[Federal Register Volume 80, Number 134 (Tuesday, July 14, 2015)]
[Proposed Rules]
[Pages 41198-41316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17190]



[[Page 41197]]

Vol. 80

Tuesday,

No. 134

July 14, 2015

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 510





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

  Federal Register / Vol. 80 , No. 134 / Tuesday, July 14, 2015 / 
Proposed Rules  

[[Page 41198]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 510

[CMS-5516-P]
RIN 0938-AS64


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

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

ACTION: Proposed rule.

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

DATES: Comment period: To be assured consideration, comments on this 
proposed rule must be received at one of the addresses provided in the 
ADDRESSES section no later than 5 p.m. EDT on September 8, 2015.

ADDRESSES: In commenting, please refer to file code CMS-5516-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-5516-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-5516-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--

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

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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

FOR FURTHER INFORMATION CONTACT: 
Claire Schreiber, [email protected], 410-786-8939
Gabriel Scott, [email protected], 410-786-3928

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection, generally beginning approximately 3 weeks after publication 
of the rule, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday 
through Friday of each week from 8:30 a.m. to 4:00 p.m. EDT. To 
schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

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

Alphabetical List of Acronyms

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

[micro]SA Micropolitan Statistical Area
ACO Accountable Care Organization
ASPE Assistant Secretary for Planning and Evaluation
BPCI Bundled Payments for Care Improvement
CBSA Core-Based Statistical Area
CMS Centers for Medicare & Medicaid Services
CPT Current Procedural Terminology
CCJR Comprehensive Care for Joint Replacement
CSA Combined Statistical Area
DME Durable Medical Equipment
FFS Fee-for-service
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HHA Home health agency
HOPD Hospital outpatient department
HHPPS Home Health Prospective Payment System
HIQR Hospital Inpatient Quality Reporting
HRRP Hospital Readmissions Reductions Program
HRR Hospital Referral Region
HVBP Hospital Value Based Purchasing Program
ICD-9-CM International Classification of Diseases, 9th Revision, 
Clinical Modification
IPPS Inpatient Prospective Payment System
IPF Inpatient psychiatric facility
IRF Inpatient rehabilitation facility
LEJR Lower extremity joint replacement
LOS Length of stay
LTCH Long term care hospital
LUPA Low Utilization Payment Adjustment

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MAC Medicare Administrative Contractor
MCC Major complications or comorbidities
MSA Metropolitan Statistical Area
MS-DRG Medical Severity Diagnosis-Related Group
MP Malpractice
NPP Nonphysician Practitioner
NPRA Net Payment Reconciliation Amount
OPPS Outpatient Prospective Payment System
PAC Post-acute care
SNF Skilled nursing facility
THA Total hip arthroplasty
TKA Total knee arthroplasty

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    1. Model Overview: LEJR Episodes of Care
    2. Model Scope
    3. Payment
    4. Similar Previous and Concurrent Models
    5. Overlap With Ongoing CMS Efforts
    6. Quality Measures and Reporting Requirements
    7. Data Sharing Process
    8. Beneficiary Protections
    C. Summary of Economic Effects
II. Background
III. Provisions of the Proposed Rule
    A. Proposed Definition of the Episode Initiator and Selected 
Geographic Areas
    1. Background
    2. Proposed Definition of Episode Initiator
    3. Financial Responsibility for the Episode of Care
    4. Proposed Geographic Unit of Selection and Exclusion of 
Selected Hospitals
    a. Overview and Options for Geographic Area Selection
    b. MSA Selection Methodology
    (1) Exclusion of Certain MSAs
    (2) Proposed Selection Strata
    (a) MSA Average Wage-adjusted Historic LEJR Episode Payments
    (b) MSA Population Size
    (c) Analysis of Strata
    (3) Factors Considered but Not Used in Creating Proposed Strata
    (4) Sample Size Calculations and the Number of Selected MSAs
    (5) Method of Selecting MSAs
    B. Episode Definition for the Comprehensive Care for Joint 
Replacement (CCJR) Model
    1. Background
    2. Clinical Dimension of Episodes of Care
    a. Definition of the Clinical Conditions Included in the Episode
    b. Definition of Related Services Included in the Episode
    3. Duration of Episodes of Care
    a. Beginning the Episode and Beneficiary Care Inclusion Criteria
    b. Middle of the Episode
    c. End of the Episode
    C. Proposed Methodology for Setting Episode Prices and Paying 
Model Participants Under the CCJR Model
    1. Background
    2. Performance Years, Retrospective Episode Payment, and Two-
Sided Risk Model
    a. Performance Period
    b. Proposed Retrospective Payment Methodology
    c. Proposed Two-Sided Risk Model
    3. Adjustments to Payments Included in Episode
    a. Proposed Treatment of Special Payment Provisions Under 
Existing Medicare Payment Systems
    b. Proposed Treatment of Payment for Services That Extend Beyond 
the Episode
    c. Proposed Pricing Adjustment for High Payment Episodes
    4. Proposed Episode Price Setting Methodology
    a. Overview
    b. Proposed Pricing Features
    (1) Different Target Prices for Episodes Anchored by MS-DRG 469 
vs. MS-DRG 470
    (2) Three Years of Historical Data
    (3) Proposed Trending of Historical Data to the Most Recent Year 
of the Three
    (4) Update Historical Episode Payments for Ongoing Payment 
System Updates
    (a) Proposed Inpatient Acute Services Update Factor
    (b) Proposed Physician Services Update Factor
    (c) Proposed IRF Services Update Factor
    (d) Proposed SNF Services Update Factor
    (e) Proposed HHA Services Update Factor
    (f) Proposed Other Services Update Factor
    (5) Blend Hospital-Specific and Regional Historical Data
    (6) Define Regions as U.S. Census Divisions
    (7) Normalize for Provider-Specific Wage Adjustment Variations
    (8) Proposed Combination of CCJR Episodes Anchored by MS-DRGs 
469 and 470
    (9) Discount Factor
    c. Proposed Approach To Combine Pricing Features
    5. Proposed Use of Quality Performance in the Payment 
Methodology
    a. Background
    b. Proposed Implementation of Quality Measures for 
Reconciliation Payment Eligibility
    (1) General Selection of Proposed Quality Measures
    (2) Proposal To Adjust the Payment Methodology for Voluntary 
Submission of Data for Patient-Reported Outcome Measure
    (3) Measure Risk-Adjustment and Calculations
    (4) Applicable Time Period
    (5) Criteria for Applicable Hospitals and Performance Scoring
    (a) Identification of Applicable Hospitals for the CCJR Model
    (b) Methodology to Determine Performance on the Quality Measures
    (c) Proposed Methodology To Link Quality and Payment
    (i) Background
    (ii) Alternatives Considered To Link Quality and Payment
    (iii) Proposal To Link Quality and Payment through Thresholds 
for Reconciliation Payment Eligibility
    6. Proposed Process for Reconciliation
    a. Net Payment Reconciliation Amount
    b. Payment Reconciliation
    7. Proposed Adjustments for Overlaps With Other Innovation 
Center Models and CMS Programs
    a. Overview
    b. CCJR Beneficiary Overlap With BPCI Episodes
    c. Accounting for CCJR Reconciliation Payments and Recoupments 
in Other Models and Programs
    d. Accounting for Per Beneficiary Per Month (PBPM) Payments in 
the Episode Definition
    e. Accounting for Overlap With Shared Savings Programs and Total 
Cost of Care Models
    8. Proposals To Limit or Adjust Hospital Financial 
Responsibility
    a. Overview
    b. Proposed Limit on Raw NPRA Contribution to Repayment Amounts 
and Reconciliation Payments
    (1) Proposed Limit on Raw NPRA Contribution to Repayment Amounts
    (2) Proposed Limit on Raw NPRA Contribution to Reconciliation 
Payments
    c. Proposed Policies for Certain Hospitals to Further Limit 
Repayment Responsibility
    d. Proposed Hospital Responsibility for Increased Post-Episode 
Payments
    9. Proposed Appeal Procedures for Reconciliation
    a. Payment Processes
    b. Calculation Error
    c. Dispute Resolution
    (1) Limitations on Review
    (2) Matters Subject to Dispute Resolution.
    (3) Dispute Resolution Process.
    10. Proposed Financial Arrangements, Beneficiary Incentives, and 
Proposed Program Rule Waivers and Amendments
    a. Financial Arrangements and Beneficiary Incentives
    (1) Financial Arrangements Permitted Under the CCJR Model
    (a) CCJR Sharing Arrangement Requirements.
    (b) Participation Agreements Requirements.
    (c) Gainsharing Payment and Alignment Payment Conditions and 
Restrictions.
    (d) Documentation and Maintenance of Records
    (2) Beneficiary Incentives Permitted Under the CCJR Model
    (3) Compliance with Fraud and Abuse Laws
    11. Proposed Waivers of Medicare Program Rules
    a. Overview
    b. Post-Discharge Home Visits
    c. Billing and Payment for Telehealth Services
    d. SNF 3-Day Rule
    e. Waivers of Medicare Program Rules To Allow Reconciliation 
Payment or Recoupment Actions Resulting From the Net Payment 
Reconciliation Amount12. Proposed Enforcement Mechanisms
    D. Quality Measures and Display of Quality Metrics Used in the 
CCJR Model
    1. Background
    a. Purpose of Quality Measures in the CCJR Model
    b. Public Display of Quality Measures in the CCJR Model
    2. Proposed Quality Measures for Performance Year 1 (CY 2016) 
and Subsequent Years

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    a. Hospital-Level Risk-Standardized Complication Rate (RSCR) 
Following Elective Primary Total Hip Arthroplasty (THA) and/or Total 
Knee Arthroplasty (TKA) (NQF #1550)
    (1) Background
    (2) Data Sources
    (3) Cohort
    (4) Inclusion and Exclusion Criteria
    (5) Risk-Adjustment
    (6) Calculating the Risk-Standardized Complication Rate and 
Performance Period
    b. Hospital-Level 30-day, All-Cause Risk-Standardized 
Readmission Rate (RSRR) Following Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1551)
    (1) Background
    (2) Data Sources
    (3) Cohort
    (4) Inclusion and Exclusion Criteria
    (5) Risk-Adjustment
    (6) Calculating the Risk-Standardized Readmission Rate and 
Performance Period
    c. Hospital Consumer Assessment of Healthcare Providers and 
Systems (HCAHPS) Survey
    (1) Background
    (2) Data Sources
    (3) Cohort
    (4) Inclusion and Exclusion Criteria
    (5) Case-Mix-Adjustment
    (6) HCAHPS Scoring
    (7) Performance period
    d. Applicable Time Period
    3. Possible New Outcomes for Future Measures
    a. Hospital-Level Performance Measure(s) of Patient-Reported 
Outcomes Following Elective Primary Total Hip and/or Total Knee 
Arthroplasty
    (1) Background
    (2) Data Sources
    (3) Cohort
    (4) Inclusion and Exclusion Criteria
    (5) Outcome
    (6) Risk-Adjustment (if Applicable)
    (7) Calculating the Risk-Standardized Rate
    (8) Performance Period
    (9) Requirements for Successful Submission of THA/TKA Voluntary 
Data
    b. Measure that Captures Shared Decision-Making Related to 
Elective Primary Total Hip and/or Total Knee Arthroplasty
    c. Future Measures Around Care Planning
    d. Future Considerations for Use of Electronic Health Records
    4. Form, Manner and Timing of Quality Measure Data Submission
    5. Proposed Display of Quality Measures and Availability of 
Information for the Public From the CCJR Model
    E. Data Sharing
    1. Overview
    2. Beneficiary Claims Data
    3. Aggregate Regional Data
    4. Timing and Period of Baseline Data
    5. Frequency and Period of Claims Data Updates for Sharing 
Beneficiary-Identifiable Claims Data During the Performance Period
    6. Legal Permission to Share Beneficiary-Identifiable Data
    F. Monitoring and Beneficiary Protection
    1. Introduction and Summary
    2. Beneficiary Choice and Beneficiary Notification
    3. Monitoring for Access to Care
    4. Monitoring for Quality of Care
    5. Monitoring for Delayed Care
    G. Coordination With Other Agencies
    IV. Evaluation Approach
    A. Background
    B. Design and Evaluation Methods
    C. Data Collection Methods
    D. Key Evaluation Research Questions
    E. Evaluation Period and Anticipated Reports
    V. Collection of Information Requirements
    VI. Response to Comments
    VII. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Anticipated Effects
    1. Overall Magnitude of the Model and its Effects on the Market
    2. Effects on the Medicare Program
    a. Assumptions and Uncertainties
    b. Analyses
    c. Further Consideration
    3. Effects on Beneficiaries
    4. Effects on Small Entities
    5. Effects on Small Rural Hospitals
    6. Unfunded Mandates
    D. Alternatives
    E. Accounting Statement
    F. Conclusion
    Regulations Text

I. Executive Summary

A. Purpose

    The purpose of this proposed rule is to propose the creation and 
testing of a new payment model called the Comprehensive Care for Joint 
Replacement (CCJR) Model under the authority of the Center for Medicare 
and Medicaid Innovation (Innovation Center or CMMI). Section 1115A of 
the Social Security Act (the Act) authorizes the Innovation Center to 
test innovative payment and service delivery models to reduce program 
expenditures while preserving or enhancing the quality of care 
furnished to Medicare, Medicaid, and Children's Health Insurance 
Program beneficiaries. The intent of the CCJR model is to promote 
quality and financial accountability for episodes of care surrounding a 
lower-extremity joint replacement (LEJR) or reattachment of a lower 
extremity procedure.\1\ CCJR will test whether bundled payments to 
acute care hospitals for LEJR episodes of care will reduce Medicare 
expenditures while preserving or enhancing the quality of care for 
Medicare beneficiaries. We anticipate the CCJR model being proposed 
would benefit Medicare beneficiaries by improving the coordination and 
transition of care, improving the coordination of items and services 
paid for through Medicare Fee-For-Service (FFS), encouraging more 
provider investment in infrastructure and redesigned care processes for 
higher quality and more efficient service delivery, and incentivizing 
higher value care across the inpatient and post-acute care spectrum 
spanning the episode of care. We propose to test CCJR for a 5 year 
performance period, beginning January 1, 2016, and ending December 31, 
2020. Under FFS, Medicare makes separate payments to providers and 
suppliers for the items and services furnished to a beneficiary over 
the course of treatment (an episode of care). With the amount of 
payments dependent on the volume of services delivered, providers may 
not have incentives to invest in quality improvement and care 
coordination activities. As a result, care may be fragmented, 
unnecessary, or duplicative.
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    \1\ In this proposed rule, we use the term LEJR to refer to all 
procedures within the Medicare Severity-Diagnosis Related Groups 
(MS-DRGs) we propose to select for the model, including reattachment 
of a lower extremity, as described in section III.B. of this 
proposed rule.
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    We have previously used our statutory authority under section 1115A 
of the Act to test bundled payment models such as the Bundled Payments 
for Care Improvement (BPCI) initiative. Bundled payments for multiple 
services in an episode of care hold participating organizations 
financially accountable for an episode of care. They also allow 
participants to receive payment in part based on the reduction in 
expenditures for Medicare arising from their care redesign efforts.
    We believe the CCJR model being proposed would further the mission 
of the Innovation Center and the Secretary's goal of increasingly 
paying for value and outcomes, rather than for volume,\2\ because it 
would promote the alignment of financial and other incentives for all 
health care providers caring for a beneficiary during an LEJR episode. 
In the proposed CCJR model, the acute care hospital that is the site of 
surgery would be held accountable for spending during the episode of 
care. Participant hospitals would be afforded the opportunity to earn 
performance-based payments by appropriately reducing expenditures and 
meeting certain quality metrics. They would also gain access to data 
and educational resources to better understand post-acute care and 
associated spending. Payment approaches that reward providers that 
assume financial and performance accountability for a particular 
episode of care create

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incentives for the implementation and coordination of care redesign 
between hospitals and other providers.
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    \2\ Sylvia Mathews Burwell, HHS Secretary, Progress Towards 
Achieving Better Care, Smarter Spending, Healthier People, http://www.hhs.gov/blog/2015/01/26/progress-towards-better-care-smarter-spending-healthier-people.html (Jan 26, 2015).
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    The proposed model would require the participation of hospitals in 
multiple geographic areas that might not otherwise participate in the 
testing of bundled payments for episodes of care for LEJR procedures. 
Other episode-based, bundled payment models being tested by Centers for 
Medicare & Medicaid Services (CMS), such as the BPCI initiative, are 
voluntary in nature. Interested participants must apply to such models 
to participate. To date, we have not tested an episode payment model 
with bundled payments in which providers are required to participate. 
We recognize that realizing the full potential of new payment models 
will require the engagement of an even broader set of providers than 
have participated to date, providers who may only be reached when new 
payment models are applied to an entire class of providers of a 
service. As such, we are interested in testing and evaluating the 
impact of a bundled payment approach for LEJR procedures in a variety 
of circumstances, especially among those hospitals that may not 
otherwise participate in such a test.
    This proposed model would allow CMS to gain experience with making 
bundled payments to hospitals who have a variety of historic 
utilization patterns; different roles within their local markets; 
various volumes of services; different levels of access to financial, 
community, or other resources; and various levels of population and 
health provider density including local variations in the availability 
and use of different categories of post-acute care providers. We 
believe that by requiring the participation of a large number of 
hospitals with diverse characteristics, the proposed model would result 
in a robust data set for evaluation of this bundled payment approach, 
and would stimulate the rapid development of new evidence-based 
knowledge. Testing the model in this manner would also allow us to 
learn more about patterns of inefficient utilization of health care 
services and how to incentivize the improvement of quality for common 
LEJR procedure episodes. This learning potentially could inform future 
Medicare payment policy.
    Within this proposed rule we propose a model focused on episodes of 
care for LEJR procedures. We chose LEJR episodes for the proposed model 
because as discussed in depth in section III.C. of this proposed rule, 
these are high-expenditure, high utilization procedures commonly 
furnished to Medicare beneficiaries,\3\ where significant variation in 
spending for procedures is currently observed. The high volume of 
episodes and variation in spending for LEJR procedures create a 
significant opportunity to test and evaluate the proposed model that 
specifically focuses on a defined set of procedures. Moreover, there is 
substantial regional variation in post-acute care referral patterns and 
the intensity of post-acute care provided for LEJR patients, thus 
resulting in significant variation in post-acute care expenditures 
across LEJR episodes initiated at different hospitals. The proposed 
model would enable hospitals to consider the most appropriate post-
acute care for their LEJR patients. The proposed model additionally 
would offer hospitals the opportunity to better understand their own 
processes with regard to LEJR, as well as the processes of post-acute 
providers. Finally, while many LEJR procedures are planned, the 
proposed model would provide a useful opportunity to identify 
efficiencies both for when providers can plan for LEJR procedures and 
for when the procedure must be performed urgently.
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    \3\ For example, Total Hip Arthroplasty and Total Knee 
Arthroplasty procedures are very high volume LEJR procedures that 
together represent the largest payments for procedures under 
Medicare. Suter L, Grady JL, Lin Z et al.: 2013 Measure Updates and 
Specifications: Elective Primary Total Hip Arthroplasty (THA) And/Or 
Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-
Standardized Readmission Measure (Version 2.0). 2013. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html; Bozic KJ, 
Rubash HE, Sculco TP, Berry DJ., An analysis of Medicare payment 
policy for total joint arthroplasty. J Arthroplasty. Sep 2008; 23(6 
Suppl 1):133-138.
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    We note that we seek public comment on the proposals contained in 
this proposed rule, and also on any alternatives considered as well.

