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Proposed Cardiac, Hip, and Femur Episode Payment Models Are Next Generation from BPCI and CJR [Ober|Kaler]

The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule on July 25, 2016, entitled, Advancing Care Coordination Through Episode Payment Models (EPMs); Cardiac Rehabilitation Incentive Payment Model; and Changes to the Comprehensive Care for Joint Replacement Model (CJR), which introduces three new episode payment models (EPMs) and a Cardiac Rehabilitation (CR) incentive payment model under the authority of the Center for Medicare & Medicaid Innovation (CMMI or Innovation Center). In this proposed rule, CMS is building on the bundled payment methodologies it has already implemented under the models for Bundled Payments for Care Improvement (BPCI) and Comprehensive Care for Joint Replacement (CJR), including proposing modifications to the CJR model for conformity with the newly anticipated EPMs.

The proposed Cardiac EPMs include models for acute myocardial infarction (AMI) and coronary artery bypass graft (CABG). CMS also proposes an EPM for surgical hip/femur fracture treatment excluding lower level extremity joint replacement (SHFFT) as an expansion of the current CJR model. CMS hopes that these models will improve quality of care for beneficiaries while reducing Medicare spending during episodes of treatment of AMI, CABG and SHFFT through financial accountability. Under these new models, a hospital in which a patient is admitted for care for a heart attack, bypass surgery or surgical hip/femur fracture treatment would be accountable for the cost and quality of care provided to Medicare fee-for-service beneficiaries during the inpatient stay and for the 90-day period after discharge.

The proposed rule would phase in the new payment methodology over five years and would reward higher payments to hospitals with higher quality scores. At the end of each performance year, CMS would compare a hospital’s actual spending to its target price. CMS would pay a portion of savings achieved by hospitals that spend less than the quality-adjusted target price and that also meet certain quality measures. However, hospitals exceeding their quality-adjusted target price would have to repay the difference to Medicare.

This Client Alert begins with an introduction of the new EPMs and follows with a compendium of in-depth discussions on the essential components and structure of these newly proposed payment models. In particular, this Client Alert explains several aspects of the proposed payment models in detail, such as payment methodology, beneficiary protections, gainsharing arrangements, waivers from certain Medicare program requirements, appeals of CMS’s calculations, and modifications to the CJR model. This Client Alert continues with a discussion on CMS’s proposed qualification of the newly established EPMs and the CJR model as advanced alternative payment models (APMs) under the proposed Quality Payment Program (QPP). The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) created the QPP, and CMS’s proposed addition of certain EPMs and the CJR model represents a substantial addition of alternative payment models to the list of eligible Advanced APMs under the QPP. Lastly, this Client Alert discusses the CR incentive payment model that CMS expects to increase the use of cardiac rehabilitation services by providing incentive payments to hospitals on a per-procedure basis.

CMS has requested comments in a number of specific areas concerning the proposed models and proposed expansion of existing models. All comments are due by 5 p.m. on October 3, 2015.

Proposed Episodes: Cardiac Bundles

CMS proposes a new bundled payment initiative focused on cardiac EPMs to encourage development of cost efficiencies and increased quality of care for beneficiaries being treated for conditions that occur frequently in the Medicare population. The proposed EPMs focus on patients hospitalized for AMI and CABG. The episodes would include the initial hospitalization for the acute condition and the care provided to the patient during the 90-day post-discharge period. The inpatient hospital bears the responsibility for coordinating the beneficiary’s care during the episode and, depending on outcomes, would either receive a reconciliation payment reflecting the savings achieved or would be responsible for repaying CMS for costs above the established targets. CMS hopes that this proposed program will encourage coordination of care among a variety of providers.

The new cardiac episode bundles proposed by CMS were developed in a similar manner to the CJR model, and CMS compares and contrasts the two throughout the proposed rule. Based upon the design of the CJR model and the comments CMS received during its rulemaking process, as well as the testing experience gained through BPCI Model 2, CMS has developed these proposed EPMs to continue its efforts to increase payment based upon quality and outcomes rather than simply fee for service. One notable difference between the cardiac bundle models and the CJR model is the affected patient population. In the CJR model, the procedures are common among the Medicare population, but most are elective. Under the proposed EPMs, the patients involved in the episodes included commonly have chronic conditions that may trigger the initiating episode as well as impact the care required following discharge. Considering the chronic underlying conditions many of these beneficiaries experience, CMS is hopeful that the changes implemented during the episodes will carry over to the treatment and quality of care and outcomes for patients beyond the EPM episodes of care.

Additionally, CMS proposes to include a broader set of providers in the EPM model than those included in the CJR model. The proposed MSA selection process is intended to include a variety of providers who have not voluntarily participated in other bundled payment initiatives previously. BPCI was voluntary and the CJR model is required for acute care hospitals in selected geographic areas. CMS wants to engage providers who might not otherwise participate in such a model and is therefore testing and evaluating the three proposed EPMs in a variety of circumstances.

The EPM Model

CMS selected AMI and CABG for the opportunities to implement thoughtful care redesign and improvement of the quality of care provided to AMI and CABG patients, not only with the initial inpatient admission, but also in the follow-up care provided 90 days post discharge. CMS proposes to hold acute care hospitals in selected geographic areas financially accountable for spending and quality of care during the identified episodes of care. EPMs include a retrospective reconciliation process whereby hospitals and other providers and suppliers would continue to submit claims and receive payment for services under Medicare fee for services throughout the performance years of the EPM. The participating hospitals would be provided with target prices prior to the beginning of a performance year. This target price includes expected spending during an episode as well as a discount to Medicare.

The AMI and CABG models would be tested at the same set of hospitals and would include all beneficiaries who have an AMI treated medically or with revascularization with percutaneous coronary intervention (PCI) as well as all beneficiaries who undergo CABG — either during the care of an AMI or performed electively for a condition such as stable ischemic heart disease. CMS purposefully included AMI in this model as the first CMMI episode payment model to include significantly different clinical pathways. AMI can be treated with medical management or with PCI, and therefore presents a bundled payment for one condition that involves a variety of approaches for treatment and management of the condition, which would be reflected in the results of this bundled payment initiative.

CMS is hopeful that the proposed cardiac episodes will also reflect initial interventions designed to treat chronic conditions in the Medicare population. Based upon the steps taken by hospitals and other providers in response to the EPMs, perhaps the treatment of chronic coronary artery disease (CAD) will be impacted positively. CMS specifically seeks comments on potential model design for condition-specific episode payment models that would focus on longer-term care management of patients with CAD that may differ from the EPMs.

SHFFT Model – A CJR Expansion

The proposed SHFFT model is specifically designed to complement the CJR model. It would be tested in the same hospitals currently participating in CJR. Thus, and in contrast to the 98 metropolitan statistical areas (MSAs) proposed for the AMI and CABG models, SHFFT would apply only to those hospitals located in one of the 67 CJR MSAs.

As proposed, the SHFFT model would add three additional MS-DRGS - 480, 481, and 482 - to CJR hospitals’ current MS-DRG 469 and 470 line-up. Accordingly, and as stated by CMS, all surgical treatment options for Medicare beneficiaries with hip fracture would be included in EPMs, thereby “completing the transition to episode payment” for such procedures.

Episode Initiator and Financial Responsibility

Under the proposed EPMs, as in the CJR model, hospitals would be the accountable financial entities and the only episode initiators. Episodes would begin with an admission to an IPPS acute care hospital for an AMI, CABG or SHFFT episode. Based on the proposed definition of hospital,[i] the EPMs would be implemented only in acute care hospitals paid under IPPS, except that all Maryland acute care hospitals would be excluded, and would apply to all IPPS hospitals in the selected geographic service areas. CMS designates IPPS hospitals as the sole episode initiators to ensure the inclusion of all services furnished under fee-for-service Medicare by EPM participant hospitals.

