Request #: 6850; Related CR Release Date: May 21, 2010. Effective 
Date: January 1, 2010. Related CR Transmittal #: R1974CP, R126BP, 
R339PI, and R170FM. Implementation Date: October 4, 2010.

 Table 37--HCPCS Codes for Cardiac Rehabilitation and Intensive Cardiac
                         Rehabilitation Services
------------------------------------------------------------------------
            HCPCS Code                           Descriptor
------------------------------------------------------------------------
93797.............................  Physician services for outpatient
                                     cardiac rehabilitation; without
                                     continuous ECG monitoring (per
                                     session).
93798.............................  Physician services for outpatient
                                     cardiac rehabilitation; with
                                     continuous ECG monitoring (per
                                     session).
G0422.............................  Intensive cardiac rehabilitation;
                                     with or without continuous ECG
                                     monitoring with exercise, per
                                     session.
G0423.............................  Intensive cardiac rehabilitation;
                                     with or without continuous ECG
                                     monitoring; without exercise, per
                                     session.
------------------------------------------------------------------------

    We propose that within the AMI and CABG models, CR/ICR services 
paid by Medicare to any provider or supplier for AMI and CABG model 
beneficiaries during AMI and CABG model episodes would result in EPM-CR 
participant eligibility for CR incentive payments. For FFS-CR 
participants, we propose to use the terms ``AMI care period'' and 
``CABG care period'' to refer to a period of AMI or CABG care, 
respectively, that would meet the requirements to be an AMI or CABG 
model episode in accordance with all provisions in subpart B if the 
FFS-CR participant were an AMI or CABG model participant. CR/ICR 
services paid by Medicare to any provider or supplier for beneficiaries 
during AMI care periods and CABG care periods would result in FFS-CR 
participant eligibility for CR incentive payments. Defining AMI care 
periods and CABG care periods using the AMI and CABG model episode 
definitions ensures that the care covered under AMI care periods and 
CABG care periods is comparable to AMI and CABG model episodes in terms 
of the criteria that must be met to start an AMI care period or CABG 
care period or an AMI or CABG model episode, as well as the duration of 
AMI care periods and CABG care periods and AMI and CABG model episodes. 
This comparability would contribute to our ability to test and evaluate 
the effects of the CR incentive payment and specifically to assess 
whether there are differential effects of the CR incentive payment in 
the underlying EPM and FFS payment methodologies.
    We also propose that AMI and CABG model episodes take precedence 
over AMI care periods and CABG care periods. That is, an AMI care 
period or CABG care period would not begin if the beneficiary is in an 
AMI or CABG model episode when the AMI care period or CABG care period 
would otherwise begin. Similarly, an AMI care period or CABG care 
period would be canceled if at any time during the AMI care period or 
CABG care period the beneficiary initiates an AMI or CABG model 
episode. We believe that this is appropriate because AMI and CABG model 
participants would have ultimate responsibility for care coordination 
and the quality and cost of a beneficiary's

[[Page 50978]]

care during an AMI or CABG model episode. Giving precedence to AMI and 
CABG model episodes would also ensure that Medicare does not make 
duplicative CR incentive payments for a beneficiary and that a single 
beneficiary is not in an AMI or CABG model episode and an AMI care 
period or CABG care period at the same time.
    We propose that for the purposes of the CR incentive payment, all 
AMI and CABG model episodes and all AMI care periods and CABG care 
periods must begin on or after July 1, 2017 and end on or before 
December 31, 2021. Thus, the CR performance years would be the same as 
the performance years proposed for the EPMs in section III.D.2.a. of 
this proposed rule. Given that the CR incentive payment model seeks to 
determine whether there are differential effects of the CR incentive 
payment in the underlying EPM and FFS payment methodologies, it is 
important the EPM and CR performance years be aligned for EPM-CR 
participants.
    The proposal to establish which CR/ICR services count towards CR 
incentive payments is included in Sec.  512.705. We seek comments on 
our proposal to establish which CR/ICR services count towards CR 
incentive payments.

E. Determination of CR Incentive Payments

1. Determination of CR Amounts That Sum to Determine a CR Incentive 
Payment
    Given the potential benefits of CR/ICR services, in conjunction 
with the low adoption of these services, we seek to propose an 
incentive for CR participants that is sufficient to encourage them to 
increase clinically appropriate CR/ICR service referrals for 
beneficiaries; reduce barriers to beneficiary adherence a CR/ICR 
service treatment plan by making additional resources available for 
transportation to and from CR/ICR services; and incentivize CR 
participant monitoring and support of beneficiary adherence to all 
prescribed sessions of the CR/ICR program. As such, in addition to the 
usual payments that Medicare makes to providers and suppliers that 
furnish CR/ICR services, we propose to establish a two-level per-
service CR incentive amount that would initially incentivize the use of 
any CR/ICR services and that would increase once a beneficiary meets or 
exceeds the proposed CR/ICR service utilization benchmark. The CR 
amount would be the dollar amount determined by the two-level per-
service CR incentive amounts that apply to the number of CR/ICR 
services paid by Medicare to any provider or supplier for a beneficiary 
in an AMI or CABG model episode or AMI care period or CABG care period. 
CR amounts across all of a CR participant's beneficiaries that received 
CR/ICR services would be summed for the CR performance year to 
determine the CR incentive payment for a CR participant. CMS would pay 
the CR incentive payment from the Part B Trust Fund to the CR 
participant after the end of each CR performance year, and the 
beneficiary-specific CR amounts would be submitted to the CMS Master 
Database Management (MDM) System.
    For the purpose of determining the CR incentive payment, we propose 
to count the number of CR/ICR services for the relevant time periods 
under the OPPS and PFS on the basis of the presence on paid claims of 
the HCPCS codes that report CR/ICR services as displayed in Table 37 
and the units of service billed.
    The initial level of the per-service CR incentive amount that would 
count toward the CR amount would be $25 per CR/ICR service for each of 
the first 11 CR/ICR services paid for by Medicare during an AMI or CABG 
model episode or AMI care period or CABG care period. We believe that 
$25 is an appropriate amount to account for the additional resources 
that CR participants would expend to reduce beneficiary barriers to 
utilizing any CR/ICR services and to support beneficiary adherence to 
all prescribed services in the CR/ICR program.
    After 11 CR/ICR services are paid for by Medicare for a 
beneficiary, the level of the per-service CR incentive amount would 
increase to $175 per CR/ICR service for each additional CR/ICR service 
paid for by Medicare during the AMI or CABG model episode or AMI care 
period or CABG care period. This higher payment would account for the 
additional resources that CR participants expend to reduce beneficiary 
barriers to CR/ICR service utilization and also would reward CR 
participants for AMI or CABG model episodes or AMI care periods or CABG 
care periods in which beneficiaries meet or exceed the service 
utilization benchmark of 12 CR/ICR services.
    We set the proposed service utilization benchmark based on evidence 
from the literature that shows reduced mortality for Medicare 
beneficiaries that complete at least 12 CR sessions relative to 
Medicare beneficiaries who complete 1-11 CR sessions. A study by 
Hammill et al found that over a 4-year follow-up period beneficiaries 
who completed 12-23 CR sessions had lower mortality compared to 
beneficiaries who completed 1-11 CR sessions and that beneficiaries who 
completed 24 or more CR sessions had lower mortality compared to 
beneficiaries that completed 12-23 sessions.\129\ Figure 4 replicates 
Figure 2 from that study.
---------------------------------------------------------------------------

    \129\ Hammill BG, Curtis LH, Schulman KA, Whellan DJ. 
Relationship between cardiac rehabilitation and long-term risks of 
mortality and myocardial infarction among elderly Medicare 
beneficiaries. Circulation. 2010; 121:63-70.
    \130\ Figure 2 of Hammill BG, Curtis LH, Schulman KA, Whellan 
DJ. Relationship between cardiac rehabilitation and long-term risks 
of mortality and myocardial infarction among elderly Medicare 
beneficiaries. Circulation. 2010; 121:63-70. Note that the 30,161 
overall beneficiaries in the table contained in the figure refers to 
the number of Medicare beneficiaries that initiated cardiac 
rehabilitation services between January 1, 2000 and December 31, 
2005 in the national 5 percent sample used by Hammill et al.

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

[[Page 50979]]

[GRAPHIC] [TIFF OMITTED] TP02AU16.025

    Another study by Suaya et al showed that over a 5-year period 
beneficiaries who were hospitalized for coronary conditions or cardiac 
revascularization procedures and completed 1-24 CR sessions had lower 
mortality compared to beneficiaries who were probable candidates for CR 
but completed 0 CR sessions and that beneficiaries who completed 25 or 
more CR sessions had lower mortality compared to beneficiaries who 
completed 1-24 CR sessions.\131\ Figure 5 replicates Figure 1 from that 
study.
---------------------------------------------------------------------------

    \131\ Suaya JA, Stason WB, Ades PA, Normand ST, Shephard DS. 
Cardiac rehabilitation and survival in older coronary patients. 
Journal of the American College of Cardiology 2009; 54:25-33.

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

[[Page 50980]]

[GRAPHIC] [TIFF OMITTED] TP02AU16.026

    We do not propose to set a cap on the number of CR/ICR services 
that would count toward the CR amount during an AMI or CABG model 
episode or AMI care period or CABG care period because the literature 
shows incremental improvements in outcomes associated with more CR/ICR 
services through 36 or more sessions. The duration of AMI and CABG 
model episodes and AMI care periods and CABG care periods is only 90 
days post-discharge from the hospitalization that begins the episode or 
care period, or roughly 13 weeks, and Medicare already limits the 
number of covered CR/ICR services for a beneficiary. The number of CR 
program sessions are limited to a maximum of 2 one-hour sessions per 
day for up to 36 sessions over up to 36 weeks, with the option for an 
additional 36 sessions over an extended period of time if approved by 
the Medicare Administrative Contractor under section 1862(a)(1)(A) of 
the Act.\133\ ICR program sessions are limited to 72 one-hour sessions, 
up to 6 sessions per day, over a period of up to 18 weeks.\134\
---------------------------------------------------------------------------

    \132\ Figure 1 of Suaya JA, Stason WB, Ades PA, Normand ST, 
Shephard DS. Cardiac rehabilitation and survival in older coronary 
patients. Journal of the American College of Cardiology 2009; 54:25-
33.
    \133\ 42 CFR 410.49(b)(1)(vii).
    \134\ Section 1861(eee)(1) of the Act.
---------------------------------------------------------------------------

    We believe that the higher per-service CR incentive amount that 
would count toward the CR amount when CR/ICR services paid by Medicare 
to any provider or supplier for a beneficiary in an AMI or CABG model 
episode or AMI care period or CABG care period meet or exceed the 
evidence-based service utilization benchmark would strengthen the 
financial incentive for CR participants to ensure beneficiary adherence 
to all prescribed CR/ICR services beyond the initial $25 per-service CR 
incentive amount for the first 11 CR/ICR services. Moreover, the higher 
level of the per-service CR incentive amount when a beneficiary 
completes at least 12 CR/ICR services provides a strong incentive for 
CR participants to expand CR referrals and to increase the likelihood 
that beneficiaries complete a clinically meaningful number of CR 
services. The proposal creates a continuous, significant incentive for 
increased CR/ICR service utilization that provides value beyond the 
service utilization benchmark of 12 CR/ICR services, consistent with 
the literature that shows a decrease in mortality for beneficiaries 
that complete more CR sessions relative to beneficiaries that complete 
fewer CR sessions.
    The CR amount for a beneficiary in a CR participant's AMI and CABG 
model episodes or AMI care periods and CABG care periods in a CR 
performance year would be the sum of the $25 per-service CR incentive 
amount for each of the first 11 CR/ICR services and the $175 per-
service CR incentive amount for each additional CR/ICR service paid by 
Medicare beyond the first 11. The CR participant's CR incentive payment 
for a CR performance year would be determined based on the sum of the 
CR amounts across all of its beneficiaries for that CR performance 
year.
    We believe that this comprehensive CR incentive payment methodology 
would be appropriate because it would create an explicit, strong 
incentive for CR participants to expand the utilization of CR/ICR 
services to achieve at least the evidence-based service utilization 
benchmark of 12 ICR/CR services and then significantly and continuously 
incentivize the provision of additional CR/ICR services that provide 
additional value, even if the full benefit of CR/ICR services for 
beneficiaries that have had an AMI or a CABG is not realized until 
after an episode or care period ends. Moreover, the CR incentive 
payment could offset resource costs incurred by CR participants that 
successfully increase utilization of CR/ICR services, such as FFS-CR 
participants providing transportation or EPM-CR participants providing 
beneficiary engagement incentives as discussed in sections III.I.9. and 
VI.F.6. of this proposed rule for EPM-CR and FFS-CR participants, 
respectively.
    Because the CR incentive payment would be made to the CR 
participant

[[Page 50981]]

retrospectively after the end of a CR performance year as discussed in 
section VI.E.4. of this proposed rule, the CR incentive payment would 
represent the totality of financial reward to the CR participant based 
on the proposed methodology for determining the payment based on CR/ICR 
service utilization during the CR performance year. The CR 
participant's resources required to support the increased utilization 
of CR/ICR services are likely to vary among beneficiaries. For example, 
it is possible that greater CR participant resources may be required to 
encourage and support the utilization of a beneficiary's first CR/ICR 
services during an AMI or CABG model episode or AMI care period or CABG 
care period, in comparison with promoting adherence to additional 
prescribed CR/ICR services once the care pattern is well-established 
for that beneficiary. The proposed retrospective payment approach means 
CR participants would have the flexibility to redesign care to meet the 
needs of their beneficiaries regarding increased utilization of CR/ICR 
services, even though the CR incentive payment methodology only 
provides the higher level per-service CR incentive amount when CR/ICR 
service utilization achieves levels associated with improved outcomes. 
This approach is consistent with the model payment methodology that is 
designed to reward the value and not the volume of services by 
providing a higher total financial reward for utilization of services 
that has been shown to result in improved outcomes.
    The proposals for determining the amount of the CR incentive 
payments are included in Sec.  512.710(a) and (b). We would also note 
that we expect to revisit the levels of the CR incentive payment and 
the service utilization benchmark over the CR performance years as we 
observe the effects of the model policies on CR/ICR service utilization 
and the long-term outcomes and Medicare expenditures for CR incentive 
payment model beneficiaries under the EPM and Medicare FFS program 
payment methodologies for overall care. For example, it is possible 
that the proposed CR incentive payment methodology could lead to 
substantial increases in CR/ICR service utilization such that the 
proposed CR incentive payment model policies may no longer be necessary 
or appropriate once new care patterns are well-established.
2. Relation of CR Incentive Payments to EPM Pricing and Payment 
Policies and Sharing Arrangements for EPM-CR Participants
    We view the proposed CR incentive payments as separate and distinct 
from reconciliation payments and Medicare repayments for EPM-CR 
participants determined under Sec.  512.305(d). The determination of 
these latter payments is based on an assessment of actual episode 
payments and quality of the totality of episode services and 
coordination of those services during AMI and CABG model episodes 
within a performance year, consistent with the goals of improving 
quality and reducing costs within the model episode itself. In 
contrast, the proposed CR incentive payment under the CR incentive 
payment model is a more circumscribed and specific payment designed to 
financially incentivize increased utilization of CR/ICR services which 
may improve quality and reduce costs for AMI and CABG model 
beneficiaries in the long-term, after the episodes end. Thus, we 
propose to determine and apply the CR incentive payment separately from 
the determination and application of reconciliation payments and 
Medicare repayments for EPM-CR participants. Moreover, would also note 
that we propose to make CR incentive payments to EPM-CR participants 
without application of the limitation on gains as specified in Sec.  
512.305(c)(2)(iii)(B). This is because the limitation on gains is 
designed to mitigate potential excessive reductions in utilization 
under the proposed EPMs, and by construction, the CR incentive payment 
would only be made when an EPM-CR participant increases utilization of 
CR/ICR services. Therefore, the CR incentive payment is unrelated to 
the comparison of actual EPM episode payment to the quality-adjusted 
target price in calculating the NPRA, to which the limitation on gains 
applies and that may ultimately result in a reconciliation payment to 
an EPM-CR participant.
    Consistent with the aforementioned proposal and for the 
aforementioned reasons, in contrast to reconciliation payments, we 
propose to not permit the inclusion of CR incentive payments in sharing 
arrangements for EPM-CR participants specified in Sec.  512.500. As 
discussed in section III.I.1. of this proposed rule, we believe that 
EPM participants may wish to enter into financial arrangements with 
providers and suppliers caring for EPM beneficiaries to share financial 
risks and rewards under the EPM, in order to align the financial 
incentives of those providers, suppliers, and Medicare ACOs with the 
EPM goals of improving quality and efficiency for EPM episodes. In 
contrast, the CR incentive payment for EPM-CR participants is 
specifically tied to increased utilization of CR/ICR services within 
AMI and CABG model episodes and, therefore, is designed to reward 
increased EPM-CR participant referral of AMI and CABG model 
beneficiaries to CR/ICR programs, as well as supporting beneficiary 
adherence to the referral and participation in CR/ICR services, rather 
than the quality and efficiency of EPM episodes themselves. Thus, we do 
not propose to allow CR incentive payments to be included in sharing 
arrangements, and the CR incentive payments may be shared with other 
individual and entities only under circumstances which comply with all 
existing laws and regulations, including fraud and abuse laws. 
Similarly, we do not propose that CR incentive payment be allowed to be 
shared by FFS-CR participants with other individuals and entities other 
than under circumstances which comply with all existing laws and 
regulations, including fraud and abuse laws. We refer to section VI.G. 
of this proposed rule for further discussion of considerations 
regarding financial arrangements under the CR incentive payment model.
    Likewise, we propose to exclude CR incentive payments when updating 
quality-adjusted target prices for EPM-CR participants for performance 
years 3-5 of the EPM because payments for CR/ICR services already would 
be captured in the claims used to update those quality-adjusted target 
prices. Therefore, we believe that including the CR incentive payments 
would result in double counting expenditures for CR/ICR services when 
updating quality-adjusted target prices. We note that while the CR 
incentive payments would not be included in the calculation of actual 
EPM episode spending or when updating quality-adjusted target prices 
for EPM-CR participants, the claims for those CR/ICR services upon 
which the CR incentive payment was determined would be included in both 
calculations.
    The proposals for keeping CR incentive payments, if any, separate 
from reconciliation payments and Medicare repayments as well as 
excluding them from sharing arrangements and updating quality adjusted 
target prices for EPM-CR participants are included in Sec.  512.710(c) 
through (e). We seek comments on our proposals to keep CR incentive 
payments separate and exclusive.

[[Page 50982]]

3. CR Incentive Payment Report
    For CR participants to receive timely and meaningful feedback on 
their performance with respect to the proposed CR incentive payments, 
we propose to annually issue to CR participants a report containing at 
a minimum--
     1--The number of AMI and CABG model episodes or AMI care 
periods and CABG care periods attributed to the CR participant in which 
Medicare paid for 11 or fewer CR/ICR services for a beneficiary during 
the CR performance year, if any;
     2--The total number of CR/ICR services Medicare paid for 
during AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (1);
     3--The amount of the CR incentive payment attributable to 
the AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (1);
     4--The number of AMI and CABG model episodes or AMI care 
periods and CABG care periods attributed to the CR participant in which 
Medicare paid for 12 or more CR/ICR services for a beneficiary during 
the CR performance year, if any;
     5--The total number of CR/ICR services Medicare paid for 
during AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (4);
     6--The amount of the CR incentive payment attributable to 
the AMI and CABG model episodes or AMI care periods and CABG care 
periods identified in (4); and
     7--The total amount of the CR incentive payment.
    We also considered including additional information in the CR 
incentive payment report, including information on the number of CR/ICR 
services paid for by Medicare during each AMI or CABG model episode or 
AMI care period or CABG care period attributed to the CR participant 
during the CR performance year. However, because EPM-CR participants 
and FFS-CR participants can request more specific beneficiary-level 
data that would contain information on CR/ICR services paid for by 
Medicare for each AMI or CABG model episode or AMI care period or CABG 
care period attributed to the CR participant during the CR performance 
year, as discussed in sections III.K.2. and VI.F.3. of this proposed 
rule, we do not propose to include such additional information in the 
CR incentive payment report.
    For EPM-CR participants, we propose to issue this annual report at 
the same time we issue the reconciliation report specified in Sec.  
512.305(f). For FFS-CR participants, we propose to issue this report at 
the same time proposed for EPM-CR participants.
    The proposal to issue a CR incentive payment report is included in 
Sec.  512.710(f). We seek comments on our proposal to issue a CR 
incentive payment report to CR participants and what other information, 
if any, would be helpful to include in the CR incentive payment report.
4. Proposed Timing for Making CR Incentive Payments
    We propose to make CR incentive payments on a retrospective basis. 
In the case of an EPM-CR participant, these payments would occur 
concurrently with EPM reconciliation payments or repayment amounts 
assessed for a specific CR performance year which is the same as the 
performance year for the EPM, subject to the relation of the CR 
incentive payment described in section VI.E.2. of this proposed rule 
and the appeals process for EPM participants described in section 
III.D.8. of this proposed rule. In the case of a FFS-CR participant, 
these payments would occur at the same time as is proposed for EPM-CR 
participants, subject to the appeals process described in section 
VI.F.2. of this proposed rule.
    The proposed timing for making CR incentive payments is included in 
Sec.  512.710(g). We seek comments on our proposed timing for making CR 
incentive payments.

F. Provisions for FFS-CR Participants

1. Access to Records and Retention for FFS-CR Participants
    In section III.H. of this proposed rule, we discuss our proposals 
for record access and retention under the EPM. The proposals describe 
the access to records and retention requirements for all EPM 
participants, including EPM-CR participants and other individuals and 
entities with respect to the EPM and CR incentive payment model, if the 
latter is applicable to the EPM participant. Two of the six categories 
of information subject to the requirements, specifically compliance 
with the requirements of the CR incentive payment model and the 
obligation to repay any CR incentive payments owed to CMS, are relevant 
only to the CR incentive payment model. Thus, we propose to establish 
CR incentive payment model access to records and retention requirements 
for FFS-CR participants and any other individuals or entities providing 
items or services to a FFS-CR beneficiary that are the same as we 
propose for EPM-CR participants and other individuals and entities but 
only for the two categories of information that are applicable to the 
CR incentive payment model. The other four categories of information 
proposed for records access and retention under the EPM, specifically 
the calculation, distribution, receipt, or recoupment of gainsharing 
payments, alignment payments, distribution payments, and downstream 
distribution payments; the quality of the services furnished; the 
sufficiency of beneficiary notifications; and the accuracy of the EPM 
participant's submissions under CEHRT use requirements, are not 
relevant to the CR incentive payment model for FFS-CR participants and 
other individuals and entities providing items and services to FFS-CR 
beneficiaries because the CR incentive payment model includes no 
policies that relate directly to these categories of information.
    The proposals for access to records and record retention for FFS-CR 
participants and other individuals and entities providing items and 
services to FFS-CR beneficiaries are included in Sec.  512.715. We seek 
comment on our proposals, including whether it is necessary, reasonable 
and appropriate to impose these access and retention obligations on the 
FFS-CR participant and other individuals and entities providing items 
and services to FFS-CR beneficiaries for the proposed categories of 
information to be retained and made accessible. In addition, we seek 
comment on whether additional or different safeguards would be needed 
to ensure program integrity, protect against abuse, and ensure that the 
goals of the CR incentive payment model are met.
2. Appeals Process for FFS-CR Participants
a. Overview
    In section III.D.8. of this proposed rule, we discuss our proposals 
for the appeals process under the EPMs. The proposal outlines the 
appeals process requirements for all EPM participants, including EPM-CR 
participants, with respect to the EPM and CR incentive payment model, 
if the latter is applicable to the EPM participant. CR incentive 
payments as well as non-payment related issues, such as enforcement 
matters, are relevant only to the CR incentive payment model. Thus, we 
propose to establish CR incentive payment model appeals process for 
FFS-CR participants that have the same requirements as we propose for 
the EPM but based on only the CR incentive payment and non-

[[Page 50983]]

payment related issues, such as enforcement matters. All other 
appealable items under the EPM, specifically related to payment, 
reconciliation amounts, repayment amounts, determinations associated 
with quality measures affecting payment are not relevant to the CR 
incentive payment model for any FFS-CR participants because the CR 
incentive payment model includes no policies that relate directly to 
these categories of information.
b. Notice of Calculation Error (First Level Appeal)
    We propose the following calculation error process for the CR 
incentive payment model to contest matters related to the calculation 
of the FFS-CR participant's CR incentive payment as reflected in the CR 
incentive payment report. FFS-CR participants would review their CR 
incentive payment report and be required to provide written notice of 
any error in a calculation error form that must be submitted in a form 
and manner specified by CMS. Unless the FFS-CR participant provides 
such notice, the CR incentive payment report would be deemed final 
within 45 calendar days after it is issued, and CMS would proceed with 
payment. 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. We propose that if a FFS-CR participant does not submit 
timely notice of a calculation error, which is notice within 45 
calendar days of the issuance of the CR incentive payment report, the 
FFS-CR participant would be precluded from later contesting the CR 
incentive payment report for that CR performance year.
    In summary, we propose the following requirements in Sec.  
512.720(a) for notice of calculation error:
     Subject to the limitations on review in subpart H of this 
part, if a FFS-CR participant wishes to dispute calculations involving 
a matter related to a CR incentive payment, the FFS-CR participant is 
required to provide written notice of the error, in a form and manner 
specified by CMS.
     Unless the FFS-CR participant provides such notice, CMS 
deems final the applicable CR incentive payment report 45 calendar days 
after the applicable CR incentive payment report is issued and proceeds 
with the payment as applicable.
     If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the applicable CR incentive payment 
report, 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 FFS-CR participant.
     Only FFS-CR participants may use the notice of calculation 
error process described in this subpart.
    We seek comment on the proposed notice of calculation error 
requirements.
c. Dispute Resolution Process (Second Level of Appeal)
    We propose the following dispute resolution process. First, we 
propose that only a FFS-CR participant may utilize this dispute 
resolution process. Second, in order to access the dispute resolution 
process a FFS-CR participant must have timely submitted a calculation 
error form, as previously discussed, regarding the CR incentive 
payment. We propose these matters would include any amount or 
calculation indicated on a CR incentive payment report, including 
calculations not specifically reflected on a CR incentive payment 
report but which generated figures or amounts reflected on a CR 
incentive payment report. We propose calculation of CR incentive 
payment amounts would need to be first adjudicated by the calculation 
error process as previously detailed. If a FFS-CR participant wants to 
engage in the dispute resolution process with regard to the calculation 
of a CR incentive payment amount, we propose it would first need to 
submit a calculation error form. Where the FFS-CR participant does not 
timely submit a calculation error form, we propose the dispute 
resolution process would not be available to the FFS-CR participant 
with regard to the CR incentive payment report for that CR performance 
year.
    If the FFS-CR participant did timely submit a calculation error 
form and the FFS-CR participant is dissatisfied with CMS's response to 
the FFS-CR participant's notice of calculation error, the FFS-CR 
participant 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 for the FFS-CR participant's assertion that 
CMS or its representatives did not accurately calculate CR incentive 
payment in accordance with CR incentive payment model rules.
    Where the matter is unrelated to payment, such as termination from 
the CR incentive payment model, the FFS-CR participant need not submit 
a calculation error form. We propose to require the FFS-CR participant 
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 propose CMS would process the request as discussed later in this 
section.
    We propose 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 
FFS-CR participant in writing within 15 calendar days of receiving the 
FFS-CR participant'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 view to occur no later 
than 30 days after the date of the Scheduling Notice. The provisions at 
Sec.  425.804(b), (c), and (e) (as in effect on the publication date of 
this proposed rule) would apply to reviews conducted pursuant to the 
reconsideration review process for the CR incentive payment model. 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.
    In summary, we propose the following requirements in Sec.  
512.720(b) for the reconsideration process:
     If the FFS-CR participant is dissatisfied with CMS's 
response to the notice of a calculation error, the FFS-CR participant 
may request a reconsideration review in a form and manner as specified 
by CMS.
     The reconsideration request must provide a detailed 
explanation of the basis for the dispute and include supporting 
documentation for the FFS-CR participant's assertion that CMS or its 
representatives did not accurately calculate the CR incentive payment 
in accordance with subpart H of this part.
     If CMS does not receive a request for reconsideration from 
the FFS-CR participant within 10 calendar days of the issue date of 
CMS's response to the FFS-CR participant's notice of calculation error, 
then CMS's response

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to the calculation error is deemed final and CMS proceeds with the 
applicable processes, as described in subpart H of this part.
     The CMS reconsideration official notifies the FFS-CR 
participant in writing within 15 calendar days of receiving the FFS-CR 
participant's review request of the following:
    ++ The date, time, and location of the review.
    ++ The issues in dispute.
    ++ The review procedures.
    ++ The procedures (including format and deadlines) for submission 
of evidence. 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 notification.
     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 the FFS-CR participant.
     The CMS reconsideration official issues a written 
determination within 30 days of the review. The determination is final 
and binding.
     Only a FFS-CR participant may utilize the dispute 
resolution process described in this subpart. We seek comment on the 
proposed reconsideration process for the CR incentive payment model.
d. Exception to the Notice of Calculation Error Process and Notice of 
Termination
    If the FFS-CR participant contests a matter that does not involve 
an issue contained in, or a calculation which contributes to a CR 
incentive payment report, a notice of calculation error is not 
required. In instances where a notice of calculation error is not 
required, for example a FFS-CR participant's termination from the CR 
incentive payment model, we propose the FFS-CR participant provide a 
written notice to CMS requesting review within 10 calendar days of the 
notice. CMS has 30 days to respond to the FFS-CR participant's request 
for review. If the FFS-CR participant fails to notify CMS, the decision 
is deemed final.
    In summary, we propose the following requirements in Sec.  
512.720(c) for an exception to the notice of calculation error process:
     If the FFS-CR participant contests a matter that does not 
involvean issue contained in, or a calculation which contributes to a 
CR incentive payment report a notice of calculation error is not 
required. In these instances, if CMS does not receive a request for 
reconsideration from the FFS-CR participant within 10 calendar days of 
the notice of the initial determination, the initial determination is 
deemed final and CMS proceeds with the action indicated in the initial 
determination.
    In summary, we propose the following requirements in Sec.  
512.720(d) for notice of termination:
     If an FFS-CR participant receives notification that it has 
been terminated from the CR incentive payment model, it must provide a 
written request for reconsideration to CMS requesting review of the 
termination within 10 calendar days of the notice. CMS has 30 days to 
respond to the FFS-CR participant's request for review. If the FFS-CR 
participant fails to notify CMS, the termination is deemed final.
    We seek comment on the proposed exception to the process and notice 
of termination.
e. Limitations on Review
    In summary, we propose the following requirements in Sec.  
512.720(e) for 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:
    ++ 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 section 
1115A(b)(3) of Act.
    ++ The termination or modification of the design and implementation 
of a model under section 1115A(b)(3)(B) of Act.
    ++ Decisions to expand the duration and scope of a model under 
section 1115A(c) of the Act, including the determination that a model 
is not expected to meet criteria described in paragraph (e)(1) or (2) 
of this section.
    We seek comment on the proposed limitations on review.
    The proposals for the appeals process for FFS-CR participants are 
included in Sec.  512.720. We seek comment on our proposals for the 
appeals process as it related to FFS-CR participants. The two-step 
appeal process for payment matters--(1) calculation error form, and (2) 
reconsideration review--is used broadly in other CMS models. We seek 
comment on whether we should develop an alternative appeal process. In 
addition, we seek comment on whether additional or different safeguards 
would be needed to ensure program integrity, protect against abuse, and 
ensure that the goals of the CR incentive payment model are met.
3. Data Sharing for FFS-CR Participants
a. Overview
    Section III.K. of this proposed rule discusses our proposed 
policies for the types and formats of financial data that we would make 
available to EPM participants, frequency with which we would make these 
data available, and authority for making these data available to EPM 
participants. Specifically, in section III.K.2. of this proposed rule, 
we propose to provide certain financial data in two formats. First, we 
propose to make summary beneficiary claims data reports on 
beneficiaries' use of health care services during the baseline and 
performance periods upon request and in accordance with applicable 
privacy and security laws and established privacy and security 
protections. These data would consist of summary claims data reports 
that would contain payment information such as episode counts, total 
average spending for each episode, based upon categories, including, 
inpatient services, outpatient services, skilled nursing facility 
services, and carrier/Part B services. Alternatively, for EPM 
participants with the capacity to analyze raw claims data, we propose 
to make more detailed beneficiary-level information available upon 
request and in accordance with applicable privacy and security laws and 
established privacy and security protections. In addition to these more 
detailed data, we would include episode summaries, indicators for 
excluded episodes, diagnosis and procedure codes, and enrollment and 
dual eligibility information for beneficiaries that initiate EPM 
episodes. In section III.K.2. of this proposed rule, we also noted our 
view that making this information available to EPM participants would 
provide tools to monitor, understand, and manage utilization and 
expenditure patterns as well as to develop, target, and implement 
quality improvement programs and initiatives.
    In addition to the aforementioned data, we propose in section 
III.K.3. of this proposed rule to provide comparable aggregate regional 
data to EPM participants. Our proposal to make these regional data 
available is because regional pricing data would be used to determine 
benchmark and quality-adjusted target prices for EPM participants, and 
these aggregate regional data would assist participant in better 
understanding the basis of these prices. In section III.K.4. of this 
proposed rule, we propose to make 3

[[Page 50985]]

years of baseline data available to EPM participants prior to the 
models' start date, which we believe would help the participant assess 
its practice patterns, identify cost drivers, and ultimately redesign 
its care practices to improve efficiency and quality. In section 
III.K.5 of this proposed rule, we propose to provide to EPM 
participants, upon request and in accordance with the HIPAA Privacy 
Rule, up to 6 quarters of claims data as frequently as on a quarterly 
basis throughout the EPM participant's participation or until they 
notify CMS that they no longer wish to receive these data.
    As stated in section III.K.6 of this proposed rule, we believe our 
proposals are consistent with and authorized under 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 would 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). As we stated in section III.K.6. of this proposed rule, EPM 
participants would be using the data on their patients to evaluate the 
performance of the participant 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, we noted our view that this provision covers 
the uses we would expect under the proposed EPMs. We also noted our 
view that, in proposing to make available the ``minimum necessary'' 
data to accomplish the intended purpose of the use, our proposal was 
consistent with (45 CFR 164.502(b)). Last, we stated our belief that 
our 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 exception to the Privacy 
Act, which would otherwise prohibit 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)). For a 
more detailed discussion of our proposals and authority for sharing 
data with EPM participants, please see section III.K. of this proposed 
rule.
b. Data Sharing With CR Participants
    As is the case with the proposed EPMs, we believe that making 
certain beneficiary-identifiable claims information available, upon 
request and in accordance with applicable privacy and security laws and 
established privacy and security protections, is necessary for CR 
participants to best improve their performance with respect to 
increasing utilization of CR/ICR services, which we believe should 
result in improved healthcare outcomes and reduced healthcare costs. 
However, we believe that a more limited set of data would be needed for 
purposes of testing the CR incentive payment model than would be made 
available under the proposed EPMs. This is because the purposes and 
processes related to the proposed CR incentive payment model are 
narrower in focus than under the proposed EPMs where hospitals must 
coordinate care across a broader array of providers and services to 
improve health care quality across a broader range of dimensions. Also, 
unlike the EPMs where a participant's performance each performance year 
is compared against historical spending, the CR incentive payments are 
based only on a CR participant's CR/ICR service utilization performance 
within a given CR performance year. Further, CR incentive payments are 
tied only to the CR participant's performance and are unrelated to 
performance within a region.
    Thus, upon request and in accordance with applicable privacy and 
security laws and established privacy and security protections, we 
propose to make the following data available to FFS-CR participants:
     Inpatient claims--containing potential admissions for CABG 
and AMI MS-DRGs (and PCI DRGs with an AMI ICD-CM diagnosis code in the 
principal or any secondary diagnosis code position).
     Carrier and Outpatient claims--containing CR/ICR services 
that occurred in the 90-day period after discharge (called the AMI care 
period or CABG care period).
    We would note that our proposal pertains only to FFS-CR 
participants and not to EPM-CR participants. This is because an EPM-CR 
participant that has requested data under the EPM would already have 
had the data previously described made available to them under their 
broader data sharing request. As such, we believe that also making 
these data separately available to EPM-CR participants would be 
duplicative and could create confusion for participants. We would also 
note that we do not propose to make historical payment or aggregate 
regional payment data available to FFS-CR participants. This is 
because, as previously discussed, neither historical nor regional CR/
ICR service utilization performance would be factors considered when 
determining their eligibility for or the amount of a CR incentive 
payment.
    As is the case for our proposed data sharing with EPM participants, 
we propose to make these data available in either summary or claims-
level format, depending on the FFS-CR participant's request. Also, we 
propose to make these data available consistent with the same schedule 
we propose to use for making data available to EPM participants and to 
make available up to 6 quarters of claims data as frequently as on a 
quarterly basis throughout the FFS-CR participant's participation or 
until they notify CMS that they no longer wish to receive these data. 
As is the case with the EPMs, we propose that the data files would be 
packaged and sent to a data portal (to which the FFS-CR participants 
must request and be granted access) in a ``flat'' or binary format for 
the FFS-CR participant to retrieve.
    The proposal to share data with FFS-CR participants is included in 
Sec.  512.725. We seek comments on our data sharing proposals.
4. Compliance Enforcement for FFS-CR Participants and Termination of 
the CR Incentive Payment Model
    In section III.F. of this proposed rule, we discuss our proposals 
for compliance enforcement under the EPM. The proposal outlines the 
non-compliance by EPM participants, including EPM-CR participants with 
respect to the EPM and CR incentive payment model, if the latter is 
applicable to the EPM participant that may trigger compliance 
enforcement by CMS and the enforcement mechanisms available to CMS. 
Four out of the seven