B. Summary of the Major Provisions

1. Model Overview: LEJR Episodes of Care
    LEJR procedures are currently paid under the Inpatient Prospective 
Payment System (IPPS) through one of two Medicare Severity-Diagnosis 
Related Groups (MS-DRGs): MS-DRG 469 (Major joint replacement or 
reattachment of lower extremity with Major Complications or 
Comorbidities (MCC)) or MS-DRG 470 (Major joint replacement or 
reattachment of lower extremity without MCC). Under the proposed model, 
as described further in section III.B of this proposed rule, episodes 
would begin with admission to an acute care hospital for an LEJR 
procedure that is assigned to MS-DRG 469 or 470 upon beneficiary 
discharge and paid under the IPPS and would end 90 days after the date 
of discharge from the acute care hospital. This episode of care 
definition offers operational simplicity for providers and CMS. The 
episode would include the LEJR procedure, inpatient stay, and all 
related care covered under Medicare Parts A and B within the 90 days 
after discharge, including hospital care, post-acute care, and 
physician services.
2. Model Scope
    We propose that participant hospitals would be the episode 
initiators and bear financial risk under the proposed CCJR model. In 
comparison to other health care facilities, hospitals are more likely 
to have resources that would allow them to appropriately coordinate and 
manage care throughout the episode, and hospital staff members are 
already involved in hospital discharge planning and post-acute care 
recommendations for recovery, key dimensions of high quality and 
efficient care for the episode. We propose to require all hospitals 
paid under the IPPS and physically located in selected geographic areas 
to participate in the CCJR model, with limited exceptions. Eligible 
beneficiaries who receive care at these hospitals will automatically be 
included in the model. We propose to select geographic areas through a 
stratified random sampling methodology within strata based on the 
following criteria: Historical wage adjusted episode payments and 
population size. Our proposed geographic area selection process is 
detailed further in section III.A of this proposed rule.
3. Payment
    We propose to test the CCJR model for 5 performance years. During 
these performance years we propose to continue paying hospitals and 
other providers according to the usual Medicare FFS payment systems. 
However, after the completion of a performance year, the Medicare 
claims payments for services furnished to the beneficiary during the 
episode, based on claims data, would be combined to calculate an actual 
episode payment. The actual episode payment is defined as the sum of 
related Medicare claims payments for items and services furnished to a 
beneficiary during a CCJR episode. The actual episode payment would 
then be reconciled against an established CCJR target price, with 
consideration of additional payment adjustments based on quality 
performance and post-episode spending. The amount of this calculation, 
if

[[Page 41202]]

positive, would be paid to the participant hospital. This payment would 
be called a reconciliation payment. If negative, we would require 
repayment from the participant hospital. We propose Medicare would 
require repayment of the difference between the actual episode payments 
and the CCJR target price from a participant hospital if the CCJR 
target price is exceeded.
    We propose to make reconciliation payments to participant hospitals 
that achieve quality outcomes and cost efficiencies relative to the 
established CCJR target prices in all performance years of the model. 
We also propose to phase in the requirement that participant hospitals 
whose actual episode payments exceed the applicable CCJR target price 
pay the difference back to Medicare beginning in performance year 2. 
Under this proposal, Medicare would not require repayment from 
hospitals for performance year 1 for actual episode payments that 
exceed their target price in performance year 1.
    We also propose to limit how much a hospital can gain or lose based 
on its actual episode payments relative to target prices. We also 
propose additional policies to further limit the risk of high payment 
cases for all participant hospitals and for special categories of 
participant hospitals as described in section III.C. of this proposed 
rule.
4. Similar Previous and Concurrent Models
    This proposed model is informed by other models and demonstrations 
currently and previously conducted by CMS and would explore additional 
ways to enhance coordination of care and improve the quality of 
services through bundled payments.
    We recently announced the Oncology Care Model (OCM), a new 
voluntary payment model for physician practices administering 
chemotherapy. Under OCM, practices will enter into payment arrangements 
that include financial and performance accountability for episodes of 
care surrounding chemotherapy administration to cancer patients. We 
plan to coordinate with other payers to align with OCM in order to 
facilitate enhanced services and care at participating practices. More 
information on the OCM can be found on the Innovation Center's Web site 
at: http://innovation.cms.gov/initiatives/Oncology-Care/.
    Medicare tested innovative approaches to paying for orthopedic 
services in the Medicare Acute Care Episode (ACE) demonstration, a 
prior demonstration, and is currently testing additional approaches 
under BPCI. Both of these models have also informed the design of the 
CCJR model.
    Under the authority of section 1866C of the Act, we conducted a 3-
year demonstration, the Medicare Acute Care Episode (ACE) 
Demonstration. The demonstration used a prospective global payment for 
a single episode of care as an alternative approach to payment for 
service delivery under traditional Medicare FFS. The episode of care 
was defined as a combination of Part A and Part B services furnished to 
Medicare FFS beneficiaries during an inpatient hospital stay for any 
one of a specified set of cardiac and orthopedic MS-DRGs. The MS-DRGs 
tested included 469 and 470, those proposed for inclusion in the CCJR 
model. The discounted bundled payments generated an average gross 
savings to Medicare of $585 per episode for a total of $7.3 million 
across all episodes (12,501 episodes) or 3.1 percent of the total 
expected costs for these episodes. After accounting for increased post-
acute care costs that were observed at two sites, Medicare saved 
approximately $4 million, or 1.72 percent of the total expected 
Medicare spending. More information on the ACE Demonstration can be 
found on the Innovation Center's Web site at: http://innovation.cms.gov/initiatives/ACE/.
    We are currently testing the BPCI initiative. The BPCI initiative 
is comprised of four related payment models, which link payments for 
multiple services that Medicare beneficiaries receive during an episode 
of care into a bundled payment. Under the initiative, entities enter 
into payment arrangements with CMS that include financial and 
performance accountability for episodes of care. Episodes of care under 
the BPCI initiative begin with either--(1) an inpatient hospital stay 
or (2) post-acute care services following a qualifying inpatient 
hospital stay. The BPCI initiative is evaluating the effects of 
episode-based payment approaches on patient experience of care, 
outcomes, and cost of care for Medicare FFS beneficiaries. Each of the 
four models tests LEJR episodes of care. While final evaluation results 
for the models within the BPCI initiative are not yet available, we 
believe that CMS' experiences with BPCI support the design of the CCJR 
model. Under section 1115A(c) of the Act, the Secretary may, taking 
into consideration an evaluation conducted under section 1115A(b)(4) of 
the Act, ``through rulemaking, expand (including implementation on a 
nationwide basis) the duration and the scope of a model that is being 
tested under'' the Innovation Center's authority. CCJR is not an 
expansion of BPCI, and BPCI may be expanded in the future. CMS 
published a discussion item soliciting public comment on a potential 
future expansion of one or more of the models within BPCI in the CY2016 
IPPS rule, 80 FR 24414 through 24418. CCJR would not be not an 
expansion or modification of BPCI; nor does it reflect comments 
received in response to the NPRM for the 2016 IPPS Rule. CCJR is a 
unique model that tests a broader, different group of hospitals than 
BPCI. It is necessary to provide CMS with information about testing 
bundled payments to hospitals that are required to participate in an 
alternative payment model. For a discussion of why we are requiring 
hospitals to participate in the CCJR model, see section III.A of this 
proposed rule.
    The CCJR model's design was informed to a large degree by our 
experience with BPCI Model 2. BPCI's Model 2 is a voluntary episode 
payment model in which a qualifying acute care hospitalization 
initiates a 30, 60 or 90 day episode of care. The episode of care 
includes the inpatient stay in an acute care hospital and all related 
services covered under Medicare Parts A and B during the episode, 
including post-acute care services. More information on BPCI Model 2 
can be found on the Innovation Center's Web site at: http://innovation.cms.gov/initiatives/BPCI-Model-2/.
    Further information of why elements of the OCM, the ACE 
Demonstration, and BPCI Model 2 were incorporated into the design of 
the CCJR model is discussed later in this proposed rule.
5. Overlap With Ongoing CMS Efforts
    We propose to exclude from participation in CCJR certain hospitals 
participating in the risk-bearing phase of BPCI Models 2 and 4 for LEJR 
episodes, as well as acute care hospitals participating in BPCI Model 
1. We propose not to exclude beneficiaries in CCJR model episodes from 
being included in other Innovation Center models or CMS programs, such 
as the Medicare Shared Savings Program, as detailed later in this 
proposed rule. We propose to account for overlap, that is, where CCJR 
beneficiaries are also included in other models and programs to ensure 
the financial policies of CCJR are maintained and results and spending 
reductions are attributed to the correct model or program.
6. Quality Measures and Reporting Requirements
    We are proposing to adopt three hospital-level quality of care 
measures for the CCJR model. Those measures

[[Page 41203]]

include a complication measure, readmission measure, and a patient 
experience survey measure. We propose to use these measures to test the 
success of the model in achieving its goals under section 1115A of the 
Act and to monitor for beneficiary safety. We intend to publicly report 
this information on the Hospital Compare Web site. Additionally, we are 
proposing and requesting public feedback on possible voluntary 
submission of data to support the development of a hospital-level 
measure of patient-reported outcomes following an elective Primary 
Total Hip (THA) or Total Knee Arthroplasty (TKA).
7. Data Sharing Process
    We propose to share data with participant hospitals upon request 
throughout the performance period of the CCJR model to the extent 
permitted by the HIPAA Privacy Rule and other applicable law. We 
propose to share upon request both raw claims-level data and claims 
summary data by service line with participants. This approach would 
allow participant hospitals without prior experience analyzing claims 
to use summary data to receive useful information, while allowing those 
participant hospitals who prefer raw claims-level data the opportunity 
to analyze claims. We propose to provide hospitals with up to 3 years 
of retrospective claims data upon request that will be used to develop 
their target price, as described in section III.C of this proposed 
rule. In accordance with the HIPAA Privacy Rule, we would limit the 
content of this data set to the minimum data necessary for the 
participant hospital to conduct quality assessment and improvement 
activities and effectively coordinate care of its patient population.
8. Beneficiary Protections
    Under the CCJR model, beneficiaries retain the right to obtain 
health services from any individual or organization qualified to 
participate in the Medicare program. Under the CCJR model, eligible 
beneficiaries who receive services from a participant hospital would 
not have the option to opt out of inclusion in the model. We propose to 
require participant hospitals to supply beneficiaries with written 
information regarding the design and implications of this model as well 
as their rights under Medicare, including their right to use their 
provider of choice. We will also make a robust effort to reach out to 
beneficiaries and their advocates to help them understand the CCJR 
model.
    We also propose to use our existing authority, if necessary, to 
audit participant hospitals if claims analysis indicates an 
inappropriate change in delivered services. Beneficiary protections are 
discussed in greater depth in section III.E. of this proposed rule.
9. Financial Arrangements and Program Policy Waivers
    We propose to hold participant hospitals financially responsible 
for CCJR LEJR episodes as participants in the model as discussed in 
section III.C.10.a. of this proposed rule. Specifically, only these 
hospital participants would be directly subject to the requirements of 
this proposed rule for the CCJR model. Participant hospitals would be 
responsible for ensuring that other providers and suppliers 
collaborating with the hospital on LEJR episode care redesign are in 
compliance with the terms and conditions of the model.
    Several of the proposed Medicare program policy waivers outline the 
conditions under which skilled nursing facilities (SNFs) and physicians 
could furnish and bill for certain services furnished to CCJR 
beneficiaries where current Medicare programs rules would not permit 
such billing. We draw the attention of SNFs and physicians to these 
proposals that are included in section III.C.10.b.(5). of this proposed 
rule.

C. Summary of Economic Effects

    As shown in our impact analysis, we expect the proposed model to 
result in savings to Medicare of $153 million over the 5 years of the 
model. More specifically, in performance year 1 of the model, we 
estimate a Medicare cost of approximately $23 million, as we have 
proposed that hospitals will not be subject to downside risk in the 
first year of the model. As we introduce downside risk beginning in 
performance year 2 of the model, we estimate Medicare savings of 
approximately $29 million. In performance year 3 of the model, we 
estimate Medicare savings of $43 million. In performance years 4 and 5 
of the model, as we have proposed to move from target episode pricing 
that is based on a hospital's experience to target pricing based on 
regional experience, we estimate Medicare savings of $50 million and 
$53 million, respectively.
    Additionally, hospitals must meet or exceed specific thresholds on 
performance on certain quality of care measures in order to be eligible 
for a reconciliation payment and as the performance threshold increases 
in performance years 4 through 5, we estimate additional savings. As a 
result, we estimate the net savings to Medicare to be $153 million over 
the 5 years of the model. We anticipate there would be a broader focus 
on care coordination and quality improvement for LEJR episodes among 
hospitals and other providers within the Medicare program that would 
lead to both increased efficiency in the provision of care and improved 
quality of the care provided to beneficiaries.
    We note that under section 1115A(b)(3)(B) of the Act, the Secretary 
is required to terminate or modify a model unless certain findings can 
be made with respect to savings and quality after the model has begun. 
If during the course of testing the model it is determined that 
termination or modification is necessary, such actions would be 
undertaken through rulemaking.

II. Background

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

III. Provisions of the Proposed Rule

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

1. Background
    The CCJR model is different from BPCI because it would require 
participation of all hospitals (with limited exceptions) throughout 
selected geographic areas, which would result in a model that includes 
varying hospital types. However, a discussion of BPCI is relevant 
because its design informs and supports the proposed CCJR model. The 
BPCI model is voluntary, and under that model we pay a bundled payment 
for an episode of care only to entities that have

[[Page 41204]]

elected to participate in the model. We are interested in testing and 
evaluating the impact of an episode payment approach for LEJRs in a 
variety of other circumstances, including among those hospitals that 
have not chosen to voluntarily participate because we have not tested 
bundled payments for these hospitals previously. This would allow CMS 
and participants to gain experience testing and evaluating episode-
based payment for LEJR procedures furnished by hospitals with a variety 
of historic utilization patterns; roles within their local markets; 
volume of services provided; access to financial, community, or other 
resources; and population and health care provider density. Most 
importantly, participation of hospitals in selected geographic areas 
will allow CMS to test bundled payments without introducing selection 
bias such as the selection bias inherent in the BPCI model due to self-
selected participation.
2. Proposed Definition of Episode Initiator
    In BPCI Model 2, LEJR episode initiators are either acute care 
hospitals where the LEJR procedure is performed or physician group 
practices whose physician members are the admitting or operating 
physician for the hospital stay. Thus, under BPCI, it is possible that 
only some Medicare cases that could potentially be included in an LEJR 
episode at a specific hospital are actually being tested in BPCI. For 
example, if the hospital itself is not participating as an episode 
initiator under BPCI, yet some physicians who admit patients to the 
hospital are members of physician group practices participating in 
BPCI, not all of the hospital's possible LEJR episodes are tested and 
paid under BPCI.
    Under the proposed CCJR model, as described further in section 
III.B of this proposed rule, episodes would begin with admission to an 
acute care hospital for an LEJR procedure that is paid under the IPPS 
through Medical Severity Diagnosis-Related Group (MS-DRG) 469 (Major 
joint replacement or reattachment of lower extremity with MCC) or 470 
(Major joint replacement or reattachment of lower extremity without 
MCC) and end 90 days after the date of discharge from the hospital. For 
the CCJR model, we propose that hospitals would be the only episode 
initiators. For purposes of CCJR, the term ``hospital'' means a 
hospital as defined in section 1886(d)(1)(B) of the Act. This statutory 
definition of hospital includes only acute care hospitals paid under 
the IPPS. Under this proposal, all acute care hospitals in Maryland 
would be excluded from CCJR. The state of Maryland entered into an 
agreement with CMS, effective January 1, 2014, to participate in CMS' 
new Maryland All-Payer Model. In order to implement the Maryland All-
Payer Model, CMS waived certain requirements of the Act, and the 
corresponding implementing regulations, as set forth in the agreement 
between CMS and Maryland. Specifically, under the Maryland All-Payer 
Model, Maryland acute care hospitals are not paid under the IPPS or 
OPPS but rather are paid under rates set by the state. Following the 
model's performance period, Maryland will transition to a new model 
that incorporates the full spectrum of care, not just hospital 
services. As such, with respect to Maryland hospitals, CMS intends to 
test and develop new payment and delivery approaches that can 
incorporate non-hospital services in a manner that accounts for 
Maryland's unique hospital rate setting system and permit Maryland to 
develop its own strategy to incentivize higher quality and more 
efficient care across clinical situations within and beyond hospitals, 
including but not limited to LEJR episodes of care. We are proposing 
that payments to Maryland hospitals would be excluded in the regional 
pricing calculations as described in section III.C.4 of this proposed 
rule. We seek comment on this proposal and whether there are potential 
approaches for including Maryland acute care hospitals in CCJR. In 
addition, we seek comment on whether Maryland hospitals should be 
included in CCJR in the future upon any termination of the Maryland 
All-Payer Model.
    We propose to designate IPPS hospitals as the episode initiators to 
ensure that all Medicare FFS LEJR services furnished by participant 
hospitals in selected geographic areas to beneficiaries who do not meet 
the exclusion criteria specified in section III.B.3 of this proposed 
rule and are not BPCI episodes that we are proposing to exclude as 
outlined in this section and also in section III.C.7 of this proposed 
rule are included in the CCJR model. We are proposing certain 
exceptions to the inclusion of hospitals in the CCJR Model, as 
discussed in section III.C. of this proposed rule. Given that our 
proposal to initiate the LEJR episode begins with an admission to a 
hospital paid under the IPPS that results in a discharge assigned to 
MS-DRG 469 or 470, we believe that utilizing the hospital as the 
episode initiator is a straightforward approach for this model because 
the hospital furnishes the LEJR procedure. In addition, we are 
interested in testing a broad model in a number of hospitals under the 
CCJR model in order to examine results from a more generalized payment 
model. Thus, we believe it is important that, in a model where hospital 
participation is not voluntary, all Medicare FFS LEJR episodes that 
begin at the participant hospital in a selected geographic area are 
included in the model for beneficiaries that do not meet the exclusion 
criteria specified in section III.B.3 of this proposed rule and are not 
BPCI episodes that we are proposing to exclude as outlined in this 
section and also in section III.C.7 of this proposed rule. This is best 
achieved if the hospital is the episode initiator. Finally, as 
described in the following sections that present our proposed approach 
to geographic area selection, this geographic area selection approach 
relies upon our definition of hospitals as the entities that initiate 
episodes. We seek comment on our proposal to define the episode 
initiator as the hospital under CCJR.
3. Financial Responsibility for the Episode of Care
    BPCI Model 2 participants that have entered into agreements with 
CMS to bear financial responsibility for an episode of care include 
acute care hospitals paid under the IPPS, health systems, physician-
hospital organizations, physician group practices, and non-provider 
business entities that act as conveners by coordinating multiple health 
care providers' participation in the model. Thus, our evaluation of 
BPCI Model 2 will yield information about how results for LEJR episodes 
may differ based on differences in which party bears financial 
responsibility for the episode of care.
    For the CCJR model, we propose to make hospitals financially 
responsible for the episode of care for several reasons. We recognize 
that ideally all of the providers involved in the continuum of care for 
Medicare beneficiaries in a 90-day post-discharge LEJR episode would 
work together to determine the best structure for managing the LEJR 
episode, develop an efficient process that leads to high quality care, 
track information across the episode about quality and Medicare 
expenditures, and align financial incentives using a variety of 
approaches, including gainsharing. However, because the proposed CCJR 
model is testing a more generalizable model by including hospitals that 
might not participate in a voluntary model and includes episodes 
initiated at a wide variety of hospitals, we believe it is