In proposing that hospitals will bear financial responsibility under the EPM, CMS recognizes that there will be cases in which a hospital transfer occurs and therefore, as discussed below, designates which hospital would then be considered the episode initiator. CMS considered the appropriateness of including physician group practices as episode initiators and designating them with financial responsibility, but has elected not to do so. CMS proposes to exclude certain services provided by IPPS hospitals located in an area selected for the proposed EPMs if the hospital is also an episode initiator in the risk-bearing phase of BPCI models 2 or 4 and the applicable episode would also qualify for coverage under BPCI. Any EPM episodes that are not part of an overlapping episode at the participating hospital would be included in the new EPM model.

Selected Geographic Service Area

CMS proposes to implement the EPM at the MSA level, choosing 98 MSAs through simple random selection. All hospitals in the selected MSAs are included, in order to minimize the risk that participant hospitals will attempt to shift costs by sending higher-cost cases out of the EPM. CMS notes that it considered whether the new EPMs should be implemented in the same MSAs where the CJR model is currently in place, and proposes to apply the independent selection criteria developed for EPM. According to CMS, any resulting overlap in MSAs among the EPMs and CJR model would be helpful in evaluating multiple bundle payment models in the same area. CMS concludes that its proposed EPM implementation process would result in the following four categories of MSAs:

  1. MSAs in which only the CJR and SHFFT model episodes are being implemented
  2. MSAs in which only the CABG model and AMI model episodes are being implemented
  3. MSAs in which the CJR as well as the AMI, CABG, and SHFFT models are being implemented
  4. MSAs in which neither CJR nor any of the new episode payment models are being implemented

A hospital is considered located in a selected service area if the hospital is physically located within the boundary of any of the counties in that MSA of the date the selection is made. Although MSAs can be revised, for consistency, CMS proposes to maintain the cohort of hospitals throughout the five-year performance period. CMS proposes to track the hospitals via their CMS Certification Number (CCN). EPMs would administer activities related to the model based on the physical location of the CCN. If multiple hospitals operate under the same CCN and the CCN’s location falls within a selected MSA, all of those hospitals are included in the EPM model.

CMS proposes to exclude a limited number of MSAs based on three exclusion rules: 

  1. Less than 75 qualifying AMI episodes in MSA during the reference year
  2. Less than 75 non-BPCI AMI episodes in the MSA during the reference year
  3. 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

The exclusion of MSAs based on these proposed criteria results in a pool of 294 eligible MSAs from which the 98 EPM MSAs would be selected. Each MSA’s eligibility status based on the proposed exclusion rules is listed in the proposed rule and at CMMI.

Episode Definition

Defining the episode included in the proposed EPMs is a critical element of the proposed rule. CMS proposes that each episode begins with a hospitalization and extends for 90 days after discharge. Hospitals must be able to identify EPM beneficiaries during the hospitalization that initiates an episode. This hospitalization is called the anchor hospitalization.

AMI Model

The proposed AMI model generally includes:

  • Beneficiaries discharged under an AMI MS-DRG (280–282), which includes admission to an IPPS hospital for AMI that is treated with medical management, or
  • Beneficiaries with 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

CABG Model

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.

Hospitals must be able to identify EPM beneficiaries during the hospitalization that initiates an episode. This hospitalization is called the anchor hospitalization.


The proposed SHFFT Model expands the CJR Model to include surgical treatment for hip and femur fractures other than hip arthroplasty. Under the SHFFT EPM, CMMI proposes to include patients admitted and discharged under MS-DRGs 480, 481, and 482.

AMI Model with Medical Management and PCI

CMS proposes that the AMI model include beneficiaries treated for AMI with either medical management or coronary artery revascularization with PCI. An episode would be included in the EPM if the beneficiary is discharged under:

  • An AMI MS-DRG (280–282), representing those individuals admitted with AMI who receive medical therapy but no revascularization
  • 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

CMS proposes 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 primarily responsible for initiating the hospitalization are included in the AMI model. CMS believes that the AMI itself is likely to substantially influence the hospitalization and post-discharge recovery even if an AMI ICD-10-CM diagnosis code is reported in a secondary diagnosis code position. 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.

Identifying beneficiaries included in the proposed AMI model through a combination of MS-DRGs and AMI ICD-CM diagnosis codes differs from the CJR model episode definition methodology. The CJR model defines 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 is defined by admission for a surgical procedure alone. In contrast, the proposed AMI model includes admissions for a medical condition with a range of treatment options, including medical treatment and PCI. To capture beneficiaries admitted for AMI and treated with PCI requires inclusion of ICD-CM diagnosis codes paired with MS-DRGs to identify the subset of PCI MS-DRG cases associated with AMI that would be excluded from an AMI model if it only included AMI MS-DRGs.

CMS proposes an exclusion to those beneficiaries included in the AMI model based on a subset of codes that do not treat coronary obstruction. CMS proposes to exclude beneficiaries if they are 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. CMS reasons that “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.”

Related Services Included in EPM Episodes

CMS wants to encourage comprehensive and coordinated care throughout the EPM episodes. CMS therefore proposes to include all items and services paid under Medicare Part A and Part B, except for those that fall under an exclusion because they are unrelated to the EPM episodes. The services related to an EPM episode include the following:

  • 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

Like the CJR model, Medicare items and services furnished during the EPM episodes are excluded only when they are unrelated to the EPM episode diagnosis, as are procedures based on clinical rationale that would result in standard exclusions from all of the episodes in a single EPM.

Drawing on experience from drafting the CJR model, CMS proposes to exclude-

From the EPM episodes:

  • 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
  • IPPS new technology add-on payments for drugs, technologies, and services, 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
  • OPPS transitional pass-through payments for medical devices as defined in § 419.66

On an EPM-specific basis:

  • Unrelated inpatient hospital admissions during the EPM episode by identifying MS-DRGs for exclusion, including 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
  • 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)

Beginning EPM Episodes

An EPM episode would not begin prior to the anchor hospitalization, although all services that are already included in the IPPS payment based on established Medicare policies (for example, 3-day payment window payment policies) are included in the EPM episodes.

A Medicare beneficiary must meet all of the following criteria on admission to the anchor or chained anchor hospitalization (discussed below) to be included in the EPMs:

  • Enrolled in Medicare Part A and B
  • Eligibility in Medicare not based on end-stage renal disease
  • Not enrolled in any managed care plan
  • Not covered under United Mine Workers of America health care plan
  • Medicare is primary payor
  • Not aligned to an ACO in Next Generation ACO model or an ACO in the Comprehensive ESRD Care Initiative incorporating downside risk
  • Not under the care of an attending or operating physician who is a member of a physician group that initiated BPCI Model 2 at the EPM participant for the MS-DRG that will 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 EPM

The EPM episode begins with admission of a qualified Medicare beneficiary to an IPPS hospital in a selected MSA for an applicable MS-DRG for AMI, CABG or SHFFT.

