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Episode Payment Model final rule explained [PODCAST]

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Hospital_Finance_Podcast smallIn this episode, Maria Miranda, Director of Emerging Payment Models at BESLER Consulting explains the EPM final rule including updates to the CJR program and the introduction of cardiac bundles.
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Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast.

Today, I’m joined once again by Maria Miranda who is the Director of Emerging Payment Models here at BESLER. Maria is going to help us break down the EPM final rule that was issued this past December.

Welcome back to the show, Maria.

Maria Miranda: Thank you, Michael.

Mike: So, Maria, why don’t you tell us a little about the new cardiac programs that were introduced in the EPM final rule?

Maria: Sure! As you’ve mentioned, CMS passed the final rule in December that introduced four new programs. Three of those programs were related to cardiac care. And that includes AMI, CABG and Cardiac Rehab.

The AMI and CABG programs are 90-day episode bundles very similar to CJR (at least the structures are very similar to that of the CJR program). The Cardiac Rehab is actually an incentive program that encourages the use of that therapy that has been proven to have a very positive impact, but CMS believes that it’s being underutilized at this point.

Interestingly, since its publication, CMS has actually delayed the start of the EPM final rule twice. And as of this week, it actually delayed the implementation date of the programs by three months. They were slated to start July 1st of this year. They’ve been extended to October 1st of this year.

CMS is also seeking comments regarding a possible further extension to January 1st of 2018. And the reason for that is twofold:

One, if you start the programs October 1st, that doesn’t really give you a lot of time for performance year one. And there could also be changes or modifications to the actual regulation, so CMS wants to make sure that there’s enough time to comment on those proposed changes and for hospitals to prepare for the programs themselves.

Mike: So, how do these cardiac bundles differ from programs like the CJR program?

Maria: So, the program rules for CJR and the cardiac programs are very similar—and in some cases, identical. There are some differences however.

We’ll start off with the DRG’s.

CJR had only two DRG’s. These programs in total are adding an additional 17 DRG’s. The cardiac, there are 14 codes for cardiac, and 3 codes for the SHFFT program which is an extension to CJR.

So, the cardiac EPM’s are being rolled out in 98 MSA’s while the CJR was rolled out in only 67 MSA’s. So there will be more hospitals actually impacted by the cardiac program than by CJR.

The CJR program which included the two DRG’s, those DRG’s were then further fragmented to adjust for the higher cost of fractures. So you actually have four target prices.

You’re going to see something similar with AMI. AMI, that program will include codes for both AMI and PCI. However, you have to have an AMI ICD-10 diagnosis present either in the first or second position in order to qualify for the AMI episode.

The AMI episodes are also not as straightforward as CJR. For example, with the AMI episodes, you could have a planned re-admission for CABG. CJR is pretty straightforward. They tend to be elective cases. You come in, you have the CJR, and 90 days over, that episode is done.

With the planned re-admissions, that causes a change to the target pricing. So the target price for the CABG episode has to be split between the anchor piece and the post-anchor piece. So, to arrive at the target rate for CABG, you simply add those two pieces together. You get one target price for the CABG episode.

For the AMI episode, if there’s a planned re-admission, you need to take the full AMI target and the post-anchor piece of the CABG together to come up with one full target price for AMI. So that makes it a little more complicated.

Also, in general, patients that come in for AMI and CABG tend to have more chronic illness than your typical CJR patient. There’s also very high risk for re-admissions with CABG and unplanned ER visits.

So that, in and of itself, will make the percentage of your total episode expense higher on the in-patient side.

So, for example, with CJR, you had just under 50% of the total episode cost was in-patient; the rest was all post-acute. Whereas for cardiac, probably 70% to 75% of the total episode cost will be attributed to in-patient acute care.

Mike: Maria, will the program rules be similar to what was in place for CJR?

Maria: Yes, Michael, there are a lot of similarities with the program rules. And I’ll give you a couple of examples.

All of these programs have five performance years. Another example of how they’re the same is regional pricing. With CJR, we saw that two-thirds of the hospital target price was based on the hospital’s historical cost, and one-third is based on the region’s historical cost. That regional pricing then goes to 100% regional by the end of the program. That regional pricing methodology is exactly the same with EPM.

There was also a cap on the gains and losses that started at 5% and went up as high as 20%. And that is identical with EPM as well.

There are also waivers in place, similar waivers in place, for the EPM’s.

The final piece of similarity is the reconciliation. With CJR, we saw that two or three months after the end of the episode, they would get their initial reconciliation. And then, 12 months later, there would be a final reconciliation for that period. That’s all identical with EPM’s.

I think the only thing different is—and at this point, we’re not really sure where it’s going to go—is the waiver on the risk on year one. With CJR, the performance year one had no risk, and risk started in performance year two.

The way that the final rule initially came out, there would be no risk in performance year one or the first quarter of performance year two. But that’s because of when the episodes were actually slated to begin, which was July. With that, now moving out to October and possibly January 1st, we’re not sure how that’s going to end up.

Mike: How do you think quality measurement will impact these new programs?

Maria: So, all of the programs utilize HCAHPS measures to calculate the total composite quality score. However, the weight given to patient experience varies greatly between CJR and the EPM models.