[[Page 41205]]

most appropriate to identify a single type of provider to bear 
financial responsibility for making repayment to CMS under the model.
    Hospitals play a central role in coordinating episode-related care 
and ensuring smooth transitions for beneficiaries undergoing LEJR 
procedures. Moreover, the episode always begins with an acute care 
hospital stay, IPPS payments for LEJRs comprise about 50 percent of 
Medicare payments for a 90-day episode, and the beneficiary's recovery 
from surgery begins during the hospital stay. Most hospitals already 
have some infrastructure related to health information technology, 
patient and family education, and care management and discharge 
planning. This includes post-acute care (PAC) coordination 
infrastructure and resources such as case managers, which hospitals can 
build upon to achieve efficiencies under this episode payment model. 
Many hospitals also have recently heightened their focus on aligning 
their efforts with those of community providers to provide an improved 
continuum of care due to the incentives under other CMS models and 
programs, including Accountable Care Organization (ACO) initiatives 
such as the Medicare Shared Savings Program (MSSP), and the Hospital 
Readmissions Reduction Program (HRRP), establishing a base for 
augmenting these efforts under the CCJR model.
    In view of our proposal that hospitals be the episode initiators 
under this model, we believe that hospitals are more likely than other 
providers to have an adequate number of episode cases to justify an 
investment in episode management for this model. We also believe that 
hospitals are most likely to have access to resources that would allow 
them to appropriately manage and coordinate care throughout the LEJR 
episode. Finally, the hospital staff is already involved in discharge 
planning and placement recommendations for Medicare beneficiaries, and 
more efficient PAC service delivery provides substantial opportunities 
for improving quality and reducing costs under CCJR.
    We considered requiring treating physicians (orthopedic surgeons or 
others) or their associated physician group practices, if applicable, 
to be financially responsible for the episode of care under the CCJR 
Model. We expect that every Medicare beneficiary discharged with a 
diagnosis grouped under MS-DRG 469 or 470 would have an operating 
physician and an admitting physician for the hospital stay. However, 
the services of providers other than the hospital where the acute care 
hospital stay for the LEJR procedure (hereinafter ``the anchor 
hospitalization'') occurs would not necessarily be furnished in every 
LEJR episode. For example, that physicians of different specialties 
play varying roles in managing patients during an acute care 
hospitalization for a surgical procedure and during the recovery 
period, depending on the hospital and community practice patterns and 
the clinical condition of the beneficiary and could not be assumed to 
be included in every LEJR episode. This variability would make 
requiring a particular physician or physician group practice to be 
financially responsible for a given episode very challenging.
    If we were to assign financial responsibility to the operating 
physician, it is likely that there would be significant variation in 
the number of relevant episodes that could be assigned to an individual 
person. Where the physician was included in a physician group practice, 
episodes could be aggregated to this group level but this would not be 
possible for all cases and would likely still have low volume concerns. 
We believe that the small sample sizes accruing to individual physician 
and physician group practices would make systematic care redesign 
inefficient and more burdensome, given that we are proposing to test 
all episodes occurring at hospitals selected for participation for 
beneficiaries that do not meet the exclusion criteria specified in 
section III.B.3 of this proposed rule and are not BPCI episodes that we 
are proposing to exclude as outlined in this section and also in 
section III.C.7 of this proposed rule.
    Finally, we note that although the BPCI initiative includes the 
possibility of a physician group practice as a type of initiating 
participant, the physician groups electing to participate in BPCI have 
done so because their practice structure supports care redesign and 
other infrastructure necessary to bear financial responsibility for 
episodes and is not necessarily representative of the typical group 
practice. In addition, most of the physician group practices in BPCI 
are not bearing financial responsibility, but are participating in BPCI 
as partners with convener organizations (discussed later in this 
section), which enter into agreements with CMS, on behalf of health 
care providers such as physician group practices, through which they 
accept financial responsibility for the episode of care. The 
infrastructure necessary to accept financial responsibility for 
episodes is not present across all physician group practices, and thus 
we do not believe it would be appropriate to designate physician group 
practices to bear the financial responsibility for making repayments to 
CMS under the proposed CCJR model. We seek comment on our proposal to 
require the hospital to bear the financial responsibility for the 
episodes of care under CCJR.
    We are proposing that hospitals will bear the financial 
responsibility for LEJR episodes of care under CCJR. However, because 
there are LEJR episodes currently being tested in BPCI Model 1, 2, 3 or 
4, we believe that participation in CCJR should not be required if it 
would disrupt testing of LEJR episodes already underway in BPCI models. 
Therefore, we are proposing that IPPS hospitals located in an area 
selected for the model that are active Model 1 BPCI participant 
hospitals as of July 1, 2015 or episode initiators for LEJR episodes in 
the risk-bearing phase of Model 2 or 4 of BPCI as of July 1, 2015, 
would be excluded from participating in CCJR during the time that their 
qualifying episodes are included in one of the BPCI models. Likewise, 
we are proposing that if the participant hospital is not an episode 
initiator for LEJR episodes under BPCI Model 2, then LEJR episodes 
initiated by other providers or suppliers under BPCI Model 2 or 3 
(where the surgery takes place at the participant hospital) would be 
excluded from CCJR. Otherwise qualifying LEJR episodes (that is, those 
that are not part of a Model 3 BPCI LEJR episode or a Model 2 physician 
group practice-initiated LEJR episode) at the participant hospital 
would be included in CCJR.
    While we propose that the participant hospital be financially 
responsible for the episode of care under CCJR, we also believe that 
effective care redesign for LEJR episodes requires meaningful 
collaboration among acute care hospitals, PAC providers, physicians, 
and other providers and suppliers within communities to achieve the 
highest value care for Medicare beneficiaries. We believe it may be 
essential for key providers to be aligned and engaged, financially and 
otherwise, with the hospitals, with the potential to share financial 
responsibility with those hospitals. We note that all relationships 
between and among providers and suppliers must comply with all relevant 
laws and regulations, including the fraud and abuse laws and all 
Medicare payment and coverage requirements unless otherwise specified 
further later in this section and in section III.C.10 of this proposed 
rule. Depending on a hospital's current degree of clinical integration, 
new and different contractual relationships among hospitals and other 
health care

[[Page 41206]]

providers may be important, although not necessarily required, for CCJR 
model success in a community. We acknowledge that financial incentives 
for other providers may be important aspects of the model in order for 
hospitals to partner with these providers and incentivize certain 
strategies to improve episode efficiency.
    In the BPCI initiative, participants have entered a variety of 
relationships with entities above the hospital level. Some of these 
relationships are ones where the financial risk is borne by the entity 
other than the hospital, such as a parent organization (known as 
awardee conveners) and others have managerial or other responsibility 
relationships with other organizations (known as facilitator conveners) 
but financial responsibility remains with the episode initiator . We 
acknowledge the important role that conveners play in the BPCI 
initiative with regard to providing infrastructure support to hospitals 
and other entities initiating episodes in BPCI. The convener 
relationship (where another entity assumes financial responsibility) 
may take numerous forms, including contractual (such as a separate for-
profit company that agrees to take on a hospital's financial risk in 
the hopes of achieving financial gain through better management of the 
episodes) and through ownership (such as when risk is borne at a 
corporate level within a hospital chain).
    However, we are proposing that for the CCJR model, we would hold 
only the participant hospitals financially responsible for the episode 
of care. This is consistent with the goal of evaluating the impact of 
bundled payment and care redesign across a broad spectrum of hospitals 
with varying levels of infrastructure and experience in entering into 
risk-based reimbursement arrangements. If conveners were included as 
participants in CCJR, we may not gain the knowledge of how a variety of 
hospitals can succeed in relationship with CMS in which they bear 
financial risk for the episode of care. We acknowledge that CCJR 
hospitals may wish to enter into relationships with other entities in 
order to manage the episode of care or distribute risk. We do not 
intend to restrict the ability of hospitals to enter into 
administrative or risk sharing arrangements related to this model. We 
refer readers to section III.C.10 of this proposed rule for further 
discussion of model design elements that may outline financial 
arrangements between participant hospitals and other providers and 
suppliers.
4. Proposed Geographic Unit of Selection and Exclusion of Selected 
Hospitals
    In determining which hospitals to include in the CCJR model, we 
considered whether the model should be limited to hospitals where a 
high volume of LEJRs are performed, which would result in a more narrow 
test on the effects of an episode-based payment, or whether to include 
all hospitals in particular geographic areas, which would result in 
testing the effects of an episode-based payment approach more broadly 
across an accountable care community seeking to coordinate care 
longitudinally across settings. Selecting certain hospitals where a 
high volume of LEJRs are performed may allow for fewer hospitals to be 
selected as model participants, but still result in a sufficient number 
of CCJR episodes to evaluate the success of the model. However, there 
would be more potential for behavioral changes that could include 
patient shifting and steering between hospitals in a given geographic 
area that could impact the test. Additionally, this approach would 
provide less information on testing episode payments for LEJR 
procedures across a wide variety of hospitals with different 
characteristics. Selecting geographic areas and including all IPPS 
hospitals in those areas not otherwise excluded due to BPCI overlap as 
previously described and in section III.C.7 of this proposed rule as 
model participants would help to minimize the risk of participant 
hospitals shifting higher cost cases out of the CCJR model. Moreover, 
in selecting geographic areas we could choose certain characteristics, 
stratify geographic areas according to these characteristics, and 
randomly select geographic areas from within each stratum. Such a 
stratified random sampling method based on geographic area would allow 
us to observe the experiences of hospitals with various 
characteristics, such as variations in size, profit status, and episode 
utilization patterns, and examine whether these characteristics impact 
the effect of the model on patient outcomes and Medicare expenditures 
within episodes of care. Stratification would also substantially reduce 
the extent to which the selected hospitals will differ from non-
selected hospitals on the characteristics used for stratification, 
which would improve the statistical power of the subsequent model 
evaluation, improving our ability to reach conclusions about the 
model's effects on episode costs and the quality of patient care. 
Therefore, given the authority in section 1115A(a)(5) of the Act, which 
allows the Secretary to elect to limit testing of a model to certain 
geographic areas, we propose to use a stratified random sampling method 
to select geographic areas and require all hospitals paid under the 
IPPS in those areas to participate in the CCJR model and be financially 
responsible for the cost of the episode, with certain exceptions as 
previously discussed and in sections III.B.3 and III.C.7 of this 
proposed rule.
a. Overview and Options for Geographic Area Selection
    In determining the geographic unit for the geographic area 
selection for this model, we considered using a stratified random 
sampling methodology to select (1) certain counties based on their 
Core-Based Statistical Area (CBSA) status, (2) certain zip codes based 
on their Hospital Referral Regions (HRR) status or (3) certain states. 
We address each geographic unit in turn.
    We considered selecting certain counties based on their CBSA 
status. The general concept of a CBSA is that of a core area containing 
a substantial population nucleus, together with adjacent communities 
having a high degree of economic and social integration within that 
core. Counties are designated as part of a CBSA when the county or 
counties or equivalent entities are associated with at least one core 
(urbanized area or urban cluster) of at least 10,000 in population, 
plus adjacent counties having a high degree of social and economic 
integration with the core as measured through commuting ties with the 
counties associated with the core. There are 929 CBSAs currently used 
for geographic wage adjustment purposes across Medicare payment 
systems.\4\ The 929 CBSAs include 388 Metropolitan Statistical Areas 
(MSAs), which have an urban core population of at least 50,000, and the 
541 Micropolitan Statistical Areas ([micro]SA), which have an urban 
core population of at least 10,000 but less than 50,000. CBSAs may be 
further combined into a Combined Statistical Area (CSA) which consists 
of two or more adjacent CBSAs (MSAs or [micro]SAs or both) with 
substantial employment interchange. Counties not classified as a CBSA 
are typically categorized and examined at a state level.
---------------------------------------------------------------------------

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

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

[[Page 41207]]

    The choice of a geographical unit based on CBSA status could mean 
selection of a CBSA, an MSA, or a CSA. We propose basing the selection 
on an MSA, which we will discuss later in this section.
    In determining which geographic areas will be potentially subject 
to selection, we focused on MSAs, which is a subcategory within CBSA 
characterized by counties associated with an urban core population of 
at least 50,000. It is our intention at this time that counties not in 
an MSA would not be subject to the selection process. These counties 
not subject to selection would include the [micro]SA counties and the 
counties without a core urban area of at least 10,000. These areas are 
largely rural areas and have a limited number of qualifying LEJR cases. 
Relatively few of these areas would be able to qualify for inclusion 
based on the minimum number of LEJR episodes in year requirement 
discussed later in this section.
    We considered, but ultimately decided against, using CSA 
designation instead of MSAs as a potential unit of selection. Under 
this scenario, we would look at how OMB classifies counties. We would 
first assess whether a county has been identified as belonging to a 
CSA, a unit which consists of adjacent MSAs or [micro]SAs or both. If 
the county was not in a CSA, we would determine if it was in an MSA 
that is not part of a larger CSA. Counties not associated with a CSA or 
an MSA would be unclassified and excluded from selection. These 
unclassified areas would include the counties in a state that were 
either not a CBSA (no core area of at least 10,000) or associated with 
a [micro]SA (core area of between 10,000 and 50,000) but unaffiliated 
with a CSA.
    Whether to select on the basis of CSA/MSAs or just on MSAs was 
influenced by a number of factors including an assessment with respect 
to the anticipated degree to which LEJR patients would be willing to 
travel for their initial hospitalization, the extent to which surgeons 
are expected to have admitting privileges in multiple hospitals located 
in different MSAs and considerations related to the degree to which we 
desire to include hospitals within [micro]SAs that are part of a larger 
CSA. It was believed that the anticipated risk for patient shifting and 
steering between MSAs within a CSA was not severe enough to warrant 
selecting CSAs. However, for these same reasons, we believe that 
selecting complete MSAs is preferable to selecting metropolitan 
divisions of MSAs for inclusion in the CCJR model. We use the 
metropolitan divisions to set wage indices for its prospective payment 
systems. Of the 388 MSAs, there are 11 MSAs that contain multiple 
metropolitan divisions. For example, the Boston-Cambridge-Newton, MA-NH 
MSA is divided into the following metropolitan divisions:
     Boston, MA.
     Cambridge-Newton-Framingham, MA.
     Rockingham County-Strafford County, NH.

The Seattle-Tacoma-Bellevue, WA MSA is divided into the following 
metropolitan divisions:
     Seattle-Bellevue-Everett, WA.
     Tacoma-Lakewood, WA.