[[Page 50986]]

remedial actions, specifically issuing a warning letter to the EPM 
participant, requiring the EPM participant to develop a corrective 
action plan, commonly referred to as a CAP, reducing or eliminating the 
EPM participant's CR incentive payment, and terminating the EPM 
participant from the CR incentive payment model, are relevant to the CR 
incentive payment model. Thus, we propose to establish compliance 
enforcement for the CR incentive payment model for FFS-CR participants 
that is substantively similar to the requirements as we propose for the 
EPM but that the CMS enforcement mechanisms may use with FFS-CR 
participants be the four remedial actions previously listed in this 
section. All other types of enforcement mechanisms under the EPM, 
specifically, reducing or eliminating the EPM participant's 
reconciliation payment, requiring the EPM participant to terminate a 
sharing arrangement with an EPM collaborator and prohibiting the EPM 
collaborator from further engagement in sharing arrangements with the 
EPM participant, and allowing CMS to add 25 percent to a repayment 
amount on an EPM participant's reconciliation report under certain 
circumstances, are not relevant to the CR incentive payment model for 
any FFS-CR participants because the CR incentive payment model includes 
no policies that relate directly to these categories of activity.
    Another distinction between the policies proposed under the EPMs 
and the CR incentive payment model is regarding prevention of EPM-CR 
participants from avoiding the high cost and high severity patients and 
targeting low cost and low severity patients. Under the EPMs, we 
prohibit EPM participants from avoiding both potentially high cost or 
high severity patients and targeting both potentially low cost or low 
severity patients. Under the CR incentive payment model we are only 
concerned with FFS-CR participants avoiding high severity patients and 
targeting low severity patients. The goal of EPM is to maintain or 
improve quality and coordination of care while reducing program 
expenditures. In contrast, the goals of the CR incentive payment model 
are to reduce cardiovascular mortality, improve health-related quality 
of life, and reduce the risk of hospital admission. The EPM explicit 
prohibition of avoiding high cost and targeting low cost patients is 
not included for the FFS-CR participants as cost savings are not a goal 
for participants under the CR incentive payment model.
    We propose that CMS would have the remedial actions detailed in 
this section available for use against FFS-CR participants where such 
FFS-CR participant furnishing CR services to a beneficiary during the 
CR incentive payment model is not compliant in a matter listed in Sec.  
512.730(b)(1). These mechanisms would support CMS's goal for the CR 
incentive payment model to prevent overutilization of CR services that 
are not medically necessary, prevent FFS-CR participants from avoiding 
high severity patients and seeking out low severity patients, safeguard 
program integrity, protect against fraud and abuse, and deter 
noncompliance with CR incentive payment model requirements.
    Upon discovering an instance of noncompliance by a FFS-CR 
participant with the requirements of the CR incentive payment model, 
CMS, HHS, or a designee of such Agencies may take remedial action 
against such FFS-CR participant. Any information collected by CMS in 
relation to termination of a participant from the model would be shared 
with our program-integrity colleagues at HHS, the Department of 
Justice, and their respective designees. Should such participant, or 
one of its EPM collaborators, collaboration agents, or downstream 
collaboration agents, be noncompliant with the requirements of the EPMS 
or engage in unlawful behavior related to participation in the EPMS, we 
note that such information could be used in proceedings unrelated to 
the enforcement mechanisms in this section. FFS-CR participants also 
would be subject to all applicable requirements and conditions for 
Medicare participation not otherwise waived under section 1115A(d)(1) 
of the Act.
    In summary, we propose in Sec.  512.730 that FFS-CR participants 
must comply with all requirements outlined in subpart H. Except as 
specifically noted subpart H, 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.
    Further, we propose in Sec.  512.730 that CMS may take the remedial 
actions later discussed in this section, if a FFS-CR participant--
     Fails to comply with any requirements of this subpart or 
is identified as noncompliant through monitoring by HHS (including CMS 
and OIG) of the CR incentive payment model, including but not limited 
to--
    ++ Avoiding potentially high severity patients;
    ++ Targeting potentially low severity patients;
    ++ Failing to provide medically appropriate services or 
systematically engaging in the over or under delivery of appropriate 
care;
    ++ Failing to provide beneficiaries with complete and accurate 
information; or
     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;
     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 of this subpart;
     Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the CR incentive payment 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 CR 
incentive payment 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; or
     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 CR incentive payment model.
    We propose the remedial actions to include the following:
     Issuing a warning letter to the FFS-CR participant.
     Requiring the FFS-CR participant to develop a corrective 
action plan, commonly referred to as a CAP.
     Reducing or eliminating the FFS-CR participant's CR 
incentive payment.
     Terminating the FFS-CR participant from the CR incentive 
payment model.
    The proposals for compliance enforcement for FFS-CR participants 
are included in Sec.  512.730. We seek comment on our proposals for 
compliance enforcement as it is related to FFS-CR participants. In 
addition, we seek comment on whether additional or different safeguards 
would be needed to ensure program integrity, protect against

[[Page 50987]]

abuse, and ensure that the goals of the CR incentive payment model are 
met.
    We further propose under Sec.  512.905, CMS may terminate the CR 
incentive payment model for reasons including but not limited to--
     CMS no longer has the funds to support the CR incentive 
payment model; or
     CMS terminates the applicable 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.
5. Enforcement Authority for FFS-CR Participants
    OIG authority is not limited or restricted by the provisions of the 
CR incentive payment model, including the authority to audit, evaluate, 
investigate, or inspect the FFS-CR participants. Additionally, no CR 
incentive payment model provisions limit or restrict the authority of 
any other Government Agency to do the same.
    The proposals for enforcement authority for FFS-CR participants in 
the CR incentive payment model are included in Sec.  512.735. We seek 
comment 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 CR incentive payment model are met.
6. Beneficiary Engagement Incentives for FFS-CR Participants
    We propose to allow EPM participants to provide beneficiary 
engagement incentives under certain conditions as discussed in section 
III.I.9. of this proposed rule based on the goals of the EPM to improve 
EPM episode quality and efficiency. The goals of the CR incentive 
payment model in which some EPM participants also participate are to 
increase CR/ICR service care coordination and the medically necessary 
utilization of CR/ICR services in AMI and CABG model episodes for EPM-
CR participants and in AMI care periods and CABG care periods for FFS-
CR participants. We believe that one mechanism that may be useful to CR 
participants in achieving this goal is the provision of transportation 
to CR/ICR services as in-kind patient engagement incentives to AMI and 
CABG model beneficiaries and beneficiaries in AMI care periods and CABG 
care periods (hereinafter FFS-CR beneficiaries). As discussed earlier 
in this section, lack of accessibility of CR program sites can be a 
significant barrier to beneficiary adherence to a CR treatment plan. We 
do not believe there are beneficiary engagement incentives other than 
transportation that would be important for achieving the CR incentive 
payment model goals of increasing CR/ICR service care coordination and 
the medically necessary utilization of CR/ICR services. However, we 
believe that EPM-CR and FFS-CR participants should generally have the 
same regulatory flexibilities that are directly relevant to advancing 
the CR incentive payment model goals so that we can evaluate the CR 
incentive payment model under the two different underlying payment 
methodologies for AMI and CABG care (episode or FFS) and draw 
conclusions about the relationship between the CR incentive payment 
model and the underlying payment methodology for care.
    Under the proposed beneficiary engagement incentive policies for 
the EPM, EPM-CR participants would be able to provide beneficiary 
transportation to CR/ICR services in order to achieve the clinical goal 
of the EPM of beneficiary adherence to a care plan, subject to certain 
conditions on these incentives that are necessary to ensure that their 
provision is solely for the purpose of achieving the EPM goals of 
improvements in episode quality and efficiency. When transportation is 
provided by an EPM-CR participant as a beneficiary engagement incentive 
for CR/ICR services, its use would also be aligned with the CR 
incentive payment model goals of increasing CR/ICR service care 
coordination and the medically necessary utilization of CR/ICR 
services. Thus, our proposal for beneficiary engagement incentives 
under the EPM meets the potential need for transportation to CR/ICR 
services for AMI and CABG model beneficiaries under an EPM-CR 
participant.
    We propose to allow FFS-CR participants to provide transportation 
to CR/ICR services as a beneficiary engagement incentive for FFS-CR 
beneficiaries during AMI care periods and CABG care periods to allow 
these participants similar use of beneficiary engagement incentives to 
achieve the CR incentive payment model goals as would be available to 
EPM-CR participants for that purpose. We propose the same conditions on 
beneficiary engagement incentives provided by FFS-CR participants as 
would be applicable to EPM beneficiary engagement incentives when those 
beneficiary incentives are transportation.
    The proposed conditions for transportation when provided as a 
beneficiary engagement incentive by FFS-CR participants are--
     The incentive must be provided directly by the FFS-CR 
participant or by an agent of the FFS-CR participant under the FFS-CR 
participant's direction and control to the FFS-CR beneficiary during an 
AMI care period or CABG care period;
     Transportation must not be tied to the receipt of items or 
services other than CR/ICR services during AMI care periods or CABG 
care periods;.
     Transportation must not be tied to the receipt of items or 
services from a particular provider or supplier;
     The availability of transportation must not be advertised 
or promoted except that a beneficiary may be made aware of the 
availability of transportation at the time the beneficiary could 
reasonably benefit from it;
     The cost of transportation must not be shifted to another 
federal health care program, as defined at section 1128B(f) of the 
Act;.
    In addition, as we would apply to transportation as a beneficiary 
engagement incentive under the EPM, we propose the same documentation 
requirements for beneficiary engagement incentives provided by FFS-CR 
participants;.
     FFS-CR participants must maintain documentation of 
transportation furnished as a beneficiary engagement incentive that 
exceeds $25 in retail value;
     The documentation established contemporaneously with the 
provision of transportation must include at least the following:
    ++ The date the transportation is provided.
    ++ The identity of the beneficiary to whom the transportation was 
provided.
     The FFS-CR participant must retain and provide access to 
the required documentation in accordance with Sec.  512.715.
    Our proposals for beneficiary engagement incentives provided by 
FFS-CR participants are included in Sec.  512.740. We seek comment on 
our proposed provisions for beneficiary engagement incentives for FFS-
CR participants and welcome comment on additional or alternative 
program integrity safeguards. We also seek comment about beneficiary 
engagement incentives other than transportation that could advance the 
CR incentive payment model goals of increased CR/ICR service care 
coordination and the medically necessary utilization of CR/ICR services 
in AMI care periods and CABG care periods.

[[Page 50988]]

7. Waiver of Physician Definition for Providers and Suppliers of CR/ICR 
Services Furnished to FFS-CR Beneficiaries During an AMI Care Period or 
CABG Care Period
a. Overview of Program Rule Waivers
    In section III.J. of this proposed rule we discuss the proposed 
waivers of certain program rules that we believe offers providers and 
suppliers more flexibility so that they may increase coordination of 
care and management of beneficiaries in EPM episodes. These additional 
flexibilities are being proposed through our waiver authority under 
section 1115A of the Act, which affords broad authority for the 
Secretary to waive statutory Medicare program requirements as necessary 
to carry out the provisions of section 1115A. As discussed later in 
this section, we are using this authority to propose a waiver of the 
physician definition for providers and suppliers of CR/ICR services 
furnished to FFS-CR beneficiaries during an AMI care period or CABG 
care period. This proposed waiver is similar to the CR/ICR wavier for 
beneficiaries in the EPM episodes discussed in section III.J.8 of this 
proposed rule.
b. General Physician Requirements for Furnishing CR/ICR Services
    A CR program, as defined in Sec.  410.49(a) of regulations, means a 
physician-supervised program that furnishes physician prescribed 
exercise, cardiac risk factor modification, psychosocial assessment, 
and outcomes assessment. An ICR program, as defined in Sec.  410.49(a) 
of the regulations, means a physician-supervised program that furnishes 
cardiac rehabilitation and has shown, in peer-reviewed published 
research, that it improves patients' cardiovascular disease through 
specific outcome measurements described in Sec.  410.49(c). A physician 
is defined under Sec.  410.49(a), and under Sec.  1861(r)(1) of the Act 
as a doctor of medicine or osteopathy.
    In general, the following physician functions are required under 
Sec.  410.49 in furnishing CR/ICR services;
     Medical director--defined at Sec.  410.49(a) as a 
physician that oversees or supervises the cardiac rehabilitation or 
intensive rehabilitation program at a particular site;
     Supervising physician--defined at Sec.  410.49(a) as a 
physician that is immediately available and accessible for medical 
consultations and medical emergencies at all times items and services 
are being furnished to individuals under cardiac rehabilitation and 
intensive cardiac rehabilitation programs;
     Physician-prescribed exercise--defined at Sec.  410.49(a) 
as aerobic exercise combined with other types of exercise (that is, 
strengthening, stretching) as determined to be appropriate for 
individual patients by a physician; and
     Individualized treatment plan--defined at Sec.  410.49(a) 
as a written plan tailored to each individual patient that, under Sec.  
410.49(b)(2)(v), must be established, reviewed, and signed by a 
physician every 30 days.
c. Proposed Waiver of Physician Definition for Providers and Suppliers 
of CR/ICR Services Furnished to EPM Beneficiaries During AMI or CABG 
Model Episodes
    In section III.J.8. of this proposed rule, for providers or 
suppliers of CR/ICR services furnished to EPM beneficiaries during the 
proposed AMI or CABG model episodes, we propose to waive the physician 
definition, under Sec.  410.49, to allow a physician or a qualified 
nonphysician practitioner to perform the functions of supervising 
physician, prescribing exercise, and establishing, reviewing, and 
signing an individualized treatment plan every 30 days. A nonphysician 
practitioner, for the purposes of this proposed waiver is defined as a 
physician assistant, nurse practitioner, or clinical nurse specialist 
as authorized under sections 1861(s)(2)(K)(i) and (ii) of the Act and 
defined in section 1861(aa)(5) of the Act, or in Sec. Sec.  410.74, 
410.75, and 410.76 of the regulations. We do not believe a nonphysician 
practitioner is qualified to act in the capacity of a medical director. 
Thus, we are specifically excluding the medical director function from 
this proposed waiver. We propose this waiver to provide greater program 
flexibility that might increase the availability of CR/ICR services 
furnished to EPM beneficiaries during AMI or CABG model episodes. This 
proposed waiver is codified at proposed Sec.  512.630.
d. Proposed Waiver of Physician Definition for Providers or Suppliers 
of CR/ICR Services Furnished to FFS-CR Beneficiaries During AMI Care 
Periods or CABG Care Periods
    Providers and suppliers may furnish CR/ICR services to FFS-CR 
beneficiaries during AMI care periods or CABG care periods, as 
described in this section of this proposed rule. To provide greater 
program flexibility that might increase the availability of CR/ICR 
services to FFS-CR beneficiaries, we propose to provide a waiver to the 
definition of a physician to include a nonphysician practitioner 
(defined for the purposes of this waiver as a physician assistant, 
nurse practitioner, or clinical nurse specialist as authorized under 
sections 1861(s)(2)(K)(i) and (ii) of the Act and defined in section 
1861(aa)(5) of the Act, or in Sec. Sec.  410.74, 410.75, and 410.76 of 
the regulations). Thus, this proposed waiver would allow, in addition 
to a physician, a nonphysician practitioner to perform the functions of 
supervisory physician, prescribing exercise, and establishing, 
reviewing, and signing an individualized treatment plan for providers 
or suppliers of CR/ICR services furnished to a FFS-CR beneficiary 
during an AMI care period or CABG care period. This proposed waiver for 
FFS-CR beneficiaries is similar to the proposed physician definition 
waiver for EPM beneficiaries during the proposed AMI or CABG model 
episodes as discussed in section III.J.8. of this proposed rule. All 
other definitions and requirements related to a physician or 
supervising physician under Sec.  410.49 continue to apply. We solicit 
comments on this proposed waiver to allow nonphysician practitioners to 
perform the physician functions previously specified for the provision 
of CR/ICR services furnished to FFS-CR beneficiaries. This proposed 
waiver is codified at proposed Sec.  512.745.
    For a FFS-CR beneficiary, this waiver would apply to any provider 
or supplier that furnishes CR/ICR services to that beneficiary during 
an AMI care period or CABG care period. We anticipate monitoring the 
outcomes of care for beneficiaries that receive CR/ICR services under 
this waiver during an AMI care period or CABG care period. The 
monitoring may involve an analysis of all or a sample of claims, 
medical records, or other clinical data for beneficiaries and providers 
or suppliers of CR/ICR services. We solicit comments on approaches we 
may take to monitor this waiver to ensure this program flexibility does 
not have a negative effect on how beneficiaries receive CR/ICR services 
which then may affect the outcome of the beneficiary's care.
G. Considerations Regarding Financial Arrangements Under the CR 
Incentive Payment Model
    As discussed in section VI.E.2. of this proposed rule, we propose 
to not permit the inclusion of CR incentive payments in sharing 
arrangements for EPM participants specified in Sec.  512.500. 
Similarly, we do not propose to allow specific financial arrangements 
for FFS-CR participants. Thus, financial arrangements regarding CR 
incentive payments paid by CMS to CR

[[Page 50989]]

participants would be subject to all existing laws and regulations, 
including all fraud and abuse laws and applicable CR payment and 
coverage requirements. Given that more than 95 percent of CR/ICR 
services were historically furnished by hospital outpatient departments 
(HOPDs) to beneficiaries in the 90 days following discharge from a 
hospitalization for AMI or CABG, we expect that in many cases the CR 
participant that is accountable under the CR incentive payment model 
would itself carry out the model implementation activities, including 
coordination of CR/ICR services to CR beneficiaries, through the 
hospital's own CR program.\135\ However, in other cases, depending on 
beneficiary choices and the availability of CR/ICR services and 
expertise in a CR participant's local community, CR participants may 
wish to engage other individuals and entities, including individuals 
and entities that are not providers and suppliers, in order to advance 
the CR incentive payment model goals of increased CR/ICR service care 
coordination and the medically necessary utilization of CR/ICR services 
in AMI and CABG model episodes and AMI care periods and CABG care 
periods. Thus, we expect that all financial relationships with other 
individuals and entities under the CR incentive payment model would be 
narrowly focused on certain activities related to the CR participant's 
specific plan to advance the goals of model.
---------------------------------------------------------------------------

    \135\ Analysis of cardiac rehabilitation utilization in care 
periods for AMI and CABG beneficiaries initiated by all U.S. IPPS 
hospitals not in Maryland and constructed using standardized 
Medicare FFS Parts A and B claims, as proposed in this rule that 
began in CYs 2012 through 2014.
---------------------------------------------------------------------------

    For example, we expect that CR participants may choose to engage 
with providers, suppliers, and other organizations that are neither 
providers nor suppliers to assist with matters such as CR/ICR service 
utilization data analysis; beneficiary outreach; CR beneficiary care 
coordination and management for CR/ICR service referral and adherence 
to a treatment plan; CR participant compliance with the terms and 
conditions of the CR incentive payment model; or other model 
activities. These individuals and entities may play important roles in 
a CR participant's plans to implement the CR incentive payment model 
based on their direct clinical care for beneficiaries in AMI or CABG 
model episodes or AMI care periods or CABG care periods; their prior 
experience with cardiovascular risk-factor reduction and management 
initiatives; their care coordination expertise; or their familiarity 
with the local community and access to resources that may reduce 
barriers to beneficiary utilization of CR/ICR services. We expect that 
all relationships established between CR participants and other 
individuals and entities for such purposes of the CR incentive payment 
model would only be those permitted under existing law and regulation. 
We would also expect that all of these relationships would solely be 
based on the level of engagement of the individual's or entity's 
resources to directly support the CR participant's CR incentive payment 
model implementation.
    We recognize, however, that we do not have precedent with other CMS 
models and programs that have a similar design to the CR incentive 
payment model. Thus, we seek comment on whether there are other types 
of financial arrangements that CR participants would wish to pursue in 
advancing the model goals of increased CR/ICR service care coordination 
and the medically necessary utilization of CR/ICR services in AMI and 
CABG model episodes and AMI care periods and CABG care periods. We 
specifically request comments on which individuals and entities would 
be parties to the financial arrangements; what specific CR incentive 
payment model implementation activities would be included in the 
financial arrangements; and what methodologies would be used for 
sharing the CR incentive payment under such financial arrangements. In 
addition, we seek comment on what safeguards would be needed to ensure 
program integrity, protect against abuse, and ensure that the goals of 
the CR incentive payment model would be met. Based on comments and our 
early implementation experience with the CR incentive payment model, we 
may make specific proposals around CR incentive payment model financial 
arrangements in future rulemaking.

VII. 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. We have, however, 
summarized the anticipated information collection requirements in the 
Regulatory Impact Analysis.

VIII. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the ``DATES'' section of this 
preamble, and, when we proceed with a subsequent document, we will 
respond to the comments in the preamble to that document.

IX. 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 proposed rules.

A. Statement of Need

1. Need for EPM Proposed Rule
    This proposed rule is necessary in order to implement and test 
three new EPMs 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 of enhancing the quality of care furnished to individuals.'' 
Under the FFS program, 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. The goal for the proposed EPMs is to 
improve the quality of care provided to beneficiaries in an applicable 
episode while reducing episode spending through financial 
accountability.
    Payment approaches that reward providers for assuming financial and 
performance accountability for a particular episode of care can create 
incentives for the implementation and coordination of care redesign 
between participants and other providers and suppliers such as 
physicians and post-acute care providers. Under the proposed EPMs, CMS 
will test whether an EPM for AMI, CABG, and SHFFT episodes of care will 
reduce Medicare expenditures while preserving or enhancing the quality 
of care for Medicare beneficiaries. We believe the proposed models have 
the potential to benefit Medicare beneficiaries by improving the 
coordination and transition of care, improving the coordination of 
items and services paid for through FFS Medicare, encouraging more 
provider investment in infrastructure and redesigned care processes for 
higher-quality and more

[[Page 50990]]

efficient service delivery, and incentivizing higher-value care across 
the inpatient and post-acute care spectrum. The goal for the proposed 
EPMs is to improve the quality of care provided to beneficiaries in an 
applicable episode while reducing episode spending.
    The proposals for the AMI, CABG, and SHFFT models would require the 
participation of hospitals in multiple geographic areas that might not 
otherwise participate in testing episode payment for the proposed 
episodes of care. CMS is testing other episode payment models with the 
BPCI initiative and the CJR model. The BPCI initiative is voluntary; 
risk-bearing organizations applied to participate and chose from 48 
clinical episodes. In the CJR model, acute care hospitals in selected 
geographic areas are required to participate in the CJR model for all 
eligible LEJR episodes that initiate at a CJR model participant 
hospital. Realizing the full potential of new EPMs will require the 
engagement of an even broader set of providers than have participated 
to date in our episode payment models such as the BPCI initiative and 
the CJR model. As such, we are interested in testing and evaluating the 
impact of episode payment for the three proposed EPMs in a variety of 
circumstances, including those hospitals that may not otherwise 
participate in such a test.
2. Need for CJR Modifications
    This proposed rule also includes proposed modifications to the CJR 
model. Acute care hospitals in selected geographic areas are required 
to participate in the CJR model for LEJR episodes that initiate at a 
CJR model participant hospital. The modifications proposed here clarify 
and update provisions of the CJR model and create alignment between CJR 
and the proposed AMI, CABG, and SHFFT models. The primary impact of 
these changes will be related to: (1) Incorporation of BPCI and EPM 
reconciliation payments and Medicare repayments in setting quality-
adjusted target prices in performance years 3-5; and (2) updates to the 
calculation of composite quality scores.
3. Need for CR Incentive Payment Model
    CR and intensive CR services are capable of achieving significant 
improvements in patient outcomes beyond the proposed AMI and CABG model 
90-day post-discharge care period. Despite evidence from multiple 
studies that CR services improve health outcomes, these services remain 
underutilized. Beneficiaries with CAD often receive care in many 
different settings from multiple providers over the long-term and 
subsequently commonly experience care that is fragmented and 
uncoordinated. Lack of coordination, of both care and financial 
incentives, across the continuum of CAD care, results in higher than 
necessary rates of adverse drug events, hospital readmissions, 
diagnostic errors, and other adverse outcomes, as well as lower than 
appropriate utilization of evidence-based treatments. The CR incentive 
payment model will test whether a financial incentive for hospitals 
that encourages the management of beneficiaries that have had an AMI or 
a CABG in ways that may contribute to long-term improvements in quality 
and reductions in Medicare spending.
4. Aggregate Impact of EPMs, CJR, and CR Incentive Payment Model
    As detailed in Table 38, we estimate a total aggregate impact of 
$170 million in net Medicare savings over the proposed duration of the 
AMI, CABG, and SHFFT models, July 2017-December 2021. As detailed in 
Table 39, we estimate the proposed changes in the CJR model, along with 
the revised assumption that participating hospitals will report quality 
data, will increase estimated costs to the Medicare program by $35 
million over the duration of the CJR model (April 2016-December 2020) 
relative to the financial estimate published in the CJR final rule (80 
FR 73288). These estimated impacts represent the net effect of federal 
transfers that incent hospitals for improving care while making it more 
efficient. Furthermore, the proposed models may benefit beneficiaries 
since the models require participants to be accountable for episodes 
extending 90 days post-hospital discharge, which may potentially 
improve the coordination of FFS items and services, and encourage 
investment in infrastructure and redesigned care processes for high 
quality and efficient service delivery that demonstrate a dedication 
and focus toward patient-centered care. Although it is possible that 
participating hospitals may respond to the demonstration through 
improvements in the efficiency of care that reduce FFS Medicare 
spending during these episodes, such reductions in Medicare spending 
will be largely offset through greater reconciliation payments paid by 
CMS to the participating hospital. As long as reductions in Medicare 
FFS spending for participating hospitals are equally offset through 
greater reconciliation payments from CMS to those participating 
hospitals, the financial impact to the Medicare program should not be 
significantly different from what we have currently estimated.
    As detailed in Table 40, we estimate a total aggregate impact 
between $27 million in net Medicare costs and $32 million in net 
Medicare savings from July 2017-December 2024 through the cardiac 
rehabilitation incentive payment model. These estimated impacts 
represent the net effect of federal transfers to CR-EPM and CR-FFS 
participants and savings related to decreased future utilization in 
beneficiaries who receive CR/ICR services. A range of potential impacts 
is provided due to uncertainty in the likely increase in CR/ICR 
utilization based on the CR incentive provided.
    We solicit comment on the assumptions and analysis presented 
throughout this regulatory impact section.

B. Overall Impact

    We have examined the impacts of this 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

[[Page 50991]]

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. This 
proposed 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 proposed 
rule that either explicitly or implicitly pre-empts any state law, and 
furthermore we do not believe that this proposed 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
a. EPMs
    Nationally, the total number of historical episodes ending in CY 
2014 that began with IPPS hospitalizations and extended 90 days post-
hospital discharge were approximately 168,000 for AMI; 48,000 for CABG; 
and 109,000 for SHFFT. The total Medicare spending for these historical 
episodes was approximately $4.1 billion, $2.3 billion, and $4.7 
billion, respectively. Based on analysis of Medicare claims for 
historical episodes in 2012-2014, the mean estimated total payment for 
AMI episodes (defined based on ICD-CM diagnosis code and DRGs as 
described in section III.C of this proposed rule) is about $24,000, 
where approximately 61 percent of the spending is attributable to 
hospital inpatient services, 18 percent is attributable to post-acute 
care services and 21 percent to physician, outpatient hospital and 
other spending. For CABG episodes (defined based on DRGs as described 
in section III.C. of this proposed rule) the mean estimated total 
payment is about $47,000, where approximately 68 percent of the 
spending is attributable to hospital inpatient services, 12 percent is 
attributable to post-acute care services and 20 percent to physician, 
outpatient hospital and other spending. For SHFFT episodes (defined 
based on DRGs as described in section III.C. of this proposed rule) the 
mean estimated total payment is about $43,000, where approximately 33 
percent of the spending is attributable to hospital inpatient services, 
50 percent is attributable to post-acute care services and 17 percent 
to physician, outpatient hospital and other spending.
    We propose to test the AMI and CABG models in 98 MSAs out of 294 
MSAs eligible for selection, as described in section III.B.5. of this 
proposed rule; we propose to test the SHFFT model in 67 MSAs in which 
CJR is currently operating as discussed in section III.B.4. of this 
proposed rule. In the 2014 calendar year there were 136,000 episodes 
for AMI, and 42,000 for CABG in the 294 MSAs eligible for selection, 
and 33,000 episodes for SHFFT in the 67 MSAs eligible for 
participation.
b. CJR
    The overall magnitude of the CJR model is described in the CJR 
final rule (80 FR 73288). The modifications proposed in this rule are 
not related to episode definition or hospital selection and therefore 
do not affect the number of episodes included in the model or the mean 
episode payment. The primary impact of the changes proposed will be 
related to the calculation of quality-adjusted target prices, which 
will now incorporate reconciliation payments and Medicare repayments in 
years 3-5 of the model and include modifications to the calculation of 
composite quality scores. For the CJR final rule we assumed that 
hospitals will not report voluntarily submitted patient reported 
outcome measures data to CMS. Given prior experience in the Medicare 
program with voluntary reporting, we are revising our assumption to 
assume that all hospitals in CJR report this quality data. These 
modifications along with the revised assumptions regarding quality 
reporting will raise the costs estimated to the Medicare program by $35 
million from the estimate of $343 million in savings as published in 
the CJR final rule (80 FR 73288).
c. CR Incentive Payment Model
    We propose to test the CR incentive payment model in 45 of the 98 
MSAs selected for the AMI and CABG EPMs, as well as 45 FFS MSAs 
selected through stratified random sampling, as described in section VI 
of this proposed rule. As discussed subsequently in this analysis and 
displayed in Table 40, this is likely to result in an impact between 
$27 million in net Medicare costs and $32 million in net Medicare 
savings from July 2017 through December 2024.
d. Aggregate Effects on the Market
    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 models. 
Changes in Medicare payment policy often have substantial implications 
for non-Medicare payers. As an example, non-Medicare patients may 
benefit if participating EPM hospitals introduce system wide changes 
that improve the coordination and quality of health care. Other payers 
may also be developing episode payment models and may align their 
payment structures with CMS or may be waiting to utilize results from 
CMS evaluations of episode payment models. 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 welcome comments 
on our assumptions and calculations.
2. Effects on the Medicare Program
a. EPMs
    Under the proposed EPMs, the CMS will test whether an EPM for AMI, 
CABG, and SHFFT episodes of care will reduce Medicare expenditures 
while preserving or enhancing the quality of care for Medicare 
beneficiaries. Payment approaches that reward providers for assuming 
financial and performance accountability for a particular episode of 
care can potentially create incentives for the implementation and 
coordination of care redesign between participants and other providers 
and suppliers such as physicians and post-acute care providers. The 
proposed EPMs could enable hospitals to consider the most appropriate 
strategies for care redesign, including--(1) increasing post-
hospitalization follow-up and medical management for patients; (2) 
coordinating across the inpatient and post-acute care spectrum; (3) 
conducting appropriate discharge planning; (4) improving adherence to 
treatment or drug regimens; (5) reducing readmissions and complications 
during the post-discharge period; (6) managing chronic diseases and 
conditions that may be related to the proposed EPM episodes; (7) 
choosing the most appropriate post-acute care setting; and (8) 
coordinating between providers and suppliers such as hospitals, 
physicians, and post-acute care providers.
    We are interested in testing and evaluating the impact of episode 
payment for the AMI, CABG, and SHFFT models in a variety of 
circumstances, including those hospitals that may not otherwise 
participate in such a test. The clinical circumstances of the episodes 
we are proposing differ in important ways from the LEJR episodes 
included in the CJR

[[Page 50992]]

model. We expect the patient population included in these episodes 
would be substantially different from the patient population in CJR 
episodes, due to the clinical nature of the cardiac and SHFFT episodes. 
Beneficiaries in these episodes commonly have chronic conditions that 
contribute to the initiation of the episodes, and need both planned and 
unplanned care throughout the EPM episode following discharge from the 
initial hospitalization that begins the episode. Both AMI and CABG 
model episodes primarily include beneficiaries with cardiovascular 
disease, a chronic condition which likely contributed to the acute 
events or procedures that initiate the episodes. About half the average 
AMI model historical episode spending was for the initial 
hospitalization, with the majority of spending following discharge from 
the initial hospitalization due to hospital readmissions, while there 
was relatively less spending on SNF services, Part B professional 
services, and hospital outpatient services. In CABG model historical 
episodes, about three-quarters of episode spending was for the initial 
hospitalization, with the remaining episode spending relatively evenly 
divided between Part B professional services and hospital readmissions, 
and a lesser percentage on SNF services. Similar to AMI episodes, post-
acute care provider use was relatively uncommon in CABG model 
historical episodes, while hospital readmissions during CABG model 
historical episodes were relatively common. SHFFT model historical 
episodes also were accompanied by substantial spending for hospital 
readmissions, and post-acute care provider use in these episodes also 
was high.\136\
---------------------------------------------------------------------------

    \136\ Episodes for AMI, CABG, and SHFFT beneficiaries initiated 
by all U.S. IPPS hospitals not in Maryland and constructed using 
standardized Medicare FFS Parts A and B claims, as proposed in this 
rule that end in CY 2014.
---------------------------------------------------------------------------

    We believe that by requiring participation by a large number of 
hospitals with diverse characteristics, the proposed EPMs would result 
in a robust data set for evaluating this payment approach, and would 
stimulate the rapid development of new evidence-based knowledge. 
Testing the proposed EPMs in this manner would also allow us to learn 
more about patterns of inefficient utilization of health care services 
and how to possibly incentivize quality improvement for beneficiaries 
receiving services in AMI, CABG, and SHFFT episodes.
    Under the proposed EPMs, as described further in section III.B.2. 
of this proposed rule, an AMI, CABG, or SHFFT model episode would begin 
with an inpatient admission assigned to one of the following MS-DRGs 
upon beneficiary discharge: For AMI episodes, AMI MS-DRGs (280-282) and 
those PCI MS-DRGs (246-251) representing IPPS admissions for AMI that 
are treated with PCIs; CABG MS-DRGs (231-236); and SHFFT MS-DRGs (480-
482). Episodes would end 90 days after the date of discharge from the 
anchor or chained anchor hospitalization. The proposed EPM episodes 
would include the inpatient stays and all related care covered under 
Medicare Parts A and B within the 90 days after discharge, including 
hospital care, post-acute care, and physician services. Furthermore, we 
have proposed to designate EPM participant hospitals as the episode 
initiators and to be financially responsible for episode cost under the 
proposed EPMs. We propose to require all hospitals paid under the IPPS 
and physically located in selected geographic areas to participate, 
with limited exceptions. Eligible beneficiaries who receive care at 
these hospitals will automatically be included in the models. 
Geographic areas, based on MSAs, are proposed to be selected through a 
random sampling methodology. We believe the proposed EPMs may have 
financial and quality of care effects on non-hospital providers that 
are involved in the care of Medicare beneficiaries during model 
episodes, 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 across 
the inpatient and post-acute care spectrum spanning the episode of 
care.
    As described in section III.D.2. of this proposed rule, we propose 
to continue paying hospitals and other providers and suppliers 
according to the usual Medicare FFS payment systems. After the 
completion of a performance year, the Medicare claims payments for 
services furnished to the beneficiary during the EPM episode, based on 
claims data, would be combined to calculate an actual EPM episode 
payment. The actual EPM episode payment would then be reconciled 
against an established EPM quality-adjusted target price. The amount of 
this calculation, if positive, would be paid to the participant in a 
reconciliation payment. If negative, we would require repayment from 
the participant beginning in performance year 2 of the EPMs. EPM 
participants' quality performance also would be assessed at 
reconciliation; each participant would receive a composite quality 
score and a corresponding quality category. EPM participants achieving 
a quality category of ``acceptable'' or higher would be eligible for a 
reconciliation payment.
    We also propose to phase in the requirement that participants whose 
actual EPM episode payments exceed the quality-adjusted target price 
pay the difference back to Medicare beginning for performance year 2. 
Under this proposal, Medicare would not require repayment from 
participants for performance year 1 for actual EPM episode payments 
that exceed their quality-adjusted target price in performance year 1, 
and an applicable discount factor would be used for calculating 
repayment amounts for performance years 2 and 3, consistent with our 
final policies for the CJR model.
    Due to the clinical characteristics and common patterns of care in 
AMI model episodes, we propose payment adjustments in the cases of 
certain transfers and readmissions of beneficiaries to inpatient 
hospitals for these episodes. These payment adjustments are discussed 
in detail in section III.D.4.b.(1). of this proposed rule. We also 
propose to limit how much a participant can gain or lose based on its 
actual EPM episode payments relative to quality-adjusted target prices; 
we propose additional policies to further limit the risk of high 
payment cases for all EPM participants and for special categories of 
EPM participants as described in section III.D. of this proposed rule.
    Based on the mix of financial and quality incentives, the proposed 
EPMs could result in a range of possible outcomes for participants. The 
effects on hospitals of potential savings and liabilities will have 
varying degrees.
(1) Assumptions
    We used standardized Medicare claims data from July 2012 through 
September 2015 to simulate the impact that the proposed EPMs would have 
on Medicare spending for AMI, CABG, and SHFFT model episodes. 
Specifically, we applied the methodology provided in this proposed rule 
for calculating quality-adjusted target prices. For the SHFFT model, we 
applied this methodology to hospitals in the MSAs in which CJR is 
currently operating. For the AMI and CABG models, we applied this 
methodology to a hypothetic cohort including all eligible hospitals in 
a randomly selected group of 115 MSAs among 294 MSAs eligible for 
selection. The results for the AMI and CABG models were then multiplied 
by 98/115

[[Page 50993]]

to adjust for only 98 MSAs being selected. Quality-adjusted target 
prices were calculated based on hospital performance from 90-day 
episodes starting between July 2012 and June 2015. Specifically, all 
IPPS hospitals in the selected MSAs were included in this analysis; 
model-specific hospital exclusions were applied based on participation 
in BPCI Models 2 or 4 for the AMI, PCI, CABG, or SHFFT models as 
appropriate.
    We identified the anchor hospitalization based on episode 
definition criteria in section III.C. of this proposed rule and 
included the related spending that occurred 90 days after discharge. We 
removed payments excluded from the episode as unrelated to the EPM 
episode diagnosis and procedures based on clinical rationale, as 
defined in section III.C.3.b. of this proposed rule. Payments during 
the 90-day episodes were calculated using CMS standardized payment 
amounts.
    We trended utilization and prices in the prior years to match 
national performance for episodes starting from July 2014 through June 
2015. BPCI reconciliation payments were then credited to BPCI episodes 
during this time frame. We then incorporated the proposed outlier 
policy to cap spending for high cost outlier episodes such that 
payments are capped at the price MS-DRG anchor value that is 2 standard 
deviations above the regional mean as described in section III.C of 
this proposed rule.
    After we pooled episodes for each price MS-DRG, we calculated 
average episode prices for each hospital and region, as well as a 
hospital-specific weight representing a case mix value for each 
hospital that is dependent only on episode volume for a given price MS-
DRG 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 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 episode volume across the 3 historical years, with low 
volume as defined in section III.C.4.b.(6) of this proposed rule, by 
setting their episode benchmark price as the region's experience. These 
average prices were then disaggregated based on the national severity 
factor of average episode spending as described in section 
III.C.4.b.(9) of this proposed rule, the computed hospital-specific 
weight, the hospital's wage index was then applied back to the price, 
and a discount specific to the hospital's quality category was applied.
    After calculating quality-adjusted target prices for price MS-DRGs 
for each hospital appropriate for the first 2 performance years, we 
compared these quality-adjusted target prices against actual 
performance between July 2014 and June 2015. We capped actual spending 
for individual episodes based on the methodology in this proposed rule 
for high cost outlier spending episodes. After incorporating the 
proposed outlier policy, total Medicare FFS spending was reconciled 
against the quality-adjusted target price and total number of episodes 
for the hospital. The aggregate impacts were then determined by 
multiplying by the total episodes for each price MS-DRG.
    We propose that the difference between each episode's actual 
payment and the relevant quality-adjusted target price (calculated as 
quality-adjusted target price subtracted by actual episode payment) 
would be aggregated for all episodes for a participant within the 
performance year, creating the NPRA. 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. 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 proposed rule, with 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. For rural 
hospitals, MDHS, SCHs and RRCs, we are proposing a 3 percent repayment 
limit in performance year 2 and a 5 percent repayment limit in 
performance year 3 and subsequent years. As described in section 
III.C.7.e. of this proposed rule, if average 30-day post-episode 
spending for an EPM participant in any given EPM performance year is 
greater than 3 standard deviations above the regional average 30-day 
post-episode spending, based on the 30-day post-episode spending for 
episodes attributed to all regional hospitals in the same region as the 
EPM participant hospital, the EPM participant hospital would repay 
Medicare for the difference. This is not modelled as we would expect 
the repayments from EPM hospitals to CMS under this post-episode 
spending calculation to be minimal.
    As described in section III.E. of this proposed rule, we propose 
the use of a composite quality score for each EPM, where the composite 
quality score reflects a combination of outcome and patient experience 
measures. Points for quality performance and improvement (as 
applicable) will be awarded for each episode measure and then summed to 
develop a composite quality score that will determine the EPM 
participant's quality category for the episode. Quality performance 
will make up the majority of available points in the composite quality 
score, with improvement points available as ``bonus'' points for the 
measure. Additionally, participants may voluntarily submit outcome 
measures data in the SHFFT and AMI models, resulting in an extra 2 
points in their overall quality scores, up to a maximum score of 20. 
The composite quality score will be used as part of a pay-for-
performance methodology to assign respective EPM participants to four 
quality categories.
    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.
    In general, we used quality data as publicly reported on Hospital 
Compare in 2015 and 2016 to model the impact of this policy, with 2016 
measures used to calculate performance and the difference between 2015 
and 2016 measures used to calculate improvement. We proposed to 
calculate the HLMR by using 10 of the 11 publicly reported measures, 
taking the average of all publicly reported measures except how well 
hospital staff help patients manage pain, consistent with revisions 
under consideration for this HCAHPS measure.
    Specifically, we used the following data to model the impact of 
this policy:
     To calculate performance for the AMI model, we utilized: 
Hospital 30-day, all-cause, risk-standardized mortality rate following 
acute myocardial infarction hospitalization (NQF #0230) measure results 
based on the performance period of April 1, 2012 through March 31, 
2015; excess days in acute care after hospitalization for acute

