by Kevin Lieb
Principal, Advisory Solutions

Continuing with the effort to build on value-based payments, the recent announcement by the Centers for Medicare & Medicaid Services (CMS) regarding the new Episode Payment Models (EPM) for acute myocardial infarction (AMI) and coronary artery bypass grafting (CABG) reinforces the their long-held belief that physician alignment is the key component for the transition to value-based care.

While the new EPMs allow for gainsharing arrangements similar to those permitted in previous demonstrations, there are some exciting differences and modifications in the cardiac EPMs which will assist hospitals in developing meaningful and rewarding incentive programs for physicians and other providers that may participate in the program.  

Similar to the Coordinated Care for Joint Replacement (CJR) program, CMS established some ground rules that risk-bearing hospitals and EPM participants will need to follow when implementing what they refer to as “collaborator” (read: gainsharing) agreements:

  • Participants cannot earn more than 50 percent of the Medicare-approved amounts under the physician fee schedule
  • Participants must meet quality-of-care criteria that are established in advance
  • Cost savings must reflect or be tied to care redesign for EPM beneficiaries
  • Savings must be verifiable and reflect actual savings
  • Incentive payments can only be made once a year, cannot be a loan or advance payment, or a payment for referrals
  • Payments can be comprised of internal cost savings, reconciliation payments or a combination of both

In the proposed rule, CMS also clarified some previous rules of engagement for bundled payments for the new cardiac EPM, which are retroactive to the current CJR program:

  • Savings are no longer required to be tied to the activities of any specific cardiac EPM participant. Instead, calculations should be made as a whole, based on collective EPM activities and then evenly distributed among the participants.
  • Physician group practices (PGP) can now distribute payments either individually based on quality and activities or evenly across the practice — providing more flexibility at the PGP level
  • Payments may be based on contributions to care redesign activities; meaning high-volume participants should earn more than low-volume participants
  • Payments can now be made by check in addition to electronic funds transfer
  • Accountable Care Organizations (ACOs) and hospitals can now be collaborators and participate in gainsharing. Given the nature of cardiac admissions and the care redesign efforts that will need to take place for success in the program, this makes sense.

And one final clarification from CMS: hospitals and ACOs willing to enter into gainsharing arrangements with cardiac EPM participants may do so through what is now referred to as Alignment Payments. Similar to CJR, the hospital must retain at least 50 percent of the aggregate amount of all repayments. However, a hospital may not carry more than 25 percent of the cardiac EPM participant’s repayment amount. There is one exception: in the case of an ACO, the amount the hospital can carry increases to 50 percent.

This decision seems to indicate that CMS has changed its tune regarding the separation of value-based programs. While in the past, there were many efforts that kept value-based programs separate, in the brave new world of EPM, collaborators will be able to link programs through financial alignment.

These new payment models and rule clarifications are further evidence that CMS intends to continue to push the envelope of alternative payment models. They are clearly working to refine the programs and infrastructure required to implement on their end so we should expect broader programs in the future that will require new approaches to patient care. I think we should get prepared for a long and interesting ride.

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About the author. Kevin Lieb has more than 20 years of health care-related experience focusing on quality improvement, market development and cost reduction initiatives. His experience includes commercial payor bundled payment initiative (ACE, BCPI Models 2 and 4 and CJR) as well as alternative payment methodology work, such as practice/physician employment, professional service agreements and service line co-management development. 

Published: September 12, 2016