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

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

    We also considered selecting states for the CCJR model. However, we 
concluded that MSAs as a geographic unit are preferable over states for 
the CCJR model. As mentioned in section III.A.4.b of this proposed 
rule, we anticipate that hospitals that would otherwise be required to 
participate in the CCJR model would be excluded from the model because 
their relevant LEJR episodes are already being tested in BPCI. If we 
were to select states as the geographic unit, there is a potential that 
an entire state would need to be excluded because a large proportion of 
hospitals in that state are episode initiators of LEJR episodes in 
BPCI. In contrast, if we excluded a specific MSA due to BPCI 
participation, as discussed in the next section, we could still select 
another MSA within that same state. Likewise, if we chose states as the 
geographic unit, we would automatically include hospitals in all rural 
areas within the state selected. If MSAs are selected for the 
geographic unit, we anticipate that fewer small rural hospitals would 
be included in the model. Using a unit of selection smaller than a 
state would allow for a more deliberate choice about the extent of 
inclusion of rural or small population areas. Selecting states rather 
than MSAs would also greatly reduce the number of independent 
geographic areas subject to selection under the model, which would 
decrease the statistical power of the model evaluation. Finally, MSAs 
straddle state lines where providers and Medicare beneficiaries can 
easily cross these boundaries for health care. Choosing states as the 
geographic unit would potentially divide a hospital market and set up a 
greater potential for patient shifting and steering to different 
hospitals under the model. The decision that the MSA-level analysis was 
more analytically appropriate was based on the specifics of this model 
and not meant to imply that other levels of selection would not be 
appropriate in a different model such as the proposed Home Health Value 
Based Purchasing (HHVBP) model.
    For the reasons previously discussed, we propose to require 
participation in the CCJR model of all hospitals, with limited 
exceptions as previously discussed in section III.A.2.of this proposed 
rule, paid under the IPPS that are physically located in a county in an 
MSA selected through a stratified random sampling methodology, outlined 
in section III.A.3.b in this proposed rule, to test and evaluate the 
effects of an episode-based payment approach for an LEJR episodes. We 
propose to determine that a hospital is located in an area selected if 
the hospital is physically located within the boundary of any of the 
counties in that MSA as of the date the selection is made. Although 
MSAs are revised periodically, with additional counties added or 
removed from certain MSAs, we propose to maintain the same cohort of 
selected hospitals throughout the 5 year performance period of the 
model with limited exceptions as described later in this section. Thus, 
we propose not to add hospitals to the model if after the start of the 
model new counties are added to one of the selected MSAs or

[[Page 41208]]

remove hospitals from the model if counties are removed from one of the 
selected MSAs. We believe that this approach will best maintain the 
consistency of the participants in the model, which is crucial for our 
ability to evaluate the results of the model. However, we retain the 
possibility of adding a hospital that is opened or incorporated within 
one of the selected counties after the selection is made and during the 
period of performance. (See section III.C.of this proposed rule for 
discussion of how target prices will be determined for such hospitals.) 
Although we considered including hospitals in a given MSA based on 
whether the hospitals were classified into the MSA for IPPS wage index 
purposes, this process would be more complicated, and we could not find 
any compelling reasons favoring this approach. For example, we assign 
hospitals to metro divisions of MSAs when those divisions exist. See 
our previous discussion of this issue. In addition, there is the IPPS 
process of geographic reclassification by which a hospital's wage index 
value or standardized payment amount is based on a county other than 
the one where the hospital is located. For the purpose of this model, 
it is simpler and more straightforward to use the hospital's physical 
location as the basis of assignment to a geographic unit. This decision 
would have no impact on a hospital's payment under the IPPS. We seek 
comment on our proposal to include participant hospitals for the CCJR 
model based on the physical location of the hospital in one of the 
counties included in a selected MSA.
b. MSA Selection Methodology
    We propose to select the MSAs to include in the CCJR model by 
stratifying all of the MSAs nationwide according to certain 
characteristics.
(1) Exclusion of Certain MSAs
    Prior to assigning an MSA to a selection stratum, we examined 
whether the MSA met specific proposed exclusion criteria. MSAs were 
evaluated sequentially using the following 4 exclusion criteria: First, 
MSAs in which fewer than 400 LEJR episodes (determined as we propose to 
determine episodes included in this model, as discussed in section 
III.B.2) occurred from July 1, 2013 through June 30, 2014 were removed 
from possible selection. The use of the 400 LEJR cases in a year was 
based on a simple one-sided power calculation to assess the number of 
episodes that would be needed to detect a 5 percent reduction in 
episode expenditures. Accordingly, cases in hospitals paid under either 
the critical access hospital (CAH) methodology or the Maryland All-
Payer Model are not included in the count of eligible episodes. This 
criterion removed 156 MSAs from possible selection.
    Second, MSAs were removed from possible selection if there were 
fewer than 400 non-BPCI LEJR episodes in the MSA in the reference year. 
For the purposes of this exclusion, the number of BPCI episodes was 
estimated as the number of potentially eligible cases during the 
reference year that occurred in acute care hospitals participating in 
BPCI Model 1, or in phase 2 of BPCI Models 2 or 4 as of July 1, 2015 
and the number of LEJRs in 2013 and 2014 associated with these 
hospitals was examined. This criterion removed an additional 24 MSAs 
from potential selection.
    Third, MSAs were also excluded from possible selection if the MSA 
was dominated by BPCI Models 1, 2, 3, or 4 episodes to such a degree 
that it would impair the ability of participants in either the CCJR 
model or the BPCI models to succeed in the objectives of the initiative 
or impair the ability to set accurate and fair prices. We anticipate 
that some degree of overlap in the two programs will be mutually 
helpful for both models. There are two steps to this exclusion. First, 
we looked at the number of LEJR episodes at BPCI Model 1, 2 or 4 
initiating hospitals and second, the number of LEJR episodes among BPCI 
Model 3 SNF and HHA episode initiators. We set the first cut off for 
this exclusion if, within an MSA, more than 50 percent of otherwise 
qualifying proposed CCJR episodes were in Phase 2 of BPCI Model 2 or 4 
with hospital initiators. We set the second cut off for BPCI Model 3, 
based on if either SNF or HHA BPCI Model 3 initiating providers 
accounted for more than 50 percent of LEJR referrals to that provider 
type, the MSA would be eliminated from the possibility of selection. As 
a result of this third criterion, 4 additional MSAs were removed from 
possible selection. No MSAs were excluded based on Skilled Nursing 
Facility (SNF) or Health Home Agency (HHA) participation in Model 3.
    Finally, MSAs were removed if, after applying the previous 3 
criteria they remained eligible for selection, but more than 50 percent 
of estimated eligible episodes during the reference year were not paid 
under the IPPS system. Please refer to the appenda for this proposed 
rule for the status of each MSA based on these exclusion criteria, 
available at http://innovation.cms.gov/initiatives/ccjr/. After 
applying these four exclusions, 196 MSAs remained to be stratified for 
purposes of our proposed selection methodology.
(2) Proposed Selection Strata
    Numerous variables were considered as potential strata for 
classifying MSAs included in the model. However, our proposal is 
intended to give priority to transparency and understandability of the 
strata. We propose creating selection strata based on the following two 
dimensions: MSA average wage-adjusted historic LEJR episode payments 
and MSA population size.
(a) MSA Average Wage-adjusted Historic LEJR Episode Payments.
    We were interested in being able to classify and divide MSAs 
according to their typical patterns of care associated with LEJR 
episodes. As a straightforward measure of LEJR patterns of care, we 
selected the mean MSA episode payment, as defined in this proposed 
rule. MSAs vary in their average episode payments. The average episode 
payments in an area may vary for a variety of reasons including--1) in 
response to the MS-DRG mix and thus the presence of complicating 
conditions; 2) readmission rates; 3) practice patterns associated with 
type of PAC provider(s) treating beneficiaries; 4) variations of 
payments within those PAC providers, and 5) the presence of any outlier 
payments.
    The measure of both mean episode payments and median episode 
payments within the MSA was considered. We propose to stratify by mean 
because it would provide more information on the variation in episode 
payments at the high end of the range of payments. We are interested in 
the lower payment areas for the purpose of informing decisions about 
potential future model expansion. However, the CCJR model is expected 
to have the greatest impact in areas with higher average episode 
payments.
    The average episode payments used in this analysis were calculated 
based on the proposed episode definition for CCJR using Medicare claims 
accessed through the Chronic Conditions Warehouse for 3 years with 
admission dates from July 1, 2011 through June 30, 2014. Episode 
payments were wage-adjusted using the FY 2014 hospital wage index 
contained in the FY 2014 IPPS Final Rule, downloaded at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Data-Files.html. The adjusted payment was 
calculated by dividing the unadjusted payment by a factor equal to the 
sum of 0.3 plus the

[[Page 41209]]

multiplicative product of 0.7 and the wage index value of the hospital 
where the LEJR was performed. Episodes in the database with IPPS 
payments less than $4,000 for the DRG 469 or 470 case were deleted as 
indicating that the hospital did not receive full payment for the LEJR 
procedure. We also truncated the episode payment at the 99.9th 
percentile of the distribution ($135,000) to limit the impact of 
extreme outliers.
(b) MSA Population Size
    The second dimension proposed for the CCJR selection strata is the 
number of persons in the MSA. In deciding how best to incorporate the 
dimensions of urban density and availability of medical resources, a 
variety of measures were considered, including overall population in 
the included counties, overall population in the core area of the MSA, 
population over the age of 65 in the MSA, the number of hospital beds 
and the number of Medicare FFS LEJR procedures in a year. The reason we 
decided to include this dimension in the strata definition is that 
these factors are believed to be associated with the availability of 
resources and variations in practice and referral patterns by the size 
of the healthcare market. When examined, these alternative measures 
were all very highly correlated with one another, which allowed the use 
of one of these measures to be able to substitute for the others in the 
definition of the stratum. From these alternative approaches, we choose 
to use MSA population.
    In operationalizing this measure, MSAs were classified according to 
their 2010 census population.
(c) Analysis of Strata
    The two proposed domains, MSA population and MSA historic LEJR 
episode spending, were examined using a K-Means factor analysis. The 
purpose of this factor analysis was to inform the process of which cut 
points most meaningfully classify MSAs. Factor analysis attempts to 
identify and isolate the underlying factors that explain the data using 
a matrix of associations. Factor analysis is an interdependence 
technique. Essentially, variables are entered into the model and the 
factors (or clusters) are identified based on how the input variables 
correlate to one another. The resulting clusters of MSAs produced by 
this methodology suggested natural cut points for average episode 
payments at $25,000 and $28,500. While not intentional, these divisions 
correspond roughly to the 25th and 75th percentiles of the MSA 
distribution. Cut points based on these percentiles seemed reasonable 
from statistical and face validity perspectives in the sense that they 
created groups that included an adequate number of MSAs and a 
meaningful range of costs.
    As a result of this analysis, we propose to classify MSAs according 
to their average LEJR episode payment into four categories based the on 
the 25th, 50th and 75th percentiles of the distribution of the 196 
potentially selectable MSAs. This approach ranks the MSAs relative to 
one another and creates four equally sized groups of 49. The population 
distribution was divided at the median point for the MSAs eligible for 
potential selection. This resulted in MSAs being divided into two equal 
groups of 98. The characteristics of the resulting strata are shown in 
Table 1.

                     Table 1--Summary Population and Episode Payment Statistics by MSA Group
----------------------------------------------------------------------------------------------------------------
                                                                                    Payment in
                                    Payment in    Payment in 2nd  Payment in 3rd      highest          Total
                                  lowest quarter  lowest quarter  lowest quarter      quarter        eligilble
----------------------------------------------------------------------------------------------------------------
MSAs with population less than
 median:
    Number of Eligible MSAs.....              33              19              22              24              98
    Average of Population.......         251,899         238,562         268,331         254,154         253,554
    Minimum MSA Population......          96,275          55,274         106,331          96,024          55,274
    Maximum MSA Population......         425,790         416,257         424,858         428,185         428,185
    Average Episode Payments ($)         $22,994         $25,723         $27,725         $30,444         $26,410
    Minimum Episode Payments....         $18,440         $24,898         $26,764         $29,091         $18,440
    Maximum Episode Payments....         $24,846         $26,505         $28,679         $32,544         $32,544
MSAs with population more than
 median:
    Number of Eligible MSAs.....              16              30              27              25              98
    Average of Population.......       1,530,083       1,597,870       1,732,525       2,883,966       1,951,987
    Minimum MSA Population......         464,036         436,712         434,972         439,811         434,972
    Maximum MSA Population......       4,335,391       5,286,728      12,828,837      19,567,410      19,567,410
    Average Episode Payments ($)         $23,192         $25,933         $27,694         $30,291         $27,082
    Minimum Episode Payments....         $16,504         $25,091         $26,880         $28,724         $16,504
    Maximum Episode Payments....         $24,819         $26,754         $28,659         $33,072         $33,072
                                 -------------------------------------------------------------------------------
        Total Eligible MSAs.....              49              49              49              49  ..............
----------------------------------------------------------------------------------------------------------------
Note: Population and episode payment means are un-weighted averages of the MSA values within each of the eight
  MSA groups.

    Please refer to the addenda for this proposed rule for information 
on the non-excluded MSAs, their wage adjusted average LEJR episode 
spending, their population and their resultant group assignment at: 
http://innovation.cms.gov/initiatives/ccjr/.
(3) Factors Considered but Not Used in Creating Proposed Strata
    In addition to the two dimensions we are proposing to use for the 
selection groups previously discussed, a variety of possible 
alternative measures and dimensions were considered. Many of these 
variables are considered to be important but it was believed that it 
was important to have a fairly straightforward and easily 
understandable stratum definition. Simplicity, by definition, required 
that only the most important variables would be used. If a market 
characteristic under consideration was correlated with one of the 
chosen dimensions or it was believed that variations in the 
characteristic could be adequately captured by random selection within 
the strata, is was not prioritized for inclusion.
    Some of the factors considered that we are not proposing as 
dimensions are--
     Measures associated with variation in practice patterns 
associated with LEJR episodes. In considering how to operationalize 
this measure, a number of alternatives were considered including total 
PAC LEJR payments in

[[Page 41210]]

an MSA, percent of LEJR episodes with a SNF claim in an MSA, percent of 
LEJR episodes with an initial discharge to HHA, percent of LEJR 
episodes with an IRF claim, and percent of LEJR episodes with claims 
for two or more types of PAC providers;
     Measures associated with relative market share of 
providers with respect to LEJR episodes;
     Healthcare supply measures of providers in the MSA 
including counts of IRF beds, SNF beds, hospital beds, and number of 
orthopedic surgeons;
     MSA level demographic measures such as; average income, 
distributions of population by age, gender or race, percent dually 
eligible, percent of population with specific health conditions or 
other demographic composition measures; and
     Measures associated with the degree to which a market 
might be more capable or ready to implement care redesign activities. 
Examples of market level characteristics that might be associated with 
anticipated ease of implementation include the MSA-level EHR meaningful 
use levels, managed care penetration, ACO penetration and experience 
with other bundling efforts.
    It should be noted that, while these measures are proposed to be 
part of the selection stratus, we acknowledge that these and other 
market-level factors may be important to the proper understanding of 
the evaluation of the impact of CCJR. It is the intention that these 
and other measures will be considered in determining which MSAs are 
appropriate comparison markets for the evaluation as well as considered 
for possible subgroup analysis or risk adjustment purposes. The 
evaluation will include beneficiary, provider, and market level 
characteristics in how it examines the performance of this proposed 
model.
(4) Sample Size Calculations and the Number of Selected MSAs
    Analyses of the necessary sample size led us to conclude that we 
need to select 75 MSAs of the 384 MSAs with eligible LEJR episodes to 
participate in CCJR. The number and method of selection of these 75 
MSAs from the 8 proposed groups is addressed in the following section. 
In coming to the decision to target 75 MSAs, we are proposing a 
conservative approach. Going below this threshold would jeopardize our 
ability to be confident in our results and to be able to generalize 
from the model to the larger national context. We discuss the 
assumptions and modeling that went into our proposal to test the model 
in 75 MSAs later in this section.
    In calculating the necessary size of the model, a key consideration 
was to have sufficient power to be able to detect the desired size 
impact. The larger the anticipated size of the impact, the fewer MSAs 
we would have to sample in order to observe it. However, a model sized 
to be able to only detect large impacts runs the risk of not being able 
to draw conclusions if the size of the change is less than anticipated. 
The measure of interest used in estimating sample size requirements for 
the CCJR model was wage-adjusted total episode spending. The data used 
for the wage-adjusted total episode spending is the 3 year data pull 
previously described that covers LEJR episodes with admission dates 
from July 1, 2011 through June 30, 2014. For the purposes of the sample 
size calculation the impact estimate assumed we wanted to be able to 
detect a 2 percent reduction in wage adjusted episode spending after 1 
year of experience. This amount was chosen because it is the 
anticipated amount of the discount we propose to apply to target prices 
in CCJR.
    The next consideration in calculating the necessary sample size is 
the degree of certainty we will need for the statistical tests that 
will be performed. In selecting the right sample size, there are two 
types of errors that need to be considered ``false negatives'' and 
``false positives''. A false positive occurs if a statistical test 
concludes that the model was successful (the model saved money) when it 
was, in fact, not. A false negative occurs if a statistical test fails 
to find statistically significant evidence that the model was 
successful, but it was, in fact, successful. In considering the minimum 
sample size needs of a model, a standard guideline in the statistical 
literature suggests calibrating statistical tests to generate no more 
than a 5 percent chance of a false positive and selecting the sample 
size to ensure no more than a 20 percent chance of a false negative. In 
contrast, the proposed sample size for this project was based on a 20 
percent chance of a false positive and a 30 percent chance of a false 
negative in order to be as conservative as was practicable.
    A third consideration in the sample size calculation was the 
appropriate unit of selection and whether it is necessary to base the 
calculation on the number of MSAs, the number of hospitals, or the 
number of episodes. As discussed later in this section, we are 
proposing to base the sample size calculation at the MSA level.
    The CCJR model is a nested comparative study, which has two key 
features. First, the unit of assignment (to treatment and comparison 
groups) is an identifiable group; such groups are not formed at random, 
but rather through some physical, social, geographic, or other 
connection among their members. Second, the units of observation are 
members of those groups. In such designs, the major analytic problem is 
that there is an expectation for a positive correlation (intra-class 
correlation (ICC)) among observations of members of the same group 
(MSA). That ICC reflects an extra component of variance attributable to 
the group above and beyond the variance attributable to its members. 
This extra variation will increase the variance of any aggregate 
statistic beyond what would be expected with random assignment of 
beneficiaries or hospitals to the treatment group.
    In determining the necessary sample size, we need to take into 
consideration the degrees of freedom. As part of this process, we 
examined the number of beneficiaries, the number of hospitals, and the 
number of MSAs and the level of correlation in episode payments between 
each level. For example, while each beneficiary has their own episode 
expenditure level, there are commonalities between those expenditure 
amounts at the hospital level, based on hospital-specific practice and 
referral patterns. The number of degrees of freedom needed for any 
aggregate statistic is related to the number of groups (MSAs or 
hospitals), not the number of observations (beneficiary episodes). If 
we were to base the determination of the size of the model on 
beneficiary episodes where correlation exists, we would have an 
inflated false positive error rate and would overstate the impact of 
the model. We empirically examined the level of correlation between 
beneficiaries and hospitals and between hospitals and MSAs and 
determined that the correlation was high enough to be of concern and 
necessitate a MSA level unit of selection.
    Using the aforementioned assumptions, a power calculation was run 
which indicated we would need between 50 and 150 treatment MSAs to be 
able to reliably detect a 2 percent reduction in payments after 1 year. 
The lower end of this range assumes the ability of evaluation models to 
substantially reduce variation through risk adjustment and modeling. We 
anticipate that we will be able to use the conservative end of this 
range, but assuming that evaluation modeling can achieve ``best'' 
results poses a real risk to our ability to draw conclusions. We want 
to allow for some degree of flexibility and are thus proposing 
proceeding with 75 MSAs. The 75 MSA

[[Page 41211]]

number is at the 25th percentile between the 50 and 150 treatment MSA 
range. We narrowed the acceptable range to between 50 and 100, based on 
the assumption that we will be able substantial improve our estimates 
through modeling, and then chose a number in the middle of this reduced 
range.
(5) Method of Selecting MSAs
    As previously discussed, we are seeking to choose 75 MSAs from our 
proposed 8 selection groups. We examined and considered a number of 
possible approaches including equal selection in each of the eight 
groups, equal selection in the four payment groups, selection 
proportionate to the number of MSAs in each group, and a number of 
approaches that differentially weighted the payment categories.
    After consideration, it was decided that a methodology that 
proportionally under-weighted more efficient MSAs and over-weighted 
more expensive MSAs was the most appropriate approach to fulfilling the 
overall priorities of this model to increase efficiencies and savings 
for LEJR cases while maintaining or improving the overall quality of 
care. This approach would make it less likely for the MSAs in the 
lowest spending category to be selected for inclusion. We thought this 
appropriate because the MSAs in the lowest expenditure areas have the 
least room for possible improvement and are already performing 
relatively efficiently compared to other geographic areas, which means 
that experience with the model in these areas may be relatively less 
valuable for evaluation purposes. At the same time, we believed it was 
important to include some MSAs in this group in order to assess the 
performance of this model in this type of circumstance. We also believe 
it is appropriate for higher payment areas to be disproportionately 
included because they are most likely to have significant room for 
improvement in creating efficiencies. We expect more variation in 
practice patterns among the more expensive areas. There are multiple 
ways an MSA can be more relatively expensive, including through outlier 
cases, higher readmission rates, greater utilization of physician 
services, or through PAC referral patterns. A larger sample of MSAs 
within the higher payment areas will allow for us to observe the impact 
of the CCJR model on areas with these various practice patterns in the 
baseline period.
    The proposed method of disproportionate selection between the 
strata is to choose 30 percent of the MSAs in the two groups in the 
bottom quarter percentile of the payment distribution, 35 percent of 
the MSAs in the two groups in the second lowest quartile, 40 percent in 
the third quartile, and 45 percent in the highest episode payment 
quartile. This proportion works out to an average of 38 percent 
overall, which corresponds to 75 selected MSAs out of the 196 eligible. 
The number of MSAs to be chosen in the eight selection groups is shown 
in Table 2.