[[Page 50994]]

myocardial infarction measure results based on the performance period 
of April 1, 2012 through March 31, 2015; and HCAHPS survey data (NQF 
#0166) 2015 based on the performance period of January 1, 2015 through 
December 31, 2015.
     To calculate improvement for the AMI model, we utilized: 
Hospital 30-day, all-cause, risk-standardized mortality rate following 
acute myocardial infarction hospitalization (NQF #0230) measure results 
based on the performance period of April 1, 2011 through March 31, 
2014; excess days in acute care after hospitalization for acute 
myocardial infarction measure results based on the performance period 
of April 1, 2011 through March 31, 2014; and HCAHPS survey data (NQF 
#0166) 2015 based on the performance period of January 1, 2014 through 
December 31, 2014.
     To calculate performance for the CABG model, we utilized 
hospital 30-day, all-cause, risk-standardized mortality rate following 
coronary artery bypass graft surgery (NQF #2558) measure results based 
on the performance period of April 1, 2012 through March 31, 2015 and 
HCAHPS survey data (NQF #0166) 2015 based on the performance period of 
January 1, 2015 through December 31, 2015.
     To calculate improvement for the CABG model, we utilized 
hospital 30-day, all-cause, risk-standardized mortality rate following 
coronary artery bypass graft surgery (NQF #2558) measure results based 
on the performance period of April 1, 2011 through March 31, 2014 and 
HCAHPS survey data (NQF #0166) 2015 based on the performance period of 
January 1, 2014 through December 31, 2014.
     To calculate performance for the SHFFT model, we utilized 
hospital-level risk-standardized complication rate following elective 
primary total hip arthroplasty (THA) and/or total knee arthroplasty 
(TKA) measure results based on the performance period of April 1, 2012 
through March 31, 2015 and HCAHPS survey data (NQF #0166) 2015 based on 
the performance period of January 1, 2015 through December 31, 2015.
     To calculate improvement for SHFFT, we utilized hospital-
level risk-standardized complication rate following elective primary 
total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) 
measure results based on the performance periods of April 1, 2011 
through March 31, 2015 and HCAHPS survey data (NQF #0166) 2015 based on 
the performance period of January 1, 2014 through December 31, 2014.
    Consistent with prior experience in the Medicare program, which 
indicates that when payment is tied to voluntary reporting of quality 
measures most hospitals report such measures, we assume that most 
hospitals in the AMI and SHFFT models will submit voluntary measures to 
qualify for the reduced discount. For the AMI and CABG models, we 
developed composite quality scores for all eligible hospitals among the 
294 MSAs eligible for selection. Selected hospitals were assigned to a 
performance percentile and assigned the corresponding quality 
performance score points listed in Tables 15 and 17 of this proposed 
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 were in the top 10 percent of the improvement distribution 
received quality improvement points. Because 2015 data were not 
available for the AMI excess days measure, we randomly assigned 
improvement points for this measure (0.5 points) to 10 percent of 
hospitals. For SHFFT, hospitals in selected MSAs were assigned to a 
performance percentile and assigned the corresponding quality 
performance score points listed in Table 19 of this proposed 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 2 deciles from the prior year received quality 
improvement points.
    Based on these composite quality scores, 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 proposed rule, composite quality scores will 
affect hospitals' eligibility for reconciliation payments and determine 
hospitals' effective discount percentages at reconciliation.
    To simulate the impact for performance year 1, or July 1, 2017 
through December 31, 2017, we calculated the NPRA assuming no downside 
risk to participants, and using the quality-adjusted 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 for 
all episodes is greater than the sum of quality-adjusted target prices 
for all episodes) for performance year 1, Medicare will not require 
repayment of the NPRA because we are not requiring participant 
responsibility for repayment for the first performance year. 
Additionally, as part of this estimate, we accounted for whether a 
participant met the minimum composite quality score to be eligible for 
a reconciliation payment. Lastly, we have applied the 5 percent stop-
gain limit on the estimated reconciliation payments made to 
participants, and a 3 percent cap for rural hospitals, sole community 
hospitals, Medicare dependent hospitals, and rural referral centers.
    For the simulation in performance year 2, we used the quality-
adjusted target price calculated for performance year 2 that is two-
thirds hospital experience and one-third regional experience. A 5 
percent stop-loss and stop-gain limit was applied to reconciliation 
payments and repayments, and 3 percent stop-loss and stop-gain limit 
was applied for rural hospitals, sole community hospitals, Medicare 
dependent hospitals, and rural referral centers.
    For the simulation in year 3, we rebased episode prices to 
incorporate the reconciliation payments simulated from the first 
performance year. To simulate reconciliation in year 3 we used the 
quality-adjusted 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 and stop-gain limit on reconciliation payments and 
repayments from acute care hospitals included in this analysis, but 
used a 5 percent stop-loss and stop-gain limit on reconciliation 
payments and repayments from rural hospitals, sole community hospitals, 
Medicare dependent hospitals, and rural referral centers. For 
performance year 4 we simulated the reconciliation process using the 
episode quality-adjusted target price based on 100 percent of the 
regional experience, and a stop-loss and stop-gain limit set to 20 
percent for acute care hospitals, and a stop-loss and stop-gain limit 
of 10 percent for rural hospitals, sole community hospitals, Medicare 
dependent hospitals, and rural referral centers.
    For performance year 5 we rebased prices to include the simulated 
EPM reconciliation payments and repayments from performance years 1, 2, 
and 3. We simulated reconciliation in the fifth performance year using 
quality-adjusted target prices that are based on 100 percent of the 
regional experience,

[[Page 50995]]

and applied the stop-loss and stop-gain limits of 20 percent.
(2) Analyses

                                         Table 38--Estimates of Impact on the Medicare Program by Proposed EPM *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Year(s)                                      Across all 5
                                                         --------------------------------------------------------------------------------    years of
                                                                                                                                             proposed
                                                               2017            2018            2019            2020            2021           models
--------------------------------------------------------------------------------------------------------------------------------------------------------
AMI & CABG net financial impact.........................               7             (3)             (6)            (17)            (21)            (40)
SHFFT net financial impact..............................               6            (10)            (24)            (45)            (57)           (130)
Total: Net financial impact of all EPM proposals........              12            (13)            (30)            (61)            (79)           (170)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note: In millions. Totals do not necessarily equal the sums of rounded components.

    Table 38 summarizes the estimated impact for the AMI, CABG, and 
SHFFT models. Our model estimates that the Medicare program will save 
$170 million over the 5 performance years (2017 through 2021).
    The first performance year of the EPMs is expected to cost the 
Medicare program $12 million in reconciliation payments made by CMS to 
participants. We have proposed that no repayments will be assessed 
because hospitals are not subject to downside risk in performance year 
1. Participants that would receive reconciliation payments are the 
hospitals that provide lower cost care relative to their regional 
average.
    In the second performance year of the EPMs, participants on net are 
expected to pay $13 million to CMS. Downside risk is waived for all 
participants in the first quarter of the second performance year. For 
the final 3 quarters in the second performance year, we have proposed a 
5 percent stop-loss and stop-gain limit for acute care hospitals in the 
second performance year, with exception for rural hospitals, sole 
community hospitals, Medicare dependent hospitals, and rural referral 
center hospitals which would be subject to a 3 percent stop-loss and 
stop-gain limit. These limits would cap the total amount of repayments 
paid by hospitals to CMS.
    In the third performance year of the models, net reconciliation 
payments are expected to be $30 million in savings to the Medicare 
program. For performance years 4 and 5 of the models, the episode 
quality-adjusted target price will be based on full regional pricing. 
This creates greater variation between the quality-adjusted target 
price and hospitals own experience. The stop-gain and stop-loss limits 
of 20 percent are applied, with a stop-gain and stop-loss limit of 5 
percent for rural hospitals, sole community hospitals, Medicare 
dependent hospitals, and rural referral centers hospitals. As a result, 
net payments are expected to be $61 million from participants to the 
Medicare program in the fourth year and $79 million in the fifth year. 
These estimated savings in years 4 and 5 represent 2.0 percent of total 
episode spending in those years. The total savings to the Medicare 
program after the 5 performance years are expected to be $170 million 
out of $13.8 billion or 1.2 percent in total episode spending. Costs to 
the Medicare program may increase if providers are able to use waivers 
provided to increase episode volume among beneficiaries that would be 
expected to be less costly than the hospital's quality-adjusted target 
price without the need for improving the coordination of car.
(3) Uncertainties
    These estimates are somewhat uncertain. As a result, the proposed 
models could produce more Medicare savings or could result in 
additional costs to the Medicare program. This analysis assumes that 
the demonstration incentives drive no change in utilization for the use 
of services within the bundled episode, as this would not materially 
affect the financial impact. The prospective prices for the proposed 
episodes 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 episode that is not 
driven by the demonstration incentives, 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 episode that 
is not driven by the demonstration incentives, then costs to the 
Medicare program may increase due to greater reconciliation payments 
paid by Medicare to participants.
    We are also assuming that most hospitals will submit voluntary 
measures to qualify for the reduced discount. As a sensitivity test, if 
no hospitals report this data, the AMI model and SHFFT models together 
are estimated to save the Medicare program an additional $36 million 
over the 5 performance years.
    Additionally, we were unable to fully estimate the impact of the 
proposal in section III.D. which addresses beneficiaries in EPMs who 
are also aligned or attributed to a Medicare Shared Savings Program 
participant or a participant in an ACO model initiated by the CMS 
Innovation Center. Savings achieved during an EPM episode are proposed 
to be attributed to the EPM participant, with EPM reconciliation 
payments for ACO-aligned beneficiaries treated as ACO expenditures, 
which should serve to minimize the financial impact of ACO overlap on 
overall savings. As described in section III.D.6, beginning in July 
2017 we are proposing to exclude from AMI, CABG, and SHFFT episodes 
beneficiaries aligned to ACOs in the Next Generation ACO model and ESRD 
ESCOs in the Comprehensive ESRD Care Initiative in tracks with downside 
risk for financial losses. Excluding these beneficiaries from the 
proposed EPMs will have the effect of reducing the number of eligible 
episodes and therefore the expected savings generated by implementation 
of the EPMs. Due to the uncertainty associated with projecting future 
beneficiary alignment to ACOs, ACO participation, and beneficiaries 
experiencing EPM episodes across the performance years of the models, 
we are unable to quantify the impact of this proposed exclusion.
    Due to the uncertainty of estimating this model, actual results 
could be higher or lower than this estimate. Our analysis to the best 
of our ability presents the cost and transfer payment effects of this 
proposed rule to the best of our ability. We solicit comments on the 
assumptions and analysis presented. Additionally, we note that for 
these estimates, we did not make assumptions for changes in efficiency 
or utilization over the course of the performance period.
b. CJR
    We propose to modify the CJR model to include reconciliation 
payments and Medicare repayments in our

[[Page 50996]]

calculations when updating CJR episode quality-adjusted target prices 
for performance years 3 through 5. We also propose to create 
consistency between the CJR composite quality scores and SHFFT 
composite quality scores by--(1) awarding quality improvement points 
based on an improvement of 2 deciles (rather than 3 deciles as in the 
final CJR rule); (2) capping the total composite quality score at 20; 
and(3) utilizing an updated HCAHPS algorithm.
(1) Assumptions and Uncertainties
    We used final action Medicare claims data from January 1, 2012 
through December 31, 2014 to update the impact originally outlined in 
the CJR final rule (80 FR 73288) to reflect the changes proposed here 
for the CJR model. Specifically, we estimated the effect of including 
BPCI and CJR reconciliation payments and Medicare repayments in setting 
quality-adjusted target prices in performance years 3-5 to include the 
new quality adjusted discounts that begin in the first performance 
year, and by updating our prior assumption regarding CJR participation 
with voluntary reporting of quality metrics to be more consistent with 
prior experience in the Medicare program.
    Due to proposed changes in the calculation of the CJR composite 
scores, we used quality data as publicly reported on Hospital Compare 
in 2015 and 2016 to model the impact of this policy, with 2016 measures 
used to calculate performance and the difference between 2015 and 2016 
measures used to calculate improvement. We proposed to calculate the 
HLMR by using 10 of the 11 publicly reported measures, taking the 
average of all publicly reported measures except how well hospital 
staff help patients manage pain, consistent with revisions under 
consideration for this HCAHPS measure. Calculations are as follows:
     To calculate performance for the CJR model, we utilized 
hospital-level risk-standardized complication rate following elective 
primary total hip arthroplasty (THA) and/or total knee arthroplasty 
(TKA) measure results based on the performance period of April 1, 2012 
through March 31, 2015 and HCAHPS survey data (NQF #0166) 2015 based on 
the performance period of January 1, 2015 through December 31, 2015.
     To calculate improvement for CJR, we utilized hospital-
level risk-standardized complication rate following elective primary 
total hip arthroplasty (THA) and/or total knee arthroplasty (TKA) 
measure results based on the performance periods of April 1, 2011 
through March 31, 2015 and HCAHPS survey data (NQF #0166) 2015 based on 
the performance period of January 1, 2014 through December 31, 2014.
    For the purpose of this analysis, we assumed that hospitals 
participating in the CJR model will voluntarily submitted patient-
reported outcome measures to qualify for the lower discount, consistent 
with prior experience in the Medicare program.
    CJR participants were assigned to a performance percentile and 
assigned the corresponding quality performance score as described in 
the CJR final rule (80 FR 73288). 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 2 deciles from the 
prior year received quality improvement points, with the total 
composite quality score capped at 20. These composite quality scores, 
updated to be consistent with the methodology proposed in the CJR 
modifications, were then applied to the development of quality-adjusted 
target prices as described in the CJR final rule (80 FR 73288).
    We note that we are proposing a modification to the application of 
the stop-loss and stop-gain limits to exclude hospital responsibility 
for post-episode spending from the application of these limits. We 
assume that the number of hospitals affected by this change would be 
small and have not modelled the impact of this change.
(2) Analyses

                                          Table 39--Estimates of Impact on the Medicare Program for CJR Model *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Year(s)                                      Across all 5
                                                         --------------------------------------------------------------------------------  years of the
                                                               2016            2017            2018            2019            2020       proposed model
--------------------------------------------------------------------------------------------------------------------------------------------------------
Original CJR net financial impact from final rule.......              11            (36)            (71)           (120)           (127)           (343)
CJR modifications net financial impact..................               3               6              13              11               2              35
--------------------------------------------------------------------------------------------------------------------------------------------------------
* In millions. Totals do not necessarily equal the sums of rounded components.

    Modifications to the CJR model proposed in section V. of this 
proposed rule would begin at the time of reconciliation for performance 
year 1 and therefore affect estimates of the impact of the model from 
April 2016-December 2020. The change in the estimated net financial 
impact to the Medicare program from the modifications in this proposed 
rule is $22 million, and the updated assumptions regarding the number 
of hospitals that report quality data is modelled to be $14 million 
dollars. The total estimated net financial impact to the Medicare 
program from both the modifications in the proposed rule and revised 
assumptions are $35 million. Due to the uncertainty of estimating this 
model, actual results could be higher or lower than this estimate. 
Additionally, we note that due to the uncertainty associated with 
projecting future beneficiary alignment to ACOs, ACO participation, and 
beneficiaries experiencing CJR episodes across the performance years of 
the models, we are unable to quantify the impact of proposed exclusions 
related to ACOs. We are also unable at this time to estimate the 
impacts of considering certain CJR and EPM providers and Affiliated 
Practitioners to be participating in Advanced APMs. Eligible clinicians 
that qualify as QPs for a year through participation in EPMs and CJR 
will receive a bonus equal to 5 percent of their prior year Medicare 
payments, thereby increasing Medicare expenditures.
c. CR Incentive Payment Model
    As detailed in section VI of this proposed rule, the CR incentive 
payment model will test whether a financial incentive for hospitals 
that encourages the management of beneficiaries that have had an AMI or 
a CABG in ways that may contribute to long-term improvements in quality 
and reductions in Medicare spending. We proposed the CR incentive 
payment model to test the effects on quality of care and Medicare 
expenditures of

[[Page 50997]]

providing explicit financial incentives to CR participants for 
beneficiaries hospitalized for treatment of AMI or CABG to encourage 
care coordination and greater utilization of medically necessary CR/ICR 
services for 90 days post-hospital discharge where the beneficiary's 
overall care is paid under either an EPM or the Medicare FFS program.
    Under the CR incentive payment model, we proposed to provide a CR 
incentive payment to selected hospitals with financial responsibility 
for AMI or CABG model episodes (hereinafter EPM-CR participants) 
because they are already engaged in managing the AMI or CABG model 
beneficiary's overall care for a period of time following hospital 
discharge. We also proposed to provide a CR incentive payment to 
selected hospitals that are not AMI or CABG model participants 
(hereinafter FFS-CR participants), enabling us to test and improve our 
understanding of the effects of the CR incentive payment within the 
context of an EPM and the Medicare FFS program, as well as to identify 
potential interactions between the proposed CR incentive payment and 
the underlying EPM and FFS payment methodologies. We have therefore 
proposed to test the CR incentive payment model in 45 of the 98 MSAs 
selected for the AMI and CABG EPMs, as well as 45 FFS MSAs selected 
through stratified random sampling.
(1) Assumptions and Uncertainties
    We used final action Medicare claims data from January 1, 2012 
through December 31, 2015 to identify CR and ICR services that count 
towards CR incentive payments on the basis of the presence of the HCPCS 
codes on PFS and OPPS claims and APC codes on OPPS claims that report 
CR/ICR services. We then compared total Medicare spending over 3 years 
post hospital discharge for AMI and CABG for patients that received 
cardiac rehabilitation services within 90 days of discharge, to 
patients that did not receive cardiac rehabilitation services within 90 
days of discharge. We found that among patients continuously enrolled 
over 3 years in FFS Medicare Part A and B those receiving cardiac 
rehabilitation services within 90 days of discharge from an AMI and or 
CABG hospitalization had lower Medicare spending relative to patients 
whom did not receive cardiac rehabilitation services post discharge 
from an AMI and or CABG hospitalization, even after adjusting for 
differences in age, sex, and case-mix between the two populations. The 
difference in average spending between the group that received cardiac 
rehabilitation services and the group that did not receive cardiac 
rehabilitation services within 90 days of discharge represents the 
reduction in Medicare spending we would anticipate from an additional 
beneficiary receiving cardiac rehabilitation services due to the 
cardiac rehabilitation incentive payment model.
    CR incentive payments apply to CR/ICR sessions during the 90-day 
episode (for EPM participants) or 90-day care period (for FFS 
participants) from date of discharge. CR and ICR services paid by 
Medicare to any provider or supplier for model beneficiaries during AMI 
or CABG model episodes/care periods would result in participant 
eligibility for CR incentive payments.
    To model the impact of the cardiac rehabilitation incentive payment 
model we calculated the costs of the incentive payments for patients 
receiving cardiac rehabilitation services, as well as any reduction in 
Medicare spending due to more patients receiving cardiac rehabilitation 
services. For the 294 MSAs eligible for the AMI and CABG EPM, we used 
Medicare claims data for the 2015 calendar year to calculate what the 
cardiac rehabilitation incentive payments would be for all patients 
receiving cardiac rehabilitation services within 90 days of an AMI and 
CABG hospitalization. For a given increase in the proportion of 
patients observed in the 2015 calendar year that receive cardiac 
rehabilitation services, we calculated both the cost of the cardiac 
rehabilitation incentive payments for these additional patients, as 
well as the estimated reduction in Medicare spending over a 3 year 
period due to these new patients receiving cardiac rehabilitation 
services. We calculated pricing based on the structure described in 
section VI.E. For a given rate of patients receiving cardiac 
rehabilitation services we summed the costs of CR incentive payments. 
We then subtracted the estimated reduction in Medicare spending due to 
any increase in the rate of patients receiving cardiac rehabilitation 
services relative to the rate receiving such services in the 2015 
calendar year to arrive at the net financial impact. To adjust the 
results to account for only 90 MSAs being selected for the cardiac 
rehabilitation incentive payment model we multiplied the final results 
by 90/294. The final results were then multiplied by 90/294 as only 90 
MSAs are to be selected for the cardiac rehabilitation incentive 
payment model.
    We recognize that utilization of CR/ICR services is driven by many 
factors, and we lack sufficient data to reliably estimate the effect of 
a CR incentive payment on beneficiary utilization of CR/ICR services, 
particularly during the 90-day episode/care period. Therefore, we 
calculated a range of potential impacts based on alternatives in the 
increase in cardiac rehabilitation utilization, ranging from no change 
to an increase in utilization of 4 percentage points.
(2) Analyses

 Table 40--Range of Potential Long-Term Impact of Cardiac Rehabilitation Incentive Payment Model on the Medicare
                                                    Program *
----------------------------------------------------------------------------------------------------------------
                                                                        Increase in cardiac rehabilitation
                                                                                   utilization:
                              Year                               -----------------------------------------------
                                                                                   2 percentage    4 percentage
                                                                    No increase       points          points
----------------------------------------------------------------------------------------------------------------
2017............................................................               1               1               1
2018............................................................               6               5               5
2019............................................................               6               4               1
2020............................................................               6               2             (3)
2021............................................................               7  ..............             (7)
2022............................................................  ..............             (7)            (15)
2023............................................................  ..............             (5)            (10)
2024............................................................  ..............             (2)             (5)
                                                                 -----------------------------------------------
    Total: 2017-2024............................................              27             (2)            (32)
----------------------------------------------------------------------------------------------------------------
* In millions of dollars. Totals do not necessarily equal the sums of rounded components.


[[Page 50998]]

    Table 40 summarizes the estimated impact for the CR incentive 
payment model. Our model estimates that the impact on the Medicare 
program may range from up to $27 million of spending to $32 million of 
savings between 2017 and 2024, depending on the change in utilization 
of CR/ICR services based on the proposed incentive structure. The model 
only estimates the financial effects of additional patients receiving 
CR/ICR services, and does not take into account potential changes in 
the volume of CR/ICR services that patients may receive within 90 days 
of hospital discharge. Increasing CR/ICR services within 90 days of 
hospital discharge will increase CR/ICR incentive payments, and may 
influence Medicare spending after the 90 day episode. Due to the 
uncertainty of estimating this model, actual results could be higher or 
lower than this estimate. Our analysis to the best of our ability 
presents the cost and transfer payment effects of this proposed rule. 
We solicit comments on the assumptions and analysis presented.
d. 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, as well 
as the CJR model. 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 MSDRGs. 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. 
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. We believe that our experiences with 
BPCI support the design of the EPMs.
    Although there is some evidence from BPCI and ACE suggesting that 
providers may improve their performance, the participants that 
volunteered to participate may be in a better position to reduce 
episode spending relative to the average provider. The CJR model is 
testing the first bundled payment model under the Innovation Center 
authority in which providers are required to participate. The CJR model 
test began in April 2016. The design of the EPMs proposed here 
incorporates early learnings from the CJR model, and we propose 
additional refinements to the CJR rule in this proposed rule to support 
successful implementation.
    Finally, although we project savings to Medicare under the proposed 
EPMs and CJR, 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 it is determined that termination or modification is necessary, 
such actions would be undertaken through rulemaking.
3. Effects on Beneficiaries
    We believe that episode payment models may have the potential to 
benefit beneficiaries because the intent of the models is to test 
whether providers under episode payment models 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 
post-acute care spectrum spanning the episode of care. We believe that 
episode payment models have a patient-centered focus such that they 
incentivize improved healthcare delivery and communication delivered 
around the needs of the beneficiary, thus potentially benefitting the 
beneficiary community. However, the demonstration does not affect 
beneficiary cost sharing with each provider or premiums paid by 
beneficiaries. If there is a shift in provider usage within each 
bundle, then beneficiary cost sharing could be higher or lower than 
would otherwise be experienced.
    We propose several patient outcomes and patient experience measures 
to tie payment to quality performance with the intent that this 
approach would encourage the provider community to focus on and deliver 
improved quality care for Medicare beneficiaries. Additionally, 
participants must meet an acceptable level of quality performance in 
order to qualify to receive a reconciliation payment. The 
accountability of participants for both quality and cost of care 
provided for Medicare beneficiaries within an episode provides 
participants with new incentives to improve the health and well-being 
of the Medicare beneficiaries they treat.
    Additionally, the proposed EPMs and CJR do not affect the 
beneficiary's freedom of choice to obtain health services from any 
individual or organization qualified to participate in the Medicare 
program guaranteed under section 1802 of the Act. Eligible 
beneficiaries who choose to receive services from a participant would 
not have the option to opt out of inclusion in the models. Although the 
proposed EPMs and CJR allow participants to enter into risk-sharing 
arrangements with certain other providers, and participants may 
recommended those providers to the beneficiary, participants 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 have proposed to use our existing authority, if 
necessary, to audit participants if claims analysis indicates an 
inappropriate change in delivered services. As described in section 
III.G. of this proposed rule, given that participants would receive a 
reconciliation payment when they are able to reduce average costs per 
case and achieve acceptable or greater quality performance, 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 participants--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 proposed to require providers to supply 
beneficiaries with written information regarding the design and 
implications of these EPMs as well as their rights under Medicare, 
including their right to use their provider of choice.
    We have proposed to implement several safeguards to ensure that 
Medicare beneficiaries do not

[[Page 50999]]

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 post-hospital discharge episode 
duration is sufficiently long to minimize the risk that any episode-
related care will be delayed beyond the end of the episode. Moreover, 
we propose that as part of the payment definition (see section III.D of 
this proposed rule) that certain outlier costs 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.
    Lastly, we note that Medicare payments for services will continue 
to be made for each Medicare FFS payment system under CJR and these 
EPMs. Because we propose to waive beneficiary coinsurance for 
reconciliation payments and repayments, beneficiaries will be subject 
to copayments, deductibles, and coinsurance consistent with Medicare 
FFS payments, rather than as determined by quality-adjusted target 
prices. We assume that beneficiary payments will not be affected, as 
only the hospital will be subject to the reconciliation process. If EPM 
participants are successful in improving quality or care while reducing 
costs, beneficiaries may benefit through reduced out-of-pocket 
expenditures. Alternatively, if participating providers respond to the 
demonstration by shifting medical care outside of the 90 day bundle, 
than this may negatively impact the quality of care that beneficiaries 
receive. We welcome public comments on our estimates of the impact of 
our proposals on Medicare beneficiaries.
4. 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 models proposed here would not include any rural 
hospitals, given that the models would only include hospitals located 
in MSAs, as proposed in section III.A. However, we also note that for 
purposes of our proposal to include a more protective stop-loss policy 
for certain hospitals, 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. The proposed models will affect some rural hospitals 
based on this definition.
    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 have proposed additional financial 
protections for certain categories of hospitals, including rural 
hospitals. In performance year 2, an EPM participant could owe Medicare 
no more than 10 percent of the sum of quality-adjusted target prices 
for the hospital's episodes in an EPM as we phase in repayment 
responsibility under the models. In performance year 3 and beyond when 
full repayment responsibility is in place, no more than 20 percent of 
the sum of quality-adjusted target prices for the hospital's episodes 
in an EPM could be owed by a hospital to Medicare. However, for rural 
hospitals, Medicare Dependent Hospitals, Rural Referral Centers and 
Sole Community, we proposed a stop loss limit policy of 3 percent of 
episode payments for these categories of hospitals. More specifically, 
in performance year 2, a hospital could owe Medicare no more than 3 
percent of the sum of quality-adjusted target prices for the hospital's 
episodes in an EPM. In performance years 3 through 5, a hospital could 
owe Medicare no more than 5 percent of the sum of quality-adjusted 
target prices for the hospital's episodes. Although we propose these 
additional protections, we believe that few rural hospitals will be 
included in the models, and therefore that few will need those 
protections.
    AMI, CABG, and SHFFT episodes account for less than 5 percent of 
all discharges, and because relatively few of these procedures are 
performed at small rural hospitals, and because the EPMs are 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 proposed rule would not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    We are soliciting public comments on our estimates and analysis of 
the impact of our proposals on those small rural hospitals.
5. 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/smallbusiness-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 proposed rule relating to acute care hospitals would 
have some effects on a substantial number of other providers involved 
in these episodes of care including surgeons and other physicians, 
skilled nursing facilities, physical therapists, and other providers.
    Although we acknowledge that many of the affected entities are 
small entities, and the analysis discussed throughout this proposed 
rule discusses aspects of episode payment models that may or will 
affect them, we have no reason to assume that these effects will reach 
the threshold level of 3 percent of revenues used by HHS to identify 
what are likely to be ``significant'' impacts. 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. Hospitals 
currently experience frequent changes to payment (for example, as both 
hospital affiliations and preferred provider networks change) that may 
impact revenue, and we have no reason to assume that this will change 
significantly under the proposed models.
    Accordingly, we have determined that this proposed rule will not 
have a significant impact on a substantial number of small entities. We 
solicit public comments on our estimates and analysis of the impact of 
our proposals on those small entities.
6. Effects of Information Collection
    There are three primary sets of information collection activities 
that EPM participants may be engaged in: Activities related to quality 
reporting, activities related to Advanced APM participation, and ad hoc 
reporting of beneficiary notification upon request by

[[Page 51000]]

CMS. Here, we briefly describe the anticipated scope and effects of 
information collection in each of these three areas for EPM 
participants.
    Quality reporting associated with the EPMs includes EPM-specific 
quality measures, HCAHPS, and voluntarily reported quality measures 
(AMI and SHFFT models only), described in more detail in section III.E. 
of this proposed rule. IPPS hospitals are subject to incentives under 
quality reporting incentives such as the HVBP program and Medicare 
Electronic Health Record (EHR) Incentive Program, among others. Most 
IPPS hospitals already report information for the EPM-specific quality 
measures and HCAHPS for other CMS programs, and those hospitals that do 
not otherwise report this information to CMS would not be required to 
report under the EPMs. Thus, EPM participants would have no additional 
information collection activities for the required quality measures 
under the EPMs.
    For the AMI model, participants have the option of reporting data 
for the Hybrid AMI Mortality measure. This measure includes a 
combination of claims and EHR data for a total of five EHR-based 
clinical data elements and six claims-based elements. AMI voluntary 
data submission must occur within 60 days of most recent data 
collection period. Successful submission of optional Hybrid AMI 
Mortality measure data will be based upon inclusion of five key 
clinical data elements.
    We anticipate that participants who choose to engage in voluntary 
reporting of the Hybrid AMI Mortality measure will engage in the 
following process:
     Hospitals receive the measure authoring tool (MAT) output, 
a template layout for the data reporting file, and other artifacts that 
describe what they are supposed to do and how. The only data elements 
required are simple labs and vital signs that are collected 
consistently in structured fields. All hospitals with EHRs should be 
able to extract these from structured fields. Many will have some 
experience based on work with eCQMs.
     Hospitals review the MAT output and submit questions or 
request clarification via ongoing Q&A.
     Hospitals create a query for their EHR database using the 
MAT output and populate the reporting file with the core clinical data 
elements (CCDE). The hospital IT staff will typically run some queries 
on a small set of admissions and look at the corresponding charts to 
make sure they are getting the right data and may modify the query if 
needed.
     Hospitals submit the CCDE to CMS on the prescribed 
template (QRDA, consolidated clinical document architecture (CCDA), or 
simple excel file are all options).
     Hospitals do not need to do any measure calculation. Once 
data elements are submitted, CMS will link with claims data to 
calculate measure scores.
    Given this process, the initial effort of establishing operability 
will create the majority of burden. Once the initial effort of 
establishing the query is complete, the burden will be minimal, as the 
same query can be run against the EHR for ongoing reporting. We assume 
that the primary cost for a hospital will be the IT support to set up 
the initial query and ensure the correct data is being pulled from the 
EHR. The data elements should be less burdensome than a typical eCQM 
because participants do not need to create new fields, all data is 
feasibly accessed in current EHRs without creating new clinical 
workflows, and hospitals do not need to do any measure calculation.
    AMI model participants must meet the following requirements for 
each performance year in order to fulfill the successful Hybrid AMI 
Mortality data collection criterion. In performance year 1, 
participants will be required to submit this data for 50 percent of 
eligible AMI episodes occurring during the 2-month period between July 
1, 2017 and August 31, 2017. In performance year 2, AMI voluntary data 
submission will be for 10 months of eligible discharges. In performance 
years 3 through 5, participants will need to submit data for the entire 
performance year. Furthermore, in performance years 2 through 5, 
participants will be required to submit the five key clinical data 
elements for at least 90 percent of eligible AMI discharges.
    We are unable to provide a direct cost estimate for hospitals at 
this time, but hope to learn through commenters and expect to learn 
more as part of model testing. The voluntary data submission initiative 
will allow AMI model participants to build processes to extract and 
report the EHR data elements, as well as support CMS testing of systems 
required for Hybrid AMI Mortality measure (NQF #2473) production 
including data receiving and auditing, the merging EHR and claims data, 
calculation and production of measure results.
    For the SHFFT model, the optional quality measure is based on a 
patient reported outcomes measure, which draws upon patient interviews 
to gain insights into patient experience and related outcomes.
    We anticipate that participants who choose to engage in voluntary 
reporting of the THA/TKA PRO and limited risk variable data submission 
will engage in the following process:
     Participating hospitals will need to establish a means to 
collect patient-reported outcome data from patients pre-operatively 
and, again, post-operatively. In addition, they would need to collect 
select additional risk variables from patient charts.
     The specific instruments (and risk variables) have been 
vetted by a Technical Expert Panel and public comment: Veterans RAND 12 
Item Health Survey (VR-12) or Patient-Reported Outcomes Measurement 
Information System (PROMIS) Global-10 generic PRO survey; Hip 
disability and Osteoarthritis Outcome Score (HOOS)/Knee injury and 
Osteoarthritis Outcome Score (KOOS) Jr. or HOOS/KOOS subscales PRO 
survey; additional risk variables that can be physician-reported or 
chart-abstracted.
     If hospitals select the least burdensome instruments, data 
collection requires patients to answer 16 through 17 outcome questions 
and 3 risk factor questions. Estimates from instrument developers, 
input from the patient members of a Technical Expert Panel, and 
empirical results from a survey of physicians collecting similar data 
on THA/TKA patients support minimal patient burden (under 5 minutes) to 
collect the required data.
     Pre-operative survey completion could be arranged to be 
completed online, by phone, or at pre-operative clinic or hospital 
admission intake visits. Post-operative survey completion must occur 
between 270 and 365 days after the eligible elective primary procedure, 
and may occur in a variety of ways, such as online or by phone.
     Hospitals will collect or extract 6 risk variables that 
are commonly available in the medical record.
    Currently available data suggests costs associated with information 
collection for this measure can vary tremendously. We anticipate the 
SHFFT patient-reported outcomes reporting costs to a participant 
hospital would decrease over time as the collection process in 
streamlined and integrated into clinical care workflows. A number of 
hospitals are already collecting this data either as a part of an 
established registry or for participation in the existing CJR bundled 
payment. For these participants, the burden of developing data 
collection systems will be minimal. We also seek comment, in particular 
from hospitals already collecting this

[[Page 51001]]

data, on our assumptions and information on any costs associated with 
this work.
    Participating hospitals must meet the following requirements for 
each performance year in order to fulfill the successful PRO data 
collection criterion. In performance year 1, participants must submit 
data for at least 50 percent of eligible procedures or at least 50 
cases. In performance year 2, participants must submit data for at 
least 60 percent of eligible procures or at least 75 cases. In 
performance year 3, participants must submit data for at least 70 
percent of eligible procures or at least 100 cases. In performance 
years 4 and 5, participants must submit data for at least 80 percent of 
eligible procures or at least 200 cases.
    We are unable to provide a direct cost estimate for hospitals at 
this time, but expect to learn more as part of SHFFT and CJR model 
testing, but seek comment on our assumptions.
    Overall, we anticipate the net burden of voluntary data submissions 
in the AMI and SHFFT models will be marginal, as we anticipate 
hospitals will only choose to proceed with optional data submission if 
they believe the net financial benefit will be positive.
    Information collection related to the Track 1 EPMs and the Track 1 
CJR model to meet the Advanced APM requirements included in the Quality 
Payment Program proposed rule and to operationalize the EPMs and CJR as 
Advanced APMs includes EPM and CJR participant attestation to CEHRT and 
clinician financial arrangements lists submission. We believe that the 
selection by EPM and CJR participants to meet and attest to the CEHRT 
use requirement would create no significant additional administrative 
burden on EPM and CJR model participants. With respect to the 
submission of clinician financial arrangements lists (no more 
frequently than quarterly), while the required submission of this 
information under the Track 1 EPMs and the Track 1 CJR model may create 
some additional administrative requirements for certain EPM and CJR 
participants, we expect that Track 1 EPM participants could modify 
their contractual relationships with their EPM collaborators with which 
the EPM participant directly contracts to require the EPM collaborators 
to submit this information to the EPM participants. We also expect that 
EPM participants could modify their contracts with EPM collaborators to 
include similar requirements in their contracts with collaboration 
agents and in the contracts of collaboration agents with downstream 
collaboration agents.
    Finally, we expect that participants are able to produce lists of 
beneficiaries who have received compliant notification of participation 
in model. We provided flexible guidelines for this requirement as 
specific record keeping methods can be chosen by individual 
participants so long as the necessary information is maintained readily 
available to report upon request. We seek comment on any burden derived 
from this requirement. In total, we anticipate marginal additional 
reporting burden resulting from this proposed rule. We are interested 
in comments from stakeholders regarding methodology for data submission 
which minimizes duplication and optimizes information collection for 
participants.
7. 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 2016, that 
is approximately $146 million. This proposed 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 $146 million in any 1 year.
D. Alternatives Considered
    Throughout this proposed rule, we have identified our proposed 
policies and alternatives that we have considered, and provided 
information as to the effects of these alternatives and the rationale 
for each of the proposed policies. We solicit and welcome comments on 
our proposals, on the alternatives we have 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 hospitals in the CJR model, hospitals proposed for inclusion 
in the SHFFT model, and to hospitals that could be selected to 
participate in the proposed AMI and CABG models. This proposed rule 
will not impinge directly on hospitals that are not participating in 
CJR or the EPMs. However, it may encourage innovations in health care 
delivery in other areas or in care paid through other payers. For 
example, a hospital and affiliated providers may choose to extend their 
arrangements for an EPM to other payers, not just those beneficiaries 
paid under Medicare FFS. 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 EPMs. We welcome comments that address these or 
other possibilities.
    We present the implications of alternatives considered in the 
development of the EPMs here. As discussed in section III.C., we 
propose to define beneficiary inclusion in the AMI model by discharge 
under an AMI MS-DRG (280-282), representing those individuals admitted 
with AMI who receive medical therapy but no revascularization, and 
discharge under a PCI MS-DRG (246-251) with an ICD-10-CM diagnosis code 
of AMI on the IPPS claim for the anchor hospitalization in the 
principal or secondary diagnosis code position. Alternately, we could 
define beneficiary inclusion based only on the principal diagnosis 
code. Doing so would result in a 2.4 percent fewer episodes included in 
the AMI model annually.
    As discussed in section III.E., we proposed to allow participants 
to qualify for a higher composite quality score in the AMI and SHFFT 
models based on submission of voluntary measures. If we had not 
provided the option for participants to achieve an increased composite 
quality score for voluntary reporting (or if we assume no hospitals 
report this data), the AMI model and SHFFT models are estimated to save 
the Medicare program an additional 36 million over the 5 performance 
years.
    As discussed in section VI. of this proposed rule, we have proposed 
the selection of CR MSAs via a modified stratified random selection 
based on several key dimensions related to CR/ICR service provision, 
including percent of eligible cases in the MSA who receive CR/ICR 
services, percent who complete CR or ICR services, and the number of 
CR/ICR providers. We also outlined alternative MSA selection strategies 
and solicited comments on the MSA selection approach. We anticipate 
that, because these approaches draw from the same pool of eligible MSAs 
without regard to MSA size or total cost of care during the episode or 
care period, the overall financial impact of different selection 
methodologies will be minimal, and the primary impact of varied MSA 
selection approaches will be on balance among model arms for 
evaluation.
E. Accounting Statement and Table
    As required by OMB Circular A-4 under Executive Order 12866 
(available at https://www.whitehouse.gov/omb/circulars_a004_a-4) in 
Table 41, we have prepared an accounting statement showing the 
classification of transfers, benefits, and costs associated with the

[[Page 51002]]

provisions in this proposed rule. The accounting statement is based on 
estimates provided in this regulatory impact analysis.