CMS addresses hospital transfers of beneficiaries with AMI, either from an inpatient admission or from one hospital’s emergency department (without inpatient admission) to another, as a common occurrence in the treatment of beneficiaries with an initial diagnosis of AMI. CMS considers common transfer scenarios for AMI beneficiaries that could occur based upon 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 (no transfer)
  • Admitted to the initial treating hospital and later transferred to a transfer hospital — considered an inpatient-to-inpatient transfer and the transfer hospital as an inpatient-to-inpatient transfer hospital (i-i transfer hospital)
  • Transferred from the initial treating hospital to a transfer hospital without admission to the initial treating hospital — considered an outpatient-to-inpatient transfer and the transfer hospital as an outpatient-to-inpatient transfer hospital (o-i transfer hospital)

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 at which the episode begins would then be financially responsible for the AMI or CABG model episode unless the episode is canceled. A chained anchor hospitalization addresses an anchor hospitalization that initiates an AMI model episode and has at least one subsequent inpatient-to-inpatient transfer. To determine attribution in scenarios discussed above, CMS developed a summary chart of its proposals:



Episode Initiation & Attribution

No transfer (participant): Beneficiary admitted to an initial treating hospital that is 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.

Initiate AMI or CABG model episode based on anchor hospitalization MS-DRG.

Attribute episode to the initial treating hospital.

No transfer (nonparticipant): Beneficiary admitted to an initial 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.

No AMI or CABG model episode is initiated.

Inpatient-to-inpatient transfer (nonparticipant to participant): Beneficiary admitted to an initial treating hospital that is not an AMI or CABG model participant and later 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.

Initiate AMI or CABG model episode based on the MS-DRG at i-i transfer hospital.

Attribute episode to the i-i transfer hospital.

Inpatient-to-inpatient transfer (participant to participant or participant to nonparticipant): Beneficiary admitted to an initial treating 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 and later transferred to an i-i transfer hospital for an AMI, PCI, or CABG MS-DRG, regardless of whether the i-i transfer hospital is an AMI or CABG model participant.

Initiate AMI or CABG model episode based on anchor hospitalization MS-DRG at initial treating hospital. If the chained anchor hospitalization results in a final AMI, PCI, or CABG MS-DRG, calculate episode benchmark price based on the AMI, PCI or CABG MS-DRG with the highest IPPS weight. If the final MS-DRG is not an AMI, PCI, or CABG MS-DRG, cancel the episode. Attribute episode to the initial treating hospital.

Outpatient-to-inpatient transfer (nonparticipant to participant or participant to participant): Beneficiary transferred without admission from the initial treating hospital, regardless of whether the 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.

Initiate AMI or CABG model episode based on anchor hospitalization MS-DRG at o-i transfer hospital. Attribute episode to the o-i transfer hospital.

Outpatient-to-inpatient transfer (participant to nonparticipant): 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.

No AMI or CABG model episode is initiated.

End of EPM Episode

EPM episodes begin with the applicable hospital admission and end 90 days post discharge. CMS believes 90 days provides sufficient incentives for attentive medical management, rehabilitation, and beneficiary education and engagement to measure the effect of such efforts. As in the CJR model, CMS proposes that the day of discharge from the anchor hospitalization counts as day one of the post-hospital discharge period. An AMI model episode is extended if there is a chained anchor hospitalization (defined as an anchor hospitalization with a subsequent inpatient-to-inpatient transfer), and ends on the 90th day after discharge from the final hospitalization.

EPM Episode Cancellation

CMS proposes limited circumstances that would end an EPM episode. If an EPM episode is canceled, 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 to be reconciled against the EPM quality-adjusted target price.

The model episode is cancelled and excluded from the calculation of any net payment reconciliation amount (NPRA) if the beneficiary does any of the following during the episode:

  • Ceases to meet any of the criteria
  • Dies during the anchor hospitalization
  • Initiates any BPCI model episode

Additionally, an AMI model episode is cancelled if the beneficiary is discharged from the final hospital in a chained anchor hospitals under an MS-DRG that is not an AMI MS-DRG, PCI MS-DRG or CABG MS-DRG.

In a departure from the CJR model, if the beneficiary dies after hospitalization, the episode would still be considered for purposes of the EPM Model.

Additionally, an AMI model episode is canceled if the beneficiary is discharged 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 is canceled if the final transfer hospitalization MS-DRG is any MS-DRG other than an AMI, PCI, or CABG MS-DRG).

CMS decided against cancelling an AMI episode altogether for a CABG readmission during the 90-day post-hospital discharge period, as well as cancelling the AMI model episode and initiating 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, CMS proposes to apply an adjusted AMI model-episode benchmark price that includes a CABG readmission so as not to financially penalize participant hospitals for relatively uncommon, costly, clinically appropriate care patterns for beneficiaries in AMI model episodes.

Performance Period

Similar to the CJR model, the EPM model has a proposed five-year performance period. The episodes of care that would be considered under the proposed model would include some EPM episodes that begin in one calendar year but would be considered in the following performance year if an EPM episode ends after December 31 in the given calendar year.

Performance Year 

EPM Episodes Included in Performance Year


EPM episodes that start on or after July 1, 2017 and end on or before December 31, 2017


EPM episodes that end between January 1, 2018 and December 31, 2018, inclusive


EPM episodes that end between January 1, 2019 and December 31, 2019, inclusive


EPM episodes that end between January 1, 2020 and December 31, 2020, inclusive


EPM episodes that end between January 1, 2021 and December 31, 2021, inclusive

Target Prices

CMS would set a quality-adjusted target price for different episodes based on historical data for the specific type of episode of care beginning with the hospitalization and ending 90 days after discharge. The base target price would be calculated based on the MS-DRG. CMS would use data from 2013–2015 to calculate the target prices for performance years 1 and 2, data from 2015–2017 for performance years 3 and 4, and data from 2017–2019 for performance year 5.

Target prices would be adjusted based on the complexity of treating a heart attack or providing bypass surgery. For example, CMS proposes to adjust prices upwards for those heart attack patients who need to be transferred to a different hospital during their care to reflect the most resource-intensive cardiac care provided during the hospitalization. For heart attack patients, target prices would also differ depending on whether the patient was treated with surgery or medical management.

Target prices would be based on a blend of hospital-specific and regional historical data:

  • July 1, 2017 – December 31, 2018 (performance years 1 and 2): Two-thirds participant-specific data and one-third regional data
  • 2019 (performance year 3): One-third participant-specific data and two-thirds regional data
  • 2020-2021 (performance years 4 and 5): Only regional data

However, target prices for low-volume hospitals would be based solely on regional data. The first performance period will run from July 1, 2017 through December 31, 2017. The second through fifth performance periods will align with calendar years 2018 through 2021.

CMS will communicate quality-adjusted target prices to EPM participants prior to the beginning of the performance period.

Payments, Net Payment Reconciliation Amount (NPRA) and the Reconciliation Process

Providers and suppliers bill and are paid in accordance with existing rules as if EPM rules were not in effect. Annually, CMS would calculate the actual episode payment for each EPM episode and determine the amount of a reconciliation payment to or Medicare repayment amount from EPM participants for that performance year.

Two months after the end of a performance year, actual spending for the episode would be compared to the target price that reflects episode quality for the responsible hospital. Hospitals that deliver care for less than the quality-adjusted target price, while meeting certain quality standards, would be paid the savings achieved. Hospitals that exceed the quality-adjusted target price would have to repay Medicare.

Phase-In and Stop Loss

Similar to other recent bundled payment methodologies, CMS would phase in the downside risk (repayment to Medicare) and the amount of gains (payments from Medicare to hospitals) a hospital could incur.