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

    We selected the proposed MSAs for the CCJR model through random 
selection. In the proposed method of selection, each MSA was assigned 
to one of the eight selection groups previously identified. Based on 
this sampling methodology, SAS Enterprise Guide 7.1 software was used 
to run a computer algorithm designed to randomly select MSAs from each 
strata. SAS Enterprise Guide 7.1 and the computer algorithm used to 
conduct selection represents an industry-standard for generating 
advanced analytics and provides a rigorous, standardized tool by which 
to satisfy the requirements of randomized selection. The key SAS 
commands employed include a ``PROC SURVEYSELECT'' statement coupled 
with the ``METHOD=SRS'' option used to specify simple random sampling 
as the sample selection method. A random number seed was generated for 
each of the eight strata by using eight number seeds corresponding to 
birthdates and anniversary dates of parties present in the room. The 
random seeds for stratum one through eight were as follows: 907, 414, 
525, 621, 1223, 827, 428, 524. Note that no additional stratification 
was used in any of the eight groupings so as to produce an equal 
probability of selection within each of the eight groups. For more 
information on this procedure and the underlying statistical 
methodology, please reference SAS support documentation at: http://support.sas.com/documentation/cdl/en/statug/63033/HTML/default/viewer.htm#statug_surveyselect_sect003.htm/. We also considered a 
potential alternative approach to this random selection in which we 
would generate a starting number within SAS and then choose every third 
MSA within a group starting at this point until the relevant number of 
MSAs were chosen. We opted to not utilize this feature for simplicity's 
sake and alignment with other randomization methodologies used for CMS 
models.
    The selection of an MSA means that all hospitals that are 
physically located anywhere within the counties that make up the MSA 
are included. By definition, the entire county is included in an MSA 
and hospitals that are in the relevant counties will be impacted even 
if they are not part of the core urban area.
    The MSAs selected may change if the methodology changes in response 
to comments on the proposed methodology. Should the methodology we 
propose in this rule change as a result of comments received during the 
rulemaking process, it could result in different areas being selected 
for the model. In such an event, we would

[[Page 41212]]

apply the final methodology and announce the selected MSAs in the final 
rule. Therefore we seek comment from all interested parties in every 
MSA on the randomized selection methodology proposed in this section.
    In accordance with section 1115A of the Act, we are proposing to 
codify these proposals in regulation in the new proposed part 510 of 
the Code of Federal Regulations.

            Table 3--Proposed MSAS Included in the CCJR Model
------------------------------------------------------------------------
                MSA                               MSA Name
------------------------------------------------------------------------
10420.............................  Akron, OH.
10740.............................  Albuquerque, NM.
11700.............................  Asheville, NC.
12020.............................  Athens-Clarke County, GA.
12420.............................  Austin-Round Rock, TX.
13140.............................  Beaumont-Port Arthur, TX.
13900.............................  Bismarck, ND.
14500.............................  Boulder, CO.
15380.............................  Buffalo-Cheektowaga-Niagara Falls,
                                     NY.
16020.............................  Cape Girardeau, MO-IL.
16180.............................  Carson City, NV.
16740.............................  Charlotte-Concord-Gastonia, NC-SC.
17140.............................  Cincinnati, OH-KY-IN.
17820.............................  Colorado Springs, CO.
17860.............................  Columbia, MO.
18580.............................  Corpus Christi, TX.
19500.............................  Decatur, IL.
19740.............................  Denver-Aurora-Lakewood, CO.
20020.............................  Dothan, AL.
20500.............................  Durham-Chapel Hill, NC.
21780.............................  Evansville, IN-KY.
22420.............................  Flint, MI.
22500.............................  Florence, SC.
22660.............................  Fort Collins, CO.
23540.............................  Gainesville, FL.
23580.............................  Gainesville, GA.
24780.............................  Greenville, NC.
25420.............................  Harrisburg-Carlisle, PA.
26300.............................  Hot Springs, AR.
26900.............................  Indianapolis-Carmel-Anderson, IN.
28140.............................  Kansas City, MO-KS.
28660.............................  Killeen-Temple, TX.
29820.............................  Las Vegas-Henderson-Paradise, NV.
30700.............................  Lincoln, NE.
31080.............................  Los Angeles-Long Beach-Anaheim, CA.
31180.............................  Lubbock, TX.
31540.............................  Madison, WI.
32780.............................  Medford, OR.
32820.............................  Memphis, TN-MS-AR.
33100.............................  Miami-Fort Lauderdale-West Palm
                                     Beach, FL.
33340.............................  Milwaukee-Waukesha-West Allis, WI.
33700.............................  Modesto, CA.
33740.............................  Monroe, LA.
33860.............................  Montgomery, AL.
34940.............................  Naples-Immokalee-Marco Island, FL.
34980.............................  Nashville-Davidson--Murfreesboro--
                                     Franklin, TN.
35300.............................  New Haven-Milford, CT.
35380.............................  New Orleans-Metairie, LA.
35620.............................  New York-Newark-Jersey City, NY-NJ-
                                     PA.
35980.............................  Norwich-New London, CT.
36260.............................  Ogden-Clearfield, UT.
36420.............................  Oklahoma City, OK.
36740.............................  Orlando-Kissimmee-Sanford, FL.
37860.............................  Pensacola-Ferry Pass-Brent, FL.
38300.............................  Pittsburgh, PA.
38940.............................  Port St. Lucie, FL.
38900.............................  Portland-Vancouver-Hillsboro, OR-WA.
39340.............................  Provo-Orem, UT.
39740.............................  Reading, PA.
40060.............................  Richmond, VA.
40420.............................  Rockford, IL.
40980.............................  Saginaw, MI.
41860.............................  San Francisco-Oakland-Hayward, CA.
42660.............................  Seattle-Tacoma-Bellevue, WA.
42680.............................  Sebastian-Vero Beach, FL.
43780.............................  South Bend-Mishawaka, IN-MI.
41180.............................  St. Louis, MO-IL.
44420.............................  Staunton-Waynesboro, VA.
45300.............................  Tampa-St. Petersburg-Clearwater, FL.
45780.............................  Toledo, OH.
45820.............................  Topeka, KS.
46220.............................  Tuscaloosa, AL.
46340.............................  Tyler, TX.
47260.............................  Virginia Beach-Norfolk-Newport News,
                                     VA-NC.
48620.............................  Wichita, KS.
------------------------------------------------------------------------

B. Episode Definition for the Comprehensive Care for Joint Replacement 
(CCJR) Model

1. Background
    Coordinated Quality Care-Joint Replacement is an episode payment 
model, focused on incentivizing health care providers to improve the 
efficiency and quality of care for an episode of care as experienced by 
a Medicare beneficiary by bundling payment for services furnished to 
the beneficiary for an episode of care for a specific clinical 
condition over a defined period of time. Key policies of such a model 
include the definition of episodes of care. Episodes of care have two 
significant dimensions--(1) a clinical dimension that describes what 
clinical conditions and associated services comprise the episode; and 
(2) a time dimension that describes the beginning, middle, and end of 
an episode. We present our proposals for these two dimensions of CCJR 
episodes in this section.
2. Clinical Dimension of Episodes of Care
a. Definition of the Clinical Conditions Included in the Episode
    As discussed previously in section I.A. of this proposed rule, we 
have identified LEJR episodes, primarily hip and knee replacements, as 
the focus of this model. We believe that a straightforward approach for 
hospitals and other providers to identify Medicare beneficiaries in 
this payment model is important for the care redesign that is required 
for model success, as well as to operationalize the proposed payment 
and other model policies.
    The vast majority of lower extremity joint replacements (LEJRs) are 
furnished in the inpatient hospital setting, with a small fraction of 
partial knee replacements occurring in the hospital outpatient 
department (HOPD) setting. Most of the Current Procedural Terminology 
(CPT) codes that physicians report for LEJR are on the hospital 
Outpatient Prospective Payment System (OPPS) inpatient only list. The 
CY 2015 OPPS inpatient only list is Addendum E of the CY 2015 Hospital 
Outpatient Prospective Payment-Final Rule with Comment Period, which is 
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices-Items/CMS-1613-FC.html. Thus, under current FFS payment policy, Medicare pays 
hospitals for the facility services required for LEJR only when those 
procedures are furnished in the inpatient hospital setting. Therefore, 
we believe an episode payment model most appropriately focuses around 
an inpatient hospitalization for these major surgical procedures, as 
there is little opportunity for shifting the procedures under this 
model to the outpatient setting.
    We note further that LEJRs are paid for under the IPPS through the 
following two Medicare Severity-Diagnosis Related Groups (MS-DRGs):
     MS-DRG 469 (Major joint replacement or reattachment of 
lower extremity with Major Complications or Comorbidities (MCC)).
     MS-DRG 470 (Major joint replacement or reattachment of 
lower extremity without MCC).
    Multiple ICD-9-CM procedure codes that describe LEJR procedures and 
other less common lower extremity procedures group to these MS-DRGs, 
with their percentage distribution within the IPPS MS-DRGs 469 and 470 
for the past 4 years outlined in Table 4.

[[Page 41213]]



           Table 4--Distribution of Hospital Claims for Procedure Codes Mapping to MS-DRGS 469 and 470
----------------------------------------------------------------------------------------------------------------
    ICD-9-CM  procedure code                Code descriptor           FY 2014 %  FY 2013 %  FY 2012 %  FY 2011 %
----------------------------------------------------------------------------------------------------------------
81.54...........................  Total knee replacement............         57         58         58         58
81.51...........................  Total hip replacement.............         30         29         29         28
81.52...........................  Partial hip replacement...........         12         13         13         14
81.56...........................  Total ankle replacement...........          0          0          0          0
00.85...........................  Resurfacing hip, total, acetabulum          0          0          0          0
                                   and femoral head.
00.86...........................  Resurfacing hip, partial, femoral           0          0          0          0
                                   head.
00.87...........................  Resurfacing hip, partial,                   0          0          0          0
                                   acetabulum.
84.27...........................  Lower leg or ankle reattachment...          0        N/A        N/A        N/A
84.28...........................  Thigh reattachment................        N/A        N/A        N/A          0
----------------------------------------------------------------------------------------------------------------
Note: Percentages or claim counts with ``N/A'' had no claims. percentages of 0% represent less than 0.5% of
  total claims.

    Additionally, we note that there are various types of claims-based 
information available to CMS, hospitals, and other providers, that 
could be used to identify beneficiaries in the model who receive LEJRs, 
including the MS-DRGs for the acute care hospitalization for the 
procedure, the ICD-9-CM procedure code on the hospital claim, or the 
CPT code(s) reported by the orthopedic surgeon who furnishes the 
surgical procedure. While we could utilize ICD-9-CM procedure codes or 
CPT codes to identify beneficiaries included in the model, over 85 
percent of procedures that group to MS-DRGs 469 and 470 are hip or knee 
replacements. Additionally, the hospitals that would be participating 
in this model receive payment under the IPPS, which is not determined 
by CPT codes and is based on clinical conditions and procedures that 
group to MS-DRGs. Finally, our review of the other low volume 
procedures that group to these same MS-DRGs, aside from total or 
partial hip and knee replacements, does not suggest that there is 
significant clinical or financial heterogeneity within these two MS-
DRGs such that we would need to define care for included beneficiaries 
by ICD-9-CM procedure codes.
    Therefore, we propose that an episode of care in the CCJR model is 
triggered by an admission to an acute care hospital stay (hereinafter 
``the anchor hospitalization'') paid under MS-DRG 469 or 470 under the 
IPPS during the model performance period. This approach offers 
operational simplicity for providers and CMS, and is consistent with 
the approach taken by the BPCI initiative to identify beneficiaries 
whose care is included in the LEJR episode for that model. We seek 
public comments on this proposal to define the clinical conditions that 
are the target of CCJR.
b. Definition of Related Services Included in the Episode
    For purposes of this model, as in BPCI, given the frequent 
comorbidities experienced by Medicare beneficiaries and the generally 
elective nature of LEJR, we are interested in testing inclusive 
episodes to incentivize comprehensive, coordinated patient-centered 
care for the beneficiary throughout the episode. We propose to exclude 
only those Medicare items and services furnished during the episode 
that are unrelated to LEJR procedures based on clinical justification. 
During our experience with BPCI implementation, we reviewed a number of 
narrow episode definitions for LEJR episodes that were recommended by 
BPCI participants and other interested parties during the design phase 
for this project. We concluded that these narrow definitions commonly 
exclude many services that may be linked to the LEJR, as LEJR 
beneficiaries, on average, are at higher risk for more clinical 
problems than Medicare beneficiaries who have not recently undergone 
such procedures.
    Therefore, we propose that all CCJR episodes, beginning with the 
admission for the anchor hospitalization under MS-DRG 469 or 470 
through the end of the proposed episode, include all items and services 
paid under Medicare Part A or Part B with the exception of certain 
exclusions as proposed in this section that are excluded because they 
are unrelated to the episode. The items and services ultimately 
included in the episode after the exclusions are applied are called 
related items and services. As proposed in sections III.C.4 and III.C.6 
of this proposed rule, Medicare spending for related items and services 
would be included in the historical data used to set target prices, as 
well as in the calculation of actual episode spending that would be 
compared against the target price to assess the performance of 
participant hospitals. In contrast, Medicare spending for unrelated 
items and services (excluded from the episode definition) would not be 
included in the historical data used to set target prices or in the 
calculation of actual episode spending.
    Related items and services included in CCJR episodes would be the 
following items and services paid under Medicare Part A or Part B, 
after the exclusions are applied:
     Physicians' services.
     Inpatient hospital services (including readmissions), with 
certain exceptions proposed later in this section.
     Inpatient psychiatric facility (IPF) services.
     LTCH services.
     IRF services.
     SNF services.
     HHA services.
     Hospital outpatient services.
     Independent outpatient therapy services.
     Clinical laboratory services.
     Durable medical equipment (DME).
     Part B drugs.
     Hospice.
    We note that under our proposed definition of related services 
included in the episode, the episode could include certain per-member-
per-month model payments, as discussed in section III.C of this 
proposed rule.
    We propose to exclude from CCJR drugs that are paid outside of the 
MS-DRG, specifically hemophilia clotting factors (Sec.  412.115), 
identified through HCPCS code, diagnosis code, and revenue center on 
IPPS claims. Hemophilia clotting factors, in contrast to other drugs 
that are administered during an inpatient hospital stay and paid 
through the MS-DRG, are paid separately by Medicare in recognition that 
clotting factors are costly and essential to appropriate care for 
certain beneficiaries. Thus, we believe there are no efficiencies to be 
gained in the variable use of these high cost drugs when particular 
beneficiaries receive

[[Page 41214]]