Table 41--Accounting Statement Estimated Impacts for New Episode Payment
 Models and Proposed Changes to Comprehensive Care for Joint Replacement
------------------------------------------------------------------------
                                                        Source citation
            Category               Primary estimate     (RIA, preamble,
                                                             etc.)
------------------------------------------------------------------------
                                BENEFITS
------------------------------------------------------------------------
Annualized monetized transfers:   $19 million.......  Change from
 Discount rate 7%.                21 million........   baseline to
Annualized monetized transfers:                        proposed changes
 Discount rate 3%.                                     (Tables 38 and
                                                       39).
                                 ---------------------------------------
From whom to whom?..............  From Participant IPPS Hospitals to
                                   Federal Government.
------------------------------------------------------------------------


      Table 42--Accounting Statement Estimated Impacts for Cardiac
                 Rehabilitation Incentive Payment Model
------------------------------------------------------------------------
                                  Assuming no change
                                    in the rate of
                                  patients receiving    Source citation
            Category                    cardiac         (RIA, preamble,
                                    rehabilitation           etc.)
                                       services
------------------------------------------------------------------------
                                BENEFITS
------------------------------------------------------------------------
Annualized monetized transfers:   $5 million........  Change from
 Discount rate 7%.                5 million.........   baseline to
Annualized monetized transfers:                        proposed changes
 Discount rate 3%.                                     (Table 40).
                                 ---------------------------------------
From whom to whom?..............  From Federal Government to Participant
                                   IPPS Hospitals.
------------------------------------------------------------------------


 
                                     Assuming a 2
                                   percentage point
                                    increase in the     Source citation
            Category               rate of patients     (RIA, preamble,
                                   receiving cardiac         etc.)
                                    rehabilitation
                                       services
------------------------------------------------------------------------
                                BENEFITS
------------------------------------------------------------------------
Annualized monetized transfers:   $0 million........  Change from
 Discount rate 7%.                -0 million........   baseline to
Annualized monetized transfers:                        proposed changes
 Discount rate 3%.                                     (Table 40).
                                 ---------------------------------------
From whom to whom?..............  From Federal Government to Health Care
                                   Providers.
------------------------------------------------------------------------


 
                                     Assuming a 4
                                   percentage point
                                    increase in the     Source citation
            Category               rate of patients     (RIA, preamble,
                                   receiving cardiac         etc.)
                                    rehabilitation
                                       services
------------------------------------------------------------------------
                                BENEFITS
------------------------------------------------------------------------
Annualized monetized transfers:   -$3 million.......  Change from
 Discount rate 7%.                -4 million........   baseline to
Annualized monetized transfers:                        proposed changes
 Discount rate 3%.                                     (Table 40).
                                 ---------------------------------------
From whom to whom?..............  From Federal Government to Health Care
                                   Providers.
------------------------------------------------------------------------

F. Conclusion
    This 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 proposed rule, we estimate that 
the financial impact of the AMI, CABG, and SHFFT EPM models proposed 
here would be net federal savings of $170 million over a 5-year 
performance period (2017 through 2021), the financial impact of the CJR 
model as modified here with the revised assumptions on hospital 
reporting of quality data would be an estimated net federal cost of $35 
million over a 5-year period (2016 through 2020) relative to the 
estimates published in the CJR final rule. The financial impact of the 
CR incentive payment model would be net change in federal spending 
between $27 million in additional costs and $32 million in savings to 
the Medicare program over an 8-year period (2017 through 2024).
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 510

    Administrative Practice and Procedure, Health facilities, Health 
professions, Medicare, and Reporting and recordkeeping requirements.

42 CFR Part 512

    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 proposes to amend 42 CFR Chapter IV as follows:

Subchapter H--Health Care Infrastructure and Model Programs

PART 510--COMPREHENSIVE CARE FOR JOINT REPLACEMENT MODEL

0
1. The authority citation for part 510 continues to read as follows:


[[Page 51003]]


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

0
2. Section 510.2 is amended by--
0
a. Revising the definition of ``ACO'';
0
b. Adding in alphabetical order definitions for ``ACO participant'' and 
``ACO provider/supplier'';
0
c. Revising the definition for ``Alignment payment'';
0
d. Adding in alphabetical order definitions for ``Applicable discount 
factor'', ``CEHRT'', and ``CJR activities'';
0
e. Revising the definition of ``CJR collaborator'';
0
f. Adding in alphabetical order a definition for ``Collaboration 
agent'';
0
g. Removing the definition of ``Collaborator agreement'';
0
h. Revising the definitions of ``Distribution arrangement'' and 
``Distribution payment'';
0
i. Adding in alphabetical order definitions for ``Downstream 
collaboration agent'', ``Downstream distribution arrangement'', 
``Downstream distribution payment'', and ``Episode benchmark price'';
0
j. Removing the definition of ``Episode target price'';
0
k. Revising the definitions of ``HHA'' and ``Historical episode 
payment'';
0
l. Adding in alphabetical order a definition for ``Hospital'';
0
m. Removing the definitions of ``IPPS hospital (or hospital)'' and 
``practice collaboration agent'';
0
n. Adding in alphabetical order a definition for ``Quality-adjusted 
target price''; and
0
o. Revising the definition of ``Quality improvement points''.
    The additions and revisions read as follows:


Sec.  510.2   Definitions.

* * * * *
    ACO means an accountable care organization, as defined at Sec.  
425.20 of this chapter, that participates in the Medicare Shared 
Savings Program.
    ACO participant has the meaning set forth in Sec.  425.20 of this 
chapter.
    ACO provider/supplier has the meaning set forth in Sec.  425.20 of 
this chapter.
* * * * *
    Alignment payment means a payment from a CJR collaborator to a 
participant hospital under a sharing arrangement, for the sole purpose 
of sharing the participant hospital's responsibility for making 
repayments to Medicare.
* * * * *
    Applicable discount factor means the discount percentage 
established by the participant hospital's quality category as 
determined in Sec.  510.315 and that is applied to the episode 
benchmark price for purposes of determining a participant hospital's 
Medicare repayment in performance years 2 and 3.
* * * * *
    CEHRT means certified electronic health record technology that meet 
the requirements of 45 CFR 170.102.
    CJR activities means activities related to promoting accountability 
for the quality, cost, and overall care for CJR beneficiaries, 
including managing and coordinating care; encouraging investment in 
infrastructure enabling technologies and redesigned care processes for 
high quality and efficient service delivery; the provision of items and 
services during a CJR episode in a manner that reduces costs and 
improves quality; or carrying out any other obligation or duty under 
CJR.
    CJR collaborator means an ACO or one of the following Medicare-
enrolled individuals or entities that enters into a sharing 
arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Provider or supplier of outpatient therapy services.
    (8) Physician group practice (PGP).
    (9) Hospital.
    (10) CAH.
* * * * *
    Collaboration agent means an individual or entity that is not a CJR 
collaborator and that is either of the following:
    (1) A PGP member that has entered into a distribution arrangement 
with the same PGP in which he or she is an owner or employee;
    (2) An ACO participant or ACO provider/supplier that has entered 
into a distribution arrangement with the same ACO in which it is 
participating.
* * * * *
    Distribution arrangement means a financial arrangement between a 
CJR collaborator that is an ACO or PGP and a collaboration agent for 
the sole purpose of distributing some or all of a gainsharing payment 
received by the ACO or PGP.
    Distribution payment means a payment from a CJR collaborator that 
is an ACO or PGP to a collaboration agent, under a distribution 
arrangement, composed only of gainsharing payments.
* * * * *
    Downstream collaboration agent means an individual who is not a CJR 
collaborator or a collaboration agent and who is a PGP member that has 
entered into a downstream distribution arrangement with the same PGP in 
which he or she is an owner or employee, and where that PGP is a 
collaboration agent.
    Downstream distribution arrangement means a financial arrangement 
between a collaboration agent that is both a PGP and an ACO participant 
and a downstream collaboration agent for the sole purpose of 
distributing some or all of a distribution payment received by the PGP.
    Downstream distribution payment means a payment from a 
collaboration agent that is both a PGP and an ACO participant to a 
downstream collaboration agent, under a downstream distribution 
arrangement, composed only of distribution payments.
* * * * *
    Episode benchmark price means a dollar amount assigned to CJR 
episodes based on historical episode payment data (3 years of 
historical Medicare payment data grouped into CJR episodes according to 
the episode definition as described in Sec.  510.200(b)) prior to the 
application of the effective discount factor or applicable discount 
factor, as described in Sec.  510.300(c).
* * * * *
    HHA means a Medicare enrolled home health agency.
    Historical episode payment means the expenditures for historical 
episodes that occurred during the historical period used to determine 
the episode benchmark price.
    Hospital means a provider subject to the prospective payment system 
specified in Sec.  412.1(a)(1) of this chapter.
* * * * *
    Quality-adjusted target price means the dollar amount assigned to 
CJR episodes as the result of adjusting the episode benchmark price by 
the participant hospital's effective discount factor or applicable 
discount factor based on the participant hospital's quality category, 
as described in Sec.  510.300(c) and Sec.  510.315(f).
    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 for 
performance years 2 through 5 increases from the previous performance 
year by at least 2 deciles on the performance percentile scale, as 
described in Sec.  510.315(d). For performance year 1, CMS will add 
quality improvement points to a participant hospital's composite 
quality score for a measure if the hospital's

[[Page 51004]]

performance percentile on an individual quality measure increases from 
the corresponding time period in the previous year by at least 2 
deciles on the performance percentile scale, as described in Sec.  
510.315(d).
* * * * *
0
3. Section 510.110 is added to subpart B to read as follows:


Sec.  510.110  Access to records and retention.

    Participant hospitals, CJR collaborators, collaboration agents, 
downstream collaboration agents, and any other individuals or entities 
performing CJR activities must do all of the following:
    (a) Allow the Government, including CMS, OIG, HHS 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, 
distribution arrangements, downstream distribution arrangements and the 
documentation required under Sec. Sec.  510.500(d) and 510.525(c)) 
sufficient to enable the audit, evaluation, inspection or investigation 
of any of the following:
    (1) The individual's or entity's compliance with CJR model 
requirements.
    (2) The calculation, distribution, receipt, or recoupment of 
gainsharing payments, alignment payments, distribution payments, and 
downstream distribution payments.
    (3) The obligation to repay any reconciliation payments owed to 
CMS.
    (4) The quality of the services furnished to a CJR beneficiary 
during a CJR episode.
    (5) The sufficiency of CJR beneficiary notifications.
    (6) The accuracy of the CJR participant hospital's submissions 
under CEHRT use requirements.
    (b) 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--
    (1) CMS determines a particular record or group of records should 
be retained for a longer period and notifies the participant hospital 
at least 30 calendar days before the disposition date; or
    (2) There has been a dispute or allegation of fraud or similar 
fault against the participant hospital, CJR collaborator, collaboration 
agents, downstream collaboration agent, or any other individual or 
entity performing CJR activities in which case the records must be 
maintained for 6 years from the date of any resulting final resolution 
of the dispute or allegation of fraud or similar fault.
0
4. Section 510.120 is added to subpart B to read as follows:


Sec.  510.120  CJR participant hospital CEHRT track requirements.

    (a) CJR CEHRT use. For performance years 2 through 5, CJR 
participant hospitals choose either of the following:
    (1) CEHRT use. Participant hospitals attest in a form and manner 
required by CMS to their use of CEHRT as defined in Sec.  414.1305 of 
this chapter to document and communicate clinical care with patients 
and other health professionals.
    (2) No CEHRT use. Participant hospitals do not attest in a form and 
manner required by CMS to their use of CEHRT as defined in Sec.  
414.1305 to document and communicate clinical care with patients and 
other health professionals.
    (b) Clinician financial arrangements list. Each participant 
hospital that chooses CEHRT use as provided in paragraph (a)(1) of this 
section must submit to CMS a clinician financial arrangements list in a 
form and manner specified by CMS on a no more than quarterly basis. The 
list must include the following information on individuals for the 
period of the CJR performance year specified by CMS:
    (1) CJR collaborators. For each CJR collaborator who is a 
physician, nonphysician practitioner, or provider of outpatient therapy 
services during the period of the CJR performance year specified by 
CMS:
    (i) The name, TIN, and NPI of the CJR collaborator.
    (ii) The start date and, if applicable, end date, for the sharing 
arrangement between the CJR participant hospital and the CJR 
collaborator.
    (2) Collaboration agents. For each collaboration agent who is a 
physician or nonphysician practitioner of a PGP that is a CJR 
collaborator during the period of the CJR performance year specified by 
CMS:
    (i) The TIN of the PGP that is the CJR collaborator, and the name 
and NPI of the physician or nonphysician practitioner.
    (ii) The start date and, if applicable, end date, for the 
distribution arrangement between the CJR collaborator that is a PGP and 
the physician or nonphysician practitioner who is a PGP member.
    (3) Downstream collaboration agents. For each downstream 
collaboration agent who is a physician or nonphysician practitioner 
member of a PGP that is also an ACO participant in an ACO that is an 
CJR collaborator during the period of the CJR performance year 
specified by CMS:
    (i) The TIN of the PGP that is the ACO participant, and the name 
and NPI of the physician or nonphysician practitioner.
    (ii) The start date and, if applicable, end date, for the 
downstream distribution arrangement between the collaboration agent 
that is both PGP and an ACO participant and the physician or 
nonphysician practitioner who is a PGP member.
    (4) Attestation to no individuals. If there are no individuals that 
meet the requirements to be reported, as specified in paragraphs (b)(1) 
through (3) of this section, the participant hospital must attest in a 
form and manner required by CMS that there are no individuals to report 
on the clinician financial arrangements list.
    (c) Documentation requirements. (1) Each participant hospital that 
chooses CEHRT use as provided in paragraph (a)(1) of this section must 
maintain documentation of their attestation to CEHRT use and clinician 
financial arrangements lists.
    (2) The participant hospital must retain and provide access to the 
required documentation in accordance with Sec.  510.110.
0
5. Section 510.205 is amended by adding paragraph (a)(6) to read as 
follows:


Sec.  510.205  Beneficiary inclusion criteria.

    (a) * * *
    (6) For episodes that begin on or after July 1, 2017, are not 
aligned to an ACO in the Next Generation ACO model or an ACO in a track 
of the Comprehensive ESRD Care Initiative incorporating downside risk 
for financial losses.
* * * * *
0
6. Section 510.300 is amended by:
0
a. Revising the section heading;
0
b. Revising paragraphs (a) introductory text, (a)(1) through (3), and 
(a)(5);
0
d. Revising the heading for paragraph (b) and revising paragraphs 
(b)(1) introductory text, (b)(3), (5), and (7);
0
e. Adding paragraph (b)(8); and
0
f. Revising paragraph (c).
    The revisions and additions read as follows:


Sec.  510.300  Determination of episode quality-adjusted target prices.

    (a) General. CMS establishes episode quality-adjusted target prices 
for participant hospitals for each performance year of the model as

[[Page 51005]]

specified in this section. Episode quality-adjusted target prices are 
established according to the following:
    (1) MS-DRG and fracture status. MS-DRG assigned at discharge for 
anchor hospitalization and present 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 quality-
adjusted target prices. Episode quality-adjusted target prices are 
updated to account for Medicare payment updates no less than 2 times 
per year, for updated quality-adjusted target prices effective October 
1 and January 1, and at other intervals if necessary.
    (3) Episodes that straddle performance years or payment updates. 
The quality-adjusted target price that applies to the type of episode 
as of the date of admission for the anchor hospitalization is the 
quality-adjusted target price that applies to the episode.
* * * * *
    (5) Quality performance. Quality-adjusted target prices reflect 
effective discount factors or applicable discount factors based on a 
hospital's composite quality score, as specified in Sec. Sec.  
510.300(c) and 510.315(f).
* * * * *
    (b) Episode quality-adjusted target price. (1) CMS calculates 
quality-adjusted 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 quality-adjusted target price and reconciliation 
calculations. The calendar years used for historical expenditure 
calculations are as follows:
* * * * *
    (3) Exception for low-volume hospitals. Quality-adjusted target 
prices for participant hospitals with fewer than 20 CJR episodes in 
total across the 3 historical years of data used to calculate the 
quality-adjusted target price are based on 100 percent regional 
historical episode payments.
* * * * *
    (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 quality-
adjusted target price.
* * * * *
    (7) Communication of episode quality-adjusted target prices. CMS 
communicates episode quality-adjusted target prices to participant 
hospitals before the performance period in which they apply.
    (8) Inclusion of reconciliation payments and repayments. For 
performance years 3, 4, and 5 only, reconciliation payments and 
repayment amounts under Sec. Sec.  510.305(f)(2) and 510.305(f)(3) and 
from LEJR episodes included in the BPCI initiative are included in 
historical episode payments.
    (c) Discount factor. A participant hospital's episode quality-
adjusted target prices incorporate discount factors to reflect 
Medicare's portion of reduced expenditures from the CJR model as 
described in this section.
    (1) Discount factors affected by the quality incentive payments and 
the composite quality score. 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 the effective 
discount factor or applicable discount factor used for calculating 
reconciliation payments and repayment amounts. The quality-adjusted 
target prices incorporate the effective or applicable discount factor 
at reconciliation.
    (2) Discount factor for reconciliation payments. The discount 
factor for reconciliation payments in all performance years is 3.0 
percent.
    (3) Discount factors for repayment amounts. The discount factor for 
repayment amounts is--
    (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
    (iii) In performance years 4 and 5, 3.0 percent.
* * * * *
0
7. Section 510.305 is amended by revising paragraphs (e) introductory 
text, (e)(1)(ii) and (v), (f)(1)(i) and (ii), and (h)(6), adding 
paragraph (h)(7), revising paragraph (i), and adding paragraph (j) to 
read as follows:


Sec.  510.305  Determination of the NPRA and reconciliation process.

* * * * *
    (e) Calculation of the NPRA. By comparing the quality-adjusted 
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) * * *
    (ii) Multiplies each episode quality-adjusted target price 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 quality-adjusted target price applies.
* * * * *
    (v) Applies the following prior to determination of the 
reconciliation payment or repayment amount:
    (A) Limitation on loss. Except as provided in paragraph 
(e)(1)(v)(C) of this section, the total amount of the NPRA and 
subsequent reconciliation calculation 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 (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.
    (5) The post-episode spending and ACO overlap calculation amounts 
in paragraphs (j)(1) and (j)(2) of this section are not subject to the 
limitation on loss.
    (B) Limitation on gain. The total amount of the NPRA and subsequent 
reconciliation calculation 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 (i) of this section, the subsequent

[[Page 51006]]

reconciliation calculation reassesses the limitation on gain for a 
given performance year by applying the limitations on gain limits to 
the aggregate of the 2 reconciliation calculations.
    (5) The post-episode spending and ACO overlap calculation amounts 
in paragraphs (j)(1) and (j)(2) of this section are not subject to the 
limitation on gain.
    (C) 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 due to the NPRA and subsequent 
reconciliation calculation cannot exceed 3 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section. For performance 
years 3 through 5, the amount cannot exceed 5 percent of the amount 
calculated in paragraph (e)(1)(iii) of this section.
* * * * *
    (f) * * *
    (1) * * *
    (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 (i) of this section and the post-episode 
spending and ACO overlap calculations as described in paragraph (j) of 
this section are added to the current year's NPRA in order to determine 
the reconciliation payment or repayment amount.
* * * * *
    (h) * * *
    (6) The post-episode spending amount and ACO overlap calculation 
for the previous performance year, as applicable.
    (7) The reconciliation payment or repayment amount.
    (i) Subsequent reconciliation calculation. (1) 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 episode cancelations due to 
overlap between the CJR model and other CMS models and programs, or for 
other reasons as specified in Sec.  510.210(b).
    (2) The subsequent calculation for performance years 1 through 4 
occurs concurrently with the first reconciliation process for the 
following 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 aggregate calculation of the 
amounts described in paragraphs (e)(1)(iv) and (i)(1) of this section 
for that performance year (the initial reconciliation and the 
subsequent reconciliation calculation) to ensure such amount does not 
exceed the applicable stop-loss or stop-gain limits. Because there will 
be no additional performance year after performance year 5, the 
subsequent reconciliation calculation for performance year 5 will occur 
independently in 2022.
    (j) Additional adjustments to the reconciliation payment or 
repayment amount. (1) In order to account for shared savings payments, 
CMS will reduce the reconciliation payment or increase the repayment 
amount for the subsequent performance year (for years 1 through 4) by 
the amount of the participant hospital's discount percentage that is 
paid to the ACO in the prior performance year as shared savings. (This 
amount will be assessed independently for performance year 5 in 2022.) 
This adjustment is made only 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 programs:
    (i) The Pioneer ACO model.
    (ii) The Medicare Shared Savings Program.
    (iii) The Comprehensive ESRD Care Initiative (excluding a track 
with downside risk for episodes that initiate after July 1, 2017).
    (iv) The Next Generation ACO model (for CJR episodes that initiate 
prior to July 1, 2017).
    (2) Increases in post-episode spending. If the average post-episode 
Medicare Parts A and B payments for a participant hospital in the prior 
performance year is greater than 3 standard deviations above the 
regional average post-episode payments for the same performance year, 
then the spending amount exceeding three standard deviations above the 
regional average post-episode payments for the same performance year is 
subtracted from the net reconciliation or added to the repayment amount 
for the subsequent performance year for years 1 through 4, and assessed 
independently for year 5.
0
8. Section 510.310 is amended by--
0
a. Revising paragraphs (a)(1) and (2).
0
b. Removing paragraph (a)(3)
0
c. Resdesignating paragraph (a)(4) as paragraph (a)(3).
0
d. Adding a new paragraph (a)(4).
0
e. Revising paragraph (c).
0
f. Redesignating paragraph (d) as paragraph (e).
0
g. Adding a new paragraph (d).
0
h. Revising newly designated paragraph (e)(6).
    The revisions and addition read as follows:


Sec.  510.310  Appeals process.

* * * * *
    (a) * * *
    (1) Unless the participant hospital provides such notice, CMS deems 
final the CJR reconciliation report 45 calendar days after it is issued 
and proceeds with the payment or repayment processes as applicable.
    (2) If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the reconciliation report, 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.
* * * * *
    (4) Only participant hospitals may use the notice of calculation 
error process described in this part.
* * * * *
    (c) Exception to the process. If the participant hospital contests 
a matter that does not involve an issue contained in, or a calculation 
that contributes to, a CJR reconciliation report, a notice of 
calculation error is not required. In these 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) Notice of a participant hospital's termination from the CJR 
model. If a participant hospital receives notification that it has been 
terminated from the CJR model, it must provide a written notice to CMS 
requesting review of the termination within 10 calendar days of the 
notice. CMS has 30 days to respond to the participant hospital's 
request for review. If the participant hospital fails to notify CMS, 
the termination is deemed final.
    (e) * * *
    (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 expected to meet criteria described in section 1115A(c)(1) 
or (2) of the Act.
0
9. Section 510.315 is amended by--
0
a. Revising paragraph (c) introductory text.

[[Page 51007]]

0
b. Redesignating paragraph (c)(1)(ix) as paragraph (c)(1)(viii).
0
c. Redesignating paragraph (c)(2)(ix) as paragraph (c)(2)(viii).
0
d. Revising paragraph (d) and (f).
    The revisions read as follows:


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

* * * * *
    (c) Quality performance points. CMS computes quality performance 
points for each quality measure based on the participant hospital's 
performance relative to the distribution of performance of all 
``subsection (d)'' hospitals that are eligible for payment under IPPS 
and meet the minimum patient case or survey count for that measure.
* * * * *
    (d) Quality improvement points. For performance year 1, if a 
participant hospital's quality performance percentile on an individual 
measure described in Sec.  510.400(a) increases from the corresponding 
time period in the previous year by at least 2 deciles on the 
performance percentile scale, then the hospitals is eligible to receive 
quality improvement points equal to 10 percent of the total available 
point for that individual measure up to a maximum composite quality 
score of 20 points. For performance years 2 through 5, 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 2 deciles on the performance percentile scale, then 
the hospitals is eligible to receive quality improvement points equal 
to 10 percent of the total available point for that individual measure 
up to a maximum composite quality score of 20 points.
* * * * *
    (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 effective discount factors or 
applicable discount factors described in Sec.  510.300(c):
    (1) A 1.0 percentage point reduction to the effective discount 
factor or 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 effective discount 
factor or applicable discount factor for participant hospitals with 
excellent quality performance, defined as composite quality scores that 
are greater than 13.2.
0
10. Section 510.400 is amended by revising paragraph (c)(3) to read as 
follows:


Sec.  510.400  Quality measures and reporting.

* * * * *
    (c) * * *
    (3) Does not publicly report the voluntary patient-reported 
outcomes and limited risk variable data during this model, but 
indicates whether a hospital has successfully submitted such data in 
accordance with Sec.  510.400(b).
0
11. Section 510.405 is amended by revising paragraph (b) to read as 
follows:


Sec.  510.405  Beneficiary choice and beneficiary notification.

* * * * *
    (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. In 
circumstances where, due to the patient's condition, it may not be 
feasible to provide notification at such times, the notification must 
be provided to the beneficiary or his or her representative as soon as 
is reasonably practicable but no later than discharge from the 
participant hospital accountable for the episode. 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 written agreement memorializing a sharing arrangement. 
This requirement may be fulfilled by the hospital including in the 
detailed notification provided to Medicare beneficiaries a web address 
where beneficiaries may access this list.
    (2) Physician, nonphysician practitioner, and PGP provision of 
notice. A participant hospital must require any physician, nonphysician 
practitioner, or PGP 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 if known to the physician, nonphysician 
practitioner, and PGP collaborators or upon provision of the services 
during the episode.
    (3) Other CJR collaborators. A participant hospital must require 
each CJR collaborator (other than physicians, nonphysician 
practitioners, or PGP collaborators) to provide written notice of the 
structure of the model and the existence of its sharing arrangement 
with the participant hospital to any Medicare beneficiary that meets 
the criteria specified in Sec.  510.205. An ACO that is a CJR 
collaborator must require their ACO participants for which the ACO has 
an ACO distribution arrangement to provide written notice of the 
structure of the model and the existence of the ACO'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 no later than the time at which the beneficiary first receives 
services from the CJR collaborator during the CJR episode.
    (4) Discharge planning notice. A participant hospital must provide 
the beneficiary with a written notice of any potential financial 
liability that may arise from non-covered services recommended or 
presented as an option as part of discharge planning. This notice must 
be provided to the beneficiary 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 participant 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 participant hospital must

[[Page 51008]]

notify the beneficiary that the service would not be covered by 
Medicare.
    (ii) If the participant hospital is discharging a beneficiary to a 
SNF prior to the occurrence of a 3 day hospital stay, and the 
beneficiary is being admitted to or is considering a SNF that would not 
qualify under the SNF 3-day waiver in Sec.  510.610, the participant 
hospital must 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 that would be covered by 
Medicare Part B during a non-covered inpatient SNF stay.
    (5) Participant hospitals and CJR collaborators must be able to 
generate upon request a list of all beneficiaries who have received a 
notice required by this section, including the type of notice and the 
date the notice was delivered. Lists of beneficiaries that receive 
notifications must be retained and provided access to CMS, or its 
designees, in accordance with Sec.  510.110.
0
12. Section 510.410 is amended by revising paragraphs (b)(1) 
introductory text, (b)(1)(i) introductory text, (b)(1)(i)(F), 
(b)(1)(ii), (b)(1)(vi) through (x), (b)(2)(i) through (v), (vi), and 
(b)(3) to read as follows:


Sec.  510.410  Compliance enforcement.

* * * * *
    (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 its related CJR collaborators, collaboration agents, or 
downstream collaboration agents--
    (i) Fails to comply with any 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:
* * * * *
    (F) Failing to follow the requirements related to sharing 
arrangements.
    (ii) Has signed a sharing arrangement, distribution arrangement, or 
downstream distribution arrangement that is noncompliant with the 
requirements of this part.
* * * * *
    (vi) Fails to provide an accurate clinician financial arrangements 
list as specified in Sec.  510.120(b).
    (vii) 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.
    (viii) 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 CJR.
    (ix) 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.
    (x) 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 CJR.
    (2) * * *
    (i) Issuing a warning letter to the participant hospital.
    (ii) Requiring the participant hospital to develop a corrective 
action plan, commonly referred to as a CAP.
    (iii) Reducing or eliminating a participant hospital's 
reconciliation payment.
    (iv) Requiring a participant hospital to terminate a sharing 
arrangement with a CJR collaborator and prohibiting further engagement 
in sharing arrangements with the participant hospital by that CJR 
collaborator.
    (v) Prohibiting the participant hospital from participating in the 
CEHRT track.
    (vi) Terminating the participant hospital's participation in the 
CJR model. Where a participant is terminated from the CJR model, the 
participant hospital will remain liable for all negative NPRA generated 
from episodes of care that occurred prior to termination.
    (3) CMS may add 25 percent to a repayment amount on a participant 
hospital's reconciliation report if all of the following conditions are 
true:
    (i) CMS has required a corrective action plan from a participant 
hospital;
    (ii) The participant hospital owes a repayment amount to CMS; and
    (iii) The participant hospital fails to timely comply with the 
corrective action plan or is noncompliant with the CJR model's 
requirements.
0
13. Section 510.500 is revised to read as follows:


Sec.  510.500  Sharing arrangements under the CJR model.

    (a) General. (1) A participant hospital may enter into a sharing 
arrangement with a CJR collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both. A participant hospital must 
not make a gainsharing payment or receive an alignment payment except 
in accordance with a sharing arrangement.
    (2) A sharing arrangement must comply with the provisions of this 
section and all other applicable laws and regulations, including the 
applicable fraud and abuse laws and all applicable payment and coverage 
requirements.
    (3) Participant hospitals must develop, maintain, and use a set of 
written policies for selecting individuals and entities to be CJR 
collaborators. These policies must contain criteria related to, and 
inclusive of, the quality of care delivered by the potential CJR 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the participant 
hospital, any CJR collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with a 
participant hospital, CJR collaborator, collaboration agent, or 
downstream collaboration agent.
    (4) If a participant hospital enters into a sharing arrangement, 
its compliance program must include oversight of sharing arrangements 
and compliance with the applicable requirements of the CJR model.
    (b) Requirements. (1) A sharing arrangement must be in writing and 
signed by the parties, and entered into before care is furnished to CJR 
beneficiaries under the sharing arrangement.
    (2) Participation in a sharing arrangement must be voluntary and 
without penalty for nonparticipation.
    (3) The sharing arrangement must require the CJR collaborator and 
its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with the following:
    (i) 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);
    (ii) All applicable 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 sharing arrangement; and
    (iii) All other applicable laws and regulations.
    (4) The sharing arrangement must require the CJR collaborator to 
have a

[[Page 51009]]

compliance program that includes oversight of the sharing arrangement 
and compliance with the requirements of the CJR model.
    (5) The sharing arrangement must not pose a risk to beneficiary 
access, beneficiary freedom of choice, or quality of care.
    (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, its receipt of 
alignment payments, and its use of beneficiary incentives in the CJR 
model.
    (7) The written agreement memorializing a sharing arrangement must 
specify the following:
    (i) The purpose and scope of the sharing arrangement;
    (ii) The obligations of the parties, including specified CJR 
activities and other services to be performed by the parties under the 
sharing arrangement;
    (iii) The date of the sharing arrangement;
    (iv) Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out CJR activities; and
    (v) The financial or economic terms for payment, including:
    (A) Eligibility criteria for a gainsharing payment.
    (B) Eligibility criteria for an alignment payment.
    (C) Frequency of gainsharing or alignment payment.
    (D) Methodology and accounting formula for determining the amount 
of a gainsharing payment or alignment payment.
    (8) The sharing arrangement must not--
    (i) Induce the participant hospital, CJR collaborator, or any 
employees, contractors, or subcontractors of the participant hospital 
or CJR collaborator to reduce or limit medically necessary services to 
any Medicare beneficiary; or
    (ii) 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.
    (c) Gainsharing payment, alignment payment, and internal cost 
savings conditions and restrictions. (1) Gainsharing payments, if any, 
must--
    (i) Be derived solely from reconciliation payments, or internal 
cost savings, or both;
    (ii) Be distributed on an annual basis (not more than once per 
calendar year);
    (iii) Not be a loan, advance payment, or payment for referrals or 
other business; and
    (iv) Be clearly identified as a gainsharing payment at the time it 
is paid.
    (2)(i) To be eligible to receive a gainsharing payment, a CJR 
collaborator must meet quality of care criteria for the performance 
year for which the participant hospital accrued the internal cost 
savings or earned the reconciliation payment that comprises the 
gainsharing payment. The quality of care criteria must be established 
by the participant hospital and directly related to the CJR episode.
    (ii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator other than a 
PGP or an ACO must have directly furnished a billable item or service 
to a CJR beneficiary during a CJR episode that occurred in the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount.
    (iii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is a PGP 
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 same performance year for which 
the participant hospital accrued the internal cost savings or earned 
the reconciliation payment that comprises the gainsharing payment or 
was assessed a repayment amount; and
    (B) The PGP must have contributed to CJR activities and been 
clinically involved in the care of CJR beneficiaries during the same 
performance year for which the CJR participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed a repayment amount. 
For example, a PGP might have been clinically involved in the care of 
CJR beneficiaries by:
    (1) Providing care coordination services to beneficiaries during 
and/or after inpatient admission;
    (2) Engaging with a participant hospital in care redesign 
strategies, and actually performing a role in implementing such 
strategies, that are designed to improve the quality of care for CJR 
episodes and reduce CJR episode spending; or
    (3) In coordination with other providers and suppliers (such as 
members of the PGP, the participant hospital, and post-acute care 
providers), implementing strategies designed to address and manage the 
comorbidities of CJR beneficiaries.
    (iv) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, a CJR collaborator that is an 
ACO must meet the following criteria:
    (A) The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to a CJR beneficiary during a CJR episode that 
occurred during the same performance year for which the participant 
hospital accrued the internal cost savings or earned the reconciliation 
payment that comprises the gainsharing payment or was assessed a 
repayment amount; and
    (B) The ACO must have contributed to CJR activities and been 
clinically involved in the care of CJR beneficiaries during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment or was assessed the repayment amount. 
For example, an ACO might be have been clinically involved in the care 
of CJR beneficiaries by:
    (1) Providing care coordination services to CJR beneficiaries 
during and/or after inpatient admission;
    (2) Engaging with a participant hospital in care redesign 
strategies, and actually performing a role in implementing such 
strategies, that are designed to improve the quality of care and reduce 
spending for CJR episodes; or
    (3) In coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the participant hospital, and 
post-acute care providers), implementing strategies designed to address 
and manage the comorbidities of CJR beneficiaries.
    (3)(i) The methodology for accruing, calculating and verifying 
internal cost savings must be transparent, measurable, and verifiable 
in accordance with generally accepted accounting principles (GAAP) and 
Government Auditing Standards (The Yellow Book).
    (ii) The methodology used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the participant 
hospital through the documented implementation of CJR activities 
identified by the participant hospital and must exclude:
    (A) Any savings realized by any individual or entity that is not 
the participant hospital; and
    (B) ``Paper'' savings from accounting conventions or past 
investment in fixed costs.