Downside risk

  • July 2017 – March 2018 (performance year 1 and quarter 1 of performance year 2): no downside risk
  • April 2018 – December 2018 (quarters 2 through 4 of performance year 2): capped at 5 percent
  • 2019 (performance year 3): capped at 10 percent
  • 2020-2021 (performance years 4 and 5): capped at 20 percent


  • July 2017 – December 2018 (performance years 1 and 2): capped at 5 percent
  • 2019 (performance year 3): capped at 10 percent
  • 2020 – 2021 (performance years 4 and 5): capped at 20 percent

Program Overlap

CMS addresses three overlap scenarios with other payment models and programs:

  1. A hospital in a geographic area selected for the AMI, CABG or SHFFT model is also participating in BPCI for the same episode (Provider Overlap)
  2. A beneficiary receives care that could be counted under more than one episode or total cost of care payment model (Beneficiary Overlap)
  3. The need for reconciliation of EPM payments with payments under other models and programs to ensure the entity closest to the beneficiary’s care is credited (Payment Reconciliation)

Provider Overlap

In the case of Provider Overlap, BPCI would trump. Similar to CJR model requirements, a hospital may participate in an EPM only for episodes anchored by an EPM MS-DRG that are not covered under the hospital’s current BPCI Model 2 or 4 agreement. (If the hospital withdraws from the BPCI episodes anchored by EPM MD-DRG, the hospital would participate in the EPM for which it was previously excluded.)

With regard to a BPCI PGP, if, for any portion of an EPM episode, a Medicare beneficiary would also be in a BPCI PGP episode (i.e., the attending or operating physician who initiates the episode is a member of a BPCI PGP that is party to a BPCI agreement) CMS would cancel or not initiate the EPM episode. Example: 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 initiating the episode 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.

Beneficiary Overlap

Any BPCI model 2, 3 or 4 episode would trump, cancel or prevent an AMI, CABG or SHFFT episode. Example: If a beneficiary is in an ongoing AMI model episode and is treated for SHFFT by a participant in a BPCI SHFFT episode, the initial AMI model episode would be canceled and a new episode under BPCI would be initiated.

The CJR model, on the other hand, allows a beneficiary to be in a CJR LEJR episode and a non-LEJR BPCI episode concurrently. CMS asserts the higher probability of concurrent episodes among AMI, CABG and/or SHFFT due to higher readmission rates for such beneficiaries requires different policy to avoid duplicative savings/loss calculations.

With regard to overlap in CJR or another EPM, if a beneficiary is in a SHFFT, AMI or CABG model or CJR episode and has a readmission that (1) is not excluded from the ongoing episode, and (2) could initiate a new CJR or EPM episode, that readmission would not initiate another episode or cancel the ongoing episode. However, if the readmission (1) is excluded from the ongoing episode definition and (2) could otherwise initiate a CJR or EPM episode, such episode would initiate and the ongoing episode and new episode would continue concurrently. 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 the EPM participant in the SHFFT model during the ongoing CJR episode, the CJR episode would continue and model episode would not initiate.

Finally, there is potential Beneficiary Overlap with Shared Savings Models when a beneficiary in an AMI, CABG or SHFFT model episode is also aligned or attributed to a Shared Savings Program or a participant in an ACO model. In response to prior comments, CMS proposes to exclude beneficiaries from EPMs who are aligned to ACOs in the Next Generation ACO model and ESRD Seamless Care Organizations incorporating downside risk in the Comprehensive ESRD Care Initiatives, but to follow the CJR model for overlap between EPMs and other ACOs in the Medicare Shared Savings Program. However, CMS seeks comments on expanding the exclusion of beneficiaries to CJR and to other ACOs accepting two-sided risk, such as ACOs in the Shared Savings Program Track 3.

Payment Reconciliation

Similar to the CJR model, CMS proposes to include Per-Beneficiary Per-Month (PBPM) payments, which are made for new services included in other innovation center models, in the EPM reconciliation calculation if the services are clinically related. Specifically, CMS must determine the services 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. However, all services paid by PBPM payments funded through the CMMI’s appropriation under section 1115A of the Act would be excluded from EPM, without a determination of clinical relatedness. In addition, and again consistent with the CJR model, Oncology Care and Medicare Care Choices model services and conditions are excluded from EPM reconciliation, as CMS does not believe such services are clinically related to EPMs. This general proposal to include clinically related PBPM services in EPM reconciliation would apply to all models with PBPM payments as well as future models and programs that incorporate PBPM payments.

EPM Quality Measures and Use in EPM Payment Methodologies

Similar to the CJR model, CMS proposes to link each EPM participant hospital’s payment to its quality performance such that participant hospitals delivering higher quality care would be eligible for higher amounts of payment savings than those with lower quality measures. More specifically, CMS proposes to employ each EPM participant hospital’s quality measure performance to adjust such hospital’s effective discount factor used to calculate the episode target prices. The effective discount factor would be based on the EPM participant hospital’s quality performance overall and on its improvement on the quality measures, all as reflected in each EPM participant’s composite quality score. The composite quality score would be calculated for each performance year at the time of reconciliation.

CMS is not proposing to use any readmission measures that would apply to clinical conditions in the episodes but that are already in place under the hospital readmission program.

Selection of Proposed Quality Measures

AMI Model: For the AMI model, CMS proposes three quality measures and one measure that depend on the voluntary submission of data:

  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)
  4. Voluntary Hybrid Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #2473) (Hybrid AMI Mortality) data submission

CABG Model: CMS proposes two quality measures for the CABG model:

  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)

SHFFT Model: For the SHFFT model, CMS proposes to employ the same quality measures currently used in the CJR model, which are two quality measures and one voluntary data submission:

  1. Hospital-level RSCR following elective primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1550) (Hip/Knee Complications)
  2. HCAHPS Survey (NQF #0166)
  3. THA/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)

Use of Proposed Quality Measures in Payment Methodologies

CMS proposes to set an episode benchmark price for each episode and to then apply an effective discount factor based on the EPM participant’s quality performance and improvement during the performance year. The quality-based discount factor would range from 1.5 percent for those with high quality scores to 3.0 percent for those with relatively poor quality scores.

The quality performance would also affect the EPM participant’s repayment obligation in the event that a repayment is required. Again, under the repayment approach, the EPM participant may be required to repay to Medicare a portion or all of the excess episodes payments. (No repayment would be required in the first performance year, and the percentage discount would be phased in after that.) But for those EPM participants with higher composite quality scores, the discount percentage used in making the repayment calculations would be reduced, thereby reducing the repayment obligation.

An EPM participant’s quality performance would be determined based on the participant’s overall – or composite – performance, as opposed to the participant’s performance on each quality measure. EPM participants with a low volume without a reportable value for the measure, new hospitals, and EPM participants for which CMS has suppressed the measure value due to error would be assigned a 50th performance percentile of the measure result.

CMS proposes to recognize EPM participants that have substantial improvement from the prior year’s measured performance on that measure by adding up to 10 percent of the maximum value to each quality measure (excluding voluntary data submission measures). Measure improvement would be determined differently under the AMI and CABG models from what is being done under the CJR model.

CMS would assign different weights in the composite quality score to individual quality measures. The EPM participant’s score on those performance measures would depend on the participant’s ranking between equal to or greater than the 90th percentile or less than the 30th percentile. Additionally, for the AMI model, quality measure scores of two points would be added for successful submission of the mortality data. Further, improvement scores would be available.

Similarly, CMS sets forth weights for the CABG model. Again, an EPM participant’s scores would depend on the participant’s ranking between the 90th percentile and less than the 30th percentile. And, as with the AMI model, improvement scores would be available.

For the SHFFT model, CMS employs the same calculation used in the CJR model. The points assigned would depend, again, on whether the EPM participant falls at or above the 90th performance percentile or below the 30th performance percentile.