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

[[Page 41215]]

treatment of thromboembolic complications of the LEJR. We propose to 
exclude hospital admissions for chronic disease surgical MS-DRGs, such 
as prostatectomy (removal of the prostate gland), as they are unrelated 
to the clinical condition that led to the LEJR nor would they have been 
precipitated by the LEJR. Finally, we propose that hospital admissions 
for acute disease surgical MS-DRGs, such as appendectomy, be excluded 
because they are highly unlikely to be related to, or precipitated by, 
LEJR procedures and would not be affected by LEJR episode care 
redesign.
    With respect to the LEJR proposed diagnosis code exclusions for 
Part B services for this model, we propose that ICD-9-CM codes be 
excluded or included as a category and as identified by code ranges. We 
propose that disease-related diagnoses, such as osteoarthritis of the 
hip or knee, are included. We also propose that body system-related 
diagnoses are included because they relate to complications that may 
arise from interactions with the health care system. An example of this 
would be pressure pre-ulcer skin changes. Additionally, we propose that 
all common symptom diagnoses are included because providers have 
significant discretion to select these as principal diagnosis codes. We 
propose that acute disease diagnoses, such as severe head injury, are 
excluded. Finally, we propose that chronic disease diagnoses be 
included or excluded based on specific clinical and coding judgment as 
described previously with respect to the original development of the 
exclusions for LEJR episodes under BPCI, taking into consideration 
whether the condition was likely to have been affected by the LEJR 
procedure and recovery period and whether substantial services were 
likely to have been provided for the chronic condition during the 
episode. Thus, chronic kidney disease and cirrhosis would be included 
in the episode, but glaucoma and chemotherapy would be excluded.
    Exclusions from CCJR episodes are based on care for unrelated 
clinical conditions represented by MS-DRGs for readmissions during the 
episode and ICD-9 CM codes for Part B services furnished during the 
episode after discharge from the anchor hospitalization. The complete 
lists of proposed excluded MS-DRGs for readmissions and proposed 
excluded ICD-9-CM codes for Part B services is posted on the CMS Web 
site at http://innovation.cms.gov/initiatives/ccjr/.
    We note that as CMS moves to implement ICD-10-CM we will make the 
CCJR exclusions that would map to the final ICD-9-CM exclusions for 
CCJR available in the ICD-10-CM format as well. We propose that all 
Part A and B-covered items and services that would not be excluded 
based on the exclusions list are included in the episode. Furthermore, 
we propose to update the exclusions list without rulemaking on an 
annual basis, at a minimum, to reflect annual changes to ICD-CM coding 
and annual changes to the MS-DRGs under the IPPS, as well as to address 
any other issues that are brought to our attention by the public 
throughout the course of the model test.
    We would first develop potential exclusions list revisions of MS-
DRGs for readmissions and ICD-9 (or ICD-10, as applicable) diagnosis 
codes for Part B services based on our assessment against the following 
standards:
     We would not exclude any items or services that are--
    ++ Directly related to the LEJR procedure itself (such as loosening 
of the joint prosthesis) or the quality or safety of LEJR care (such as 
post-surgical wound infection or venous thromboembolism); and
    ++ For chronic conditions that may be affected by the LEJR 
procedure or post-surgical care (such as diabetes). By this we mean 
that where a beneficiary's underlying chronic condition would be 
affected by the LEJR procedure, or where the beneficiary's LEJR or 
post-LEJR care must be managed differently as a result of the chronic 
condition, then those items and services would be related and would be 
included in the episode.
     We would exclude items and services for--
    ++ Chronic conditions that are generally not affected by the LEJR 
procedure or post-surgical care (such as removal of the prostate). By 
this we mean that where a beneficiary's underlying chronic condition 
would not be affected by the LEJR procedure, or where the beneficiary's 
LEJR or post-LEJR care need not be managed differently as a result of 
the chronic condition, then those items and services would not be 
related and would not be included in the episode; and
    ++ Acute clinical conditions not arising from existing episode-
related chronic clinical conditions or complications of LEJR surgery 
from the episode (such as appendectomy).
    We would post the potential revised exclusions, which could include 
additions to or deletions from the exclusions list, to the CMS Web site 
to allow for public input on our planned application of these 
standards, and then adopt changes to the exclusions list with posting 
to the CMS Web site of the final revised exclusions list after our 
consideration of the public input.
    We seek comment on our proposals for identifying excluded 
readmissions and Part B-covered items and services, as well as our 
proposed process for updating the exclusions list.
3. Duration of Episodes of Care
a. Beginning the Episode and Beneficiary Care Inclusion Criteria
    While we propose to identify LEJR episodes by an acute care 
hospitalization for MS-DRG 469 and 470, we recognize that the 
beneficiary's care for an underlying chronic condition, such as 
osteoarthritis, which ultimately leads to the surgical procedure, 
typically begins months to years prior to the surgical procedure. 
Because of the clinical variability leading up to the joint replacement 
surgery and the challenge of identifying unrelated services given the 
multiple chronic conditions experienced by many beneficiaries, we do 
not propose to begin the episode prior to the anchor hospitalization 
(that is, the admission that results in a discharge under MS-DRG 469 or 
470). We believe the opportunities for care redesign and improved 
efficiency prior to the inpatient hospital stay are limited for an 
episode payment model of this type that focuses on a surgical procedure 
and the associated recovery once the decision to pursue surgery has 
been made, rather than an episode model that focuses on decision-making 
and management of a clinical condition itself (such as osteoarthritis).
    We propose to begin the episode with an inpatient anchor 
hospitalization for MS-DRG 469 or MS-DRG 470 in accordance with the 
methodology described. This proposal to begin the episode upon 
admission for the anchor hospitalization is consistent with LEJR 
episode initiation under Model 2 of BPCI. While we are not proposing to 
begin the episode prior to the inpatient hospital admission, we note 
that our proposed episode definition includes all services that are 
already included in the IPPS payment based on established Medicare 
policies, such as diagnostic services (including clinical diagnostic 
laboratory tests) and nondiagnostic outpatient services related to a 
beneficiary's hospital admission provided to a beneficiary by the 
admitting hospital, or by an entity wholly owned or wholly operated by 
the admitting hospital (or by another entity under arrangements with 
the admitting hospital), within 3 days prior to and including the date 
of the beneficiary's admission. For more

[[Page 41216]]

information on the 3-Day Payment Window payment policies, see CMS Pub. 
100-04, Chapter 3, section 40.3 and Chapter 4, section 10.12.
    We propose that the defined population of Medicare beneficiaries 
whose care will be included in CCJR meet the following criteria upon 
admission to the anchor hospitalization. We note that these criteria 
are also consistent with Model 2 of BPCI, as well as most other 
Innovation Center models that do not target a specific subpopulation of 
beneficiaries. The LEJR episodes for all beneficiaries in the defined 
population will be included in CCJR (although certain episodes may be 
canceled for purposes of determining actual episode payments for 
reasons discussed later in this proposed rule), and we refer readers to 
section I.B.8 of this proposed rule for further discussion of 
beneficiary notification and a beneficiary's ongoing right under CCJR 
to obtain health services from any individual or organization qualified 
to participate in the Medicare program.
     The beneficiary is enrolled in Medicare Part A and Part B 
throughout the duration of the episode.
     The beneficiary's eligibility for Medicare is not on the 
basis of End Stage Renal Disease.
     The beneficiary must not be enrolled in any managed care 
plan (for example, Medicare Advantage, Health Care Prepayment Plans, 
cost-based health maintenance organizations).
     The beneficiary must not be covered under a United Mine 
Workers of America health plan, which provides healthcare benefits for 
retired mine workers.
     Medicare must be the primary payer.
    Our proposal for inclusion of beneficiaries in CCJR is as broad as 
feasible, representing all those LEJR episodes for which we believe we 
have comprehensive historical Medicare payment data that allow us to 
appropriately include Medicare payment for all related services during 
the episode in order to set appropriate episode target prices. For 
beneficiaries whose care we propose to exclude from the model, we are 
unable to capture or appropriately attribute to the episode the related 
Medicare payments because of Medicare's payment methodology. For 
example, if a beneficiary is enrolled in a Medicare Advantage plan, 
Medicare makes capitated payments (and providers do not submit complete 
claims data to CMS), so we would not have a way to identify and 
attribute the portion of those payments related to an LEJR episode. 
More information on setting bundled payment target prices for episodes 
under CCJR is available in section III.C.4.b of this proposed rule. 
Including the broadest feasible array of Medicare beneficiaries' 
admissions in the model would provide CMS with the most robust 
information about the effects of this model on expenditures and quality 
for beneficiaries of the widest variety of ages and comorbidities, and 
allow the participant hospitals the greatest opportunity to benefit 
financially from systematic episode care redesign because most Medicare 
beneficiaries undergoing an LEJR procedure will be included in the 
model and, therefore, subject to the policies we propose.
    We seek comment on our proposal on when to begin the CCJR episode, 
as well as to identify the care included for beneficiaries.
b. Middle of the Episode
    We propose that once the episode begins for a beneficiary whose 
care is included, the episode continues until the end as described in 
the next section of this proposed rule, unless the episode is cancelled 
because the beneficiary no longer meets the same inclusion criteria 
proposed for the beginning of the episode at any point during the 
episode. When an episode is cancelled, the services furnished to 
beneficiaries prior to and following the episode cancellation will 
continue to be paid by Medicare as usual but we will not calculate 
actual episode spending that would otherwise under CCJR be reconciled 
against the target price for the beneficiary's care (see section 
III.C.6 of this proposed rule). As discussed in section III.C.10.a.(3) 
of this proposed rule with comment period, waivers of program rules 
applicable to beneficiaries in CCJR episodes would apply to the care of 
beneficiaries who are in CCJR episodes at the time when the waiver is 
used to bill for a service that is furnished to the beneficiary, even 
if the episode is later cancelled.
    We believe it would be appropriate to cancel the episode when a 
beneficiary's status changes during the episode such that they no 
longer meet the criteria for inclusion because the episode target price 
reflects full payment for the episode, yet we would not have full 
Medicare episode payment data for the beneficiary to reconcile against 
the target price.
    In addition, we propose that the following circumstances would also 
cancel the episode:
     The beneficiary is readmitted to an acute care hospital 
during the episode and discharged under MS-DRG 469 or 470 (in this 
case, the first episode would be cancelled and a new LEJR episode would 
begin for the beneficiary).
     The beneficiary dies during the anchor hospitalization.
     The beneficiary initiates an LEJR episode under BPCI 
Models 1, 2, 3 or 4.
    In the case of beneficiary death during the anchor hospitalization, 
we believe it would be appropriate to cancel the episode as there are 
limited efficiencies that could be expected during the anchor hospital 
stay itself. In the case of beneficiary readmission during the first 
CCJR episode for another LEJR (typically a planned staged second 
procedure), we do not believe it would be appropriate to include two 
episodes in the model with some time periods overlapping, as that could 
result in attribution of the Medicare payment for 2 periods of PAC to a 
single procedure.
    We seek comment on our proposals to cancel episodes once they have 
begun but prior to their end.
c. End of the Episode
    LEJR procedures are typically major inpatient surgical procedures 
with significant associated morbidity and a prolonged recovery period 
that often is marked by significant PAC needs, potential complications 
of surgery, and more intense management of chronic conditions that may 
be destabilized by the surgery. In light of the course of recovery from 
LEJRs for Medicare beneficiaries, we propose that an episode in the 
CCJR model end 90 days after discharge from the acute care hospital in 
which the anchor hospitalization (for MS-DRG 469 or 470) took place. 
Hereinafter, we refer to the proposed CCJR model episode duration as 
the ``90-day post-discharge'' episode. To the extent that a Medicare 
payment for included services spans a period of care that extends 
beyond the episode duration, these payments would be prorated so that 
only the portion attributable to care during the fixed duration of the 
episode is attributed to the episode spending.
    We note for the vast majority of beneficiaries undergoing a hip or 
knee joint replacement, a 90-day post-discharge episode duration 
encompasses the full transition from acute care and PAC to recovery and 
return to activities. We believe the 90-day post-discharge episode 
duration encourages acute care hospitals, physicians, and PAC providers 
to promote coordinated, quality care as the patient transitions from 
the inpatient to outpatient settings and the community.
    In proposing the 90-day post-discharge duration for LEJR episodes 
in CCJR, we took into consideration the literature regarding the 
clinical

[[Page 41217]]

experiences of patients who have undergone THA or TKA procedures. In 
2007-2008, the 30-day all-cause readmission rate for primary THA among 
Medicare beneficiaries was 8.5 percent, while the 90-day all-cause 
readmission rate was 11.9 percent, indicating that while the rate of 
readmission begins to taper after 30 days, readmissions continue to 
accrue throughout this 90 day window.\6\ In single center studies, 
Schairer et al found unplanned 30-day hospital readmission rates were 
3.5 percent and 3.4 percent and unplanned 90-day hospital admission 
rates were 4.5 percent and 6 percent for primary THA and TKA, 
respectively, demonstrating that the risk of readmission remains 
significantly elevated from 30 through 90 days post-hospital 
discharge.7 8 Further exploring the reasons for unplanned 
admission for TKAs within 90 days of a knee replacement procedure, 
Schairer et al found that 75 percent were caused by surgical causes 
such as arthrofibrosis and surgical site infection. Additional 
information on the common reasons for hospital readmission following 
TKA or THA can be obtained from The American College of Surgeons 
National Surgical Quality Improvement Program.\9\ These data identified 
the top ten reasons for readmission within 30 days of a hip or knee 
arthroplasty:
---------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

[[Page 41218]]

[GRAPHIC] [TIFF OMITTED] TP14JY15.000

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

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

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

    Other tests of bundled payment models for hip and knee replacement 
have used 90-day post-discharge episodes.\18\ We also note that despite 
BPCI Model 2 allowing participants a choice between 30-, 60-, or 90-day 
post-discharge episodes, over 86 percent of participants have chosen 
the 90-day post-discharge episode duration for the LEJR episode. 
Further, a 90-day post-discharge episode duration aligns with the 90-
day global period included in the Medicare Physician Fee Schedule 
payment for the surgical procedure.
---------------------------------------------------------------------------

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

    We also considered proposing a 60-day post-discharge episode 
duration, but the full transition of care following LEJR would exceed 
this window for some beneficiaries, especially those who are discharged 
to an institutional post-acute provider initially and then

[[Page 41219]]

transition to home health or outpatient therapy services for continued 
rehabilitation. According to a report from ASPE on Medicare 
beneficiaries receiving PAC following major joint replacement in 2006, 
13 percent first receive SNF services and then receive HHA services--
with a total mean episode duration of 56.8 days.\19\ An additional 9.2 
percent receive HHA services first and then receive outpatient therapy 
services--with a total mean episode duration of 78.7 days. Finally, 6.7 
percent receive IRF services first and then HHA services (total mean 
length of stay 55.3 days), and 4.8 percent receive SNF services first 
and then outpatient therapy services (total mean length of stay 71.5 
days). The remainder only receives one type of PAC.
---------------------------------------------------------------------------

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

    Therefore, in order to be inclusive of most possible durations of 
recovery, and services furnished to reach recovery, we propose the 90-
day post-discharge episode duration for CCJR. We believe that 
beneficiaries will benefit from aggressive management and care 
coordination throughout this episode duration, and hospitals will have 
opportunities under CCJR to achieve efficiencies from care redesign 
during the 90-day post-discharge episode period.
    We seek comment on our proposal to end the episode 90 days after 
the date of discharge from the anchor hospitalization, as well as on 
the alternative we considered of ending the CCJR episode 60 days after 
the date of discharge.
    In accordance with section 1115A of the Act, we are proposing to 
codify these proposals in regulation in the new proposed Part 510.

C. Proposed Methodology for Setting Episode Prices and Paying Model 
Participants under the CCJR Model

1. Background
    As described in section II.B of this proposed rule, we propose to 
use the CCJR episode payment model to incentivize participant hospitals 
to work with other health care providers to improve quality of care for 
Medicare beneficiaries undergoing LEJR procedures and post-operative 
recovery, while enhancing the efficiency with which that care is 
provided. We propose to apply this incentive by paying participant 
hospitals or holding them responsible for repaying Medicare based on 
their CCJR episode quality and Medicare expenditure performance. The 
following sections describe our proposals for--
     How CCJR episodes would be attributed to a participant 
hospital;
     How the reconciliation of Medicare expenditures based on 
actual episode spending in relation to the target price would be 
structured and operationalized;
     How Medicare actual episode payments under existing 
payment systems would be compared against episode target prices;
     How hospital quality of care for CCJR episodes would be 
compared against quality thresholds Medicare establishes under this 
model;
     How payments to or repayment amounts from participant 
hospitals would be determined so that, on average, the episode target 
prices are paid by Medicare for CCJR episodes; and
     What protections from excessive risk due to high payment 
cases would be in place for participant hospitals.
2. Performance Years, Retrospective Episode Payment, and Two-sided Risk 
Model
a. Performance Period
    We propose that the CCJR model would have 5 performance years. The 
performance years would align with calendar years, beginning January 1, 
2016. Table 6 includes details on which episodes would be included in 
each of the 5 performance years.

                Table 6--Performance Years for CCJR Model
------------------------------------------------------------------------
                                                    Episodes included in
       Performance year           Calendar year       performance year
------------------------------------------------------------------------
1.............................               2016  Episodes that start
                                                    on or after January
                                                    1, 2016, and end on
                                                    or before December
                                                    31, 2016.
2.............................               2017  Episodes that end
                                                    between January 1,
                                                    2017, and December
                                                    31, 2017, inclusive.
3.............................               2018  Episodes that end
                                                    between January 1,
                                                    2018, and December
                                                    31, 2018, inclusive.
4.............................               2019  Episodes that end
                                                    between January 1,
                                                    2019, and December
                                                    31, 2019, inclusive.
5.............................               2020  Episodes that end
                                                    between January 1,
                                                    2020, and December
                                                    31, 2020, inclusive.
------------------------------------------------------------------------

    All episodes tested in this model will begin on or after January 1, 
2016 and end on or before December 31, 2020. We note that this 
definition results in performance year 1 being shorter than the later 
performance years in terms of the length of time over which an anchor 
hospitalization could occur under the model. We also note that some 
episodes that begin in a given calendar year may be captured in the 
following performance year due to the episodes ending after December 
31st (for example, episode beginning in December 2016 and ending in 
March 2017 would be part of performance year 2). We believe 5 years 
would be sufficient time to test the CCJR model and gather sufficient 
data to evaluate whether it improves the efficiency and quality of care 
for an LEJR episode of care. Having fewer than 5 performance years may 
not provide sufficient time or data for evaluation. The 5-year 
performance period is consistent with the performance period used for 
other CMMI models (for example, the Pioneer Accountable Care 
Organization (ACO) Model).
b. Proposed Retrospective Payment Methodology
    As described in section III.B of this proposed rule, we propose 
that an episode in the CCJR model begins with the admission for an 
anchor hospitalization and ends 90 days post-discharge from the anchor 
hospitalization, including all related services covered under Medicare 
Parts A and B during this timeframe, with limited exclusions and 
adjustments, as described in sections III.B, III.C.3, and III.C.7 of 
this proposed rule. The