[[Page 51010]]

    (4) The total amount of a gainsharing payment for a performance 
year paid to a CJR collaborator must not exceed the following:
    (i) In the case of a CJR collaborator who is a physician or 
nonphysician practitioner, 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the participant hospital's CJR 
beneficiaries during CJR episodes that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being made.
    (ii) In the case of a CJR collaborator that is a PGP, 50 percent of 
the Medicare-approved amounts under the PFS for items and services 
billed by the PGP and furnished to the participant hospital's CJR 
beneficiaries by members of the PGP during CJR episodes that occurred 
during the same performance year for which the participant hospital 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment being made.
    (5) The amount of any gainsharing payments must be determined in 
accordance with a methodology that is substantially based on quality of 
care and the provision of CJR activities. The methodology may take into 
account the amount of such CJR activities provided by a CJR 
collaborator relative to other CJR collaborators.
    (6) For a performance year, the aggregate amount of all gainsharing 
payments that are derived from a reconciliation payment must not exceed 
the amount of the reconciliation payment the participant hospital 
receives from CMS.
    (7) No entity or individual, whether a party to a sharing 
arrangement 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 past or anticipated referrals or business otherwise 
generated by, between or among the participant hospital, any CJR 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with a participant 
hospital, CJR collaborator, collaboration agent, or downstream 
collaboration agent.
    (8) 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.
    (9) The sharing arrangement must require the participant hospital 
to recoup any gainsharing payment that contained funds derived from a 
CMS overpayment on a reconciliation report or was based on the 
submission of false or fraudulent data.
    (10) 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--
    (i) Issued, distributed, or paid prior to the calculation by CMS of 
a repayment amount reflected in a reconciliation report;
    (ii) Loans, advance payments, or payments for referrals or other 
business; or
    (iii) Assessed by a participant hospital if it does not owe a 
repayment amount.
    (11) The participant hospital must not receive any amounts under a 
sharing arrangement from a CJR collaborator that are not alignment 
payments.
    (12) For a performance 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.
    (13) The aggregate amount of all alignment payments from a CJR 
collaborator to the participant hospital may not be greater than:
    (i) With respect to a CJR collaborator other than an ACO, 25 
percent of the participant hospital's repayment amount.
    (ii) With respect to a CJR collaborator that is an ACO, 50 percent 
of the participant hospital's repayment amount.
    (14) The methodology for determining alignment payments must not 
directly account for the volume or value of past or anticipated 
referrals or business otherwise generated by, between or among the 
participant hospital, any CJR collaborator, any collaboration agent, 
any downstream collaboration agent, or any individual or entity 
affiliated with a participant hospital, CJR collaborator, collaboration 
agent, or downstream collaboration agent.
    (15) All gainsharing payments and any alignment payments must be 
administered by the participant hospital in accordance with generally 
accepted accounting principles (GAAP) and Government Auditing Standards 
(The Yellow Book).
    (16) All gainsharing payments and alignment payments must be made 
by check, electronic funds transfer, or another traceable cash 
transaction.
    (d) Documentation requirements. (1) Participant hospitals must:
    (i) Document the sharing arrangement contemporaneously with the 
establishment of the arrangement;
    (ii) Maintain accurate current and historical lists of all CJR 
collaborators, including collaborator names and addresses; update such 
lists on at least a quarterly basis; and publicly report the current 
and historical lists of CJR collaborators on a Web page on the 
participant hospital's Web site; and
    (iii) Maintain and require each CJR collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
the:
    (A) Nature of the payment (gainsharing payment or alignment 
payment);
    (B) Identity of the parties making and receiving the payment;
    (C) Date of the payment;
    (D) Amount of the payment; and
    (E) Date and amount of any recoupment of all or a portion of a CJR 
collaborator's gainsharing payment.
    (2) The participant hospital must keep records of:
    (i) Its process for determining and verifying its potential and 
current CJR collaborators' eligibility to participate in Medicare;
    (ii) Its plan to track internal cost savings;
    (iii) Information on the accounting systems used to track internal 
cost savings;
    (iv) A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings; and
    (v) Its plan to track gainsharing payments and alignment payments.
    (3) The participant hospital must retain and provide access to, and 
must require each CJR collaborator to retain and provide access to, the 
required documentation in accordance with Sec.  510.110.
0
14. Section 510.505 is revised to read as follows:


Sec.  510.505  Distribution arrangements.

    (a) General. (1) A PGP or ACO that has entered into a sharing 
arrangement with a participant hospital may distribute all or a portion 
of any gainsharing payment it receives from the participant hospital 
only in accordance with a distribution arrangement.
    (2) All distribution arrangements must comply with the provisions 
of this section and all other applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All distribution arrangements must be in 
writing and

[[Page 51011]]

signed by the parties, contain the date of the agreement, and be 
entered into before care is furnished to EPM beneficiaries under the 
distribution arrangement.
    (2) Participation in a distribution arrangement must be voluntary 
and without penalty for nonparticipation.
    (3) The distribution arrangement must require the collaboration 
agent to comply with all applicable laws and regulations.
    (4) The opportunity to make or receive a distribution payment must 
not be conditioned directly or indirectly on the volume or value of 
past or anticipated referrals or business otherwise generated by, 
between or among the participant hospital, any CJR collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any distribution payments from an ACO must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision of CJR activities and that may 
take into account the amount of such CJR activities provided by a 
collaboration agent relative to other collaboration agents.
    (6) The amount of any distribution payments from a PGP to a member 
must be determined either in a manner that complies with Sec.  
411.352(g) of this chapter or in accordance with a methodology that is 
substantially based on quality of care and the provision of CJR 
activities and that may take into account the amount of such CJR 
activities provided by a collaboration agent relative to other 
collaboration agents.
    (7) Except for a distribution payment from a PGP to a PGP member 
that complies with Sec.  411.352(g), a collaboration agent is eligible 
to receive a distribution payment only if the collaboration agent 
furnished or billed for an item or service rendered to a CJR 
beneficiary during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being distributed.
    (8) Except for a distribution payment from a PGP to a PGP member 
that complies with Sec.  411.352(g), the total amount of distribution 
payments for a performance year paid to a collaboration agent must not 
exceed the following:
    (i) In the case of a collaboration agent who is physician or 
nonphysician practitioner, 50 percent of the total Medicare-approved 
amounts under the PFS for items and services furnished by the 
collaboration agent to the participant hospital's CJR beneficiaries 
during CJR episodes that occurred during the same performance year for 
which the participant hospital accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment being distributed.
    (ii) In the case of a collaboration agent that is a PGP, 50 percent 
of the total Medicare-approved amounts under the PFS for items and 
services billed by the PGP for items and services furnished to the 
participant hospital's CJR beneficiaries during a CJR episode that 
occurred during the same performance year for which the participant 
hospital accrued the internal cost savings or earned the reconciliation 
payment that comprises the gainsharing payment being distributed.
    (9) With respect to the distribution of any gainsharing payment 
received by a PGP or ACO, the total amount of all distribution payments 
must not exceed the amount of the gainsharing payment received by the 
CJR collaborator from the participant hospital.
    (10) All distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction.
    (11) The collaboration agent must retain the 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 the collaboration agent to reduce or limit medically 
necessary items and services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (13) The CJR collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  510.110, including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any distribution payment(s).
    (iii) The identity of each collaboration agent that received a 
distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any distribution payment.
    (14) The CJR collaborator may not enter into a distribution 
arrangement with any individual or entity that has a sharing 
arrangement with the same participant hospital.
    (15) The CJR collaborator must retain and provide access to, and 
must require collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  510.110.
0
15. Section 510.506 is added to read as follows:


Sec.  510.506  Downstream distribution arrangements.

    (a) General. (1) An ACO participant that is a PGP and that has 
entered into a distribution arrangement with a CJR collaborator that is 
an ACO may distribute all or a portion of any distribution payment it 
receives from the CJR collaborator only in accordance with downstream 
distribution arrangement.
    (2) All downstream distribution arrangements must comply with the 
provisions of this section and all applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All downstream distribution arrangements must 
be in writing and signed by the parties, contain the date of the 
agreement, and be entered into before care is furnished to CJR 
beneficiaries under the downstream distribution arrangement.
    (2) Participation in a downstream distribution arrangement must be 
voluntary and without penalty for nonparticipation.
    (3) The downstream distribution arrangement must require the 
downstream collaboration agent to comply with all applicable laws and 
regulations.
    (4) The opportunity to make or receive a downstream distribution 
payment must not be conditioned directly or indirectly on the volume or 
value of past or anticipated referrals or business otherwise generated 
by, between or among the participant hospital, any CJR collaborator, 
any collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with a participant hospital, CJR 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any downstream distribution payment must be 
determined either in a manner that complies with Sec.  411.352(g) of 
this chapter or in accordance with a methodology that is substantially 
based on the quality of care and the provision of CJR activities and 
that may take into account the amount of such CJR activities provided 
by a downstream collaboration agent relative to other downstream 
collaboration agents.
    (6) Except for a downstream distribution payment that complies with

[[Page 51012]]

Sec.  411.352(g), a downstream collaboration agent is eligible to 
receive a downstream distribution payment only if the PGP billed for an 
item or service furnished by the downstream collaboration agent to a 
CJR beneficiary during a CJR episode that occurred during the same 
performance year for which the participant hospital accrued the 
internal cost savings or earned the reconciliation payment that 
comprise the gainsharing payment from which the ACO made the 
distribution payment to the PGP that is an ACO participant.
    (7) Except for a downstream distribution payment that complies with 
Sec.  411.352(g), the total amount of downstream distribution payments 
for a performance year paid to a downstream collaboration agent must 
not exceed 50 percent of the total Medicare-approved amounts under the 
PFS for services billed by the PGP and furnished by the downstream 
collaboration agent to the participant hospital's CJR beneficiaries 
during CJR episodes that occurred during the same performance year for 
which the participant hospital accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment from which the ACO made the distribution payment to the PGP 
that is an ACO participant.
    (8) The total amount of all downstream distribution payments made 
to downstream collaboration agents must not exceed the amount of the 
distribution payment received by the PGP from the ACO.
    (9) All downstream distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction.
    (10) The downstream collaboration agent must retain his or her 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
    (11) The downstream distribution arrangement must not--
    (i) Induce the downstream 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.
    (12) The PGP must maintain contemporaneous documentation regarding 
downstream distribution arrangements in accordance with Sec.  510.110, 
including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any downstream distribution payment.
    (iii) The identity of each downstream collaboration agent that 
received a downstream distribution payment.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any downstream distribution payment.
    (13) The PGP may not enter into a downstream distribution 
arrangement with any PGP member who has either of the following:
    (i) A sharing arrangement with a participant hospital.
    (ii) A distribution arrangement with the ACO the PGP is a 
participant in.
    (14) The PGP must retain and provide access to, and must require 
downstream collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  510.110.
0
16. Section 510.515 is amended by revising paragraphs (a)(2) and (3) 
and (b) through (d) and removing paragraph (e).
    The revisions read as follows:


Sec.  510.515  Beneficiary incentives under the CJR model.

* * * * *
    (a) * * *
    (2) The item or service provided must be reasonably connected to 
medical care provided to a beneficiary during a CJR episode of care.
    (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 (c) of this section, for a beneficiary in a CJR episode by 
engaging the beneficiary in better managing his or her own health.
    (b) Technology provided to a CJR beneficiary. Beneficiary 
engagement incentives involving technology are subject to the following 
additional conditions:
    (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 (c) 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 CJR participant; 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.
    (c) Clinical goals of the CJR model. The following are the 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 LEJR procedure.
    (d) 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 established contemporaneously 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 documentation regarding items of technology exceeding $100 
in retail value must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of a CJR episode as described 
in paragraph (b)(3) of this section.
    (4) The CJR participant hospital must retain and provide access to 
the required documentation in accordance with Sec.  510.110.
0
17. Section 510.610 is revised to read as follows:


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 that begin on or after January 1, 2017, CMS waives the SNF 3-
day rule for coverage of a SNF stay for a beneficiary who meets the 
eligibility criteria in 510.205 on the date of discharge from the 
anchor hospitalization, but only if the SNF is identified on the 
applicable calendar quarter list of qualified SNFs at the time of the 
CJR beneficiary's admission to the SNF.
    (b) Financial liability for non-covered SNF services. (1) If CMS 
determines that the waiver requirements specified in paragraph (a) of 
this section were not met, the following apply:
    (1) CMS makes no payment to a SNF for SNF services if the SNF 
admits a CJR beneficiary who has not had a qualifying inpatient stay.
    (2) In the event that CMS makes no payment for SNF services 
furnished by a SNF as a result of paragraph (b)(1) of this section, the 
beneficiary protections specified in paragraph (b)(3) of this section 
apply, unless the participant hospital has provided the beneficiary 
with a discharge planning notice in accordance with 501.405(b)(4).
    (3) If the participant hospital does not provide the beneficiary 
with a discharge planning notice in accordance with Sec.  
510.405(b)(4)--

[[Page 51013]]

    (A) The SNF must not charge the beneficiary for the expenses 
incurred for such services;
    (B) The SNF must return to the beneficiary any monies collected for 
such services; and
    (C) The participant hospital is financially liable for the expenses 
incurred for such services.
    (4) If the participant hospital provided a discharge planning 
notice to the beneficiary in accordance with Sec.  510.405(b)(4), then 
normal SNF coverage requirements apply and the beneficiary may be 
financially liable for noncovered SNF services.
    (c) Other requirements. All other Medicare rules for coverage and 
payment of Part A-covered services continue to apply except as 
otherwise waived in this part.
0
18. Section 510.620 is amended by revising paragraph (a) to read as 
follows:


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

    (a) Waiver of deductible and coinsurance. CMS waives the 
requirements of sections 1813 and 1833(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.
* * * * *
0
19. Part 512 is added to subchapter H to read as follows:

PART 512--EPISODE PAYMENT MODEL

Sec.
Subpart A--General Provisions
512.1 Basis and scope.
512.2 Definitions.
Subpart B--Episode Payment Model Participants
512.100 EPM episodes being tested.
512.105 Geographic areas.
512.110 Access to records and retention.
512.120 EPM participant CEHRT track requirements.
Subpart C--Scope of Episodes
512.200 Time periods for EPM episodes.
512.210 Included and excluded services.
512.230 Beneficiary inclusion criteria.
512.240 Determination of the EPM episode.
Subpart D--Pricing and Payment
512.300 Determination of episode quality-adjusted target prices and 
actual episode payments.
512.305 Determination of the NPRA and reconciliation process.
512.307 Subsequent calculations.
512.310 Appeals process.
512.315 Composite quality scores for determining reconciliation 
payment eligibility and effective and applicable discount factors.
512.320 Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.
512.350 Data sharing.
Subpart E--Quality Measures, Beneficiary Protections, and Compliance 
Enforcement
512.400 Quality measures and reporting--general.
512.411 Quality measures and reporting for AMI model.
512.412 Quality measures and reporting for CABG model.
512.413 Quality measures and reporting for SHFFT model.
512.450 Beneficiary choice and beneficiary notification.
512.460 Compliance enforcement.
Subpart F--Financial Arrangements and Beneficiary Incentives
512.500 Sharing arrangements under the EPM.
512.505 Distribution arrangements under the EPM.
512.510 Downstream distribution arrangements under the EPM.
512.520 Enforcement authority under the EPM.
512.525 Beneficiary engagement incentives under the EPM.
Subpart G--Waivers
512.600 Waiver of direct supervision requirement for certain post-
discharge home visits.
512.605 Waiver of certain telehealth requirements.
512.610 Waiver of SNF 3-day rule.
512.615 Waiver of certain post-operative billing restrictions.
512.620 Waiver of deductible and coinsurance that otherwise apply to 
reconciliation payments or repayments.
512.630 Waiver of physician definition for furnishing cardiac 
rehabilitation and intensive cardiac rehabilitation services to an 
EPM beneficiary.
Subpart H--CR Incentive Payment Model for EPM and Medicare Fee-for-
Service Participants
512.700 Basis and scope.
512.703 CR incentive payment model participants.
512.705 CR/ICR services that count towards CR incentive payments.
512.710 Determination of CR incentive payments.

Provisions for FFS-CR Participants

512.715 Access to records and retention for FFS-CR participants.
512.720 Appeals process for FFS-CR participants.
512.725 Data sharing for FFS-CR participants.
512.730 Compliance enforcement for FFS-CR participants.
512.735 Enforcement authority for FFS-CR participants.
512.740 Beneficiary engagement incentives for FFS-CR participant 
use.
512.745 Waiver of physician definition for furnishing CR and ICR 
services to a FFS-CR beneficiary.
Subparts I-J [Reserved]
Subpart K--Model Termination
512.900 Termination of an episode payment model.
512.905 Termination of the CR Incentive Payment 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.  512.1  Basis and scope.

    (a) Basis. This part implements the test of episode payment models 
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 each episode payment model.
    (2) The episodes being tested in each episode payment model.
    (3) The methodology for pricing and payment under each episode 
payment model.
    (4) Quality performance standards and quality reporting 
requirements.
    (5) Safeguards to ensure preservation of beneficiary choice and 
beneficiary notification.


Sec.  512.2  Definitions.

    For the purposes of this part, the following definitions are 
applicable unless otherwise stated:
    ACO means an accountable care organization, as defined at Sec.  
425.20 of this chapter, that participates in the Shared Savings 
Program.
    ACO participant has the meaning set forth in Sec.  425.20 of this 
chapter.
    ACO provider/supplier has the meaning set forth in Sec.  425.20 of 
this chapter.
    Actual episode payment means the sum of Medicare claims payments 
for items and services that are included in the episode in accordance 
with Sec.  512.210(a), excluding the items and services described in 
Sec.  512.210(b).
    Alignment payment means a payment from an EPM collaborator to an 
EPM participant under a sharing arrangement, for the sole purpose of 
sharing the EPM participant's responsibility for making repayments to 
Medicare.

[[Page 51014]]

    AMI means acute myocardial infarction, an event caused by 
diminished blood supply to the heart leading to irreversible heart 
muscle cell damage or death.
    AMI care period means a period of AMI care that would meet the 
requirements to be an AMI model episode in accordance with all 
provisions in subpart B if the FFS-CR participant were an AMI model 
participant.
    AMI model means the EPM for AMI.
    AMI model participant means an EPM participant that is an IPPS 
hospital (other than those hospitals specifically excepted under Sec.  
512.100(b)) with a CCN primary address in one of the geographic areas 
selected for participation in the AMI model in accordance with Sec.  
512.105(b), as of the date of selection or any time thereafter during 
any performance year.
    Anchor hospitalization means a hospitalization that initiates an 
EPM episode and has no subsequent inpatient-to-inpatient transfer 
chained anchor hospitalization.
    Anchor hospitalization portion means the part of an EPM episode 
that occurs during the anchor or chained anchor hospitalization.
    Anchor MS-DRG means the MS-DRG assigned to the first 
hospitalization discharge, which initiates an EPM episode.
    Applicable discount factor means the discount percentage 
established by the EPM participant's quality category as determined in 
Sec.  512.315, that is applied to the episode benchmark price for 
purposes of determining an EPM participant's Medicare repayment in 
performance years 2 (DR) and 3.
    BPCI stands for the Bundled Payment for Care Improvement 
initiative.
    CABG means coronary artery bypass graft, a surgical procedure that 
diverts the flow of blood around a section of a blocked or partially 
blocked artery in the heart, creating a new pathway that improves blood 
flow to heart muscle.
    CABG care period means a period of CABG care that would meet the 
requirements to be a CABG model episode in accordance with all 
provisions in subpart B if the FFS-CR participant were a CABG model 
participant.
    CABG model means the EPM for CABG.
    CABG model participant means an EPM participant that is an IPPS 
hospital (other than those hospitals specifically excepted under Sec.  
512.100(b)) with a CCN primary address in one of the geographic areas 
selected for participation in the CABG model in accordance with Sec.  
512.105(b), as of the date of selection or any time thereafter during 
any performance year.
    CAH means a critical access hospital designated under subpart F of 
part 485 of this chapter.
    CCN stands for CMS certification number.
    CEC stands for Comprehensive ESRD Care Initiative.
    CEHRT means certified electronic health record technology that meet 
the requirements of 45 CFR 170.102.
    Chained anchor hospitalization means an anchor hospitalization that 
initiates an AMI model episode and has at least one subsequent 
inpatient-to-inpatient transfer.
    Collaboration agent means an individual or entity that is not an 
EPM collaborator and that is either of the following:
    (1) A PGP member that has entered into a distribution arrangement 
with the same PGP in which he or she is an owner or employee.
    (2) An ACO participant or ACO provider/supplier that has entered 
into a distribution arrangement with the same ACO in which it is 
participating.
    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.
    CR means cardiac rehabilitation as defined in Sec.  410.49(a) of 
this chapter, a physician-supervised program that furnishes physician 
prescribed exercise, cardiac risk factor modification, psychosocial 
assessment, and outcomes assessment.
    CR amount means the dollar amount determined by the number of CR/
ICR services paid by Medicare to any provider or supplier for a 
beneficiary in an AMI or CABG model episode or AMI care period or CABG 
care period.
    CR incentive payment means a payment made by CMS to an EPM-CR 
participant or FFS-CR participant for CR/ICR service use that is the 
sum of the CR amounts as determined in accordance with Sec.  512.710.
    CR incentive payment model means the model testing CR incentive 
payments for CR/ICR service use made in accordance with subpart H.
    CR participant means all EPM-CR participants and FFS-CR 
participants.
    CR performance year means one of the years in which the CR 
incentive payment model is being tested. Performance years for the CR 
incentive payment model correlate to calendar years with the exception 
of performance year 1, which is July 1, 2017 through December 31, 2017.
    CR service count means the number of CR/ICR services paid by 
Medicare to any provider or supplier for a beneficiary in an AMI or 
CABG model episode or AMI care period or CABG care period.
    Distribution arrangement means a financial arrangement between an 
EPM collaborator that is an ACO or PGP and a collaboration agent for 
the sole purpose of distributing some or all of a gainsharing payment 
received by the ACO or PGP.
    Distribution payment means a payment from an EPM collaborator that 
is an ACO or PGP to a collaboration agent, under a distribution 
arrangement, composed only of gainsharing payments.
    DME stands for durable medical equipment.
    Downstream collaboration agent means an individual who is not an 
EPM collaborator or a collaboration agent and who is a PGP member that 
has entered into a downstream distribution arrangement with the same 
PGP in which he or she is an owner or employee, and where that PGP is a 
collaboration agent.
    Downstream distribution arrangement means a financial arrangement 
between a collaboration agent that is both a PGP and an ACO participant 
and a downstream collaboration agent for the sole purpose of 
distributing some or all of a distribution payment received by the PGP.
    Downstream distribution payment means a payment from a 
collaboration agent that is both a PGP and an ACO participant to a 
downstream collaboration agent, under a downstream distribution 
arrangement, composed only of distribution payments.
    Effective discount factor means the discount factor established by 
the EPM participant's quality category as determined in Sec.  512.315, 
that is applied to the episode benchmark price to calculate the 
quality-adjusted target price.
    Episode attribution means the process of assigning financial 
responsibility for an EPM episode to an EPM participant.
    Episode benchmark price means a dollar amount assigned to EPM 
episodes based on historical episode data (3 years of historical 
Medicare payment data grouped into EPM episodes according to the EPM 
episode definitions as discussed in Sec.  512.300(b)) prior to the 
application of the effective discount factor, as described in Sec.  
512.300(d).

[[Page 51015]]

    Episode payment model (EPM) means the AMI model, CABG model, SHFFT 
model, or another model with payment made on an episode basis in 
accordance with this part. For each section of regulations, a single 
model applies when reading the entire section.
    EPM activities means activities related to promoting accountability 
for the quality, cost, and overall care for EPM beneficiaries, 
including managing and coordinating care; encouraging investment in 
infrastructure, enabling technologies, and redesigned care processes 
for high quality and efficient service delivery; the provision of items 
and services during an EPM episode in a manner that reduces costs and 
improves quality; or carrying out any other obligation or duty under 
the EPM.
    EPM beneficiary means a beneficiary who meets the beneficiary 
inclusion criteria in Sec.  512.230 and who is in an EPM episode.
    EPM collaborator means an ACO or one of the following Medicare-
enrolled individuals or entities that enters into a sharing 
arrangement:
    (1) SNF.
    (2) HHA.
    (3) LTCH.
    (4) IRF.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Provider or supplier of outpatient therapy services.
    (8) PGP.
    (9) Hospital.
    (10) CAH.
    EPM composite quality score means a score computed for each EPM 
participant's level of quality performance and improvement and 
successful reporting of voluntary data, if applicable, on specified EPM 
quality measures as described in Sec.  512.315.
    EPM-CR participant means an AMI or CABG model participant that is 
eligible to receive CR incentive payments from CMS in accordance with 
Sec.  512.710.
    EPM episode of care (or Episode) means all Medicare Part A and Part 
B items and services described in Sec.  512.210(a) (and excluding the 
items and services described in Sec.  512.210(b)) that are furnished to 
an EPM beneficiary described in Sec.  512.240 that begins with the 
beneficiary's admission to an anchor hospitalization, with the day of 
discharge itself from the anchor hospitalization or from the final 
hospital in a chained anchor hospitalization being counted as the first 
day of the 90-day post-discharge period.
    EPM participant means a Medicare provider or supplier that is 
eligible to receive payment from CMS on an episode basis for services 
rendered to EPM beneficiaries.
    ESRD stands for end-stage renal disease.
    FFS-CR beneficiary means a beneficiary attributed to an FFS-CR 
participant and receiving care during an AMI care period or CABG care 
period.
    FFS-CR participant means a hospital that is not an EPM participant 
and that is eligible to receive CR incentive payments from CMS in 
accordance with Sec.  512.710.
    Gainsharing payment means a payment from an EPM participant to an 
EPM collaborator, under a sharing arrangement, composed of only 
reconciliation payments or internal cost savings or both.
    HCAHPS stands for Hospital Consumer Assessment of Healthcare 
Providers and Systems.
    HCPCS stands for CMS Common Procedure Coding System.
    Health Insurance Claim Number (HICN) means the unique number 
assigned by the Social Security Administration to an individual for the 
purpose of identifying that individual as a Medicare beneficiary.
    HHA means a Medicare-enrolled home health agency.
    Historical episode payment means the expenditures for episodes that 
occurred during the historical period used to determine the EPM episode 
benchmark price.
    Hospital means a provider subject to the prospective payment system 
specified in Sec.  412.1(a)(1) of this chapter.
    ICD-CM stands for International Classification of Diseases, 
Clinical Modification.
    ICR means intensive cardiac rehabilitation as defined in Sec.  
410.49(a) of this chapter, a physician-supervised program that 
furnishes cardiac rehabilitation and has shown, in peer-reviewed 
published research, that it improves patients' cardiovascular disease 
through specific outcome measurements described in Sec.  410.49(c) of 
this chapter.
    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 EPM participant resulting from care 
redesign undertaken by such participant in connection with providing 
items and services to beneficiaries within specific EPM episodes. 
Internal cost savings does not include savings realized by any 
individual or entity that is not the EPM participant.
    Intracardiac procedures means procedures performed within the heart 
chambers, rather than within coronary artery blood vessels, through 
percutaneous access to blood vessels. These procedures are indicated 
for the treatment of congenital cardiac malformations, cardiac valve 
disease, and cardiac arrhythmias.
    IPF stands for inpatient psychiatric facility.
    IRF stands for inpatient rehabilitation facility.
    LTCH stands for long-term care hospital.
    MDH means a Medicare-dependent, small rural 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 a PGP and who 
has reassigned to the PGP his or her right to receive Medicare payment.
    MSA stands for metropolitan statistical area and means a CBSA 
associated with at least one urbanized area that has a population of at 
least 50,000.
    MS-DRG stands for Medicare severity diagnosis-related group, which 
is the classification of inpatient hospital discharges updated in 
accordance with Sec.  412.10 of this chapter.
    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) of this chapter).
    (5) A clinical social worker (as defined at Sec.  410.73(a) of this 
chapter).
    (6) A registered dietician or nutrition professional (as defined at 
Sec.  410.134 of this chapter).
    NPI stands for National Provider Identifier.
    NPRA means the net payment reconciliation amount determined in 
accordance with Sec.  512.305(c).
    OIG stands for the Department of Health and Human Services Office 
of Inspector General.
    PAC stands for post-acute care.
    PBPM stands for per-beneficiary-per-month.
    PCI means percutaneous coronary intervention, a procedure used to 
open blocked arteries in the heart through percutaneous placement of a 
small wire mesh tube that keeps the artery open

[[Page 51016]]

and minimizes the risk of it later narrowing.
    Performance year means one of the years in which the EPM is being 
tested. Performance years for the EPMs correlate to calendar years with 
the exception of performance year 1, which is July 1, 2017 through 
December 31, 2017.
    Performance year 2 (DR) means the second, third, and fourth 
quarters of performance year 2, which is from April 1, 2018 to December 
31, 2018, and during which an EPM participant assumes downside risk and 
would have Medicare repayment responsibility under the models.
    Performance year 2 (NDR) means the first quarter of performance 
year 2, which is from January 1, 2018 to March 31, 2018, and during 
which an EPM participant assumes no downside risk and therefore would 
have no Medicare repayment responsibility under the models.
    PFS means the Medicare Physician Fee Schedule authorized under 
section 1848 of the Social Security Act.
    PGP stands for physician group practice.
    Physician has the meaning set forth in section 1861(r) of the Act.
    Post-anchor hospitalization portion means the part of an episode 
that occurs after the anchor or chained anchor hospitalization.
    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 EPM episode.
    Price MS-DRG means the MS-DRG that applies when establishing the 
EPM benchmark episode price that applies to an EPM episode. For 
episodes without a chained anchor hospitalization, the price MS-DRG is 
the anchor MS-DRG. For episodes with a chained anchor admission, the 
price MS-DRG is assigned based on Sec.  512.300(c)(7).
    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-adjusted target price means the dollar amount assigned to 
EPM episodes as the result of reducing the episode benchmark price by 
the EPM participant's effective discount factor based on the EPM 
participant's quality category, as described in Sec.  512.315(b)(5), 
(c)(5) or (d)(5).
    Quality improvement points are points that CMS adds to an EPM 
participant's EPM composite quality score for a measure if the EPM 
participant's performance improves from the previous performance year 
according to the relevant EPM measure improvement methodology.
    Quality performance points are points that CMS adds to an EPM 
participant's EPM composite quality score for a measure based on the 
performance percentile scale and for successful submission of voluntary 
data if applicable to the EPM.
    Reconciliation payment means a payment made by CMS to an EPM 
participant as determined in accordance with Sec.  512.305(d).
    Repayment amount means the amount owed by an EPM participant to 
CMS, as reflected on a reconciliation report.
    RRC means a rural referral center that satisfies the criteria set 
forth in Sec.  412.96 of this chapter.
    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.
    SCH means a sole community hospital that meets the classification 
criteria specified in Sec.  412.92 of this chapter.
    Sharing arrangement means a financial arrangement between an EPM 
participant and an EPM collaborator for the sole purpose of making 
gainsharing payments or alignment payments under the EPM.
    SHFFT stands for surgical hip/femur fracture treatment and means 
surgical treatment for hip and femur fractures, other than hip 
replacements, consisting primarily of hip fixation procedures, with or 
without reduction of the fracture, as well as open and closed surgical 
approaches.
    SHFFT model means the EPM for SHFFT.
    SHFFT model participant means an EPM participant that is an IPPS 
hospital (other than those hospitals specifically excepted under Sec.  
512.100(b)) with a CCN primary address in one of the geographic areas 
selected for participation in a SHFFT model in accordance with Sec.  
512.105(a), as of the date of selection or any time thereafter during 
any performance year.
    SNF stands for skilled nursing facility.
    THA/TKA stands for total hip arthroplasty/total knee arthroplasty.
    Therapist means one of the following as defined at Sec.  484.4 of 
this chapter:
    (1) Physical therapist.
    (2) Occupational therapist.
    (3) Speech-language pathologist.
    TIN stands for taxpayer identification number.
    Two-sided risk arrangement means an arrangement in which the ACO 
may share savings with the Medicare program, if it meets the 
requirements for doing so, and is also liable for sharing losses 
incurred under the program or model, if it meets the criteria under 
which sharing losses occurs.

Subpart B--Episode Payment Model Participants


Sec.  512.100  EPM episodes being tested.

    (a) Initiation of an episode. An episode is initiated when an EPM 
participant admits a Medicare beneficiary described in Sec.  512.230 
for an anchor hospitalization.
    (b) Hospital exclusions. (1) A hospital is excluded from 
participating in EPMs for EPM anchor MS-DRGs that are included in BPCI 
episodes in which the hospital currently participates.
    (2) These exclusions cease to apply as of the date that the 
hospital no longer meets the conditions specified in this paragraph (b) 
or September 30, 2018, whichever date is sooner.
    (c) Types of EPM episodes. An EPM episode is initiated by a 
beneficiary's admission to an EPM participant for an anchor 
hospitalization that is paid under an EPM anchor MS-DRG and, in the 
case of the AMI model, with an AMI ICD-10-CM diagnosis code if the 
admission is under a PCI MS-DRG. The EPM anchor MS-DRGs and ICD-10-CM 
diagnosis codes for the EPM episodes are as follows:
    (1) Acute myocardial infarction (AMI). (i) Discharge under an AMI 
MS-DRG (MS-DRGs 280 to 282); or
    (ii) Discharge under a PCI MS-DRG (MS-DRGs 246 to 251) with an ICD-
10-CM diagnosis code of AMI on the claim for the anchor hospitalization 
in the principal or secondary diagnosis code position.
    (2) Coronary artery bypass graft (CABG). Discharge under a CABG MS-
DRG (MS-DRGs 231 to 236).
    (3) Surgical hip/femur fracture treatment (SHFFT). Discharge under 
a SHFFT MS-DRG (MS-DRG 480 to 482).
    (d) Identifying AMI historical episodes and EPM episodes with AMI 
ICD-CM diagnosis codes. CMS develops a list of AMI ICD-9-CM and ICD-10-
CM

[[Page 51017]]

diagnosis codes that identify the initiation of historical episodes or 
initiate AMI model episodes when reported in the principal or secondary 
diagnosis code position on the inpatient hospital claim for a 
historical hospitalization or the anchor hospitalization discharged 
under PCI MS-DRGs (MS-DRGs 246 to 251). The list of ICD-9-CM and ICD-
10-CM diagnosis codes representing AMI is posted on the CMS Web site.
    (1) On an annual basis, or more frequently as needed, CMS updates 
the list of ICD-10-CM diagnosis codes representing AMI to reflect 
coding changes or other issues brought to CMS's attention.
    (2) CMS applies the following standard when revising the list of 
ICD-10-CM diagnosis codes representing AMI: The ICD-10-CM diagnosis 
code is sufficiently specific that it represents an AMI.
    (3) CMS posts the following to the CMS Web site:
    (i) Potential AMI ICD-10-CM diagnosis codes for public comment; and
    (ii) A final AMI ICD-10-CM diagnosis code list after consideration 
of public comment.
    (4) CMS excludes AMI historical episodes with PCI MS-DRGs and 
inpatient claims that contain intracardiac ICD-9-CM procedure codes. 
CMS excludes historical AMI model episodes discharged under PCI MS-DRGs 
with an AMI ICD-9-CM diagnosis code in the principal or secondary 
diagnosis code position on the inpatient hospital claim from the AMI 
historical episodes that set episode benchmark prices if there is an 
intracardiac ICD-9-CM procedure code in any procedure code field on the 
inpatient hospital claim. The intracardiac ICD-9-CM procedure codes are 
as follows:
    (i) 35.52 (Repair of atrial septal defect with prosthesis, closed 
technique).
    (ii) 35.96 (Percutaneous balloon valvuloplasty).
    (iii) 35.97 (Percutaneous mitral valve repair with implant).
    (iv) 37.26 (Catheter based invasive electrophysiologic testing).
    (v) 37.27 (Cardiac mapping).
    (vi) 37.34 (Excision or destruction of other lesion or tissue of 
heart, endovascular approach).
    (vii) 37.36 (Excision, destruction, or exclusion of left atrial 
appendage).
    (viii) 37.90 (Insertion of left atrial appendage device).


Sec.  512.105  Geographic areas.

    (a) The SHFFT model shall be implemented in the same geographic 
areas as the CJR model as described under 42 CFR part 510.105.
    (b) The geographic areas for inclusion in the CABG and AMI models 
will be obtained using a random sampling of certain MSAs in the United 
States. All counties within each of the selected MSAs are selected for 
inclusion in the AMI and CABG models. CMS excludes MSAs that met the 
following criteria between January 1, 2014 and December 31, 2014 from 
the possibility of being selected geographic areas. MSAs are excluded 
if they:
    (1) Had fewer than 75 AMI episodes;
    (2) Had fewer than 75 AMI episodes that were not attributable to 
BPCI Model 2 or 4 AMI, CABG or PCI episodes; or
    (3) Had more than 50 percent of otherwise qualifying (BPCI or non 
BPCI) episodes attributable to a BPCI Model 2 or 4 AMI, CABG or PCI 
episodes.
    (c) In all geographic areas where the AMI, CABG, or SHFFT models 
are being implemented, the accountable financial entity shall be an 
acute care IPPS hospital.


Sec.  512.110  Access to records and retention.

    EPM participants, EPM collaborators, collaboration agents, 
downstream collaboration agents, and any other individuals or entities 
performing EPM activities must:
    (a) Allow the Government, including CMS, OIG, HHS 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 of care 
criteria, billings, lists of EPM collaborators, sharing arrangements, 
distribution arrangements, downstream distribution arrangements, and 
the documentation required under Sec. Sec.  512.500(d) and 512.525(d)) 
sufficient to enable the audit, evaluation, inspection, or 
investigation of the following:
    (1) The individual's or entity's compliance with EPM requirements 
and, if applicable, the individual's or entity's compliance with CR 
incentive payment model requirements.
    (2) The calculation, distribution, receipt, or recoupment of 
gainsharing payments, alignment payments, distribution payments, and 
downstream distribution payments.
    (3) The obligation to repay any reconciliation payments or CR 
incentive payments, if applicable, owed to CMS.
    (4) The quality of the services furnished to an EPM beneficiary 
during an EPM episode.
    (5) The sufficiency of EPM beneficiary notifications.
    (6) The accuracy of the EPM participant's submissions under CEHRT 
use requirements.
    (b) Maintain all such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the EPM 
participant's participation in the EPM or from the date of completion 
of any audit, evaluation, inspection, or investigation, whichever is 
later, unless--
    (1) CMS determines a particular record or group of records should 
be retained for a longer period and notifies the EPM participant at 
least 30 calendar days before the disposition date; or
    (2) There has been a dispute or allegation of fraud or similar 
fault against the EPM participant, EPM collaborator, collaboration 
agent, downstream collaboration agent, or any other individual or 
entity performing EPM activities in which case the records must be 
maintained for 6 years from the date of any resulting final resolution 
of the dispute or allegation of fraud or similar fault.


Sec.  512.120  EPM participant CEHRT track requirements.

    (a) EPM CEHRT use. For performance year 2 (DR) and performance 
years 3-5, EPM participants choose either of the following:
    (1) CEHRT use. EPM participants attest in a form and manner 
required by CMS to their use of CEHRT as defined in section 414.1305 to 
document and communicate clinical care with patients and other health 
professionals.
    (2) No CEHRT use. EPM participants do not attest in a form and 
manner required by CMS to their use of CEHRT as defined in Sec.  
414.1305 to document and communicate clinical care with patients and 
other health professionals.
    (b) Clinician financial arrangements list. Each EPM participant 
that chooses CEHRT use as provided in paragraph (a)(1) of this section 
must submit to CMS a clinician financial arrangements list in a form 
and manner specified by CMS on a no more than quarterly basis. The list 
must include the following information on individuals for the period of 
the EPM performance year specified by CMS:
    (1) EPM collaborators. For each EPM collaborator who is a 
physician, nonphysician practitioner, or provider of outpatient therapy 
services during the period of the EPM performance year specified by 
CMS:
    (i) The name, TIN, and NPI of the EPM collaborator.
    (ii) The start date and, if applicable, end date, for the sharing 
arrangement between the EPM participant and the EPM collaborator.