As noted above, the methodologies link quality and payment. EPM participants providing high-quality care would be able to reduce the effective discount factor used to calculate their quality-adjusted prices at reconciliation and, if necessary, for repayment. The EPM participant’s eligibility for a reconciliation payment, the effective discount for that reconciliation payment, and the effective discount for the repayment amount would all vary depending on that participant’s score. Further, the repayment discount factor would vary depending on the performance year. No repayment would be due in year 1; there would be reduced repayment discounts in years 2 and 3; and the full discount amount would not apply until years 3 and 4. CMS further illustrates this methodology in tables set forth in the rules.

Example: For the AMI model, a composite quality score of less than 3.6% would mean that the participant would have an effective discount factor of 3.0 but would not be eligible for reconciliation. There would be no repayment obligation in the first year, but there would be an applicable discount factor for repayment that would increase, depending on the EPM participant’s score, in years 2 through 5.

For the CABG model, by contrast, the composite quality scores would vary between less than 2.8 to greater than 17.5. Again, at the lower end of the scale, the participant would not be eligible for reconciliation payment and would have a higher effective discount factor for reconciliation payment and for repayment (with repayment not applicable in the first year).

Under the SHFFT model the composite quality scores vary from less than 5 on the low end to greater than 15 on the high end.

The proposed quality measure performance periods for required and voluntary submissions of data vary from model to model and performance year to performance year.

How the Calculation Works

Sample Calculations

CMS provides the following example of how the calculations would work under EPMs:

Consider hospitals in model years 4 and 5 in a region where Medicare historically spent an average of $50,000 for each coronary bypass surgery patient, taking into account the costs of surgery as well as all related care provided in the 90 days after hospital discharge. Target prices would reflect the average historical pricing minus the discount rate based on quality performance and improvement.

  • Hospital A is performing at the highest overall level on quality measures and its discount rate is 1.5 percent for the episode. As a result, its quality-adjusted target price for bypass surgery is $49,250 (or $50,000 minus the discount of $750). By taking measures to avoid readmissions and other unnecessary costs, Hospital A is able to reduce average total hospitalization and related 90-day post-discharge costs for bypass surgery patients to $48,000. Hospital A would be paid average savings of $1,250 per patient.
  • Hospital B in the same region also reduces its average costs to $48,000 per patient. However, it achieves only acceptable overall performance on quality measures. Its discount rate is 3 percent and its quality-adjusted target price is $48,500 (or $50,000 minus the discount of $1,500). Hospital B would be paid average savings of only $500 per patient.

Subsequent Calculations

During the following performance year’s reconciliation process, about 14 months after the end of the prior performance year, CMS 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. It would then use this calculation to revise its determinations of amounts due to and from hospitals.

Beneficiary Notice, Choice, and Protections

As with the CJR model, EPM beneficiaries may not opt out of the EPM model. Accordingly, and as outlined below, CMS has placed significant emphasis on (1) ensuring Medicare beneficiaries are both adequately notified of, and educated regarding, the EPM model, (2) respecting Medicare beneficiary choice; and (3) instituting sufficient beneficiary protections.

Beneficiary Notice

CMS proposes that, both EPM participant hospitals and their EPM collaborators share responsibility for informing and educating beneficiaries.

EPM Participant Hospitals

EPM participant hospitals must provide written notice to EPM beneficiaries upon admission or immediately following the decision to schedule or provide applicable EPM model services. Recognizing that a patient’s condition may not always allow for such a notice timeline, CMS proposes that, in such circumstances, the notice must instead be provided “as soon as is reasonably practicable but no later than discharge from the participant hospital accountable for the episode.”

Such notice (to be developed or approved by CMS) must contain, among other information: (1) a detailed explanation of the model and how it may impact the beneficiary’s care (2) notice that the beneficiary retains freedom of choice, and (3) a list of the providers and suppliers with whom the participant hospital has a sharing arrangement. In addition, EPM participant hospitals are responsible for adding to their discharge planning notice materials notice of any potential financial liability associated with non-covered services recommended or presented as an option in the discharge planning process.

EPM Collaborators

EPM collaborators must likewise provide written notice to EPM beneficiaries – for physicians and PGP collaborators, at the time that the decision to undergo an EPM-covered procedure or service is made, and for post-acute care providers/suppliers and ACOs, at the time the EPM beneficiary first receives services from the applicable provider during an EPM episode. As with EPM participant hospitals, in the event an emergency situation does not allow for advance notice, notice may be provided at a later time. While CMS’s requirements with respect to the content of the notice vary per provider, all such notices must be developed or approved by CMS, and acknowledge the existence of a sharing arrangement with the EPM participant hospital.

Notably, EPM participant hospitals and their EPM collaborators must be able to, upon CMS’s request, generate a list of all beneficiaries who have received an EPM model notice, including the type of notice and the date it was delivered.

Beneficiary Choice

CMS is careful to note that the EPM model does not create any new restrictions with respect to beneficiary choice. As with CMS’s stated policy in the CJR model, while hospitals may recommend “preferred providers” consistent with applicable statute and regulations, in doing so, they must (1) still present to beneficiaries the full list of medically appropriate post-acute providers and (2) not otherwise restrict beneficiary choice. In addition, EPM participant hospitals may not charge any post-acute care provider a fee to be included on any such “preferred” list nor may they accept such payments.

Beneficiary Protections

CMS notes its intent to both closely monitor EPM participants’ claims data and conduct audits to ensure beneficiary access to care remains uncompromised. Specifically, CMS indicates that it would monitor arrangements between EPM participant hospitals and their EPM collaborators to ensure such arrangements “do not result in the denial of medically-necessary care or other programmatic or patient abuses.”

In addition, and with respect to post-acute care, CMS now seeks to supplement the discharge planning requirements under existing conditions of participation with the following criteria: EPM participants must, as part of discharge planning, “account for financial bias” by providing each patient with a complete list of all available post-acute care options (within the applicable service area and consistent with medical need), including beneficiary cost-sharing and quality information, where available and as applicable. As noted previously in the proposed rule, CMS is careful to state that it does not view this added cost/quality transparency requirement as precluding 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.”

CMS also proposes to monitor for “delayed care,” i.e., the potential for an EPM participant to delay services until after the 90-day episode following an acute clinical event. To that end, and to forestall any incentive to inappropriately shift care, CMS proposes to make EPM participant hospitals liable for “post-episode payment amounts.” Such liability would be imposed only to the extent the EPM participant hospital’s average spending, in the 30 days following the end of the applicable EPM episode, exceeds three standard deviations above the regional average. Notably, post-episode spending amounts would not be subject to stop-gain and stop-loss limits.

Financial Arrangements Under the Newly Proposed Episode Payment Models — Gainsharing

Consistent with the bundled programs issued to date, CMS has again recognized the importance and value of gainsharing by including detailed information on gainsharing in its proposed EPMs – the AMI, CABG, and SHFFT models. CMS anticipates that EPM participants will align with key providers and suppliers to work together and promote accountability for quality, cost, and care provided to beneficiaries. EPM participants can enter into sharing arrangements with EPM collaborators to 1) share savings generated through reductions in episode spend below the target price (NPRA); 2) share savings generated through internal cost savings programs (ICS); and 3) share repayment responsibility. 