[[Page 41220]]

episodes would be attributed to the participant hospital where the 
anchor hospitalization occurred.
    We propose to apply the CCJR episode payment methodology 
retrospectively. Under this proposal, all providers and suppliers 
caring for Medicare beneficiaries in CCJR episodes would continue to 
bill and be paid as usual under the applicable Medicare payment system. 
After the completion of a CCJR performance year, Medicare claims for 
services furnished to beneficiaries in that year's non-cancelled 
episodes would be grouped into episodes and aggregated, and participant 
hospitals' CCJR episode quality and actual payment performance would be 
assessed and compared against episode quality thresholds and target 
prices, as described in sections III.C.5 and III.C.4 of this proposed 
rule, respectively. After the participant hospitals' actual episode 
performance in quality and spending are compared against the 
aforementioned episode quality thresholds and target prices, we would 
determine if Medicare would make a payment to the hospital 
(reconciliation payments), or if the hospital owes money to Medicare 
(resulting in Medicare repayment). The possibility for hospitals to 
receive reconciliation payments or be subject to repayment (note: 
participant hospitals would not be subject to repayment for performance 
year 1) is further discussed in section III.C.2.c. of this proposed 
rule.
    We considered an alternative option of paying for episodes 
prospectively by paying one lump sum amount to the hospital for the 
expected costs of the 90-day episode. However, we believe such an 
option would be challenging to implement at this time given the payment 
infrastructure changes for both hospitals and Medicare that would need 
to be developed to pay and manage prospective CCJR episode payments. We 
note that a retrospective episode payment approach is currently being 
utilized under BPCI Model 2. We believe that a retrospective payment 
approach can accomplish the objective of testing episode payment in a 
broad group of hospitals, including financial incentives to streamline 
care delivery around that episode, without requiring core billing and 
payment changes by providers and suppliers, which would create 
substantial administrative burden. However, we seek comment on 
potential ways to implement a prospective payment approach for CCJR in 
future performance years of the model.
c. Proposed Two-Sided Risk Model
    We propose to establish a two-sided risk model for hospitals 
participating in the CCJR model. We propose to provide episode 
reconciliation payments to hospitals that meet or exceed quality 
performance thresholds and achieve cost efficiencies relative to CCJR 
target prices established for them, as defined later in sections 
III.C.4 and III.C.5 of this proposed rule. Similarly, we propose to 
hold hospitals responsible for repaying Medicare when actual episode 
payments exceed their CCJR target prices in each of performance years 2 
through 5, subject to certain proposed limitations discussed in section 
III.C.8 of this proposed rule. Target prices would be established for 
each participant hospital for each performance year.
    We propose that hospitals will be eligible to receive 
reconciliation payments from Medicare based on their quality and actual 
episode spending performance under the CCJR model in each of CCJR 
performance years 1 through 5. Additionally, we propose to phase in the 
responsibility for hospital repayment of episode actual spending if 
episode actual spending exceeds their target price starting in 
performance year 2 and continuing through performance year 5. Under 
this proposal in performance year 1, participant hospitals would not be 
required to pay Medicare back if episode actual spending is greater 
than the target price.
    We considered an episode payment structure in which, for all 5 
performance years of the model, participant hospitals would qualify for 
reconciliation payments if episode actual spending was less than the 
episode target price, but would not be required to make repayments to 
Medicare if episode actual spending was greater than the episode target 
price. However, we believe not holding hospitals responsible for 
repaying excess episode spending would reduce the incentives for 
hospitals to improve quality and efficiency. We also considered 
starting the CCJR payment model with hospital responsibility for 
repaying excess episode spending in performance year 1 to more strongly 
align participant hospital incentives with care quality and efficiency. 
However, we believe hospitals may need to make infrastructure, care 
coordination and delivery, and financial preparations for the CCJR 
episode model, and that those changes can take several months or longer 
to implement. With this consideration in mind, we propose to begin 
hospitals' responsibility for repayment of excess episode spending 
beginning in performance year 2 to afford hospitals time to prepare, 
while still beginning some incentives earlier (that is, reconciliation 
payments in year 1) to improve quality and efficiency of care for 
Medicare beneficiaries. We solicit comment on the proposed incentive 
structure for CCJR.
    In an effort to further ensure hospital readiness to assume 
responsibility for circumstances that could lead to a hospital repaying 
to Medicare actual episode payments that exceed the episode target 
price, we propose to begin to phase in this responsibility for 
performance year 2, with full responsibility for excess episode 
spending (as proposed in this rule) applied for performance year 3 
through performance year 5. To carry out this ``phase in'' approach, we 
propose during the first year of any hospital financial responsibility 
for repayment (performance year 2) to set an episode target price that 
partly mitigates the amount that hospitals would be required to repay 
(see section III.C.4.b of this proposed rule), as well as more greatly 
limits (as compared to performance years 3 through 5) the maximum 
amount a hospital would be required to repay Medicare across all of its 
episodes (see section III.C.8 of this proposed rule).
3. Adjustments to Payments Included in Episode
    Medicare payments during the model's performance year for Parts A 
and B claims for services included in the episode definition, as 
discussed in section III.B of this proposed rule, would be summed 
together for each non-cancelled CCJR episode that occurred to create 
the actual episode payment amount. We propose three adjustments to this 
general approach for--(1) special payment provisions under existing 
Medicare payment systems; (2) payment for services that straddle the 
end of the episode; and (3) high payment episodes. We note there would 
be further adjustments to account for overlaps with other Innovation 
Center models and CMS programs; we refer readers to section III.C.7 of 
this proposed rule.
    We do not propose to adjust hospital-specific or regional 
components of target prices for any Medicare repayment or 
reconciliation payments made under the CCJR model; CCJR repayment and 
reconciliation payments would be not be included per the proposed 
episode definition in section III.B of this proposed rule. Including 
reconciliation payments and Medicare repayments in target price 
calculations would perpetuate the initial set of target prices

[[Page 41221]]

once CCJR performance years are captured in the 3- historical-years of 
data used to set target prices, as proposed in section III.C.4. of this 
proposed rule, beginning with performance year 3 when performance year 
1 would be part of the 3-historical-years. Including any prior 
performance years' reconciliations or repayments in target price 
calculations would approximately have the effect (excluding impact of 
the proposed adjustments for high payment episodes (see section 
III.C.3.c. of this proposed rule) and proposed limits or adjustments to 
hospital financial responsibility (see section III.C.8. of this 
proposed rule)) of Medicare paying hospitals the target price, 
regardless of whether the hospital went below, above, or met the target 
price in the prior performance years before accounting for the 
reconciliation payments or repayments. We intend for target prices to 
be based on historical patterns of service actually provided, so we do 
not propose to include reconciliation payments or repayments for prior 
performance years in target price calculations.
a. Proposed Treatment of Special Payment Provisions Under Existing 
Medicare Payment Systems
    Many of the existing Medicare payment systems have special payment 
provisions that have been created by regulation or statute to improve 
quality and efficiency in service delivery. IPPS hospitals are subject 
to incentives under the HRRP, the Hospital Value-Based Purchasing 
(HVBP) Program, the Hospital-Acquired Condition (HAC) Reduction 
Program, and the Hospital Inpatient Quality Reporting Program (HIQR) 
and Outpatient Quality Reporting Program (OQR). IPPS hospitals and CAHs 
are subject to the Medicare EHR Incentive Program. Additionally, the 
majority of IPPS hospitals receive additional payments for Medicare 
Disproportionate Share Hospital (DSH) and Uncompensated Care, and IPPS 
teaching hospitals can receive additional payments for Indirect Medical 
Education (IME). IPPS hospitals that meet a certain requirements 
related to low volume Medicare discharges and distance from another 
hospital receive a low volume add-on payment. As mentioned in section 
III.B.2.b of this proposed rule, acute care hospitals may receive new 
technology add-on payments to support specific new technologies or 
services that substantially improve the diagnosis or treatment of 
Medicare beneficiaries and would be inadequately paid otherwise under 
the MS-DRG system. Also, some IPPS hospitals qualify to be sole 
community hospitals (SCHs) or Medicare-dependent hospitals (MDHs), and 
they may receive enhanced payments based on cost-based hospital-
specific rates for services; whether a SCH or MDH receives enhanced 
payments may vary year to year, in accordance with Sec. Sec.  419.43(g) 
and 412.108(g), respectively.
    Medicare payments to providers of post-acute services, including 
IRFs, SNFs, IPFs, HHAs, LTCHs, and hospice facilities, are conditioned, 
in part, on whether the provider satisfactorily reports certain 
specified data to CMS: the Inpatient Rehabilitation Facility Quality 
Reporting Program (IRF QRP), the Skilled Nursing Facility Quality 
Reporting Program (SNF QRP), the Inpatient Psychiatric Facility Quality 
Reporting Program (IPF QRP), the Home Health Quality Reporting Program 
(HH QRP), the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP), and the Hospice Quality Reporting Program. Additionally, IRFs 
located in rural areas receive rural add-on payments, IRFs serving 
higher proportions of low-income beneficiaries receive increased 
payments according to their low-income percentage (LIP), and IRFs with 
teaching programs receive increased payments to reflect their teaching 
status. SNFs receive higher payments for treating beneficiaries with 
human immunodeficiency virus (HIV). HHAs located in rural areas also 
receive rural add-on payments.
    Ambulatory Surgical Centers have their own Quality Reporting 
Program (ASC QRP). Physicians also have a set of special payment 
provisions based on quality and reporting: the Medicare EHR Incentive 
Program for Eligible Professionals, the Physician Quality Reporting 
System (PQRS), and the Physician Value-based Modifier Program.
    The intent of the CCJR model is not to replace the various existing 
incentive programs or add-on payments, but instead to test further 
episode payment incentives towards improvements in quality and 
efficiency beyond Medicare's existing policies. Therefore, we propose 
that the hospital performance and potential reconciliation payment or 
Medicare repayment be independent of, and not affect, these other 
special payment provisions.
    We propose to exclude the special payment provisions as discussed 
previously when calculating actual episode payments, setting episode 
target prices, comparing actual episode payments with target prices, 
and determining whether a reconciliation payment should be made to the 
hospital or funds should be repaid by the hospital.
    Not excluding these special payment provisions would create 
incentives that are not aligned with the intent of the CCJR model. Not 
excluding the quality and reporting-related special payment provisions 
could create situations where a high-quality or reporting compliant 
hospital or both receiving incentive payments, or those hospitals that 
discharge patients to PAC providers that receive incentives for being 
reporting compliant, may appear to be ``high episode payment'' under 
CCJR. Conversely, lower quality or hospitals not complying with 
reporting programs or both that incur payment reduction penalties, or 
hospitals that discharge to PAC providers that are not reporting 
compliant, may appear to be ``low episode payment'' under CCJR. Such 
outcomes would run counter to CCJR's goal of improving quality. Also, 
not excluding add-on payments for serving more indigent patients, 
having low Medicare hospital volume, being located in a rural area, 
supporting greater levels of provider training, choosing to use new 
technologies, and having a greater proportion of CCJR beneficiaries 
with HIV from CCJR actual episode payment calculations may 
inappropriately result in hospitals having worse episode payment 
performance. Additionally, not excluding enhanced payments for MDHs and 
SCHs may result in higher or lower target prices just because these 
hospitals received their enhanced payments in one historical year but 
not the other, regardless of actual utilization. We believe the 
proposed approach of excluding special payment provisions would ensure 
a participant hospital's actual episode payment performance is not 
artificially improved or worsened because of payment reduction 
penalties or incentives or enhanced or add-on payments, the effects of 
which we are not proposing to test with CCJR.
    In addition to the various incentive, enhanced, and add on 
payments, sequestration came into effect for Medicare payments for 
discharges on or after April 1, 2013, per the Budget Control Act of 
2011 and delayed by the American Taxpayer Relief Act of 2012. 
Sequestration applies a 2 percent reduction to Medicare payment for 
most Medicare FFS services. Similar to the previously discussed 
incentive, enhanced, and add-on payments, we intend CCJR to be 
independent of the introduction and potential future elimination of 
sequestration. We do not intend to have participant hospitals' episodes 
appear to be ``low payment''

[[Page 41222]]

episodes relative to historical data, for part of which sequestration 
may not have been in effect, just because of an across-the-board 
Medicare payment reduction through sequestration. Therefore, we propose 
to account for the effects of sequestration when calculating actual 
episode payments, setting episode target prices, comparing actual 
episode payments with target prices, and determining whether a 
reconciliation payment should be made to the hospital or hospitals 
should repay Medicare.
    In order to operationalize the exclusion of the various special 
payment provisions in calculating episode expenditures, we propose to 
apply the CMS Price (Payment) Standardization Detailed Methodology 
described on the QualityNet Web site at http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350. This pricing standardization approach is the same as used for 
the HVBP program's Medicare spending per beneficiary metric.
    We solicit comment on this proposed approach to treating special 
payment provisions in the various Medicare payment systems.
b. Proposed Treatment of Payment for Services That Extend Beyond the 
Episode
    As we proposed a fixed 90-day post-discharge episode as discussed 
in section III.B of this proposed rule, we believe there would be some 
instances where a service included in the episode begins during the 
episode but concludes after the end of the episode and for which 
Medicare makes a single payment under an existing payment system. An 
example would be a beneficiary in a CCJR episode who is admitted to a 
SNF for 15 days, beginning on Day 86 post-discharge from the anchor 
CCJR hospitalization. The first 5 days of the admission would fall 
within the episode, while the subsequent 10 days would fall outside of 
the episode.
    We propose that, to the extent that a Medicare payment for included 
episode services spans a period of care that extends beyond the 
episode, these payments would be prorated so that only the portion 
attributable to care during the episode is attributed to the episode 
payment when calculating actual Medicare payment for the episode. For 
non-IPPS inpatient hospital (for example, CAH) and inpatient PAC (for 
example, SNF, IRF, LTCH, IPF) services, we propose to prorate payments 
based on the percentage of actual length of stay (in days) that falls 
within the episode window. Prorated payments would also be similarly 
allocated to the 30-day post-episode payment calculation in section 
III.C.8.e. of this proposed rule. In the prior example, one-third of 
the days in the 15-day length of stay would fall within the episode 
window, so under the proposed approach, one-third of the SNF payment 
would be included in the episode payment calculation, and the remaining 
two-thirds (because the entirety of the remaining payments fall within 
the 30 days after the episode ended) would be included in the post-
episode payment calculation.
    For HHA services that extend beyond the episode, we propose that 
the payment proration be based on the percentage of days, starting with 
the first billable service date (``start of care date'') and through 
and including the last billable service date, that fall within the CCJR 
episode. Prorated payments would also be similarly allocated to the 30-
day post-episode payment calculation in section III.C.8.e of this 
proposed rule. For example, if the patient started receiving services 
from an HHA on day 86 after discharge from the anchor CCJR 
hospitalization and the last billable home health service date was 55 
days from the start of home health care date, the HHA claim payment 
amount would be divided by 55 and then multiplied by the days (5) that 
fell within the CCJR episode. The resulting, prorated HHA claim payment 
amount would be considered part of the CCJR episode. Services for the 
prorated HHA service would also span the entirety of the 30 days after 
the CCJR episode spends, so the result of the following calculation 
would be included in the 30-day post-episode payment calculation: HHA 
claim payment amount divided by 55 and then multiplied by 30 days (the 
number of days in the 30-day post-episode period that fall within the 
prorated HHA service dates).
    There may also be instances where home health services begin prior 
to the CCJR episode start date, but end during the CCJR episode. In 
such instances, we would also prorate HHA payments based on the 
percentage of days that fell within the episode. Because these services 
end during the CCJR episode, prorated payments for these services would 
not be included in the 30-day post-episode payment calculation 
discussed in section III.C.8.e. of this proposed rule. For example, if 
the patient's start of care date for a home health 60-day claim was 
February 1, the anchor hospitalization was March 1 through March 4 
(with the CCJR episode continuing for 90 days after March 4), and the 
patient resumed home care on March 5 with the 60-day home health claim 
ending on April 1 (that is, April 1 was the last billable service 
date), we would divide the 60-day home health claim payment amount by 
60 and then multiply that amount by the days from the CCJR admission 
through April 1 (32 days) to prorate the HHA payment. This proposed 
prorating method for HHA claims is consistent with how partial episode 
payments (PEP) are paid for on home health claims.
    For IPPS services that extend beyond the episode (for example, 
readmissions included in the episode definition), we propose to 
separately prorate the IPPS claim amount from episode target price and 
actual episode payment calculations as proposed in section III.C.8 of 
this proposed rule, called the normal MS-DRG payment amount for 
purposes of this proposed rule. The normal MS-DRG payment amount would 
be pro-rated based on the geometric mean length of stay, comparable to 
the calculation under the IPPS PAC transfer policy at Sec. Sec.  
412.4(f) and as published on an annual basis in Table 5 of the IPPS/
LTCH PPS Final Rules. Consistent with the IPPS PAC transfer policy, the 
first day for a subset of MS-DRGs (indicated in Table 5 of the IPPS/
LTCH PPS Final Rules) would be doubly weighted to count as 2 days to 
account for likely higher hospital costs incurred at the beginning of 
an admission. If the actual length of stay that occurred during the 
episode is equal to or greater than the MS-DRG geometric mean, the 
normal MS-DRG payment would be fully allocated to the episode. If the 
actual length of stay that occurred during the episode is less than the 
geometric mean, the normal MS-DRG payment amount would be allocated to 
the episode based on the number of inpatient days that fall within the 
episode. If the full amount is not allocated to the episode, any 
remainder amount would be allocated to the 30 day post-episode payment 
calculation discussed in section III.C.8.e of this proposed rule. The 
proposed approach for prorating the normal MS-DRG payment amount is 
consistent with the IPPS transfer per diem methodology.
    The following is an example of prorating for IPPS services that 
extend beyond the episode. If beneficiary has a readmission for MS-DRG 
493--lower extremity and humerus procedures except hip, foot, and 
femur, with complications--into an IPPS hospital on the 89th day after 
discharge from a CCJR anchor hospitalization, and is subsequently 
discharged after a length of stay of 5 days, Medicare payment for this 
readmission would be prorated for inclusion in the episode. Based on 
Table

[[Page 41223]]

5 of the IPPS/LTCH PPS Final Rule for FY 2015, the geometric mean for 
MS-DRG 493 is 4 days, and this MS-DRG is indicated for double-weighting 
the first day for proration. This readmission has only 2 days that 
falls within the episode, which is less than the MS-DRG 493 geometric 
mean of 4 days. Therefore, the normal MS-DRG payment amount associated 
with this readmission would be divided by 4 (the geometric mean) and 
multiplied by 3 (the first day is counted as 2 days, and the second day 
contributes the third day), and the resulting amount is attributed to 
the episode. The remainder one-fourth would be captured in the post-
episode spending calculation discussed in section III.C.8 of this 
proposed rule. If the readmission occurred on the 85th day after 
discharge from the CCJR anchor hospitalization, and the length of stay 
was 7 days, the normal MS-DRG payment amount for the admission would be 
included in the episode without proration because length of stay for 
the readmission falling within the episode (6 days) is greater than or 
equal to the geometric mean (4 days) for the MS-DRG.
    We considered an alternative option of including the full Medicare 
payment for all services that start during the episode, even if those 
services did not conclude until after the episode ended, in calculating 
episode target prices and actual payments. Previous research on bundled 
payments for episodes of PAC services noted that including the full 
payment for any claim initiated during the fixed episode period of time 
will capture continued service use. However, prorating only captures a 
portion of actual service use (and payments) within the bundle. \20\ As 
discussed in section III.B of this proposed rule, the CCJR model 
proposes an episode length that extends 90 days post-discharge, and 
Table 5 in section III.B.3.c. of this proposed rule demonstrates that 
the average length of stay in PAC during a 90-day episode with a MS-DRG 
470 anchor hospitalization is 47.3 days. Therefore, the length of the 
episode under CCJR (90 days) should be sufficient to capture the vast 
majority of service use within the episode, even if payments for some 
services that extend beyond the episode duration are prorated and only 
partly attributed to the episode.
---------------------------------------------------------------------------

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

c. Proposed Pricing Adjustment for High Payment Episodes
    Given the broad proposed LEJR episode definition and 90-day post-
discharge episode duration proposed for CCJR, we want to ensure that 
hospitals have some protection from the variable repayment risk for 
especially high payment episodes, where the clinical scenarios for 
these cases each year may differ significantly and unpredictably. We do 
not believe the opportunity for a hospital's systematic care redesign 
of LEJR episodes has significant potential to impact the clinical 
course of these extremely disparate high payment cases.
    The BPCI Model 2 uses a generally similar episode definition as 
proposed for CCJR and the vast majority of BPCI episodes being tested 
for LEJR are 90 days in duration following discharge from the anchor 
hospitalization. Similarly, we believe the BPCI distribution of Model 2 
90-day LEJR episode payment amounts as displayed in Figure 1 provides 
information that is relevant to policy development regarding CCJR 
episodes.