[[Page 51018]]

    (2) Collaboration agents. For each collaboration agent who is a 
physician or nonphysician practitioner of a PGP that is an EPM 
collaborator during the period of the EPM performance year specified by 
CMS:
    (i) The TIN of the PGP that is the EPM collaborator, and the name 
and NPI of the physician or nonphysician practitioner.
    (ii) The start date and, if applicable, end date, for the 
distribution arrangement between the EPM collaborator that is a PGP and 
the physician or nonphysician practitioner who is a PGP member.
    (3) Downstream collaboration agents. For each downstream 
collaboration agent who is a physician or nonphysician practitioner 
member of a PGP that is also an ACO participant in an ACO that is an 
EPM collaborator during the period of the EPM performance year 
specified by CMS:
    (i) The TIN of the PGP that is the ACO participant, and the name 
and NPI of the physician or nonphysician practitioner.
    (ii) The start date and, if applicable, end date, for the 
downstream distribution arrangement between the collaboration agent 
that is both PGP and an ACO participant and the physician or 
nonphysician practitioner who is a PGP member.
    (4) Attestation to no individuals. If there are no individuals that 
meet the requirements to be reported, as specified in paragraphs (b)(1) 
through (3) of this section, the EPM participant must attest in a form 
and manner required by CMS that there are no individuals to report on 
the clinician financial arrangements list.
    (c) Documentation requirements. (1) Each EPM participant that 
chooses CEHRT use as provided in paragraph (a)(1) of this section must 
maintain documentation of their attestation to CEHRT use and clinician 
financial arrangements lists.
    (2) The EPM participant must retain and provide access to the 
required documentation in accordance with Sec.  512.110.

Subpart C--Scope of Episodes


Sec.  512.200  Time periods for EPM episodes.

    All AMI, CABG, and SHFFT episodes begin on or after July 1, 2017 
and end on or before December 31, 2021.


Sec.  512.210  Included and excluded services.

    (a) Included services for an EPM. All Medicare Parts A and B items 
and services are included in the EPM episode, except as specified in 
paragraph (b) of this section. These services include, but are not 
limited to, the following:
    (1) Physicians' services.
    (2) Inpatient hospital services.
    (3) IPF services.
    (4) LTCH services.
    (5) IRF services.
    (6) SNF services.
    (7) HHA services.
    (8) Hospital outpatient services.
    (9) Independent outpatient therapy services.
    (10) Clinical laboratory services.
    (11) DME.
    (12) Part B drugs and biologicals.
    (13) Hospice.
    (14) PBPM payments under models tested under section 1115A of the 
Act.
    (b) Excluded services. The following items, services, and payments 
are excluded from the EPM episode:
    (1) Hemophilia clotting factors provided in accordance with Sec.  
412.115 of this chapter.
    (2) New technology add-on payments for medical devices 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 MS-DRG that 
initiates the EPM episode, or price anchor MS-DRG as applicable, as 
determined by CMS. Excluded services include, but are not limited to 
the following:
    (i) Inpatient hospital admissions for MS-DRGs that group to the 
following categories of diagnoses:
    (A) Oncology.
    (B) Trauma medical.
    (C) Chronic disease surgical unrelated to a condition likely to 
have been affected by care during the EPM episode, such as 
prostatectomy.
    (D) Acute disease surgical unrelated to a condition resulting from 
or likely to have been affected by care during the EPM episode, such as 
appendectomy.
    (ii) Medicare Part B services, as identified by the principal ICD-
CM diagnosis code on the claim that groups to the following categories 
of diagnoses:
    (A) Acute disease diagnoses unrelated to a condition resulting from 
or likely to have been affected care during the EPM episode, 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 care during the EPM episode or whether 
substantial services were likely to be provided for the chronic 
condition during the EPM episode.
    (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 for an EPM, as described 
in paragraph (b)(4) of this section.
    (iv) All PBPM model payments funded from CMS' Innovation Center 
appropriation.
    (c) Updating the lists of excluded services for EPMs. (1) The EPM 
lists that are based on anchor MS-DRG, or price MS-DRG, as applicable, 
of excluded MS-DRGs, ICD-9-CM and ICD-10-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 EPM lists of excluded services to reflect annual coding changes or 
other issues brought to CMS' attention.
    (3) CMS applies the following standards when revising the EPM lists 
of excluded services for reasons other than to reflect annual coding 
changes:
    (i) Items or services that are directly related to the EPM episode 
or the quality or safety of the EPM episode care would be included in 
the EPM episode.
    (ii) Items or services for chronic conditions that may be affected 
by the EPM episode care would be related and included in the EPM 
episode.
    (iii) Items and services for chronic conditions that are generally 
not affected by the EPM episode care would be excluded from the EPM 
episode.
    (iv) Items and services for acute clinical conditions not arising 
from existing, EPM episode-related chronic clinical conditions or 
complications of EPM episode care would be excluded from the EPM 
episode.
    (v) PBPM payments under CMS models determined to be primarily used 
for care coordination or care management services for clinical 
conditions in EPM excluded categories of diagnoses, as described in 
paragraph (b)(4)(iii) of this section would be excluded from the EPM 
episode.
    (4) CMS posts the following on the CMS Web site:
    (i) Potential revisions to the EPM exclusion lists to allow for 
public comment; and
    (ii) Updated EPM exclusion lists after consideration of public 
comment.


Sec.  512.230  Beneficiary inclusion criteria.

    EPM episode care is furnished to beneficiaries who meet all of the 
following criteria upon admission to the anchor hospitalization:
    (a) Enrolled in Medicare Part A and Part B.
    (b) Eligibility for Medicare is not based on end-stage renal 
disease, as described in Sec.  406.13 of this chapter.

[[Page 51019]]

    (c) Not enrolled in any managed care plan (for example, Medicare 
Advantage, health care prepayment plans, or cost-based health 
maintenance organizations).
    (d) Not covered under a United Mine Workers of America health care 
plan.
    (e) Have Medicare as their primary payer pursuant to the 
requirements in 42 CFR 411.20, et seq.
    (f) Not aligned to an ACO in the Next Generation ACO model or an 
ACO in a track of the Comprehensive ESRD Care Initiative incorporating 
downside risk for financial losses.
    (g) Not under the care of an attending or operating physician, as 
designated on the inpatient hospital claim, who is a member of a 
physician group practice that initiates BPCI Model 2 episodes at the 
EPM participant for the MS-DRG that would be the anchor MS-DRG under 
the EPM.
    (h) Not already in any BPCI model episode.
    (i) Not already in an AMI; SHFFT; CABG; or CJR model episode with 
an episode definition that does not exclude the MS-DRG that would be 
the anchor MS-DRG under the EPM.


Sec.  512.240  Determination of the EPM episode.

    (a) AMI Model--(1) General. The AMI model episode begins with the 
admission of a Medicare beneficiary as described in Sec.  512.230 to an 
AMI model participant for an anchor hospitalization.
    (i) If there is no chained anchor hospitalization, then the AMI 
model episode 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.
    (ii) If there is a chained anchor hospitalization, then the AMI 
model episode ends on the 90th day after the date of discharge from the 
final hospitalization in the chained anchor hospitalization, with the 
day of discharge itself being counted as the first day in the 90-day 
post-discharge period.
    (2) AMI model episode attribution in chained anchor 
hospitalizations. AMI model episodes that include a chained anchor 
hospitalization are attributed to the AMI model participant that 
initiated the AMI model episode. The methodology for assigning the 
price MS-DRG in these circumstances is specified in Sec.  
512.300(c)(7).
    (3) Cancellation of an AMI model episode. The AMI model episode is 
canceled and is not included in the determination of NPRA as specified 
in Sec.  512.305 if the beneficiary does any of the following during 
the episode:
    (i) Ceases to meet any criterion listed in Sec.  512.230(a) through 
(f).
    (ii) Dies during the anchor hospitalization.
    (iii) Is discharged from the final hospital in a chained anchor 
hospitalization under an MS-DRG that is not an AMI MS-DRG (MS-DRGs 280 
to 282), PCI MS-DRG (MS-DRGs 246 to 251), or CABG MS-DRG (MS-DRGs 231 
to 236), regardless of whether the final transfer hospital is an AMI or 
CABG model participant.
    (iv) Initiates any BPCI model episode.
    (b) CABG Model--(1) General. The CABG model episode begins with the 
admission of a Medicare beneficiary as described in Sec.  512.230 to a 
CABG model participant 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.
    (2) Cancellation of a CABG model episode. The CABG model episode is 
canceled and is not included in the determination of NPRA as specified 
in Sec.  512.305 if the beneficiary does any of the following during 
the episode:
    (i) Ceases to meet any criterion listed in Sec.  512.230(a) through 
(f).
    (ii) Dies during the anchor hospitalization.
    (iii) Initiates any BPCI model episode.
    (c) SHFFT Model--(1) General. The SHFFT model episode begins with 
the admission of a Medicare beneficiary as described in Sec.  512.230 
to a SHFFT model participant 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.
    (2) Cancellation of a SHFFT model episode. The SHFFT model episode 
is canceled and is not included in the determination of NPRA as 
specified in Sec.  512.305 if the beneficiary does any of the following 
during the episode:
    (i) Ceases to meet any criterion listed in Sec.  512.230 (a) 
through (f).
    (ii) Dies during the anchor hospitalization.
    (iii) Initiates any BPCI model episode.

Subpart D--Pricing and Payment


Sec.  512.300  Determination of episode quality-adjusted target prices 
and actual episode payments.

    (a) General. CMS establishes episode quality-adjusted target prices 
and calculates actual episode payments for EPM participants for each 
performance year of the EPMs as specified in this section.
    (b) Calculating episode quality-adjusted target prices. Episode 
quality-adjusted target prices and actual episode payments are 
calculated for episodes according to the following:
    (1) For episodes involving AMI, MS-DRGs
    (i) 280 (Acute myocardial infarction, discharged alive with MCC)
    (ii) 281 (Acute myocardial infarction, discharged alive with CC)
    (iii) 282 (Acute myocardial infarction, discharged alive without 
CC/MCC)
    (iv) 246 (Perc cardiovasc proc with drug-eluting stent with MCC or 
4+ vessels/stents)
    (v) 247 (Perc cardiovasc proc with drug-eluting stent without MCC)
    (vi) 248 (Perc cardiovasc proc with non-drug-eluting stent with MCC 
or 4+ vessels/stents)
    (vii) 249 (Perc cardiovasc proc with non-drug-eluting stent without 
MCC)
    (viii) 250 (Perc cardiovasc proc without coronary artery stent with 
MCC)
    (ix) 251 (Perc cardiovasc proc without coronary artery stent 
without MCC).
    (2) For episodes involving CABG, MS-DRGs
    (i) 231 (Coronary bypass with PTCA with MCC)
    (ii) 232 (Coronary bypass with PTCA without MCC)
    (iii) 233 (Coronary bypass with cardiac cath with MCC)
    (iv) 234 (Coronary bypass with cardiac cath without MCC)
    (v) 235 (Coronary bypass without cardiac cath with MCC)
    (vi) 236 (Coronary bypass without cardiac cath without MCC)
    (3) For episodes involving SHFFT, MS-DRGs
    (i) 480 (Hip and femur procedures except major joint with MCC)
    (ii) 481 (Hip and femur procedures except major joint with CC)
    (iii) 482 (Hip and femur procedures except major joint without CC 
or MCC)
    (c) Calculating quality-adjusted target prices. CMS calculates 
quality adjusted target prices as specified in Sec.  512.300(c)(1) 
through (13).
    (1) Calculation of the historical expenditures. CMS calculates 
historical expenditure calculations based on the following calendar 
years:
    (i) Episodes beginning in 2013 through 2015 for performance years 1 
and 2.
    (ii) Episodes beginning in 2015 through 2017 for performance years 
3 and 4.
    (iii) Episodes beginning in 2017 through 2019 for performance year 
5.
    (2) Calculation of the quality-adjusted target prices. CMS 
calculates quality-adjusted target prices based on a blend of each EPM-
participant hospital-

[[Page 51020]]

specific and regional historical episode expenditures.
    (i) The region corresponds to the U.S. Census Division associated 
with the primary address of the CCN of the EPM participant and the 
regional component is based on episodes occurring at all acute care 
hospitals in said region, except as follows.
    (ii) In cases where an MSA selected for participation in an EPM 
spans more than one U.S. Census Division, the entire MSA is grouped 
into the U.S. Census Division where the largest city by population in 
the MSA is located for quality-adjusted target price and episode 
payment calculations.
    (3) Calculation of the quality-adjusted target price blend. The 
quality-adjusted target price blend consists of the following:
    (i) Two-thirds of the EPM participant'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 EPM participant'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.
    (4) Exception for low-volume hospitals. (i) For the SHFFT model, 
quality-adjusted target prices for participants with fewer than 50 
SHFFT model episodes in total across the 3 historical years of data 
used to calculate the quality-adjusted target price are based on 100 
percent regional historical episode payments.
    (ii) For the AMI model, quality-adjusted target prices for price 
MS-DRGs 280-282 for participants with fewer than 75 AMI model episodes 
with price MS-DRGs 280-282 in total across the 3 historical years of 
data used to calculate the quality-adjusted target price are based on 
100 percent regional historical episode payments.
    (iii) For the AMI model, quality-adjusted target prices for price 
MS-DRGs 246-251 for participants with fewer than 125 AMI model episodes 
with price MS-DRGs 246-251 in total across the 3 historical years of 
data used to calculate the quality-adjusted target price are based on 
100 percent regional historical episode payments.
    (iv) For the CABG model, quality-adjusted target prices for 
participants with fewer than 50 CABG model episodes in total across the 
3 historical years of data used to calculate the quality-adjusted 
target price are based on 100 percent regional historical episode 
payments.
    (5) Exception for recently merged or split hospitals. EPM-
participant hospital-specific historical episode payments for EPM 
participants 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).
    (6) Episodes that straddle performance years or payment updates. 
Where an episode straddles performance years or payment updates, the 
quality-adjusted target price is based on the quality-adjusted target 
price for the type of episode as of the date of admission for the 
anchor hospitalization.
    (7) Adjustments for certain hospitalizations under the AMI and CABG 
models--(i) Adjustments for chained anchor hospitalizations that 
initiate AMI model episodes with any of AMI MS-DRGs 280-282 or PCI MS-
DRGs 246-251. The episode benchmark price for a chained anchor 
hospitalization is assigned based on the price MS-DRG designated in 
accordance with a hierarchy as follows:
    (A) If the chained anchor hospitalization does not include CABG MS-
DRGs 231-236 within the chain, the price MS-DRG is the AMI or PCI MS-
DRG with the highest IPPS weight, subject to possible adjustment for 
readmission to a CABG MS-DRG as specified in paragraph (c)(7)(iii) of 
this section.
    (B) If the chained anchor hospitalization includes any of CABG MS-
DRGs 231-236, the price MS-DRG is the CABG MS-DRG with the highest IPPS 
weight with the episode benchmark price determined in accordance with 
paragraph (c)(7)(ii) of this section.
    (C) If the final discharge for a chained anchor hospitalization 
includes an MS-DRG other than AMI MS-DRG 280-282, PCI MS-DRG 246-251, 
or CABG MS-DRG 231-236, the episode is canceled for purposes of the AMI 
model and services furnished prior to and following the episode 
cancellation would continue to be paid by Medicare as usual.
    (ii) Adjustments for CABG model episodes with price MS-DRGs 231-
236. The episode benchmark price for an episode with CABG price MS-DRG 
231-236 is set based on the sum of expenditures during the anchor 
hospitalization portion and post-anchor hospitalization portion of the 
episode as follows:
    (A) The anchor hospitalization portion of the episode benchmark 
price is set based on the CABG price MS-DRG at discharge.
    (B) The post-anchor hospitalization portion of the episode 
benchmark price is set separately for episodes:
    (1) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG with major complication or comorbidity (231, 233, 
or 235).
    (2) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (3) Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG with major complication or comorbidity (231, 233, 
or 235).
    (4) Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (iii) Adjustments for Certain AMI Model Episodes with CABG 
Readmissions. The episode benchmark price for an AMI model episode with 
AMI price MS-DRG 280-282 or PCI price MS-DRG 246-251 with a readmission 
to any of CABG price MS-DRGs 231-236 is the sum of the anchor 
hospitalization portion of the CABG episode benchmark price 
corresponding to the MS-DRG of the CABG readmission and the episode 
benchmark price for the corresponding price MS-DRG that would be 
applied to the episode if it did not include a CABG readmission.
    (8) Inclusion of reconciliation payments and Medicare repayments. 
CMS will include certain reconciliation payments and Medicare 
repayments when updating quality adjusted target prices.
    (i) Inclusion of reconciliation payments and Medicare repayments in 
BPCI initiative. Reconciliation payments and Medicare repayments under 
Sec.  512.305(d)(2) and (3) and those from episodes in the BPCI 
initiative are included when updating quality-adjusted target prices 
for performance years 3-5, subject to the adjustment for CABG model 
episodes in paragraph (c)(8)(ii) of this section.
    (ii) Inclusion of reconciliation payments and Medicare repayments 
in CABG model episodes. When updating prices for CABG episodes, 
Reconciliation payments and Medicare repayments under Sec.  
512.305(d)(2) and Sec.  512.305(d)(3) and from episodes included in the 
BPCI initiative will be apportioned proportionally to the anchor 
hospitalization and post-anchor hospitalization portions of historical

[[Page 51021]]

CABG episodes. The proportions will be based on based on regional 
average historical episode payments that occurred during the anchor 
hospitalization portion of CABG model episodes and regional average 
historical episode payments that occurred during the post-anchor anchor 
hospitalization portion of CABG model episodes that were initiated 
during the three historical years.
    (9) Communication of quality-adjusted target prices. CMS 
communicates quality-adjusted target prices to EPM participants prior 
to the beginning of the performance period in which they apply.
    (10) Applicable time period for updating quality-adjusted target 
prices. In general quality-adjusted target prices are updated to 
account for Medicare payment updates no less than 2 times per year, for 
updated quality-adjusted target prices effective October 1 and January 
1, and at other intervals if necessary as determined by CMS.
    (i) For CABG model episodes, quality-adjusted target prices are 
updated by separately updating the anchor hospitalization portion of 
the episode benchmark price and the post-anchor hospitalization portion 
of the episode benchmark price and then applying the effective discount 
factor.
    (ii) [Reserved].
    (11) Trending of historical expenditure data. CMS trends historical 
expenditure data by applying separate national trend factors to episode 
payments in the scenarios described below. A trend factor is calculated 
for each of the first two years in the historical period based on the 
ratio of national average episode payments in the third year of the 
historical period to national average episode payments in each of the 
first 2 years in the historical period, for the following scenarios:
    (i) Separately for each SHFFT price MS-DRG 480-482.
    (ii) Separately for each AMI price MS-DRG 280-282 and PCI price MS-
DRG 246-251 for AMI model episodes without CABG readmissions.
    (iii) For CABG model episodes, separately for the anchor 
hospitalization portion and post-anchor hospitalization portion as 
follows:
    (A) For the anchor hospitalization portion of CABG model episodes, 
separately for each CABG price MS-DRG 231-236.
    (B) For the post-anchor hospitalization portion of CABG model 
episodes, separately for episodes:
    (1) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG with major complication or comorbidity (231, 233, 
or 235).
    (2) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (3) Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG with major complication or comorbidity (231, 233, 
or 235).
    (4) Without AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (12) Normalizing for wage variation. CMS applies the CMS Price 
(Payment) Standardization Detailed Methodology to remove wage level 
differences in calculating EPM-episode benchmark prices and actual EPM-
episode payments. CMS reintroduces wage index variations by multiplying 
the blended and updated historical payments by a wage normalization 
factor of 0.7 * IPPS wage index + 0.3.
    (13) Combining episodes to set stable benchmark and quality-
adjusted target prices. For purposes of having sufficient episode 
volume to set stable EPM episode benchmark and quality-adjusted target 
prices, where applicable, CMS aggregates EPM episodes and portions of 
EPM episodes across dimensions that include anchor MS-DRGs, the 
presence of an AMI ICD-CM diagnosis code on the anchor inpatient claim, 
and the presence of a major complication or comorbidity for anchor CABG 
MS-DRGs.
    (i) For each EPM, CMS combines episodes for anchor MS-DRGs adjusted 
for severity and hospital-specific and region-specific weights both for 
EPM participants and IPPS hospitals within each region for the purposes 
of blending EPM-participant hospital-specific components of the episode 
benchmark price and region-specific components of the episode benchmark 
price as follows:
    (A) For SHFFT model episodes, CMS combines episodes with price MS-
DRGs 480-482.
    (B) For AMI model episodes with AMI price MS-DRGs in 280-282 or PCI 
price MS-DRGs 246-251 and without readmissions for CABG MS-DRGs, 
episodes with AMI price MS-DRGs 280-282 are grouped separately from 
episodes with PCI price MS-DRGs 246-251.
    (C) For CABG model episodes with CABG price MS-DRGs in 231-236, CMS 
separately groups the anchor hospitalization portion and the post-
anchor hospitalization portion.
    (1) For the anchor hospitalization portion of CABG model episodes, 
the anchor hospitalization portion is grouped by the CABG price MS-DRG.
    (2) For the post-anchor hospitalization portion of CABG model 
episodes, the post-anchor hospitalization portion is grouped by 
episodes:
    (i) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and price MS-DRG with major complication or comorbidity (231, 233, or 
235).
    (ii) With AMI ICD-CM diagnosis code on the anchor inpatient claim 
and price MS-DRG without major complication or comorbidity (232, 234, 
or 236).
    (iii) Without AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG with major complication or comorbidity (231, 
233, or 235).
    (iv) Without AMI ICD-CM diagnosis code on the anchor inpatient 
claim and price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (ii) After blending EPM-participant hospital-specific and regional-
specific components of the combined episodes, CMS separates episodes to 
calculate episode benchmark prices according to the episode price MS-
DRG, subject to adjustments described in Sec.  512.300(c)(7).
    (d) Effective discount factor. An EPM participant's quality-
adjusted target prices incorporate an effective discount factor to 
reflect Medicare's portion of reduced expenditures from the EPM as 
described in this section.
    (1) Effective discount factor for reconciliation payments. The 
effective discount factor for reconciliation payment in all performance 
years is determined by the EPM participant's quality category as 
provided in Sec.  512.315(b)(5), (c)(5), and (d)(5).
    (2) Applicable discount factor for repayment amounts. The 
applicable discount factor for repayment amounts is--
    (i) Not applicable in performance year 1 and performance year 2 
(NDR), as the requirement for EPM participant repayment is waived.
    (ii) In performance year 2 (DR) and performance year 3 when partial 
EPM participant repayment applies, as determined by the EPM 
participant's quality category as provided in Sec.  512.315(b)(5), 
(c)(5), and (d)(5).
    (iii) Not applicable in performance years 4 and 5 when full EPM 
participant repayment applies, as determined by the effective discount 
factor that applies to repayment amounts as specified in paragraph 
(d)(1) of this section.
    (e) Exceptions that apply to both quality-adjusted target prices 
and actual episode payments--(1) Exception for

[[Page 51022]]

high episode payment. For each EPM, actual episode payments and 
historical episode payments are capped at 2 standard deviations above 
the mean regional episode payment for the EPM-participant hospital-
specific and regional components of the quality-adjusted target price 
under the applicable model, as well as for calculating actual episode 
payments under the applicable EPM during a performance year, subject to 
the exceptions noted in paragraphs (e)(1)(i) through (iv) of this 
section.
    (i) For AMI model episodes with price MS-DRGs 280-282 or PCI price 
MS-DRGs 246-251 without readmission for CABG MS-DRGs 231-236, payments 
are capped separately based on the price MS-DRG.
    (ii) For CABG model episodes with price CABG MS-DRGs 231-236, 
episode payments during the anchor hospitalization portion are capped 
separately from episode payments during the post-anchor hospitalization 
portion as follows.
    (A) Payments during the anchor hospitalization portion are capped 
based on the CABG price MS-DRG 231-236.
    (B) Payments during the post-anchor hospitalization portion are 
capped separately for episodes:
    (1) With an AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG with major complication or comorbidity (231, 233, 
or 235).
    (2) With an AMI ICD-CM diagnosis code on the anchor inpatient claim 
and CABG price MS-DRG without major complication or comorbidity (232, 
234, or 236).
    (3) Without an AMI ICD-CM diagnosis code on the anchor inpatient 
claim and CABG price MS-DRG with major complication or comorbidity 
(231, 233, or 235).
    (4) Without an AMI ICD-CM diagnosis code on the anchor inpatient 
claim and CABG price MS-DRG without major complication or comorbidity 
(232, 234, or 236).
    (iii) For AMI model episodes with a CABG price MS-DRG 231-236, 
payments are capped separately for those payments that occurred during 
the chained anchor hospitalization and for those payments that occurred 
after the chained anchor hospitalization.
    (A) For the chained anchor hospitalization portion of the episode, 
the cap is applied based on the anchor hospitalization portion of a 
CABG episode for the corresponding price MS-DRG.
    (B) For the post-anchor hospitalization portion of the episode, the 
cap is applied based on the post-anchor hospitalization portion of a 
CABG episode for the corresponding price MS-DRG with AMI ICD-CM 
diagnosis code.
    (iv) For AMI episodes with either AMI price MS-DRG 280-282 or PCI 
price MS-DRG 246-251 and with readmission for a CABG MS-DRG 231-236, 
the cap is applied separately to the payments during the CABG 
readmission and all other payments during the episode.
    (A) For payments during the CABG readmission portion of the 
episode, the cap is applied for the anchor hospitalization portion of a 
CABG episode for the corresponding CABG readmission MS-DRG.
    (B) For all other payments during the episode, the cap is applied 
to the AMI model episodes with AMI price MS-DRG 280-282 or PCI price 
MS-DRGs 246-251 and without readmission for CABG MS-DRGs corresponding 
to the AMI price MS-DRG.
    (2) Exclusion of incentive programs and add-on payments under 
existing Medicare payment systems. Certain incentive programs and add-
on payments are excluded by CMS' application of the CMS Price (Payment) 
Standardization Detailed Methodology used for the Medicare spending per 
beneficiary measure in the Hospital Value-Based Purchasing Program and 
Physician Value-Based Payment Modifier Program as specified in Sec.  
414.1235(a)(6) and (c)(1) of this chapter.
    (f) Allocation of payments for services that straddle the episode--
(1) General. Services included in the episode that begin before the 
start of or continue beyond the end of an EPM episode are prorated so 
that only the portion attributable to care furnished during the episode 
are included in the calculation of actual episode payments.
    (2) Proration of services. Payments for services that straddle the 
episode are prorated using the following methodology:
    (i) 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.
    (ii) 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 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 
(determined in Sec.  512.307(c)).


Sec.  512.305  Determination of the NPRA and reconciliation process.

    (a) General. Providers and suppliers furnishing items and services 
included in the EPM episode bill for such items and services in 
accordance with existing rules and as if this part were not in effect.
    (b) Annual reconciliation. CMS annually performs the processes 
described in paragraphs (c) and (d) of this section to determine actual 
episode payments for each EPM episode for the performance year (except 
for episodes that have been canceled in accordance with Sec.  
512.240(a)(3), (b)(2), and (c)(2)) and determines the amount of a 
reconciliation payment to or Medicare repayment amount from EPM 
participants, if any, for that performance year.
    (c) Annual reconciliation to establish NPRA. (1) Beginning 2 months 
after the end of each performance year and using the most recent claims 
data available, CMS performs a reconciliation calculation to establish 
an NPRA for each EPM participant based on the following process.
    (2) CMS--
    (i) Assesses whether EPM participants are in an acceptable or 
better quality category under Sec.  512.315; and
    (ii) Calculates the NPRA for each EPM participant for each 
performance year, including separately for episodes ending during the 
performance year 2 (DR) portion and episodes ending during the 
performance year 2 (NDR) portion of performance year 2, by comparing 
the quality-adjusted target prices and the

[[Page 51023]]

EPM participant's actual episode payments for the performance year or 
portion of that performance year as described in Sec.  512.300 as 
follows:
    (A) Determines actual EPM episode payments for each EPM episode 
included in the performance year or portion of that performance year.
    (B) Multiplies the quality-adjusted target price by the number of 
non-canceled EPM episodes included in the performance year or portion 
of that performance year to which that episode quality-adjusted price 
applies and aggregates these amounts.
    (C) Subtracts the amount determined under paragraph (c)(2)(ii)(A) 
of this section from the amount determined under paragraph 
(c)(2)(ii)(B) of this section.
    (iii) Applies the following:
    (A) Limitation on loss. Except as provided in paragraph 
(c)(2)(iii)(C) of this section, the total amount of the NPRA and 
subsequent reconciliation calculation for a performance year or portion 
of that performance year cannot exceed the following:
    (1) For performance year 2 (NDR) only, 0 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section for the 
performance year.
    (2) For performance year 2 (DR) only, 5 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section for the 
performance year.
    (3) For performance year 3, 10 percent of the amount calculated in 
paragraph (c)(2)(ii)(B) of this section for the performance year.
    (4) For performance years 4 and 5, 20 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section for the 
performance year.
    (B) Limitation on gain. The total amount of the NPRA and subsequent 
reconciliation calculation for a performance year cannot exceed the 
following:
    (1) For performance years 1 and 2, 5 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section for the 
performance year.
    (2) For performance year 3, 10 percent of the amount calculated in 
paragraph (c)(2)(ii)(B) of this section for the performance year.
    (3) For performance years 4 and 5, 20 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section for the 
performance year.
    (C) Financial loss limits for rural hospitals, SCHs, MDHs, and 
RRCs. If an EPM participant is a rural hospital, SCH, MDH or RRC, then 
for performance year 2 (DR), the total sum of the NPRA and subsequent 
reconciliation calculation cannot exceed 3 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section. For performance 
years 3 through 5, the total cannot exceed 5 percent of the amount 
calculated in paragraph (c)(2)(ii)(B) of this section.
    (D) Application of limitations on losses and gains. CMS establishes 
limits on losses and gains specifically with respect to and separately 
for each EPM. For performance year 2, CMS establishes limits on losses 
for each EPM separately for the performance year 2 (DR) and performance 
year 2 (NDR) portions of that performance year.
    (d) Determination of reconciliation or repayment amount--(1) 
General. (i) Subject to paragraphs (c)(2)(iii)(B) and (d)(1)(iv) of 
this section, for performance year 1, the reconciliation payment (if 
any) is equal to the NPRA.
    (ii) Subject to paragraphs (c)(2)(iii)(A) through (c)(2)(iii)(C) 
and (d)(1)(iv) of this section, for performance year 2, results from 
the subsequent reconciliation calculation for a prior year's 
reconciliation, as described in Sec.  512.307, and the post-episode 
spending and ACO overlap calculations, as described in Sec.  512.307(b) 
and (c), are added to the sum of NPRA for performance year 2 (NDR) and 
NPRA for performance year 2 (DR) in order to determine the 
reconciliation or repayment amount.
    (iii) Subject to paragraphs (c)(2)(iii)(A) through (C) and 
(d)(1)(iv) of this section, for performance years 3 through 5, results 
from the subsequent reconciliation calculation for a prior year's 
reconciliation, as described in Sec.  512.307, and the post-episode 
spending and ACO overlap calculations, as described in Sec.  512.307(b) 
and (c), are added to the current year's NPRA in order to determine the 
reconciliation or repayment amount.
    (iv) The reconciliation or repayment amount may be adjusted as 
described in Sec.  512.460(b)(5).
    (2) Reconciliation payment. If the amount described in paragraph 
(d)(1) of this section is positive and the EPM participant quality 
category as described in Sec.  512.315 is acceptable, good, or 
excellent, Medicare pays the EPM participant a reconciliation payment 
in an amount equal to the amount described in paragraph (d)(1) of this 
section. If the EPM participant's quality category as described in 
Sec.  512.315 is unacceptable, the EPM participant is not eligible to 
be paid a reconciliation payment.
    (3) Repayment amount. If the amount described in paragraph (d)(1) 
of this section is negative, the EPM participant pays to Medicare an 
amount equal to the amount described in paragraph (d)(1) of this 
section, in accordance with Sec.  405.371 of this chapter. CMS waives 
this requirement for performance year 1.
    (e) EPM participants found to be engaged in inappropriate and 
systemic under delivery of care. If the EPM participant is found to be 
engaged in an inappropriate and systemic under delivery of care as 
specified in Sec.  512.460(b)(1)(i)(C), the quality of the care 
provided must be considered to be seriously compromised and the EPM 
participant must be ineligible to receive or retain a reconciliation 
payment for any period in which such under delivery of care was found 
to occur.
    (f) Reconciliation report. (1) CMS issues each EPM participant a 
reconciliation report for the performance year. Each reconciliation 
report contains the following:
    (i) Information on the EPM participant's composite quality score 
described in Sec.  512.315.
    (ii) The total actual episode payments for the EPM participant.
    (iii) The NPRA.
    (iv) Whether the EPM participant is eligible for a reconciliation 
payment or must make a repayment to Medicare.
    (v) The NPRA and subsequent reconciliation calculation amount for 
the previous performance year, as applicable.
    (vi) The post-episode spending amount and ACO overlap calculation 
for the previous performance year, as applicable.
    (vii) The reconciliation payment or repayment amount.
    (2) For performance year 2, the reconciliation report would also 
include information separately for the performance year 2 (DR) and 
performance year 2 (NDR) portions of that year.


Sec.  512.307  Subsequent calculations.

    (a) Subsequent reconciliation calculation. (1) Fourteen months 
after the end of each performance year, CMS performs an additional 
calculation, which accounts for changes since the calculation of the 
initial NPRA, using claims data available at that time, to account for 
final claims run-out and any additional episode cancellations due to 
overlap or other reasons as specified in sections Sec.  512.240(a)(3), 
(b)(2), and (c)(2).
    (2) The additional calculation occurs concurrently with the 
reconciliation process for the most recent performance year and 
determines the subsequent calculation amount as follows:
    (i) For performance years other than performance year 2, if the 
result of the subsequent reconciliation calculation is different than 
zero, CMS applies the stop-loss and stop-gain limits in

[[Page 51024]]

Sec.  512.305 (c)(2)(iii)(A) through (C) to the calculations in 
aggregate for that performance year (the initial reconciliation from 
section Sec.  512.305(c)(2)(ii)(C), before application of the stop-loss 
and stop-gain limits, and the subsequent reconciliation calculation) to 
ensure the calculations in aggregate do not exceed the stop-loss or 
stop-gain limits. CMS then takes the difference between that amount and 
the initial NPRA after application of the stop-loss and stop-gain 
limits in section Sec.  512.305 (c)(2)(iii)(A) through (C) to determine 
the subsequent calculation amount.
    (ii) For performance year 2, CMS performs the subsequent 
reconciliation calculations separately for performance year 2 (NDR) and 
performance year 2 (DR) and then combines these amounts to determine 
the subsequent reconciliation calculation for performance year 2 as 
follows:
    (A) If the results of the subsequent reconciliation calculation for 
performance year 2 (NDR) is different than zero, CMS applies the stop-
loss and stop-gain limits in Sec.  512.305 (c)(2)(iii)(A) through (C) 
to the calculations in aggregate for performance year 2 (NDR) (the 
initial reconciliation from Sec.  512.305(c)(2)(ii)(C), not including 
application of the stop-loss and stop-gain limits, and the subsequent 
reconciliation calculation) to ensure the calculations in aggregate do 
not exceed the stop-loss or stop-gain limits. CMS then takes the 
difference between that amount and the initial NPRA after application 
of the stop-loss and stop-gain limits in section Sec.  512.305 
(c)(2)(iii)(A) through (C) to calculate the subsequent calculation 
amount for performance year 2 (NDR).
    (B) If the results of the subsequent reconciliation calculation for 
performance year 2 (DR) is different than zero, CMS applies the stop-
loss and stop-gain limits in Sec.  512.305 (c)(2)(iii)(A) through (C) 
to the calculations in aggregate for performance year 2 (DR) (the 
initial reconciliation from section Sec.  512.305(c)(2)(ii)(C), prior 
to application of the stop-loss and stop-gain limits, and the 
subsequent reconciliation calculation) to ensure the calculations in 
aggregate do not exceed the stop-loss or stop-gain limits. CMS then 
takes the difference between that amount and the initial NPRA after 
application of the stop-loss and stop-gain limits in section Sec.  
512.305(c)(2)(iii)(A) through (C) to calculate the subsequent 
calculation amount for performance year 2 (DR).
    (C) The subsequent calculation amount for performance year 2 is the 
sum of paragraphs (a)(2)(ii)(A) and (a)(2)(ii)(B) in this section.
    (iii) 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.
    (iv) Because EPM participants do 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.
    (b) Additional calculations to determine the reconciliation payment 
or repayment amount. CMS will reduce the reconciliation payment or 
increase the repayment amount for the subsequent performance year to 
account for shared savings paid to the ACO in the prior performance 
year by the amount of the EPM discount factor paid out to the ACO as 
shared savings in the prior performance year. This adjustment is only 
made when the EPM participant is a participant or provider/supplier in 
the ACO and the EPM beneficiary is assigned or aligned to one of the 
following ACO models or programs:
    (1) The Medicare Shared Savings Program.
    (2) The Comprehensive ESRD Care Initiative (excluding a track with 
downside risk).
    (c) Increases in post-episode spending. If the average post-episode 
Medicare Parts A and B payments for an EPM participant in the prior 
performance year is greater than 3 standard deviations above the 
regional average post-episode payments for the same performance year, 
then the spending amount exceeding three standard deviations above the 
regional average post-episode payments for the same performance year is 
added to the calculation of the reconciliation or repayment amount for 
the subsequent performance year.


Sec.  512.310   Appeals process.

    (a) Notice of calculation error (first level of appeal). Subject to 
the limitations on review in subpart D of this part, if an EPM 
participant wishes to dispute calculations involving a matter related 
to payment, a CR incentive payment, reconciliation amounts, repayment 
amounts, or determinations associated with quality measures affecting 
payment, the EPM participant is required to provide written notice of 
the error, in a form and manner specified by CMS.
    (1) Unless the EPM participant provides such notice, CMS deems 
final the reconciliation report and CR incentive payment report 45 
calendar days after the reconciliation report or CR incentive payment 
report is issued and proceeds with the payment or repayment processes 
as applicable.
    (2) If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the reconciliation report or CR 
incentive payment report, 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 EPM participant.
    (3) Only EPM participants may use the notice of calculation error 
process described in this part.
    (b) Dispute resolution process (second level of appeal). (1) If the 
EPM participant is dissatisfied with CMS's response to the notice of a 
calculation error, the EPM participant may request a reconsideration 
review in a form and manner as specified by CMS.
    (2) The reconsideration request must provide a detailed explanation 
of the basis for the dispute and include supporting documentation for 
the EPM participant's assertion that CMS or its representatives did not 
accurately calculate the NPRA, the reconciliation payment, the CR 
incentive payment, or the repayment amount in accordance with subpart D 
of this part.
    (3) If CMS does not receive a request for reconsideration from the 
EPM participant within 10 calendar days of the issue date of CMS's 
response to the EPM participant's notice of calculation error, then 
CMS's response to the calculation error is deemed final and CMS 
proceeds with the applicable processes, as described in subpart D of 
this part.
    (4) The CMS reconsideration official notifies the EPM participant 
in writing within 15 calendar days of receiving the EPM participant'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.