CMS proposes gainsharing requirements that are largely consistent with those requirements found in the CJR model regulations. However, as noted below and discussed elsewhere herein, CMS is attempting to both streamline and clarify the CJR regulations while also expanding the scope of financial arrangements under the EPMs. Through these proposed changes, CMS is aiming to align the EPM and CJR models. CMS summarizes the changes to the CJR regulations as falling into the following four categories:

  1. Eliminating duplication of requirements in similar provisions
  2. Providing clarity and consistency through streamlining and reorganizing
  3. Responding to feedback from hospitals and stakeholders seeking greater flexibility
  4. Expanding the scope of financial arrangements under the EPM

Highlights of the proposed AMI, CABG, and SHFTT model risk-sharing requirements are summarized below.

EPM Collaborators – Risk sharing partners

EPM collaborators are defined to include:

  • SNFs, HHAs, LTCHs, IRFs
  • Physician group practices (PGPs), physicians, NPPs
  • Providers or suppliers of outpatient therapy services
  • Hospitals
  • CAHs
  • ACOs participating in the Shared Savings Program (excludes Next Generation ACOs and ESCO ACOs in the Comprehensive ESRD Care Model that are in tracks with downside risk for financial losses)

Hospitals, CAHs, and ACOs are new additions to the list of collaborators. CMS is likewise proposing this change to the CJR model.

Selection Criteria

To be considered an EPM collaborator, the individual or entity must meet hospital-defined quality of care measures directly related to the episode. Such measures may be forward looking, or based on prior performance, and cannot be based, directly or indirectly, on the volume or value of past or anticipated referrals between the parties. 

Selection criteria cannot take into account the amount of EPM activities provided by an actual or potential EPM collaborator. The EPM participant must develop and maintain a written set of policies addressing selection criteria. 

Compliance Oversight

EPM Participants and EPM Collaborators must each have a compliance program that provides oversight of the sharing arrangement and compliance with the requirements of the EPM. CMS does not mandate that the compliance program take a specific form, noting that the OIG has repeatedly emphasized that there is not a “one-size-fits-all” compliance program. CMS seeks comment on the anticipated effect of the compliance program requirements (particularly for individual practitioners, NPPS, and small physician group practices).

Board or Other Governing Body Oversight

The EPM participant’s board or other governing body must have responsibility for oversight of the hospital’s participation in 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.

EPM Activities

In an attempt to provide further guidance on what constitutes care redesign, CMS proposes to define EPM activities as activities related to promoting accountability for quality, cost, and overall care provided to beneficiaries. Specifically, the proposed definition includes the following activities:

  • Managing and coordinating care
  • Encouraging investment in infrastructure and care processes
  • Provision of items and services during an episode aimed at reducing cost and improving quality
  • Carrying out any other obligation or duty under the EPM

CMS seeks comment on the proposed definition and CMS’s approach of utilizing the proposed definition as a comprehensive framework for capturing both direct care and care redesign for EPM episodes. CMS is likewise proposing an identical concept – CJR activities – for the CJR model.

Sharing Arrangements

Sharing arrangements are financial arrangements between the EPM participant and EPM collaborators, pursuant to which the parties may share downside and/or upside risk. The arrangement must be in writing, signed by the parties, and executed prior to the services being delivered under the sharing arrangement. Participation must be voluntary and the decision not to participate cannot be subject to penalty. The sharing arrangement must require the EPM collaborator to meet the EPM program requirements.

The written agreement must specify the following:

  • Purpose and scope of arrangement
  • Obligations of parties – including the EPM activities
  • Date of the sharing arrangement
  • Management and staffing information
  • Financial and economic terms for payment (eligibility, frequency, and methodology for payment)

EPM collaborators may in turn enter into downstream arrangements, referred to as “distribution arrangements” or “downstream distribution arrangements.”

  • Distribution Arrangement: Financial arrangements between an EPM collaborator (ACO or PGP) and its collaboration agent for the sole purpose of sharing a gainsharing payment received by the ACO or PGP.
  • Downstream Distribution Arrangement: Financial arrangement between an EPM collaborator that is both an ACO and PGP and its downstream collaboration agent for the sole purpose of sharing the distribution payment received by the PGP.

Alignment Payments

Alignment payments are defined as a payment from an EPM collaborator to a participant hospital to cover any repayment amount due to CMS.

  • An EPM participant can only receive up to 50 percent of the repayment amount from its EPM collaborators.
  • A single, non-ACO EPM collaborator’s alignment payment contribution is limited to 25 percent of the EPM participant’s repayment obligation risk. ACO EPM collaborators may contribute up to 50 percent of the EPM participant’s repayment obligation.

Gainsharing Payments

Gainsharing payments are derived from ICS, reconciliation payments (i.e., positive NPRA), or both. To receive a gainsharing payment, the EPM collaborator must:

  • Meet the agreed-upon quality criteria during the applicable performance year in which the savings accrued
  • Directly render a billable item or services to EPM beneficiaries during an episode

Gainsharing payments made pursuant to a distribution arrangement are referred to as distribution payments. Gainsharing payments made pursuant to a downstream distribution arrangement are similarly referred to as downstream distribution payments.

Gainsharing and Alignment Payment Frequency

Gainsharing payments may be made only once per calendar year and must be clearly identified as a gainsharing payment at the time of payment. Alignment payments have no set time interval, BUT they cannot be paid prior to CMS’s calculation of the repayment amount.

Gainsharing Methodology (Added flexibility for PGPs)

As a general matter, payments must be made in accordance with a gainsharing methodology that is substantially based on:

  • Quality of care
  • Provision of EPM activities

Provided gainsharing payments (including distribution payments and downstream distribution payments) meet the above criteria, they may directly take into account the volume of EPM activities provided by an EPM collaborator. Example: a physician who treats 100 EPM beneficiaries and delivers high-quality and efficient care can earn a larger gainsharing payment than a physician who treats 10 EPM beneficiaries and delivers high-quality and efficient care. CMS specifically states that “accounting for the relative amount of EPM activities” does not undermine the volume or value prohibition.

The proposed methodology provides added flexibility for PGPs. Distribution payments made by a PGP to its members can be based on the above methodology or in a manner that complies with the Stark law § 411.352(g). Payments made pursuant to the latter methodology would permit (1) PGP members who are not collaboration agents to receive money funded by the gainsharing payment through the PGPs profit sharing; and (2) PGP members who are collaboration agents to receive distribution payments without regard to the gainsharing cap. While this represents a departure from the current CJR regulations, CMS is likewise proposing the same change for the CJR model.

Gainsharing with PGPs and ACOs

To receive a gainsharing payment, the PGP must:

  • Have at least one physician/NPP member that actually furnished service to an EPM beneficiary during an EPM episode
  • Contribute to the EPM participant’s care redesign and be clinically involved in the care of EPM beneficiaries

To receive a gainsharing payment, the ACO must:

  • Have 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
  • The ACO must contribute to the EPM participant’s care redesign and be clinically involved in the care of EPM beneficiaries

Gainsharing Cap

Physician/NPP cap: Gainsharing payments to a physician for each calendar year may not exceed 50 percent of the total Medicare Physician Fee Schedule (PFS) paid to that physician/NPP for services furnished to the EPM participant’s EPM beneficiaries during an EPM episode

Group cap: Gainsharing payments to a PGP for each calendar year may not exceed 50 percent of the total Medicare PFS for services furnished by physician/NPP members of the PGP to the EPM hospital’s EPM beneficiaries during an EPM episode. Distribution and downstream distribution payments from a PGP to a PGP member are excepted from the cap, provided the payments are made pursuant to § 411.352(g).

Administration of Gainsharing/Alignment Payments

Gainsharing and alignment payments must be administered by the EPM participant in accordance with GAAP and Yellow Book. Payments must be made by check, EFT or another traceable cash transaction. Note that this reflects a departure from current CJR model requirements that mandate payments be made by EFT only. CMS’s proposal reflects an attempt to ease administrative burden on potential model participants.