In CJR, the outcomes was 60% of the total (50% of it was a risk score and 10% was voluntary patient data), the other 40% was patient experience. With the cardiac EPM’s, 80% of that total score will be based on outcomes and only 20% will be based on patient experience.

So, AMI and CABG utilize the 30-day mortality rates for the relevant categories, whereas CJR used the risk standardized complication rates.

AMI also utilizes something that’s called excess days measure in their overall calculation. So for example, when you’re calculating the composite quality score for an AMI episode, 50% is going to come from the mortality rate, 20% will come from the excess days, and 10% from voluntary patient information. That’s a total of 80%. The other 20% is patient experience.

Then for CABG, the mortality rate will be weighted at 70% because CMS considers mortality to be a very serious outcome for this procedure. The voluntary data will be weighted at 10% for a total of 80% outcomes. And then the 20% remaining is patient experience.

Mike: Maria, what do you think providers should be doing to prepare for these new programs?

Maria: So Michael, similar to CJR, if they’re already participating in any of the BPCI or other value-based models, they probably have gotten a head start. If they haven’t been participating or if they don’t already have a team in place to prepare for these new models, that’s really where they need to start at this point. They need to start identifying who those players will be internally and assigning very specific roles.

What you need to do with these—again, very similar to CJR—is you need to figure out where you are in comparison to your region because the regions are going to play a big role in your target pricing. The other thing you need to do is figure out where you are, how you measure on quality and patient experience.

So, CMS is not going to issue your historical data for a couple of months. But your quality data is already available on Hospital Compare, so you can at a minimum start there and see where you are compared to national on quality. On quality, you’re compared to the national percentile. So that’s probably a good starting place.

Mike: Well, can you tell me about the surgical hip and femur fracture treatments program?

Maria: So, that program is being tested in the same 67 MSA’s as CJR. So if you’re a hospital that’s currently participating in CJR, you’ll also participate in the SHFFT program. That program will utilize the same outcomes measures. So, exactly what I explained before with CJR, the 50% for risk, the 40% for HCAHPS and 10% for the voluntary data, that will be the same for the SHFFT program. So, no additional effort there.

Again, the only difference with the SHFFT is that those cases tend to be more emergent in nature as opposed to CJR. That tends to be planned. So that’s probably the only area where the way that you manage the program will be a bit different than the way that you manage CJR.

Mike: In the final rule, in addition to the new episode payment models, an incentive program for cardiac rehab was also introduced. What can you tell us about that?

Maria: So, according to CMS, the Cardiac Rehab is an underutilized treatment. And it has been shown to improve long-term patient outcomes. So, Cardiac Rehab will be effective in 90 MSA’s.

Forty-five of those MSA’s are MSA’s that are also impacted by the AMI and CABG programs; the other 45 are in MSA’s that are not part of any EPM’s.

The program will provide financial incentives to providers of beneficiaries that are hospitalized for the treatment of AMI or CABG.

So, CMI basically wants to encourage the use of these medically necessary treatment for cardiac rehab and intensive cardiac rehab within that same 90 days post-discharge as the EPM models.

They also want to encourage care coordination.

By choosing participants that are in both EPM and non-EPM MSA’s to participate in the program, CMS can then assess the impact of the use of cardiac rehab independent of the EPM program.

So, the program will make incentive payments that are retrospective. So, it’s after the EPM models are done. After that 90 days, that’s when you get that additional incentive payment. The payment will be $25 per service for the first 11 cardiac rehab or intensive cardiac rehab services, and then $175 for each additional service after the 11.

This is going to be a separate payment that has nothing to do with reconciliation for EPM participants. It won’t be included in the cap on gains. Similarly, CMS won’t allow you to include the cardiac rehab in any of your gain-sharing agreements. And it also will not be calculated as part of your target price. So it’s completely separate from the reconciliation because they want to make sure that it’s truly an incentive and it’s not impacted in any way by the EPM program.

Mike: So last, but not least, do you expect anything to change with this new federal administration now that Tom Price is the head of HHS?

Maria: We’ve already seen some change, right? We’ve seen the delay of the new cardiac EPM programs and expansion of CJR. It’s hard to say at this point, Michael. We know that Tom Price is not crazy about the mandatory aspect of the models. The fact that they’re delaying the EPM a couple of months out, they may be considering whether or not to pull out the mandatory portion of the model.

In general, I don’t expect bundled payments really to go anywhere regardless of what happens with the EPM models. First of all, if CMS is trying to help to save the Medicare Trust Fund, if that’s still a concern, then these models need to continue because we need to continue the shift from volume to value.

Second, providers have already committed to the shift. They have been investing in resources as well as technology or making vast changes in the way that they operate and making strides toward population health.

We’ve also seen that a lot of the health plans, as they tend to piggyback off of everything that CMS does, they’ve already started reaching out to providers, and many of them already have plans in place that are very similar to CJR. We know they’re considering plans for cardiac and some of the other services.

So, I really don’t see that that’s going to change very much. We’re going towards this patient-centered healthcare environment, and these programs are just the tip of the iceberg.

Mike:  Maria, thanks so much for stopping by and helping us understand more about the EPM final rule.

Maria: Great! Thank you, Michael.

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