[[Page 51025]]

    (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 the EPM.
    (7) The CMS reconsideration official issues a written determination 
within 30 days of the review. The determination is final and binding.
    (8) Only EPM participants may use the dispute resolution process 
described in this part.
    (c) Exception to the notice of calculation error process. If the 
EPM participant contests a matter that does not involve an issue 
contained in, or a calculation which contributes to, a reconciliation 
report or CR incentive payment report a notice of calculation error is 
not required. In these instances, if CMS does not receive a request for 
reconsideration from the EPM participant within 10 calendar days of the 
notice of the initial determination, the initial determination is 
deemed final and CMS proceeds with the action indicated in the initial 
determination.
    (d) Notice of an EPM participant's termination from the EPM. If an 
EPM participant receives notification that it has been terminated from 
the EPM and wishes to appeal such termination, it must provide a 
written request for reconsideration to CMS requesting review of the 
termination within 10 calendar days of the notice. CMS has 30 days to 
respond to the EPM participant's request for review. If the EPM 
participant fails to notify CMS, the termination is deemed final.
    (e) 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 to expand the duration and scope of a model under 
section 1115A(c) of the Act, including the determination that a model 
is not expected to meet criteria described in paragraph (e)(1) or (2) 
of this section.


Sec.  512.315  Composite quality scores for determining reconciliation 
payment eligibility and effective and applicable discount factors.

    (a) General. An EPM participant's eligibility for a reconciliation 
payment under Sec.  512.305, and the determination of effective 
discount factors and applicable discount factors for reconciliation and 
repayment, respectively, under paragraphs (b)(5), (c)(5), and (d)(5) of 
this section, for a performance year depend on the EPM participant's 
EPM composite quality score (including any quality performance points 
and quality improvement points earned) for that performance year.
    (b) AMI model--(1) AMI model composite quality score. CMS 
calculates an AMI model composite quality score for each AMI model 
participant for each performance year, which equals the sum of the 
following:
    (i) The AMI model participant's quality performance points for the 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
Following Acute Myocardial Infarction (NQF #0230) measure described in 
Sec.  512.411(a)(1). This measure is weighted at 50 percent of the AMI 
model composite quality score.
    (ii) The AMI model participant's quality performance points for the 
Excess Days in Acute Care after Hospitalization for AMI measure 
described in Sec.  512.411(a)(2). This measure is weighted at 20 
percent of the AMI model composite quality score.
    (iii) The AMI model participant's quality performance points for 
the Hospital Consumer Assessment of Healthcare Providers and Systems 
Survey (NQF #0166) measure described in Sec.  512.411(a)(3). This 
measure is weighted at 20 percent of the AMI model composite quality 
score.
    (iv) Any additional quality improvement points the AMI model 
participant may earn as a result of demonstrating improvement on the 
quality measures in Sec.  512.411(a), as described in paragraph (b)(3) 
of this section.
    (v) If applicable, 2 additional points for successful Hybrid 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 
Acute Myocardial Infarction (AMI) Hospitalization (NQF #2473) measure 
voluntary data submission as described in Sec.  512.411(b)(2). 
Successful submission is weighted at 10 percent of the AMI model 
composite quality score.
    (2) AMI model quality performance points. CMS computes quality 
performance points for each quality measure based on the AMI model 
participant's performance percentile relative to the national 
distribution of all subsection (d) hospitals that are eligible for 
payment under the IPPS and meet the minimum measure patient case or 
survey count.
    (i) For the Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) Following Acute Myocardial Infarction (NQF #0230) measure 
described in Sec.  512.411(a)(1), CMS assigns the AMI model participant 
measure value to a performance percentile and then quality performance 
points are assigned based on the following performance percentile 
scale:
    (A) 10.00 points for >= 90th.
    (B) 9.25 points for >= 80th and < 90th.
    (C) 8.50 points for >= 70th and < 80th.
    (D) 7.75 points for >= 60th and < 70th.
    (E) 7.00 points for >= 50th and < 60th.
    (F) 6.25 points for >= 40th and < 50th.
    (G) 5.50 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (ii) For the Excess Days in Acute Care after Hospitalization for 
AMI measure described in Sec.  512.411(a)(2), CMS assigns the AMI model 
participant measure value to a performance percentile and then quality 
performance points are assigned based on the following performance 
percentile scale:
    (A) 4.00 points for >= 90th.
    (B) 3.70 points for >= 80th and < 90th.
    (C) 3.40 points for >= 70th and < 80th.
    (D) 3.10 points for >= 60th and < 70th.
    (E) 2.80 points for >= 50th and < 60th.
    (F) 2.50 points for >= 40th and < 50th.
    (G) 2.20 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (iii) For the Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (NQF #0166) measure described in Sec.  
512.411(a)(3), CMS assigns the AMI model participant measure value to a 
performance percentile and then quality performance points are assigned 
based on the following performance percentile scale:
    (A) 4.00 points for >= 90th.
    (B) 3.70 points for >= 80th and < 90th.
    (C) 3.40 points for >= 70th and < 80th.
    (D) 3.10 points for >= 60th and < 70th.
    (E) 2.80 points for >= 50th and < 60th.
    (F) 2.50 points for >= 40th and < 50th.
    (G) 2.20 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (3) AMI model quality improvement points. If an AMI model 
participant's own improvement in the participant's measure point 
estimate from the previous year on an individual measure described in 
Sec.  512.411(a), regardless of the participant's measure point 
estimate starting and ending values, falls into the top 10 percent of 
all subsection (d) hospitals that are eligible for payment under the 
IPPS based on the national distribution of measure improvement

[[Page 51026]]

over the most recent two years, then the AMI model participant is 
eligible to receive quality improvement points up to 10 percent of the 
total available points for that measure. The AMI model composite 
quality score is capped at 20 points.
    (4) Exception for AMI model participants without a measure value. 
In the case of an AMI model participant 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 AMI model participant for the individual measure.
    (i) An AMI model participant does not have a measure value for 
the--
    (A) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Acute Myocardial Infarction (NQF #0230) measure 
described in Sec.  512.411(a)(1) if the participant does not meet the 
minimum 25 case count.
    (B) Excess Days in Acute Care after Hospitalization for AMI measure 
described in Sec.  512.411(a)(2) if the participant does not meet the 
minimum 25 case count.
    (C) Hospital Consumer Assessment of Healthcare Providers and 
Systems Survey (NQF #0166) measure described in Sec.  512.411(a)(3) if 
the participant does not meet the minimum of 100 completed surveys and 
does not have 4 consecutive quarters of HCAHPS data.
    (D) Measures described in paragraphs (4)(i)(A) through (C) of this 
section, if CMS identifies an error in the data used to calculate the 
measure and suppresses the measure value.
    (5) Establishing AMI model reconciliation payment eligibility and 
effective and applicable discount factors. CMS determines 
reconciliation payment eligibility and the effective discount factor 
for reconciliation payments in all performance years and repayment 
amounts in performance years 4 and 5, as well as the applicable 
discount factor for repayment amounts in performance years 2 (DR) and 
3, for AMI model participants based on the AMI model composite quality 
score described in paragraph (b)(1) of this section.
    (i) Reconciliation payment eligibility requires an acceptable or 
better quality category, defined as an AMI model composite quality 
score of greater than or equal to 3.6.
    (ii) Effective discount factor for reconciliation payments.
    (A) A 3.0 percentage point effective discount factor for AMI model 
participants in the unacceptable or acceptable category, defined as an 
AMI model composite quality score that is less than 6.9.
    (B) A 2.0 percentage point effective discount factor for AMI model 
participants in the good quality category, defined as an AMI model 
composite quality score that is greater than or equal to 6.9 and less 
than or equal to 14.8.
    (C) A 1.5 percentage point effective discount factor for AMI model 
participants in the excellent quality category, defined as an AMI model 
composite quality score that is greater than 14.8.
    (iii) Applicable discount factor for repayment amount in 
performance years 2 (DR) and 3.
    (A) A 2.0 percentage point applicable discount factor for AMI model 
participants in the unacceptable or acceptable quality category, 
defined as an AMI model composite quality score of less than 6.9.
    (B) A 1.0 percentage point applicable discount factor for AMI model 
participants in the good quality category, defined as an AMI model 
composite quality score that is greater than or equal to 6.9 and less 
than or equal to 14.8.
    (C) A 0.5 percentage point applicable discount factor for AMI model 
participants in the excellent quality category, defined as an AMI model 
composite quality scores that is greater than 14.8.
    (c) CABG model--(1) CABG model composite quality score. CMS 
calculates a CABG model composite quality score for each CABG model 
participant for each performance year, which equals the sum of the 
following:
    (i) The CABG model participant's quality performance points for the 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 2558) 
measure described in Sec.  512.412(a)(1). This measure is weighted at 
75 percent of the CABG model composite quality score.
    (ii) The CABG model participant's quality performance points for 
the Hospital Consumer Assessment of Healthcare Providers and Systems 
Survey (NQF #0166) measure described in Sec.  512.412(a)(2). This 
measure is weighted at 25 percent of the CABG model composite quality 
score.
    (iii) Any additional quality improvement points the CABG model 
participant may earn as a result of demonstrating improvement on the 
quality measures in paragraphs (b)(1)(i) and (ii) of this section, as 
described in paragraph (c)(3) of this section.
    (2) CABG model quality performance points. CMS computes quality 
performance points for each quality measure based on the CABG model 
participant's performance percentile relative to the national 
distribution of all subsection (d) hospitals that are eligible for 
payment under the IPPS and meet the minimum measure patient case or 
survey count.
    (i) For the Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate (RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 
2558) measure described in Sec.  512.412(a)(1), CMS assigns the CABG 
model participant measure value to a performance percentile and then 
quality performance points are assigned based on the following 
performance percentile scale:
    (A) 15.00 points for >= 90th.
    (B) 13.88 points for >= 80th and < 90th.
    (C) 12.75 points for >= 70th and < 80th.
    (D) 11.63 points for >= 60th and < 70th.
    (E) 10.50 points for >= 50th and < 60th.
    (F) 9.38 points for >= 40th and < 50th.
    (G) 8.25 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (ii) For the Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (NQF #0166) measure described in Sec.  
512.412(a)(2), CMS assigns the CABG model participant measure value to 
a performance percentile and then quality performance points are 
assigned based on the following performance percentile scale:
    (A) 5.00 points for >= 90th.
    (B) 4.63 points for >= 80th and < 90th.
    (C) 4.25 points for >= 70th and < 80th.
    (D) 3.88 points for >= 60th and < 70th.
    (E) 3.50 points for >= 50th and < 60th.
    (F) 3.13 points for >= 40th and < 50th.
    (G) 2.75 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (3) CABG model quality improvement points. If a CABG model 
participant's own improvement in the participant's measure point 
estimate from the previous year on an individual measure described in 
Sec.  512.412(a), regardless of the participant's measure point 
estimate starting and ending values, falls into the top 10 percent of 
all subsection (d) hospitals that are eligible for payment under the 
IPPS based on the national distribution of measure improvement over the 
most recent two years, then the CABG model participant is eligible to 
receive quality improvement points up to 10 percent of the total 
available points for that measure. The total CABG model composite 
quality score is capped at 20 points.
    (4) Exception for CABG model participants without a measure value. 
In the case of a CABG model participant without a measure value that 
would allow CMS to assign quality performance points for that quality

[[Page 51027]]

measure, CMS assigns the 50th percentile quality performance points to 
the hospital for the individual measure.
    (i) A CABG model participant does not have a measure value for 
the--
    (A) Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF# 
2558) measure described in Sec.  512.412(a)(1) if the CABG model 
participant does not meet the minimum 25 case count.
    (B) Hospital Consumer Assessment of Healthcare Providers and 
Systems Survey (NQF #0166) measure described in Sec.  512.412(a)(2) if 
the CABG model participant does not meet the minimum of 100 completed 
surveys and does not have 4 consecutive quarters of HCAHPS data.
    (C) Measures described in paragraphs (c)(4)(i)(A) and (c)(4)(i)(B) 
of this section, if CMS identifies an error in the data used to 
calculate the measure and suppresses the measure value.
    (5) Establishing CABG model reconciliation payment eligibility and 
effective and applicable discount factors. CMS determines 
reconciliation payment eligibility and the effective discount factor 
for reconciliation payments in all performance years and repayment 
amounts in performance years 4 and 5, as well as applicable discount 
factor for repayment amounts in performance years 2 (DR) and 3, for 
CABG model participants based on the CABG model composite quality score 
described in paragraph (c)(1) of this section.
    (i) Reconciliation payment eligibility requires an acceptable or 
better quality category, defined as a CABG model composite quality 
score of greater than or equal to 2.8.
    (ii) Effective discount factor for reconciliation payments.
    (A) A 3.0 percentage point effective discount factor for CABG model 
participants in the unacceptable or acceptable quality category, 
defined as a CABG model composite quality score that is less than 4.8.
    (B) A 2.0 percentage point effective discount factor for CABG model 
participants in the good quality category, defined as a CABG model 
composite quality score that is greater than or equal to 4.8 and less 
than or equal to 17.5.
    (C) A 1.5 percentage point effective discount factor for CABG model 
participants in the excellent quality category, defined as a CABG model 
composite quality score that are greater than 17.5.
    (iii) Applicable discount factor for repayment amount in 
performance years 2 (DR) and 3.
    (A) A 2.0 percentage point applicable discount factor for CABG 
model participants in the unacceptable or acceptable quality category, 
defined as a CABG model composite quality score of less than 4.8.
    (B) A 1.0 percentage point applicable discount factor for CABG 
model participants in the good quality category, defined as a CABG 
model composite quality score that is greater than or equal to 4.8 and 
less than or equal to 17.5.
    (C) A 0.5 percentage point applicable discount factor for CABG 
model participants in the excellent quality category, defined as a CABG 
model composite quality scores that is greater than 17.5.
    (d) SHFFT model--(1) SHFFT model composite quality score. CMS 
calculates a SHFFT model composite quality score for each SHFFT model 
participant for each performance year, which equals the sum of the 
following:
    (i) The SHFFT model participant's quality performance points for 
the Hospital-Level Risk-Standardized Complication Rate following 
Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty 
(NQF #1550) measure described in Sec.  512.413(a)(1). This measure is 
weighted at 50 percent of the SHFFT model composite quality score.
    (ii) The SHFFT model participant's quality performance points for 
the Hospital Consumer Assessment of Healthcare Providers and Systems 
Survey (NQF #0166) measure described in Sec.  512.413(a)(2). This 
measure is weighted at 40 percent of the SHFFT model composite quality 
score.
    (iii) Any additional quality improvement points the SHFFT model 
participant may earn as a result of demonstrating improvement on either 
or both of the quality measures in paragraphs (d)(1)(i) and (ii) of 
this section, as described in paragraph (d)(3) of this section.
    (iv) 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.  512.413(b)(2). Successful 
submission is weighted at 10 percent of the SHFFT model composite 
quality score.
    (2) SHFFT model quality performance points. CMS computes quality 
performance points for each quality measure based on the SHFFT model 
participant's performance percentile on that measure relative to the 
national distribution of all subsection (d) hospitals that are eligible 
for payment under the IPPS and meet the minimum measure patient case or 
survey count.
    (i) For the Hospital-Level Risk-Standardized Complication Rate 
Following Elective Primary Total Hip Arthroplasty and/or Total Knee 
Arthroplasty (NQF #1550) measure described in Sec.  512.413(a)(1), CMS 
assigns the SHFFT model participant measure value to a performance 
percentile and then quality performance points are assigned based on 
the following performance percentile scale:
    (A) 10.00 points for >= 90th.
    (B) 9.25 points for >= 80th and < 90th.
    (C) 8.50 points for >= 70th and < 80th.
    (D) 7.75 points for >= 60th and < 70th.
    (E) 7.00 points for >= 50th and < 60th.
    (F) 6.25 points for >= 40th and < 50th.
    (G) 5.50 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (ii) For the Hospital Consumer Assessment of Healthcare Providers 
and Systems Survey (NQF #0166) measure described in Sec.  
512.413(a)(2), CMS assigns the SHFFT model participant measure value to 
a performance percentile and then quality performance points are 
assigned based on the following performance percentile scale:
    (A) 8.00 points for >= 90th.
    (B) 7.40 points for >= 80th and < 90th.
    (C) 6.80 points for >= 70th and < 80th.
    (D) 6.20 points for >= 60th and < 70th.
    (E) 5.60 points for >= 50th and < 60th.
    (F) 5.00 points for >= 40th and < 50th.
    (G) 4.40 points for >= 30th and < 40th.
    (H) 0.00 points for < 30th.
    (3) SHFFT quality improvement points. If a SHFFT model 
participant's quality performance percentile on an individual measure 
described in Sec.  512.413(a) increases from the previous performance 
year by at least 2 deciles on the performance percentile scale, then 
the SHFFT model participant is eligible to receive quality improvement 
points up to 10 percent of the total available points for that 
individual measure. The total SHFFT model composite quality score is 
capped at 20 points.
    (4) Exception for SHFFT model participants without a measure value. 
In the case of a SHFFT model participant 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 participant for the individual measure.
    (i) A SHFFT model participant does not have a measure value for 
the--
    (A) Hospital-Level Risk-Standardized Complication Fate Following 
Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty 
(NQF #1550) measure described in Sec.  510.413(a)(1) if the participant 
does not meet the minimum 25 case count; or
    (B) Hospital Consumer Assessment of Healthcare Providers and 
Systems

[[Page 51028]]

Survey measure (NQF #0166) described in Sec.  510.413(a)(2) if the 
participant does not meet the minimum of 100 completed surveys and does 
not have 4 consecutive quarters of HCAHPS data.
    (C) Measures described in paragraphs (d)(4)(i)(A) and (d)(4)(i)(B) 
of this section, if CMS identifies an error in the data used to 
calculate the measure and suppresses the measure value.
    (5) Establishing SHFFT model reconciliation payment eligibility and 
effective and applicable discount factors. CMS determines 
reconciliation payment eligibility and the effective discount factor 
for reconciliation payments in all performance years and repayment 
amounts in performance years 4 and 5, as well as the applicable 
discount factor for repayment amounts in performance years 2 (DR) and 
3, for SHFFT model participants based on the SHFFT model composite 
quality score described in paragraph (d)(1) of this section.
    (i) Reconciliation payment eligibility requires an acceptable or 
better quality category, defined as a SHFFT model composite quality 
score of greater than or equal to 5.0.
    (ii) Effective discount factor for reconciliation payments.
    (A) A 3.0 percentage point effective discount factor for SHFFT 
model participants in the unacceptable or acceptable quality category, 
defined as a SHFFT model composite quality score that is less than 6.9.
    (B) A 2.0 percentage point effective discount factor for SHFFT 
model participants in the good quality category, defined as a SHFFT 
model composite quality score that is greater than or equal to 6.9 and 
less than or equal to 15.0.
    (C) A 1.5 percentage point effective discount factor for SHFFT 
model participants in the excellent quality category, defined as a 
SHFFT model composite quality score that are greater than 15.0.
    (iii) Applicable discount factor for repayment amount in 
performance years 2 (DR) and 3.
    (A) A 2.0 percentage point applicable discount factor for SHFFT 
model participants in the unacceptable or acceptable quality category, 
defined as a SHFFT model composite quality score of less than 6.9.
    (B) A 1.0 percentage point applicable discount factor for SHFFT 
model participants in the good quality category, defined as a SHFFT 
model composite quality score that is greater than or equal to 6.9 and 
less than or equal to 15.0.
    (C) A 0.5 percentage point applicable discount factor for SHFFT 
model participants in the excellent quality category, defined as a 
SHFFT model composite quality scores that is greater than 15.0.


Sec.  512.320  Treatment of incentive programs or add-on payments under 
existing Medicare payment systems.

    No EPM replaces any existing Medicare incentive programs or add-on 
payments. The quality-adjusted target prices and NPRAs for an EPM 
participant under such models are independent of, and do not affect, 
any incentive programs or add-on payments under existing Medicare 
payment systems.


Sec.  512.350  Data sharing.

    (a) General. CMS makes available to EPM participants, through the 
most appropriate means, data that CMS determines may be useful to EPM 
participants to do the following:
    (1) Determine appropriate ways to increase the coordination of 
care.
    (2) Improve quality.
    (3) Enhance efficiencies in the delivery of care.
    (4) Otherwise achieve the goals of the models described in this 
section.
    (b) Beneficiary-identifiable data. (1) CMS makes beneficiary-
identifiable data available to an EPM participant in accordance with 
applicable privacy laws and only in response to the EPM participant's 
request for such data for a beneficiary who has been furnished a 
billable service by the EPM participant corresponding to the episode 
definitions for the EPM.
    (2) The minimum data necessary to achieve the goals of the EPM, as 
determined by CMS, may be provided under this section for an EPM 
participant's baseline period and as frequently as on a quarterly basis 
throughout the EPM participant's participation in an EPM.

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


Sec.  512.400  Quality measures and reporting--general.

    (a) Reporting of quality measures. Quality measures are used for 
public reporting, for determining whether an EPM participant is 
eligible for reconciliation payments under Sec.  512.305(d)(1)(iii)), 
and for assigning the effective and applicable discount factors for the 
performance year to an EPM participant as described in Sec.  
512.315(b)(5), (c)(5), and (d)(5).
    (b) Quality measures. Quality measures differ by EPM.
    (c) Public reporting. CMS--
    (1) Makes the required quality measurement results for each EPM 
participant in each performance year publicly available on the CMS Web 
site in a form and manner as determined by CMS;
    (2) Shares each EPM participant's quality metrics with the 
participant prior to display on the CMS Web site; and
    (3) Does not publicly report the voluntary measure data submitted 
under an EPM in Sec.  512.411(b) or Sec.  512.413(b) but does indicate 
whether an EPM participant has voluntarily submitted such data.


Sec.  512.411  Quality measures and reporting for AMI model.

    (a) Required measures. (1) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Acute Myocardial 
Infarction (NQF #0230) (MORT-30-AMI).
    (2) Excess Days in Acute Care after Hospitalization for AMI (AMI 
Excess Days).
    (3) HCAHPS Survey (NQF #0166).
    (b) Voluntary measure. (1) Voluntary Hybrid Hospital 30-Day, All-
Cause, Risk-Standardized Mortality Rate Following Acute Myocardial 
Infarction (AMI) Hospitalization (NQF #2473) (Hybrid AMI Mortality).
    (2) To be eligible to receive the additional points added to the 
AMI composite quality score for successful voluntary data submission of 
clinical electronic health record data, as described in Sec.  
512.411(b)(1), AMI model participants must submit the clinical 
electronic health record data requested by CMS related to each eligible 
AMI anchor hospitalization during the performance period. The data must 
be submitted within 60 days of the end of the most recent performance 
period and be accompanied by the limited risk variable data (five 
elements finalized) as outlined in Sec.  512.315(b)(1)(iv).
    (i) For each eligible AMI anchor hospitalization, all five risk 
variable data elements are required to be submitted. The five risk 
variables are as follows:
    (A) Age.
    (B) First-captured heart rate measured within 2 hours of a patient 
presenting to the hospital.
    (C) First-captured systolic blood pressure measured within 2 hours 
of a patient presenting to the hospital.
    (D) First-captured troponin values measured within 24 hours of a 
patient presenting to the hospitals.
    (E) First-captured creatinine values measured within 24 hours of a 
patient presenting to the hospitals.
    (ii) For each eligible AMI anchor hospitalization, six linking 
variables are

[[Page 51029]]

required to merge the electronic health record data with the CMS claims 
data:
    (A) AMI model participant CCN.
    (B) Medicare Health Insurance Claim Number.
    (C) Sex.
    (D) Date of birth.
    (E) Admission date.
    (F) Discharge date.
    (iii) For years 1 through 5 of the AMI model an increasing amount 
of data are requested by CMS for each performance period as follows:
    (A) Year 1. Submit electronic health record data on > 50% of 
eligible AMI anchor hospitalizations between July 1, 2017 and August 
31, 2017.
    (B) Year 2. Submit electronic health record data on over 90% of 
eligible AMI anchor hospitalizations between September 1, 2017 and June 
30, 2018.
    (C) Year 3. Submit electronic health record data on over 90% of 
eligible AMI anchor hospitalizations between July 1, 2018 and June 30, 
2019.
    (D) Year 4. Submit electronic health record data on over 90% of 
eligible AMI anchor hospitalizations between July 1, 2019 and June 30, 
2020.
    (E) Year 5. Submit electronic health record data on over 90% of 
eligible AMI anchor hospitalizations between July 1, 2020 and June 30, 
2021.


Sec.  512.412  Quality measures and reporting for CABG model.

    (a) Required measures. (1) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass 
Graft (CABG) Surgery (NQF# 2558) (MORT-30-CABG).
    (2) HCAHPS Survey (NQF #0166).
    (b) [Reserved].


Sec.  512.413  Quality measures and reporting for SHFFT model.

    (a) Required measures. (1) Hospital-Level Risk-Standardized 
Complication Rate Following Elective Primary Total Hip Arthroplasty 
and/or Total Knee Arthroplasty (NQF #1550) (Hip/Knee Complications).
    (2) HCAHPS Survey (NQF #0166).
    (b) Voluntary measure. (1) Patient-reported outcomes and limited 
risk variable data following elective primary THA/TKA.
    (2) To be eligible to receive the additional points added to the 
SHFFT model composite quality score for successful voluntary data 
submission of patient-reported outcomes and limited risk variable data, 
as described in Sec.  512.315(d)(1)(iv), SHFFT model participants 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.  512.315(d)(1)(iv).
    (i) For each eligible procedure all eleven risk variable data 
elements are required to be submitted. The eleven risk variables are as 
follows:
    (A) Date of birth.
    (B) Race.
    (C) Ethnicity.
    (D) Date of admission to anchor hospitalization.
    (E) Date of eligible THA/TKA procedure.
    (F) Medicare Health Insurance Claim Number.
    (G) Body mass index.
    (H) Use of chronic (>= 90 days) narcotics.
    (I) Total painful joint count.
    (J) Quantified spinal pain.
    (K) Single Item Health Literacy Screening (SILS2) questionnaire.
    (ii) Participants must also submit the amount of requested THA/TKA 
patient-reported outcomes data required for each year of the SHFFT 
model in order to be considered successful in submitting voluntary 
data.
    (A) The amount of requested THA/TKA patient-reported outcomes data 
to submit, in order to be considered successful increases each 
subsequent year of the SHFFT model over the 5 years of the model.
    (B) A phase-in approach that determines the amount of requested 
THA/TKA patient-reported outcomes data to submit over the 5 years of 
the SHFFT model is 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:
    (1) Greater than or equal to 60 percent of eligible procedures or 
greater than or equal to 75 percent eligible patients during the data 
collection period.
    (2) Submission of requested THA/TKA PRO and limited risk variable 
data is completed within 60 days of the most recent performance period.
    (iii) For years 1 through 5 of the model an increasing amount of 
data is requested by CMS for each performance period as follows:
    (A) Year 1 (2017). Submit 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.
    (B) Year 2 (2018). Submit--
    (1) Post-operative data on primary elective THA/TKA procedures for 
>= 60 percent or >= 75 procedures performed between September 1, 2016 
and June 30, 2017; and
    (2) 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.
    (C) Year 3 (2019). Submit--
    (1) Post-operative data on primary elective THA/TKA procedures for 
>= 70% or >= 100 procedures performed between July 1, 2017 and June 30, 
2018; and
    (2) 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.
    (D) Year 4 (2020). Submit--
    (1) Post-operative data on primary elective THA/TKA procedures for 
>= 80% or >= 200 procedures performed between July 1, 2018 and June 30, 
2019; and
    (2) 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.
    (E) Year 5 (2021). Submit--
    (1) Post-operative data on primary elective THA/TKA procedures for 
>= 80% or >= 200 procedures performed between July 1, 2019 and June 30, 
2020; and
    (2) Pre-operative data on primary elective THA/TKA procedures for 
>= 80% or >= 200 procedures performed between July 1, 2020 and June 30, 
2021, unless CMS requests a more limited data set, in which case, 
submit all requested data elements.


Sec.  512.450  Beneficiary choice and beneficiary notification.

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

[[Page 51030]]

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 take into account patient and family preferences when 
they are expressed.
    (2) Participant hospitals may not charge any episode payment model 
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.  512.240 of 
his or her inclusion in the episode payment model. The notice must be 
upon admission to the participant hospital or immediately following the 
decision to schedule a procedure or provide services which would result 
in a patient being discharged under a covered episode. In circumstances 
where, due to the patient's condition, it may not be feasible to 
provide notification at such times, the notification must be provided 
to the beneficiary or his or her representative as soon as is 
reasonably practicable but no later than discharge from the hospital 
accountable for the episode. The hospital must be able to generate a 
list of all beneficiaries receiving such notification including the 
date on which the notification was provided to the beneficiary to CMS 
or its designee upon request for monitoring purposes. 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 sharing arrangement.
    (2) Physician, non-physician practitioner, and PGP provision of 
notice. A participant hospital must require any physician, non-
physician practitioner, or PGP that is an episode payment model 
collaborator to provide written notice of the structure of the model 
and the existence of the physician's or PGP's sharing arrangement with 
the participant hospital to any Medicare beneficiary that meets the 
criteria specified in Sec.  512.240. The notice must be provided at the 
time that the decision to undergo a procedure or service covered under 
an episode payment model is made. In circumstances where, due to the 
patient's condition, it may not be feasible to provide notification at 
such times, the notification must be provided to the beneficiary or his 
or her representative as soon as is reasonably practicable but no later 
than discharge from the hospital accountable for the episode. The 
physician or PGP must be able to generate a list of all beneficiaries 
receiving such notification including the date on which the 
notification was provided to the beneficiary to CMS upon request for 
monitoring purposes.
    (3) PAC provider/supplier notification. A participant hospital must 
require any provider or supplier, other than the treating physician or 
member of a PGP discussed in paragraph (b)(2) of this section, with 
whom it has executed a sharing arrangement 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.  
512.240. The notice must be provided no later than the time at which 
the beneficiary first receives services from the provider or supplier 
during the episode payment model episode of care. In circumstances 
where, due to the patient's condition, it may not be feasible to 
provide notification at such times, the notification must be provided 
to the beneficiary or his or her representative as soon as is 
reasonably practicable but no later than discharge from the hospital 
accountable for the episode. The PAC provider/supplier must be able to 
generate a list of all beneficiaries receiving such notification 
including the date on which the notification was provided to the 
beneficiary to CMS upon request for monitoring purposes.
    (4) Collaborating hospital notification. An EPM participant must 
require any hospital that is an EPM collaborator to provide written 
notice of the structure of the model and the existence of the 
hospital's sharing arrangement with the EPM participant to any Medicare 
beneficiary that meets the criteria specified in Sec.  512.240. The 
notice must be upon admission to the collaborating hospital, or 
immediately following the decision to undertake a procedure or provide 
services covered under an EPM, whichever occurs later. In circumstances 
where, due to the patient's condition, it may not be feasible to 
provide notification at such times, the notification must be provided 
to the beneficiary or his or her representative as soon as is 
reasonably practicable but no later than discharge from the hospital 
accountable for the episode. Hospitals must be able to generate a list 
of all beneficiaries receiving such notification including the date on 
which the notification was provided to the beneficiary to CMS, or its 
designees, upon request for monitoring purposes.
    (5) ACO notification. An EPM participant must require any ACO that 
is an EPM collaborator to require their ACO participants for which the 
ACO has an ACO distribution arrangement as well as the ACO's providers 
and suppliers to provide written notice of the structure of the model 
and the existence of the ACO's sharing arrangement with the EPM 
participant to any Medicare beneficiary that meets the criteria 
specified in Sec.  512.240. The notice must be provided no later than 
the time at which the beneficiary first receives services from the ACO 
participant and/or an ACO PGP collaboration agent during the EPM 
episode. In circumstances where, due to the patient's condition, it may 
not be feasible to provide notification at such times, the notification 
must be provided to the beneficiary or his or her representative as 
soon as is reasonably practicable but no later than discharge from the 
hospital accountable for the episode. ACOs must be able to generate a 
list of all beneficiaries receiving such notification including the 
date on which the notification was provided to the beneficiary to CMS, 
or its designees, upon request for monitoring purposes.
    (6) 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

[[Page 51031]]

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.  512.610, the hospital must notify the 
beneficiary in accordance with paragraph (b)(6)(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.
    (7) Lists of beneficiaries that receive notifications must be 
retained and provided access to CMS, or its designees, in accordance 
with Sec.  512.110.


Sec.  512.460  Compliance enforcement.

    (a) General. EPM participants 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 applicable payment, coverage, program integrity, or other 
requirements under this chapter (such as those in parts 412 and 482 of 
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 an EPM 
participant or its related EPM collaborators, collaboration agents, or 
downstream collaboration agents does any of the following:
    (i) Fails to comply with any requirements of this part or is 
identified as noncompliant through monitoring by HHS (including CMS and 
OIG) of the applicable model, including but not limited to any of the 
following:
    (A) Avoiding potentially high cost or high severity patients.
    (B) Targeting potentially low cost or low severity 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 sharing 
arrangements.
    (ii) Has signed a sharing arrangement, distribution arrangement, or 
downstream distribution arrangement that 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 applicable episode payment 
model, or fails to take any action that CMS determines for program 
integrity reasons should have been taken to further the best interests 
of EPM.
    (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.
    (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 EPM.
    (2) Remedial actions include the following:
    (i) Issuing a warning letter to the EPM participant.
    (ii) Requiring the EPM participant to develop a corrective action 
plan, commonly referred to as a CAP.
    (iii) Reducing or eliminating the EPM participant's reconciliation 
payment.
    (iv) Reducing or eliminating the EPM participant's CR incentive 
payment.
    (v) Requiring the EPM participant to terminate a sharing 
arrangement with an EPM collaborator and prohibit further engagement by 
the EPM participant in sharing arrangements with the EPM collaborator.
    (vi) Terminating the EPM participant's participation in the EPM. 
Where a participant is terminated from an EPM, the EPM participant will 
remain liable for all negative NPRA generated from episodes of care 
that occurred prior to termination.
    (3) CMS may add 25 percent to a repayment amount on an EPM 
participant's reconciliation report if all of the following conditions 
are true:
    (i) CMS has required a corrective action plan from the EPM 
participant.
    (ii) The EPM participant owes a repayment amount to CMS.
    (iii) The EPM participant fails to timely comply with the 
corrective action plan or is noncompliant with the EPM's requirements.

Subpart F--Financial Arrangements and Beneficiary Incentives


Sec.  512.500  Sharing arrangements under the EPM.