The EPM participant must recoup a gainsharing payment if it contains funds “derived from a CMS overpayment on a reconciliation report” or if it was “based on the submission of false or fraudulent data.”

Documentation Requirements

To ensure program integrity, CMS proposes a number of documentation requirements on EPMs, among which include:

  • Contemporaneous documentation of the sharing arrangement
  • Accurate and historical list of EPM collaborators (name and address) on EPM participant’s public facing website (updated quarterly)
  • Contemporaneous documentation of the payment or receipt of gainsharing and/or alignment payments (requirement applies to EPM collaborators as well)
  • Process for determining and verifying EPM collaborators’ eligibility to participate in Medicare
  • Plan for tracking ICS
  • Information on the accounting system used to track ICS
  • Description of current health information technology (including technology that will be used to track reconciliation payments and ICS)
  • Plan for tracking gainsharing and alignment payments


Similar to the CJR model, CMS proposes to adopt waivers from certain Medicare program requirements for EPMs. Some of the waivers that apply for the CJR model would apply to the proposed EPMs. In addition, CMS proposes model-specific limits because of the differences between the joint replacement episodes and the cardiac and hip/femur episodes.

Post-Discharge Home Visits

CMS considered whether to waive the “homebound” requirement for home health services for the proposed EPMs, but ultimately decided not to do so. Instead, if an EPM beneficiary does not qualify for home health services, CMS proposes to waive the “incident to” rule so that EPM beneficiaries can receive post-discharge visits in their home or place of residence during an episode. Nurses under the general supervision of a physician may furnish such services under this waiver. Additionally, CMS proposes to waive the applicable global surgery billing rules so that practitioners can furnish and bill for post-discharge visits that would otherwise fall within surgical global periods.

Unlike the CJR model, EPMs would have varying model-specific limitations on the number of post-discharge home visits. The CJR model waiver for post-discharge home visits allows nine billable visits during the 90-day post-discharge period. For EPMs, however, CMS proposes to allow thirteen home visits for the AMI model, nine home visits for the CABG model, and nine home visits for the SHFFT model. These limits are based on the average length of stay for beneficiaries with diagnoses consistent with each respective EPM model.

Billing and Payment for Telehealth Services

Similar to the CJR model and BPCI Models 2 and 3, CMS proposes to waive the geographic-site requirement for telehealth. Such a waiver allows payment for telehealth services for eligible EPM beneficiaries located in any region so long as the other requirements for telehealth services are met. CMS also proposes to waive the originating site requirement specifying the eligible locations at which a beneficiary may receive telehealth services. This means that EPM beneficiaries could receive telehealth services in their homes or places of residence during an EPM episode. To allow reporting and billing for such telehealth services, CMS is creating a new set of HCPCS G-codes that are similar in description to evaluation and management (E/M) codes. E/M codes are generally defined by the setting of service, but current E/M codes do not describe telehealth services provided outside of health care settings. Therefore, CMS intends to create a set of G-codes to parallel the codes for E/M services provided in an office or other outpatient setting but that describe the setting of service as the beneficiary’s home.

SNF 3-Day Rule Waiver

CMS proposes to waive the SNF 3-day rule for AMI beneficiaries. The SNF 3-day rule requires Medicare beneficiaries to have a prior inpatient hospital stay of no fewer than 3 consecutive days to be eligible for Medicare coverage of inpatient SNF care. CMS declines to apply the 3-day rule waiver to CABG and SHFFT model beneficiaries, however, explaining that the average length of stay for these models exceeds 3 days. CMS notes that the mean length of stay for CABG beneficiaries is 6.0 to 11.6 days and, because the length of stay is well above 3 days, it would not be clinically appropriate to allow for early discharge by waiving the SNF 3-day rule.

The 3-day rule waiver would become available on April 1, 2018, which is intended to align with when EPM model participants begin to accept downside risk for actual episode spending. The waiver for EPMs is similar to the CJR model waiver in that it requires the SNF to earn three stars or better on the Five-Star Quality Rating System for at least seven of the most recent rolling twelve months of overall star ratings. CMS would post a list of qualified SNFs on its website for reference by participants in advance of the applicable calendar quarter.

Fraud and Abuse Waivers

CMS and the Office of Inspector General for Health and Human Services (OIG) are evaluating the need for, and scope of, any fraud and abuse waivers. Considering fraud and abuse waivers are provided under the BPCI and CJR models, EPM model participants can likely anticipate promulgation of similar waivers tailored to the structure and operations of EPMs.


CMS provides for EPM participants’ disputes of calculations involving matters related to payment, reconciliation amounts, repayment amounts or determinations associated with quality measures affecting payment. Further, EPM participants terminated from the EPM program may appeal the termination to CMS. Much of the process remains undetermined as it calls for rules that will be established by CMS. However, CMS does specify that EPM participants that wish to file an appeal must do so by notifying CMS within 45 calendar days of the issuance of the reconciliation report or CR incentive payment report. A second level of review, a reconsideration by CMS, is final and binding, without further opportunity for review.

The following issues are not subject to review:

  • Selection of models for testing or expansion under section 115A of the Act
  • Selection of organizations, sites, or participants to test those models selected
  • Elements, parameters, scope and duration of the models
  • Determinations regarding budget neutrality
  • Termination or modification of the design and implementation of a model
  • Decisions to expand the duration and scope of a model

CJR Updates

In addition to unveiling the new EPM models, CMS also proposes updates to the CJR model. The changes reflect CMS’s efforts to not only streamline CJR regulations and respond to industry feedback, but also to align the CJR and EPM models, in recognition of the fact that many hospitals may ultimately be participants under both initiatives. While not a comprehensive list, highlights of CMS’s proposed CJR program updates are outlined below:

CJR Collaborator Selection Criteria

CMS proposes to allow, for the first time, hospitals, critical access hospitals, and Medicare Shared Savings Program ACOs to participate as “CJR collaborators.” If implemented, the lists of eligible CJR collaborators and EPM collaborators would mirror one another.

Quality Composite Score

In determining a CJR participant hospital’s composite quality score, CMS considers not only the hospital’s quality outcomes for the applicable performance year, but also its level of improvement from the prior year. With this proposed rule, CMS is seeking to place greater emphasis on the value of year-to-year improvement, and as such, is reducing the threshold for CJR participant hospitals to receive “quality improvement points” from three deciles to two deciles, as compared to the national distribution of measure results for general, acute care hospitals.

Gainsharing Methodology

In addition to proposing to adopt much of the terminology used in the EPM model financial arrangements (e.g., CJR activities, collaboration agent, downstream distribution arrangement, etc.), CMS also proposes to adopt the EPM model’s more flexible gainsharing methodology.

Specifically, CMS proposes to permit a gainsharing methodology that directly accounts for the volume or value of services, provided it is “substantially based on quality of care and the provision of CJR activities.” (Note, however, that physician group practices (PGPs) and physician gainsharing cap requirements still apply.) In addition, and only with respect to downstream payments between a PGP and its physician members, CMS proposes an alternative to the “substantially based on quality of care and the provision of CJR activities” gainsharing methodology criteria. Here, CMS proposes to allow PGP CJR collaborators and ACO PGP CJR collaboration agents to make gainsharing payments to their physician members, relying upon the Stark law group practice, special compensation rules set forth at 42 C.F.R. § 411.352(g). (Note that were the PGP to rely on the Stark law special compensation rule, while the PGP itself would continue to be subject to the gainsharing cap, no such limitations would be imposed on the PGP’s physician members. In addition, group members not otherwise participating in the CJR model would be eligible to receive PGP profits generated as a result of the PGP’s participation in the CJR model.)

MACRA “Advanced APM”

Following the proposed EPM model, CMS proposes to allow CJR hospitals the opportunity to qualify as an “advanced” alternative payment model (Advanced APM), such that CJR hospitals’ physician participants may earn statutorily specified incentives for participation, as set forth in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). To qualify, the CJR participant hospital must use (and attest to such use) certified electronic health records.

Overlap with ACOs

Again paralleling its EPM proposal, CMS proposes to cancel (or never initiate in the first place) a CJR episode for beneficiaries prospectively aligned to a Next Generation ACO or ESCO in the Comprehensive ESRD Care Initiative in tracks with downside risk for financial loss. CMS proposes to implement this new policy for episodes beginning on or after July 1, 2017 in order to align with the proposed EPM implementation date.

SNF 3-Day Waiver

Beginning with episodes that start July 1, 2017, the CJR model regulations currently provide for a “SNF 3-Day Waiver.” Pursuant to the terms of this payment waiver, CJR beneficiaries may be discharged prior to the conclusion of a three-day hospital stay and still receive coverage for the skilled nursing facility (SNF) stay, provided the SNF is ranked at least three-stars by CMS. As part of the discharge planning process, and to the extent a CJR participant hospital and CJR beneficiary may rely on the SNF 3-Day waiver, the hospital must provide the CJR beneficiary with written notice of any potential financial liability. CMS seeks to go one step further by proposing that, if a hospital fails to provide beneficiaries with the required discharge notice (indicating financial liability if the beneficiary does not go to a three-star or better SNF) and the patient goes to the unqualified SNF, the CJR participant hospital would bear financial liability for such SNF services.


As with the proposed EPM, CMS proposes to expand the responsibility of CJR participant hospitals (and hence the scope of CMS’s available remedial action). Specifically, CJR participant hospitals would be responsible not only for the compliance of its CJR collaborators, but also for all CJR collaborator downstream contractors, i.e., CJR collaboration agents and downstream collaborator agents.

Advanced Alternative Payment Model Eligibility

CMS proposes to add EPMs and the CJR model as eligible Advanced Alternative Payment Models (APMs) that meet the Advanced APM participation criteria under the new Quality Payment Program (QPP). This represents a substantial update to the list of eligible Advanced APMs and allows the many physicians who are participating in the CJR model and those who would be participating in EPM to qualify for additional quality-based payments from Medicare.

Physicians and mid-level providers who meet the criteria for participation in Advanced APMs would be eligible to receive 5 percent of the estimated aggregate payment amounts for those APM participants’ covered professional services as incentive payments for payment years 2019 to 2024. These incentive payments are in addition to the already built-in gainsharing incentives in the EPM itself. Lastly, qualifying APM participants are exempt from the otherwise required participation in the Merit-Based Incentive Payment System (MIPS) program.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) created the QPP to replace the former Sustainable Growth Rate with two different quality-based reimbursement models for physicians and mid-level practitioners who bill Medicare for professional medical services. The QPP created MIPS and Advanced APMs, and requires physicians and practitioners to participate in one of the two tracks. The new designation of Advanced APMs is not the same as general APMs, since the former meet certain additional criteria required by the QPP, including taking on additional financial risk, and the latter do not. [ii]

Under MACRA, an Advanced APM must be an APM that: (1) provides payment for covered professional services based on quality measures comparable to MIPS, (2) bears risk for monetary losses of a more-than-nominal amount, and (3) requires participants in that APM to use Certified Electronic Health Record Technology (CEHRT). The specific requirements for meeting the Advanced APM criteria are delineated further in the proposed regulations implementing MACRA, but the EPM proposed rule discusses EPMs and the CJR model as meeting the first two requirements by virtue of their plan design, with a few minor exceptions. As for the requirement for CEHRT, EPM participants and CJR participant hospitals must choose whether to meet such requirement. It is important to note that CMS is not requiring participants to meet the Advanced APM criteria in order to take part in EPMs or the CJR model.

Cardiac Rehabilitation Incentive Payment Model

The newly proposed Cardiac Rehabilitation Incentive Payment Model is intended to increase the use of cardiac rehabilitation (CR) services for Medicare beneficiaries by providing incentive payments to hospitals on a per-procedure basis. CMS’s proposed rule strongly endorses the use of CR as an underutilized health care service that clinical data suggests should improve patients’ health outcomes. CMS observed astutely that the current utilization rate — only 35 percent of cardiac patients receive CR — remains “virtually unchanged over the past 2 decades.” Additionally, CMS proposes to implement the CR Incentive Payment Model to complement its efforts with EPMs for AMIs and CABGs to improve coordination of services and long-term care management.

The proposed CR incentive payment model would pay hospitals $25 per CR service for the first 11 CR services and $175 for each additional CR service provided during the 90 days after hospital discharge. The CR services can vary and can include blood pressure monitoring, exercise training, and other activities that typically require a long-term commitment from the patient. Notably, CR incentive payments are in addition to the usual payments Medicare makes to providers and suppliers providing CR services.

CMS proposes to implement the CR Incentive Payment Model in only 90 MSAs, which will be identified in the final rule. The 90 MSAs will be split evenly between 45 MSAs from the pool of MSAs participating in EPMs for AMI and CABG and 45 MSAs from the pool of eligible MSAs that were not selected for EPM participation. CMS would provide those hospitals participating in this model with a CR Incentive Payment Report on an annual retrospective basis that identifies the CR incentive payments amounts, which mirrors the reconciliation process in EPMs and the CJR model. However, unlike reconciliation payments under EPMs or CJR, participating hospitals cannot share CR incentive payments with other individuals and entities.

Ober|Kaler’s Comments

The proposed rule demonstrates CMS’s continued efforts to transition payment from fee-for-service to models that reflect efficient, coordinated, high-quality care for beneficiaries. As Medicare reimbursement exits the fee-for-service arena, CMS continues to propose alternate payment models and the reach of the programs continues to expand. These newly  proposed bundled payment models are not voluntary in the selected geographic areas, so hospitals and other post-acute care providers treating beneficiaries who may qualify for these models must be prepared for the impact of the EPM model beginning July 1, 2017.

As the CMS Innovation Center continues to develop programs, many of these programs will overlap with other alternative payment models, and hospitals will need to wrestle with coordinated care programs under multiple initiatives simultaneously, such as BPCI, CJR, EPM, CR and APM models, each with different legal and administrative requirements. Physicians and post-acute providers also will need to understand these requirements as they decide to participate with hospitals in these new alternate payment models or remain in the fee-for-service arena.

Hospitals, physicians, and post-acute care providers will need to digest these rules and consider the implications of the EPM model, CR incentive payment model and the expansion to the CJR model. As CMS notes throughout the proposed rule, the comments received in response to the CJR model were considered in drafting this proposed rule. It is clear that CMS is looking for input while these programs are in their infancy. Addressing concerns before the final rule is published may have far-reaching impact as this and future bundled payments are implemented by CMS.

CMS requested comments on the proposal as well as the alternatives it did consider, or should consider, in finalizing this program. Comments must be received by CMS on October 3, 2016, no later than 5pm.

[i] As defined in section 1886(d)(1)(B) of the Social Security Act.

[ii] For a more detailed discussion of Advanced APMs and MIPS, seePhysician Payment: CMS Proposes Quality Payment Program, Advanced APMs, and Merit-Based Incentive Payment System,” Payment Matters, May 13, 2016.

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