    (a) General. (1) An EPM participant may enter into a sharing 
arrangement with an EPM collaborator to make a gainsharing payment, or 
to receive an alignment payment, or both. An EPM participant must not 
make a gainsharing payment or receive an alignment payment except in 
accordance with a sharing arrangement.
    (2) A sharing arrangement must comply with the provisions of this 
section and all other applicable laws and regulations, including the 
applicable fraud and abuse laws and all applicable payment and coverage 
requirements.
    (3) The EPM participant must develop, maintain, and use a set of 
written policies for selecting individuals and entities to be EPM 
collaborators. These policies must contain criteria related to, and 
inclusive of, the quality of care delivered by the potential EPM 
collaborator. The selection criteria cannot be based directly or 
indirectly on the volume or value of past or anticipated referrals or 
business otherwise generated by, between or among the EPM participant, 
any EPM collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with an EPM 
participant, EPM collaborator, collaboration agent, or downstream 
collaboration agent.
    (4) If an EPM participant enters into a sharing arrangement, its 
compliance program must include oversight of sharing arrangements and 
compliance with the applicable requirements of the EPM.
    (b) Requirements. (1) A sharing arrangement must be in writing and 
signed by the parties, and entered into before care is furnished to EPM 
beneficiaries under the sharing arrangement.
    (2) Participation in a sharing arrangement must be voluntary and 
without penalty for nonparticipation.
    (3) The sharing arrangement must require the EPM collaborator and 
its employees, contractors (including collaboration agents), and 
subcontractors (including downstream collaboration agents) to comply 
with the following:
    (i) The applicable provisions of this part (including requirements 
regarding beneficiary notifications, access to records, record 
retention, and

[[Page 51032]]

participation in any evaluation, monitoring, compliance, and 
enforcement activities performed by CMS or its designees);
    (ii) All applicable 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 sharing arrangement; and
    (iii) All other applicable laws and regulations.
    (4) The sharing arrangement must require the EPM collaborator to 
have a compliance program that includes oversight of the sharing 
arrangement and compliance with the requirements of the EPM.
    (5) The sharing arrangement must not pose a risk to beneficiary 
access, beneficiary freedom of choice, or quality of care.
    (6) The board or other governing body of the EPM participant must 
have responsibility for overseeing the EPM participant's participation 
in the EPM, its arrangements with EPM collaborators, its payment of 
gainsharing payments, its receipt of alignment payments, and its use of 
beneficiary incentives in the EPM.
    (7) The written agreement memorializing a sharing arrangement must 
specify the following:
    (i) The purpose and scope of the sharing arrangement.
    (ii) The identities and obligations of the parties, including 
specified EPM activities and other services to be performed by the 
parties under the sharing arrangement;
    (iii) The date of the sharing arrangement.
    (iv) Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out EPM activities.
    (v) The financial or economic terms for payment, including the 
following:
    (A) Eligibility criteria for a gainsharing payment.
    (B) Eligibility criteria for an alignment payment.
    (C) Frequency of gainsharing or alignment payment.
    (D) Methodology and accounting formula for determining the amount 
of a gainsharing payment that is substantially based on quality of care 
and the provision of EPM activities.
    (E) Methodology and accounting formula for determining the amount 
of an alignment payment.
    (8) The sharing arrangement must not--
    (i) Induce the EPM participant, EPM collaborator, or any employees, 
contractors, or subcontractors of the EPM participant or EPM 
collaborator to reduce or limit medically necessary services to any 
Medicare beneficiary; or
    (ii) Restrict the ability of an EPM collaborator to make decisions 
in the best interests of its patients, including the selection of 
devices, supplies, and treatments.
    (c) Gainsharing payment, alignment payment, and internal cost 
savings conditions and restrictions. (1) Gainsharing payments, if any, 
must--
    (i) Be derived solely from reconciliation payments, or internal 
cost savings, or both;
    (ii) Be distributed on an annual basis (not more than once per 
calendar year);
    (iii) Not be a loan, advance payment, or payment for referrals or 
other business; and
    (iv) Be clearly identified as a gainsharing payment at the time it 
is paid.
    (2)(i) To be eligible to receive a gainsharing payment, an EPM 
collaborator must meet quality of care criteria for the performance 
year for which the EPM participant accrued the internal cost savings or 
earned the reconciliation payment that comprises the gainsharing 
payment. The quality of care criteria must be established by the EPM 
participant and directly related to EPM episodes.
    (ii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator other than a 
PGP or an ACO must have directly furnished a billable item or service 
to an EPM beneficiary during an EPM episode that occurred in the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment or was assessed a repayment amount.
    (iii) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator that is a 
PGP 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 an EPM beneficiary during 
an EPM episode that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment or was 
assessed a repayment amount; and
    (B) The PGP must have contributed to EPM activities and been 
clinically involved in the care of EPM beneficiaries during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment or was assessed a repayment amount. For example, a 
PGP might have been clinically involved in the care of EPM 
beneficiaries by--
    (1) Providing care coordination services to EPM beneficiaries 
during and/or after inpatient admission;
    (2) Engaging with an EPM participant in care redesign strategies, 
and actually performing a role in implementing such strategies, that 
are designed to improve the quality of care for EPM episodes and reduce 
EPM episode spending; or
    (3) In coordination with other providers and suppliers (such as 
members of the PGP, the EPM participant, and post-acute care 
providers), implementing strategies designed to address and manage the 
comorbidities of EPM beneficiaries.
    (iv) To be eligible to receive a gainsharing payment, or to be 
required to make an alignment payment, an EPM collaborator that is an 
ACO must meet the following criteria:
    (A) The ACO must have had an ACO provider/supplier that directly 
furnished, or an ACO participant that billed for, an item or service 
that was rendered to an EPM beneficiary during an EPM episode that 
occurred during the same performance year for which the EPM participant 
accrued the internal cost savings or earned the reconciliation payment 
that comprises the gainsharing payment or was assessed a repayment 
amount; and
    (B) The ACO must have contributed to EPM activities and been 
clinically involved in the care of EPM beneficiaries during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment or was assessed a repayment amount. For example, an 
ACO might be have been clinically involved in the care of EPM 
beneficiaries by--
    (1) Providing care coordination services to EPM beneficiaries 
during and/or after inpatient admission;
    (2) Engaging with an EPM participant in care redesign strategies, 
and actually performing a role in implementing such strategies, that 
are designed to improve the quality of care and reduce spending for EPM 
episodes; or
    (3) In coordination with providers and suppliers (such as ACO 
participants, ACO providers/suppliers, the EPM participant, and post-
acute care providers), implementing strategies designed to address and 
manage the comorbidities of EPM beneficiaries.
    (3)(i) The methodology for accruing, calculating and verifying 
internal cost savings must be transparent, measurable, and verifiable 
in

[[Page 51033]]

accordance with generally accepted accounting principles (GAAP) and 
Government Auditing Standards (The Yellow Book).
    (ii) The methodology used to calculate internal cost savings must 
reflect the actual, internal cost savings achieved by the EPM 
participant through the documented implementation of EPM activities 
identified by the EPM participant and must exclude:
    (A) Any savings realized by any individual or entity that is not 
the EPM participant; and
    (B) ``Paper'' savings from accounting conventions or past 
investment in fixed costs.
    (4) The total amount of a gainsharing payment for a performance 
year paid to certain individuals and entities that are EPM 
collaborators must not exceed the following:
    (i) In the case of an EPM collaborator who is a physician or 
nonphysician practitioner, 50 percent of the Medicare-approved amounts 
under the PFS for items and services furnished by that physician or 
nonphysician practitioner to the EPM participant's EPM beneficiaries 
during EPM episodes that occurred during the same performance year for 
which the EPM participant accrued the internal cost savings or earned 
the reconciliation payment that comprises the gainsharing payment being 
made.
    (ii) In the case of an EPM collaborator that is a PGP, 50 percent 
of the Medicare-approved amounts under the PFS for items and services 
billed by the PGP and furnished to the EPM participant's EPM 
beneficiaries by members of the PGP during EPM episodes that occurred 
during the same performance year for which the EPM participant accrued 
the internal cost savings or earned the reconciliation payment that 
comprises the gainsharing payment being made.
    (5) The amount of any gainsharing payments must be determined in 
accordance with a methodology that is substantially based on quality of 
care and the provision of EPM activities. The methodology may take into 
account the amount of such EPM activities provided by an EPM 
collaborator relative to other EPM collaborators.
    (6) For a performance year, the aggregate amount of all gainsharing 
payments that are derived from a reconciliation payment must not exceed 
the amount of the reconciliation payment the EPM participant receives 
from CMS.
    (7) No entity or individual, whether a party to a sharing 
arrangement 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 past or anticipated referrals or business otherwise 
generated by, between or among the EPM participant, any EPM 
collaborator, any collaboration agent, any downstream collaboration 
agent, or any individual or entity affiliated with an EPM participant, 
EPM collaborator, collaboration agent, or downstream collaboration 
agent.
    (8) An EPM participant must not make a gainsharing payment to an 
EPM 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 EPM episodes or other integrity problems.
    (9) The sharing arrangement must require the EPM participant to 
recoup any gainsharing payment that contained funds derived from a CMS 
overpayment on a reconciliation report or was based on the submission 
of false or fraudulent data.
    (10) Alignment payments from an EPM collaborator to an EPM 
participant may be made at any interval that is agreed upon by both 
parties, and must not be--
    (i) Issued, distributed, or paid prior to the calculation by CMS of 
a repayment amount reflected in a reconciliation report;
    (ii) Loans, advance payments, or payments for referrals or other 
business; or
    (iii) Assessed by an EPM participant if it does not owe a repayment 
amount.
    (11) The EPM participant must not receive any amounts under a 
sharing arrangement from an EPM collaborator that are not alignment 
payments.
    (12) For a performance year, the aggregate amount of all alignment 
payments received by the EPM participant must not exceed 50 percent of 
the EPM participant's repayment amount.
    (13) The aggregate amount of all alignment payments from an EPM 
collaborator to the EPM participant may not be greater than--
    (i) With respect to an EPM collaborator other than an ACO, 25 
percent of the EPM participant's repayment amount; or
    (ii) With respect to an EPM collaborator that is an ACO, 50 percent 
of the EPM participant's repayment amount.
    (14) The methodology for determining alignment payments must not 
directly account for the volume or value of past or anticipated 
referrals or business otherwise generated by, between or among the EPM 
participant, any EPM collaborator, any collaboration agent, any 
downstream collaboration agent, or any individual or entity affiliated 
with an EPM participant, EPM collaborator, collaboration agent, or 
downstream collaboration agent.
    (15) All gainsharing payments and any alignment payments must be 
administered by the EPM participant in accordance with generally 
accepted accounting principles (GAAP) and Government Auditing Standards 
(The Yellow Book).
    (16) All gainsharing payments and alignment payments must be made 
by check, electronic funds transfer, or another traceable cash 
transaction.
    (d) Documentation requirements. (1) The EPM participant must do all 
of the following:
    (i) Document the sharing arrangement contemporaneously with the 
establishment of the arrangement.
    (ii) Maintain accurate current and historical lists of all EPM 
collaborators, including EPM collaborator names and addresses.
    (A) Update such lists on at least a quarterly basis.
    (B) Publicly report the current and historical lists of EPM 
collaborators on a Web page on the EPM participant's Web site.
    (iii) Maintain and require each EPM collaborator to maintain 
contemporaneous documentation with respect to the payment or receipt of 
any gainsharing payment or alignment payment that includes at a minimum 
all of the following:
    (A) Nature of the payment (gainsharing payment or alignment 
payment).
    (B) Identity of the parties making and receiving the payment.
    (C) Date of the payment.
    (D) Amount of the payment.
    (E) Date and amount of any recoupment of all or a portion of an EPM 
collaborator's gainsharing payment.
    (F) Explanation for each recoupment, such as whether the EPM 
collaborator received a gainsharing payment that contained funds 
derived from a CMS overpayment on a reconciliation report, or was based 
on the submission of false or fraudulent data.
    (2) The EPM participant must keep records of the following:
    (i) Its process for determining and verifying its potential and 
current EPM collaborators' eligibility to participate in Medicare.
    (ii) Its plan to track internal cost savings.
    (iii) Information on the accounting systems used to track internal 
cost savings.
    (iv) A description of current health information technology, 
including

[[Page 51034]]

systems to track reconciliation payments and internal cost savings.
    (v) Its plan to track gainsharing payments and alignment payments.
    (3) The EPM participant must retain and provide access to, and must 
require each EPM collaborator to retain and provide access to, the 
required documentation in accordance with Sec.  512.110.


Sec.  512.505  Distribution arrangements under the EPM.

    (a) General. (1) A PGP or ACO that has entered into a sharing 
arrangement with an EPM participant may distribute all or a portion of 
any gainsharing payment it receives from the EPM participant only in 
accordance with a distribution arrangement.
    (2) All distribution arrangements must comply with the provisions 
of this section and all other applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All distribution arrangements must be in 
writing and signed by the parties, contain the date of the agreement, 
and be entered into before care is furnished to EPM beneficiaries under 
the distribution arrangement.
    (2) Participation in a distribution arrangement must be voluntary 
and without penalty for nonparticipation.
    (3) The distribution arrangement must require the collaboration 
agent to comply with all applicable laws and regulations.
    (4) The opportunity to make or receive a distribution payment must 
not be conditioned directly or indirectly on the volume or value of 
past or anticipated referrals or business otherwise generated by, 
between or among the EPM participant, any EPM collaborator, any 
collaboration agent, any downstream collaboration agent, or any 
individual or entity affiliated with an EPM participant, EPM 
collaborator, collaboration agent, or downstream collaboration agent.
    (5) The amount of any distribution payments from an ACO must be 
determined in accordance with a methodology that is substantially based 
on quality of care and the provision EPM activities and that may take 
into account the amount of such EPM activities provided by a 
collaboration agent relative to other collaboration agents.
    (6) The amount of any distribution payments from a PGP to a member 
must be determined either in a manner that complies with Sec.  
411.352(g) of this chapter or in accordance with a methodology that is 
substantially based on quality of care and the provision EPM activities 
and that may take into account the amount of such EPM activities 
provided by a collaboration agent relative to other collaboration 
agents.
    (7) Except for a distribution payment from a PGP to a PGP member 
that complies with Sec.  411.352(g), a collaboration agent is eligible 
to receive a distribution payment only if the collaboration agent 
furnished or billed for an item or service rendered to an EPM 
beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprises the 
gainsharing payment being distributed.
    (8) Except for a distribution payment from a PGP to a PGP member 
that complies with Sec.  411.352(g), the total amount of distribution 
payments for a performance year paid to a collaboration agent must not 
exceed the following:
    (i) In the case of a collaboration agent that is physician or 
nonphysician practitioner, 50 percent of the total Medicare-approved 
amounts under the PFS for items and services furnished by the 
collaboration agent to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment being 
distributed.
    (ii) In the case of a collaboration agent that is a PGP, 50 percent 
of the total Medicare-approved amounts under the PFS for items and 
services billed by the PGP for items and services furnished by members 
of the PGP to the EPM participant's EPM beneficiaries during EPM 
episodes that occurred during the same performance year for which the 
EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment being 
distributed.
    (9) With respect to the distribution of any gainsharing payment 
received by a PGP or ACO, the total amount of all distribution payments 
must not exceed the amount of the gainsharing payment received by the 
EPM collaborator from the EPM participant.
    (10) All distribution payments must be made by check, electronic 
funds transfer, or another traceable cash transaction.
    (11) The collaboration agent must retain the 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 the collaboration agent to reduce or limit medically 
necessary items and services to any Medicare beneficiary; or
    (ii) Reward the provision of items and services that are medically 
unnecessary.
    (13) The EPM collaborator must maintain contemporaneous 
documentation regarding distribution arrangements in accordance with 
Sec.  512.110, including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any distribution payment(s);
    (iii) The identity of each collaboration agent that received a 
distribution payment; and
    (iv) A description of the methodology and accounting formula for 
determining the amount of any distribution payment.
    (14) The EPM collaborator may not enter into a distribution 
arrangement with any individual or entity that has a sharing 
arrangement with the same EPM participant.
    (15) The EPM collaborator must retain and provide access to, and 
must require collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  512.110.


Sec.  512.510  Downstream distribution arrangements under the EPM.

    (a) General. (1) An ACO participant that is a PGP and that has 
entered into a distribution arrangement with an EPM collaborator that 
is an ACO may distribute all or a portion of any distribution payment 
it receives from the EPM collaborator only in accordance with a 
downstream distribution arrangement.
    (2) All downstream distribution arrangements must comply with the 
provisions of this section and all applicable laws and regulations, 
including the fraud and abuse laws.
    (b) Requirements. (1) All downstream distribution arrangements must 
be in writing and signed by the parties, contain the date of the 
agreement, and be entered into before care is furnished to EPM 
beneficiaries under the downstream distribution arrangement.
    (2) Participation in a downstream distribution arrangement must be 
voluntary and without penalty for nonparticipation.
    (3) The downstream distribution arrangement must require the 
downstream collaboration agent to comply with all applicable laws and 
regulations.
    (4) The opportunity to make or receive a downstream distribution 
payment must not be conditioned directly or indirectly on the volume or 
value of past or anticipated referrals or

[[Page 51035]]

business otherwise generated by, between or among the EPM participant, 
any EPM collaborator, any collaboration agent, any downstream 
collaboration agent, or any individual or entity affiliated with an EPM 
participant, EPM collaborator, collaboration agent, or downstream 
collaboration agent.
    (5) The amount of any downstream distribution payment must be 
determined either in a manner that complies with Sec.  411.352(g) of 
this chapter or in accordance with a methodology that is substantially 
based on the quality of care and the provision of EPM activities and 
that may take into account the amount of such EPM activities provided 
by a downstream collaboration agent relative to other downstream 
collaboration agents.
    (6) Except for a downstream distribution payment that complies with 
Sec.  411.352(g), a downstream collaboration agent is eligible to 
receive a downstream distribution payment only if the PGP billed for an 
item or service furnished by the downstream collaboration agent to an 
EPM beneficiary during an EPM episode that occurred during the same 
performance year for which the EPM participant accrued the internal 
cost savings or earned the reconciliation payment that comprise the 
gainsharing payment from which the ACO made the distribution payment to 
the PGP that is an ACO participant.
    (7) Except for a downstream distribution payment that complies with 
Sec.  411.352(g), the total amount of downstream distribution payments 
for a performance year paid to a downstream collaboration agent must 
not exceed 50 percent of the total Medicare-approved amounts under the 
PFS for services billed by the PGP and furnished by the downstream 
collaboration agent to the EPM participant's EPM beneficiaries during 
EPM episodes that occurred during the same performance year for which 
the EPM participant accrued the internal cost savings or earned the 
reconciliation payment that comprises the gainsharing payment from 
which the ACO made the distribution payment to the PGP that is an ACO 
participant.
    (8) The total amount of all downstream distribution payments made 
to downstream collaboration agents must not exceed the amount of the 
distribution payment received by the PGP from the ACO.
    (9) All downstream distribution payments must be made by check, 
electronic funds transfer, or another traceable cash transaction.
    (10) The downstream collaboration agent must retain his or her 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
    (11) The downstream distribution arrangement must not--
    (i) Induce the downstream 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.
    (12) The PGP must maintain contemporaneous documentation regarding 
downstream distribution arrangements in accordance with Sec.  512.110, 
including the following:
    (i) The relevant written agreements.
    (ii) The date and amount of any downstream distribution payment.
    (iii) The identity of each downstream collaboration agent that 
received a downstream distribution payment;.
    (iv) A description of the methodology and accounting formula for 
determining the amount of any downstream distribution payment.
    (13) The PGP may not enter into a downstream distribution 
arrangement with any PGP member who has--
    (i) A sharing arrangement with an EPM participant; or
    (ii) A distribution arrangement with the ACO the PGP is a 
participant in.
    (14) The PGP must retain and provide access to, and must require 
downstream collaboration agents to retain and provide access to, the 
required documentation in accordance with Sec.  512.110.


Sec.  512.520  Enforcement authority under the EPM.

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


Sec.  512.525  Beneficiary engagement incentives under the EPM.

    (a) General. EPM participants may choose to provide in-kind patient 
engagement incentives to beneficiaries in an EPM episode, subject to 
the following conditions:
    (1) The incentive must be provided directly by the EPM participant 
or by an agent of the EPM participant under the EPM participant's 
direction and control to the EPM beneficiary during an EPM episode.
    (2) The item or service provided must be reasonably connected to 
medical care provided to an EPM beneficiary during an EPM 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 (c) of this section, for a beneficiary in an EPM 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 EPM episode.
    (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) Technology provided to an EPM beneficiary. Beneficiary 
engagement incentives involving technology are subject to the following 
additional conditions:
    (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 EPM 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 (c) of this section, for a beneficiary in an EPM 
episode.
    (3) Items of technology exceeding $100 in retail value must--
    (i) Remain the property of the EPM participant; and
    (ii) Be retrieved from the beneficiary at the end of the EPM 
episode. The EPM participant 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.
    (c) Clinical goals of the EPM. The following are the clinical goals 
of the EPM, 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 
treatment for the EPM clinical condition.

[[Page 51036]]

    (4) Management of chronic diseases and conditions that may be 
affected by treatment for the EPM clinical condition.
    (d) Documentation of beneficiary engagement incentives. (1) EPM 
participants must maintain documentation of items and services 
furnished as beneficiary engagement incentives that exceed $25 in 
retail value.
    (2) The documentation established contemporaneously with the 
provision of the items and services 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 documentation regarding items of technology exceeding $100 
in retail must also include contemporaneous documentation of any 
attempt to retrieve technology at the end of an EPM episode as 
described in paragraph (b)(3) of this section.
    (4) The EPM participant must retain and provide access to the 
required documentation in accordance with Sec.  512.110.

Subpart G--Waivers


Sec.  512.600  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 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) The number of visits that are furnished to the beneficiary 
during--
    (i) An AMI episode, is up to 13 post-discharge home visits;
    (ii) A CABG episode, is up to 9 post-discharge home visits; and
    (iii) A SHFFT episode, is up to 9 post-discharge home visits.
    (c) Payment. Up to the maximum post-discharge home visits for a 
specific EPM episode, as described in paragraph (b)(5) of this section, 
may be billed under Part B by the physician or non-physician 
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.  512.605  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 an EPM, 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.  512.210.
    (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 an EPM 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 an EPM episode in accordance with Sec.  
512.210.
    (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.  512.610  Waiver of SNF 3-day rule.

    (a) Applicability of the SNF 3-day rule waiver. CMS determines that 
the SNF 3-day rule is--
    (1) Waived for the AMI model,
    (2) Not waived for the CABG model, and
    (3) Not waived for the SHFFT model.
    (b) Waiver of the SNF 3-day rule. For episodes being tested in 
those EPMs where the SNF 3-day rule is waived under paragraph (a) of 
this section, CMS waives the SNF 3-day rule for coverage of a SNF stay 
for episodes that begin on or after April 1, 2018, for an EPM 
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 EPM 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.
    (c) Financial liability for uncovered SNF services. CMS will 
determine the financial liability for uncovered SNF services if, 
subsequent to an EPM hospital applying the SNF 3-day rule waiver under 
this section, an EPM hospital incorrectly applies the SNF 3-day rule 
waiver.
    (1) If the EPM hospital discharges a beneficiary to a SNF that is 
not a qualified SNF under paragraph (b) of this section and provides 
the beneficiary with a discharge planning notice, as described at Sec.  
512.450(b)(6), to the

[[Page 51037]]

beneficiary at the time of discharge to a SNF then the SNF coverage 
requirements apply and the beneficiary may be financially liable for 
uncovered SNF services.
    (2) The EPM hospital will be financially liable for the SNF stay 
and the SNF must not bill the beneficiary for the costs of the 
uncovered SNF services furnished during the SNF stay if, subsequent to 
an EPM hospital applying the SNF 3-day rule waiver under this section, 
CMS determines the EPM hospital discharges a beneficiary--
    (i) To a SNF that is not a qualified SNF under paragraph (b) of 
this section and the EPM hospital does not provide the beneficiary with 
a discharge planning notice, as described at Sec.  512.450(b)(6)
    (ii) That is in an EPM where the SNF 3-day rule waiver is not 
applicable under paragraph (a) of this section; or
    (iii) During an episode that begins prior to April 1, 2018, where 
the SNF 3-day rule waiver is not applicable under paragraph (b) of this 
section.
    (d) Other requirements. All other Medicare rules for coverage and 
payment of Part A-covered SNF services continue to apply.


Sec.  512.615  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.  512.600, 
including those related to recovery from the surgery, as described in 
paragraph (b) of this section, for episodes being tested in an EPM.
    (b) Services to which the waiver applies. Up to the maximum post-
discharge home visits for a specific EPM episode, as described in Sec.  
512.600(b)(5), including those related to recovery from the surgery, 
per EPM episode may be billed separately under Medicare Part B by the 
physician or non-physician practitioner, or by the participant hospital 
to which the physician or non-physician 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.  512.620  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 1833(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 EPM participant hospitals.
    (b) Reconciliation payments or repayments. Reconciliation payments 
or repayments do not affect the beneficiary cost-sharing amounts for 
the Medicare Part A and Part B services provided under an EPM.


Sec.  512.630  Waiver of physician definition for furnishing cardiac 
rehabilitation and intensive cardiac rehabilitation services to an EPM 
beneficiary.

    (a) General. Section 410.49 of this chapter requires cardiac 
rehabilitation (CR) and intensive cardiac rehabilitation (ICR) services 
to be furnished under the direction of a physician as defined in Sec.  
410.49(a) of this chapter.
    (b) Waiver of the physician definition. For a provider or supplier 
of CR and ICR services to an EPM beneficiary during an AMI and CABG 
episode, as defined in Sec.  512.2, CMS waives the physician definition 
to allow the functions of supervising physician, prescribing exercise, 
and establishing, reviewing, and signing an individualized treatment 
plan for CR and ICR services to be furnished under the direction of--
    (1) A physician, as defined in section 1861(r)(1) of the Act, or
    (2) A qualified nonphysician practitioner, as defined by CMS.
    (c) Other definitions and requirements. All other definitions and 
requirements in Sec.  410.49 of this chapter related to a physician or 
supervising physician continue to apply.

Subpart H--CR Incentive Payment Model for EPM and Medicare Fee-for-
Service Participants


 Sec.  512.700  Basis and scope.

    (a) Basis. This subpart implements the cardiac rehabilitation and 
intensive cardiac rehabilitation (CR) incentive payment model under 
section 1115A of the Act.
    (b) Scope. This subpart sets forth:
    (1) The participants in the CR incentive payment model;
    (2) The CR/ICR services that count toward CR incentive payments;
    (3) The methodology for determining CR incentive payments;
    (4) Provisions for FFS-CR participants that are not EPM 
participants.


Sec.  512.703  CR incentive payment model participants.

    (a) Selection of CR MSAs. The MSAs eligible for selection for AMI 
and CABG models will be classified into one of up to ten groups based 
on their historic utilization of CR/ICR services. Within each group, 
EPM-CR and FFS-CR MSAs will be randomly selected. The number of EPM-CRs 
to be selected within each group will be distributed proportionately 
between the groups based on the assignment of the 98 EPM MSAs. The same 
number of FFS-MSAs will then be drawn from each group.
    (b) Hospitals eligible for CR incentive payments. (1) Hospitals 
that are AMI and CABG model participants located in the EPM-CR MSAs.
    (2) FFS-CR Participants. Hospitals located in the FFS-CR MSAs that 
would meet all requirements in Sec.  512.100(b) to be an AMI or CABG 
model participant if the hospital were located in an MSA selected for 
the AMI and CABG models.


Sec.  512.705  CR/ICR services that count towards CR incentive 
payments.

    (a) Identification of CR/ICR services. CR/ICR services are 
identified by the HCPCS codes for CR/ICR services included in the CMS 
change request that implements the National Coverage Determination in 
the CR performance year.
    (b) CR participant eligibility for CR incentive payment. (1) For 
EPM-CR participants, CR/ICR services paid by Medicare to any provider 
or supplier for AMI and CABG model beneficiaries during AMI and CABG 
model episodes result in eligibility for CR incentive payments.
    (2) For FFS-CR participants, CR/ICR services paid by Medicare to 
any provider or supplier for beneficiaries during AMI care periods and 
CABG care periods that would meet the requirements to be AMI and CABG 
model episodes in accordance with all provisions in subpart B if the 
FFS-CR participant were an EPM participant result in eligibility for CR 
incentive payments.
    (c) Overlap between AMI care periods and CABG care periods with AMI 
and CABG model episodes. (1) An AMI care period or CABG care period 
does not begin if the beneficiary is in an AMI or CABG model episode 
when the AMI care period or CABG care period would otherwise begin.
    (2) An AMI care period or CABG care period is canceled if at any 
time during the AMI care period or CABG care period the beneficiary 
initiates an AMI or CABG model episode.
    (d) CR incentive payment time period. All AMI and CABG model 
episodes and AMI care periods and CABG care periods begin on or after 
July 1, 2017 and end on or before December 31, 2021.

[[Page 51038]]

Sec.  512.710  Determination of CR incentive payments.

    (a) General. CMS provides a CR incentive payment for each CR 
performance year to each EPM-CR participant and FFS-CR participant 
based on CR/ICR services paid by Medicare to any provider or supplier 
for beneficiaries in AMI and CABG model episodes or AMI and CABG care 
periods, respectively. CMS makes CR incentive payments from the 
Medicare Part B Trust Fund to CR participants, and also submits 
beneficiary-specific CR amounts to the CMS Master Database Management 
System. The initial level of the per-service CR incentive amount is $25 
per CR/ICR service for each of up to 11 CR/ICR services paid for by 
Medicare. For those CR/ICR services in an AMI or CABG model episode or 
AMI care period or CABG care period that exceed 11, the per-service CR 
incentive amount increases to $175 per CR/ICR service for each 
additional CR/ICR service paid for by Medicare.
    (b) Determination of CR incentive payment. At the same time that 
CMS carries out the determination of NPRA and reconciliation process 
for an EPM performance year as specified in Sec.  512.305 for EPM 
participants, CMS also determines each CR participant's CR incentive 
payment for the CR performance year according to the following:
    (1) CR amount when the CR service count is less than 12. CMS 
determines the CR amount for a beneficiary in an AMI or CABG model 
episode or AMI care period or CABG care period with a CR service count 
less than 12 by multiplying the CR service count by $25.
    (2) CR amount when the CR service count is 12 or more. CMS 
determines the CR amount for a beneficiary in an AMI or CABG model 
episode or AMI care period or CABG care period with a CR service count 
of 12 or more as the sum of $275 ($25 multiplied by 11 for the first 11 
CR/ICR services paid for by Medicare) and $175 multiplied by the 
difference between the CR service count and 11.
    (3) CR incentive payment. CMS sums the CR amounts determined in 
paragraphs (b)(1) and (2) of this section across the CR participant's 
beneficiaries in AMI and CABG model episodes or AMI care periods and 
CABG care periods for a given CR performance year to determine the CR 
incentive payment for the CR performance year.
    (c) Relation of CR incentive payments to reconciliation and 
Medicare repayments under EPMs. CR incentive payments to EPM-CR 
participants determined under Sec.  512.710(b) are exclusive of 
reconciliation payments and Medicare repayment amounts determined under 
Sec.  512.305(d).
    (d) Relation of CR incentive payments to sharing arrangements for 
EPM-CR participants. CR incentive payments under Sec.  512.710(b) are 
not eligible for and may not be distributed under sharing arrangements 
specified in Sec.  512.500.
    (e) Exclusion of CR incentive payments when updating quality-
adjusted target prices for EPM-CR participants. CR incentive payments 
under Sec.  512.710(b) are excluded when updating quality-adjusted 
target prices for EPM performance years 3 through 5.
    (f) CR incentive payment report. At the same time CMS issues the 
reconciliation report as specified in Sec.  512.305(f) to EPM 
participants, CMS issues each EPM-CR participant and each FFS-CR 
participant a CR incentive payment report for the CR performance year. 
Each report contains the following:
    (1) The number of AMI and CABG model episodes or AMI care periods 
and CABG care periods attributed to the CR participant in which 
Medicare paid for 11 or fewer CR/ICR services for a beneficiary during 
the CR performance year, if any.
    (2) The total number of CR/ICR services Medicare paid for during 
AMI and CABG model episodes or AMI care periods and CABG care periods 
identified in paragraph (f)(1) of this section.
    (3) The amount of the CR incentive payment attributable to the AMI 
and CABG model episodes or AMI care periods and CABG care periods 
identified in paragraph (f)(1) of this section.
    (4) The number of AMI and CABG model episodes or AMI care periods 
and CABG care periods attributed to the CR participant in which 
Medicare paid for 12 or more CR/ICR services for a beneficiary during 
the CR performance year, if any.
    (5) The total number of CR/ICR services Medicare paid for during 
AMI and CABG model episodes or AMI care periods and CABG care periods 
identified in paragraph (f)(4) of this section.
    (6) The amount of the CR incentive payment attributable to the AMI 
and CABG model episodes or AMI care periods and CABG care periods 
identified in paragraph (f)(4) of this section.
    (7) The total amount of the CR incentive payment.
    (g) Timing of CR incentive payments. CMS makes CR incentive 
payments on a retrospective basis subject to the following:
    (1) For EPM-CR participants, CMS makes the CR incentive payment, if 
any, concurrently with EPM reconciliation payments or repayment amounts 
assessed for a specific EPM and CR performance year, subject to the 
appeals process for EPM participants in Sec.  512.310.
    (2) For FFS-CR participants, CMS makes the CR incentive payments, 
if any, at the same time as for EPM-CR participants, subject to the 
provisions in Sec.  512.720.

Provisions for FFS-CR Participants


Sec.  512.715  Access to records and retention for FFS-CR participants.

    FFS-CR participants and any other individuals or entities providing 
items or services to a FFS-CR beneficiary must do all of the following:
    (a) Allow the Government, including CMS, OIG, HHS and the 
Comptroller General or their designees, scheduled and unscheduled 
access to all books, contracts, records, documents, and other evidence 
(including data related to CR/ICR service utilization and payments, 
billings, and the documentation required under Sec.  512.740(b)) 
sufficient to enable the audit, evaluation, inspection, or 
investigation of the following:
    (1) The individual's or entity's compliance with CR incentive 
payment model requirements.
    (2) The obligation to repay any CR incentive payments owed to CMS.
    (b) Maintain all such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the FFS-CR 
participant's participation in the CR incentive payment model or from 
the date of completion of any audit, evaluation, inspection, or 
investigation, whichever is later, unless--
    (1) CMS determines a particular record or group of records should 
be retained for a longer period and notifies the FFS-CR participant at 
least 30 calendar days before the disposition date; or
    (2) There has been a dispute or allegation of fraud or similar 
fault against the FFS-CR participant or any other individual or entity 
providing items or services to a FFS-CR beneficiary, in which case the 
records must be maintained for 6 years from the date of any resulting 
final resolution of the dispute or allegation of fraud or similar 
fault.


Sec.  512.720  Appeals process for FFS-CR participants.

    (a) Notice of calculation error (first level of appeal). Subject to 
the limitations on review in subpart H of

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this part, if a FFS-CR participant wishes to dispute calculations 
involving a matter related to a CR incentive payment, the FFS-CR 
participant is required to provide written notice of the error, in a 
form and manner specified by CMS.
    (1) Unless the FFS-CR participant provides such notice, CMS deems 
final the applicable CR incentive payment report 45 calendar days after 
the applicable CR incentive payment report is issued and proceeds with 
the payment as applicable.
    (2) If CMS receives a notice of a calculation error within 45 
calendar days of the issuance of the applicable CR incentive payment 
report, 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 FFS-CR participant.
    (3) Only FFS-CR participants may use notice of calculation error 
process described in this part.
    (b) Dispute resolution process (second level of appeal). (1) If the 
FFS-CR participant is dissatisfied with CMS's response to the notice of 
a calculation error, the FFS-CR participant may request a 
reconsideration review in a form and manner as specified by CMS.
    (2) The reconsideration request must provide a detailed explanation 
of the basis for the dispute and include supporting documentation for 
the FFS-CR participant's assertion that CMS or its representatives did 
not accurately calculate the CR incentive payment in accordance with 
subpart H of this part.
    (3) If CMS does not receive a request for reconsideration from the 
FFS-CR participant within 10 calendar days of the issue date of CMS's 
response to the FFS-CR participant's notice of calculation error, then 
CMS's response to the calculation error is deemed final and CMS 
proceeds with the applicable processes, as described in subpart H of 
this part.
    (4) The CMS reconsideration official notifies the FFS-CR 
participant in writing within 15 calendar days of receiving the FFS-CR 
participant'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 the FFS-CR participant.
    (7) The CMS reconsideration official issues a written determination 
within 30 days of the review. The determination is final and binding.
    (8) Only FFS-CR participants may use the dispute resolution process 
described in this part.
    (c) Exception to the notice of calculation error process. If the 
FFS-CR participant contests a matter that does not involve an issue 
contained in, or a calculation which contributes to a CR incentive 
payment report a notice of calculation error is not required. In these 
instances, if CMS does not receive a request for reconsideration from 
the FFS-CR participant within 10 calendar days of the notice of the 
initial determination, the initial determination is deemed final and 
CMS proceeds with the action indicated in the initial determination.
    (d) Notice of FFS-CR participant termination from the CR incentive 
payment model. If an FFS-CR participant receives notification that it 
has been terminated from the CR incentive payment model, it must 
provide a written request for reconsideration to CMS requesting review 
of the termination within 10 calendar days of the notice. CMS has 30 
days to respond to the FFS-CR participant's request for review. If the 
FFS-CR participant fails to notify CMS, the termination is deemed 
final.
    (e) 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 to expand the duration and scope of a model under 
section 1115A(c) of the Act, including the determination that a model 
is not expected to meet criteria described in paragraph (e)(1) or (2) 
of this section.


Sec.  512.725  Data sharing for FFS-CR participants.

    (a) General. CMS makes available to FFS-CR participants, through 
the most appropriate means, data that CMS determines may be useful to 
FFS-CR participants to do the following:
    (1) Determine appropriate ways to increase the coordination of 
care.
    (2) Improve quality.
    (3) Enhance efficiencies in the delivery of care.
    (4) Otherwise achieve the goals of the model described in this 
section.
    (b) Beneficiary-identifiable data. (1) CMS makes beneficiary-
identifiable data available to a FFS-CR participant in accordance with 
applicable privacy laws and only in response to the FFS-CR 
participant's request for such data for a beneficiary who has been 
furnished a billable service by the FFS-CR participant corresponding to 
the AMI care period or CABG care period definitions.
    (2) The minimum data necessary to achieve the goals of the CR 
incentive payment test, as determined by CMS, may be provided under 
this section as frequently as on a quarterly basis throughout the FFS-
CR participant's participation in the CR incentive payment test.


Sec.  512.730  Compliance enforcement for FFS-CR participants.

    (a) General. FFS-CR participants must comply with all of the 
requirements outlined in this subpart. Except as specifically noted in 
this subpart, the regulations under this subpart 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 FFS-CR 
participant does any of the following:
    (i) Fails to comply with any requirements of this subpart or is 
identified as noncompliant through monitoring by HHS (including CMS and 
OIG) of the CR incentive payment model, including but not limited to 
the following:
    (A) Avoiding potentially high severity patients.
    (B) Targeting potentially low severity patients.
    (C) Failing to provide medically appropriate services or 
systematically engaging in the over or under delivery of appropriate 
care.

[[Page 51040]]

    (D) Failing to provide beneficiaries with complete and accurate 
information.
    (ii) Takes any action that threatens the health or safety of 
patients.
    (iii) Avoids at risk Medicare beneficiaries, as this term is 
defined in Sec.  425.20.
    (iv) Avoids patients on the basis of payer status.
    (v) 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 subpart.
    (vi) Takes any action that CMS determines for program integrity 
reasons is not in the best interests of the CR incentive payment model, 
or fails to take any action that CMS determines for program integrity 
reasons should have been taken to further the best interests of CR 
incentive payment 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.
    (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 CR incentive payment model.
    (2) Remedial actions include the following:
    (i) Issuing a warning letter to the FFS-CR participant.
    (ii) Requiring the FFS-CR participant to develop a corrective 
action plan, commonly referred to as a CAP.
    (iii) Reducing or eliminating the FFS-CR participant's CR incentive 
payment.
    (iv) Terminating the FFS-CR participant from the CR incentive 
payment model.


Sec.  512.735  Enforcement authority for FFS-CR participants.

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


Sec.  512.740  Beneficiary engagement incentives for FFS-CR participant 
use.

    (a) General. FFS-CR participants may choose to provide 
transportation to CR/ICR services as in-kind patient engagement 
incentives under the CR incentive payment model, subject to the 
following conditions:
    (1) The incentive must be provided directly by the FFS-CR 
participant or by an agent of the FFS-CR participant under the FFS-CR 
participant's direction and control to the FFS-CR beneficiary during an 
AMI care period or CABG care period.
    (2) Transportation must not be tied to the receipt of items or 
services other than CR/ICR services during AMI care periods or CABG 
care periods.
    (3) Transportation must not be tied to the receipt of items or 
services from a particular provider or supplier.
    (5) The availability of transportation must not be advertised or 
promoted except that a beneficiary may be made aware of the 
availability of transportation at the time the beneficiary could 
reasonably benefit from it.
    (6) The cost of transportation must not be shifted to another 
federal health care program, as defined at section 1128B(f) of the Act.
    (b) Documentation of beneficiary engagement incentives. (1) FFS-CR 
participants must maintain documentation of transportation furnished as 
a beneficiary engagement incentive that exceeds $25 in retail value.
    (2) The documentation established contemporaneously with the 
provision of transportation must include at least the following:
    (i) The date the incentive is provided.
    (ii) The identity of the beneficiary to whom the transportation was 
provided.
    (3) The FFS-CR participant must retain and provide access to the 
required documentation in accordance with Sec.  512.715.


Sec.  512.745  Waiver of physician definition for furnishing CR and ICR 
services to a FFS-CR beneficiary.

    (a) General. Section 410.49 of this chapter requires cardiac 
rehabilitation and intensive cardiac rehabilitation services to be 
furnished under the direction of a physician as defined in Sec.  
410.49(a) of this chapter.
    (b) Waiver of the physician definition. For a provider or supplier 
of CR or ICR services to a FFS-CR beneficiary during an AMI care period 
or CABG care period, as defined in Sec.  512.2. CMS waives the 
physician definition to allow the functions of supervising physician, 
prescribing exercise, and establishing, reviewing, and signing an 
individualized treatment plan for CR or ICR services to be furnished 
under the direction of--
    (1) A physician, as defined in section 1861(r)(1) of the Act; or
    (2) A qualified nonphysician practitioner, as defined by CMS.
    (c) Other definitions and requirements. All other definitions and 
requirements in Sec.  410.49 of this chapter related to a physician or 
supervising physician continue to apply.

Subparts I-J [Reserved]

Subpart K--Model Termination


Sec.  512.900  Termination of an episode payment model.

    CMS may terminate any episode payment model for reasons including 
but not limited to:
    (a) CMS no longer has the funds to support the applicable model; or
    (b) CMS terminates the applicable 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.


Sec.  512.905  Termination of the CR Incentive Payment Model.

    CMS may terminate the CR incentive payment model for reasons 
including but not limited to:
    (a) CMS no longer has the funds to support the CR incentive payment 
model; or
    (b) CMS terminates the applicable 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: July 19, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 20, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-17733 Filed 7-26-16; 4:15 pm]
 BILLING CODE 4120-01-P