[[Page 41224]]

[GRAPHIC] [TIFF OMITTED] TP14JY15.001

    As displayed, the mean episode payment amount is approximately 
$26,000. Five percent of all episodes are paid at two standard 
deviations above the mean payment or greater, an amount that is 
slightly more than 2 times the mean episode payment amount. While these 
high payment cases are relatively uncommon, we believe that 
incorporation of the full Medicare payment amount for such high payment 
episodes in setting the target price and correspondingly in Medicare's 
aggregate actual episode payment that is compared to the target price 
for the episode may lead in some cases to excessive hospital 
responsibility for these episode expenditures. This may be especially 
true when hospital responsibility for repayment of excess episode 
spending is introduced in performance year 2. The hospital may have 
limited ability to moderate spending for these high payment cases. Our 
proposal to exclude IPPS new technology add-on payments and separate 
payment for clotting factors for the anchor hospitalization from the 
episode definition limits excessive financial responsibility under this 
model of extremely high inpatient payment cases that could result from 
costly hospital care furnished during the anchor hospitalization. 
However, we believe an additional pricing adjustment in setting episode 
target prices and calculating actual episode payments is necessary to 
mitigate the hospital responsibility for the actual episode payments 
for high episode payment cases resulting from very high Medicare 
spending within the episode during the period after discharge from the 
anchor hospitalization, including for PAC, related hospital 
readmissions, and other items and services related to the LEJR episode.
    Thus, in order to limit the hospital's responsibility for the 
aforementioned high episode payment cases, we propose to utilize a 
pricing adjustment for high payment episodes that would incorporate a 
high payment ceiling at two standard deviations above the mean episode 
payment amount in calculating the target price and in comparing actual 
episode payments during the performance year to the target prices.
    Specifically, when setting target prices, we would first identify 
for each anchor MS-DRG in each region (discussed further in section 
III.C.4 of this proposed rule) the episode payment amount that is two 
standard deviations above the mean payment in the historical dataset 
used (discussed further in section III.C.4 of this proposed rule). Any 
such identified episode would have its payment capped at the MS-DRG 
anchor and region-specific value that is two standard deviations above 
the mean, which would be the ceiling for purposes for calculating 
target prices. We note that the calculation of the historical episode 
high payment ceiling for each region and MS-DRG anchor would be 
performed after other steps, including removal of effects of special 
payment

[[Page 41225]]

provisions and others described in section III.C.4.c. of this proposed 
rule.
    When comparing actual episode payments during the performance year 
to the target prices, episode payments for episodes in the performance 
year would also be capped at two standard deviations above the mean. 
The high episode payment ceiling for episodes in a given performance 
year would be calculated based on MS-DRG anchor-specific episodes in 
each region. We discuss further how the high episode payment ceiling 
would be applied when comparing episode payments during the performance 
year to target prices in section III.C.6. of this proposed rule.
    While this approach generally lowers the target price slightly, it 
provides a basis for reducing the hospital's responsibility for actual 
episode spending for high episode payment cases during the model 
performance years. When performing the reconciliation for a given 
performance year of the model, we would array the actual episode 
payment amounts for all episodes being tested within a single region, 
and identify the regional actual episode payment ceiling at two 
standard deviations above the regional mean actual episode payment 
amount. If the actual payment for a hospital's episode exceeds this 
regional ceiling, we would set the actual episode payment amount to 
equal the regional ceiling amount, rather than the actual amount paid 
by Medicare, when comparing a hospital's episode spending to the target 
price. Thus, a hospital would not be responsible for any actual episode 
payment that is greater than the regional ceiling amount for that 
performance year. We propose to adopt this policy for all years of the 
model, regardless of the reconciliation payment opportunity or 
repayment responsibility in a given performance year, to achieve 
stability and consistency in the pricing methodology. We believe this 
proposal provides reasonable protection for hospitals from undue 
financial responsibility for Medicare episode spending related to the 
variable and unpredictable course of care of some Medicare 
beneficiaries in CCJR episodes, while still fully incentivizing 
increased efficiencies for approximately the 95 percent of episodes for 
which we estimate actual episode payments to fall below this 
ceiling.\21\ We seek comment on our proposal to apply a pricing 
adjustment in setting target prices and reconciling actual episode 
payments for high payment episodes.
---------------------------------------------------------------------------

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

4. Proposed Episode Price Setting Methodology
a. Overview
    Whether a participant hospital receives reconciliation payments or 
is made responsible to repay Medicare for the CCJR model will depend on 
the hospital's quality and actual payment performance relative to 
episode quality thresholds and target prices. Quality performance and 
thresholds are further discussed in section III.C.5. of this proposed 
rule, and the remainder of this section will discuss the proposed 
approach to establishing target prices.
    We propose to establish CCJR target prices for each participant 
hospital. For episodes beginning in performance years 1, 3, 4, and 5, a 
participant hospital would have eight target prices, one for each of 
the following:
     MS-DRG 469 anchored episodes that were initiated between 
January 1 and September 30 of the performance year, if the participant 
hospital successfully submits data on the voluntary patient reported 
outcome measure proposed in section III.C.5. of this proposed rule.
     MS-DRG 470 anchored episodes that were initiated between 
January 1 and September 30 of the performance year, if the participant 
hospital successfully submits data on the proposed voluntary patient 
reported outcome measure.
     MS-DRG 469 anchored episodes that were initiated between 
October 1 and December 31 of the performance year, if the participant 
hospital successfully submits data on the proposed voluntary patient-
reported outcome measure.
     MS-DRG 470 anchored episodes that were initiated between 
October 1 and December 31 of the performance year, if the participant 
hospital successfully submits data on the proposed voluntary patient-
reported outcome measure.
     MS-DRG 469 anchored episodes that were initiated between 
January 1 and September 30 of the performance year, if the participant 
hospital does not successfully submit data on the voluntary patient-
reported outcome measure.
     MS-DRG 470 anchored episodes that were initiated between 
January 1 and September 30 of the performance year, if the participant 
hospital does not successfully submit data on the proposed voluntary 
patient-reported outcome measure.
     MS-DRG 469 anchored episodes that were initiated between 
October 1 and December 31 of the performance year, if the participant 
hospital does not successfully submit data on the proposed voluntary 
patient-reported outcome measure.
     MS-DRG 470 anchored episodes that were initiated between 
October 1 and December 31 of the performance year, if the participant 
hospital does not successfully submit data on the proposed voluntary 
patient-reported outcome measure.
    For episodes beginning in performance year 2, a participant 
hospital would have 16 target prices. These would include the same 
combinations as for the other 4 performance years, but one set for 
determining potential reconciliation payments, and the other for 
determining potential Medicare repayment amounts, as part of the 
phasing in of two-sided risk discussed later in this section. Further 
discussion on our proposals for different target prices for MS-DRG 469 
versus MS-DRG 470 anchored episodes, for episodes initiated between 
January 1 and September 30 versus October 1 and December 31, and for 
participant hospitals that do and do not successfully submit data on 
the proposed patient-reported outcome measure can be found in sections 
III.C.4.b and III.C.5. of this proposed rule.
    We intend to calculate and communicate episode target prices to 
participant hospitals prior to the performance period in which they 
apply (that is, prior to January 1, 2017, for target prices covering 
episodes initiated between January 1 and September 30, 2017; prior to 
October 1, 2017 for target prices covering episodes initiated between 
October 1 and December 31, 2017). We believe prospectively 
communicating prices to hospitals will help them make any 
infrastructure, care coordination and delivery, and financial 
refinements they may deem appropriate to prepare for the new episode 
target prices.
    The proposed approach to setting target prices incorporates the 
following features:
     Set different target prices for episodes anchored by MS-
DRG 469 versus MS-DRG 470 to account for patient and clinical 
variations that impact hospitals' cost of providing care.
     Use 3 years of historical Medicare payment data grouped 
into episodes of care according to the episode definition proposed in 
section III.B. of this proposed rule, hereinafter termed historical 
CCJR episodes. The specific set of 3- historical-years used would be 
updated every other performance year.

[[Page 41226]]

     Apply Medicare payment system (for example, IPPS, OPPS, 
IRF PPS, SNF, PFS, etc.) updates to the historical episode data to 
ensure we incentivize hospitals based on historical utilization and 
practice patterns, not Medicare payment system rate changes that are 
beyond hospitals' control. Because different Medicare payment system 
updates become effective at two different times of the year, we would 
calculate separate target prices for episodes initiated between January 
1 and September 30 versus October 1 and December 31.
     Blend together hospital-specific and regional historical 
CCJR episode payments, transitioning from primarily provider-specific 
to completely regional pricing over the course of the 5 performance 
years, to incentivize both historically efficient and less efficient 
hospitals to furnish high quality, efficient care in all years of the 
model. Regions would be defined as each of the nine U.S. Census 
divisions.
     Normalize for provider-specific wage adjustment variations 
in Medicare payment systems when combining provider-specific and 
regional historical CCJR episodes. Wage adjustments would be reapplied 
when determining hospital-specific target prices.
     Pool together CCJR episodes anchored by MS DRGs 469 and 
470 to use a greater historical CCJR episode volume and set more stable 
prices.
     Apply a discount factor to serve as Medicare's portion of 
reduced expenditures from the CCJR episode, with any remaining portion 
of reduced Medicare spending below the target price potentially 
available as reconciliation payments to the participant hospital where 
the anchor hospitalization occurred.
    Further discussion on each of the individual features can be found 
in section III.C.4.b. of this proposed rule. In section III.C.4.c. of 
this proposed rule, we also provide further details on the proposed 
sequential steps to calculate target prices and how each of the pricing 
features would fit together.
b. Proposed Pricing Features
(1) Different Target Prices for Episodes Anchored by MS-DRG 469 Versus 
MS-DRG 470
    For each participant hospital we propose to establish different 
target prices for CCJR episodes initiated by MS-DRG 469 versus MS-DRG 
470. MS-DRGs under the IPPS account for some of the clinical and 
resource variations that exist and that impact hospitals' cost of 
providing care. Specifically, MS-DRG 469 is defined to identify, and 
provide hospitals a higher Medicare payment to reflect the higher 
hospital costs for, hip and knee procedures with major complications or 
comorbidities. Therefore, we propose to calculate separate target 
prices for each participant hospital for CCJR episodes with MS-DRG 469 
versus MS-DRG 470 anchor hospitalizations.
    We considered adjusting the episode target prices by making 
adjustments or setting different prices based on patient-specific 
clinical indicators (for example, comorbidities). However, we do not 
believe there is a sufficiently reliable approach that exists suitable 
for CCJR episodes beyond MS-DRG-specific pricing, and there is no 
current standard on the best approach. At the time of developing this 
proposed rule Tennessee, Ohio, and Arkansas are launching multi-payer 
(including Medicaid and commercial payers, excluding Medicare) bundles 
and include hip and knee replacement as an episode 22 23 24. 
These states' hip and knee episode definitions and payment models are 
consistent with, though not the same as, the proposed CCJR episode 
described in this proposed rule. However, each of these three states 
uses different risk adjustment factors. This variation across states 
supports our belief that there is currently no standard risk adjustment 
approach widely accepted throughout the nation that could be used under 
CCJR, a model that would apply to hospitals across multiple states. 
Therefore, we are not proposing to make adjustments based on patient-
specific clinical indicators.
---------------------------------------------------------------------------

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

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

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

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

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

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

[[Page 41227]]

(2) Three Years of Historical Data
    We propose to use 3 years of historical CCJR episodes for 
calculating CCJR target prices. The set of 3- historical-years used 
would be updated every other year. Specifically--
     Performance years 1 and 2 would use historical CCJR 
episodes that started between January 1, 2012 and December 31, 2014;
     Performance years 3 and 4 would use historical episodes 
that started between January 1, 2014 and December 31, 2016; and
     Performance year 5 would use episodes that started between 
January 1, 2016 and December 31, 2018. We considered using fewer than 3 
years of historical CCJR episode data, but we are concerned with having 
sufficient historical episode volume to reliably calculate target 
prices. We also considered not updating the historical episode data for 
the duration of the model. However, we believe that hospitals' target 
prices should be regularly updated on a predictable basis to use the 
most recent available claims data, consistent with the regular updates 
to Medicare's payment systems, to account for actual changes in 
utilization. We are not proposing to update the data annually, given 
the uncertainty in pricing this could introduce for participant 
hospitals. We also note that the effects of updating hospital-specific 
data on the target price could be limited as the regional contribution 
to the target price grows, moving to two-thirds in performance year 3 
when the first historical episode data update would occur.
(3) Proposed Trending of Historical Data to the Most Recent Year of the 
Three
    We acknowledge that some payment variation may exist in the 3 years 
of historical CCJR episodes due to updates to Medicare payment systems 
(for example, IPPS, OPPS, IRF PPS, SNF PPS, etc.) and national changes 
in utilization patterns. Episodes in the third of the 3 historical 
years may have higher average payments than those from the earlier 2 
years because of Medicare payment rate increases over the course of the 
3 historical years. We do not intend to have CCJR incentives be 
affected by Medicare payment system rate changes that are beyond 
hospitals' control. In addition to the changes in Medicare payment 
systems, average episode payments may change year over year due to 
national trends reflecting changes in industry-wide practice patterns. 
For example, readmissions for all patients, including those in CCJR 
episodes, may decrease nationally due to improved industry-wide 
surgical protocols that reduce the chance of infections. We do not 
intend to provide reconciliation payments to (or require repayments 
from) hospitals for achieving lower (or higher) Medicare expenditures 
solely because they followed national changes in practice patterns. 
Instead, we aim to incentivize hospitals based on their hospital-
specific inpatient and PAC delivery practices for LEJR episodes.
    To mitigate the effects of Medicare payment system updates and 
changes in national utilization practice patterns within the 3 years of 
historical CCJR episodes, we propose to follow an approach similar to 
what is done in BPCI Model 2 and apply a national trend factor to each 
of the years of historical episode payments. Specifically, we propose 
to inflate the 2 oldest years of historical episode payments to the 
most recent year of the 3 historical years described in section 
III.C.4.b.(2) of this proposed rule. We propose to trend forward each 
of the 2 oldest years using the changes in the national average CCJR 
episode payments. We also propose to apply separate national trend 
factors for episodes anchored by MS-DRG 469 versus MS-DRG 470 to 
capture any MS-DRG-specific payment system updates or national 
utilization pattern changes. For example, when using CY 2012-2014 
historical episode data to establish target prices for performance 
years 1 and 2, under our proposal we would calculate a national average 
MS-DRG 470 anchored episode payment for each of the 3 historical years. 
The ratio of the national average MS-DRG 470 anchored episode payment 
for CY 2014 to that of CY 2012 would be used to trend 2012 MS-DRG 470 
anchored episode payments to CY 2014. Similarly, the ratio of the 
national average MS-DRG 470 anchored episode payment for CY 2014 to 
that of CY 2013 would be used to trend 2013 episode payments to CY 
2014. The aforementioned process would be repeated for MS-DRG 469 
anchored episodes. Trending CY 2012 and CY 2013 data to CY 2014 would 
capture updates in Medicare payment systems as well as national 
utilization pattern changes that may have occurred.
    We considered adjusting for regional trends in utilization, as 
opposed to national trends. However, we believe that any Medicare 
payment system updates and significant changes in utilization practice 
patterns would not be region-specific but rather be reflected 
nationally.
    We seek comment on our proposal to nationally trend historical data 
to the most recent year of the 3 being used to set the target prices.
(4) Update Historical Episode Payments for Ongoing Payment System 
Updates
    We propose to prospectively update historical CCJR episode payments 
to account for ongoing Medicare payment system (for example, IPPS, 
OPPS, IRF PPS, SNF, PFS, etc.) updates to the historical episode data 
and ensure we incentivize hospitals based on historical utilization and 
practice patterns, not Medicare payment system rate changes that are 
beyond hospitals' control. Medicare payment systems do not update their 
rates at the same time during the year. For example, IPPS, the IRF 
prospective payment system, and the SNF payment system apply annual 
updates to their rates effective October 1, while the hospital 
outpatient prospective payment system (OPPS) and Physician Fee Schedule 
(PFS) apply annual updates effective January 1. To ensure we 
appropriately account for the different Medicare payment system updates 
that go into effect on January 1 and October 1, we propose to update 
historical episode payments for Medicare payment system updates and 
calculate target prices separately for episodes initiated between 
January 1 and September 30 versus October 1 and December 31 of each 
performance year. The target price in effect as of the day the episode 
is initiated would be the target price for the whole episode. Note that 
in performance year 5, the second set of target prices would be for 
episodes that start and end between and including October 1 and 
December 31 because the fifth performance period of the CCJR model 
would end on December 31, 2020. Additionally, a target price for a 
given performance year may apply to episodes included in another 
performance year. For example, an episode initiated in November 2016, 
and ending in February 2017 would have a target price based on the 
second set of 2016 target prices (for episodes initiated between 
October 1 and December 31, 2016), and it would be captured in the CY 
2017 performance year (performance year 2) because it ended between 
January 1 and December 31, 2017. We refer readers to section III.C.3.c. 
of this proposed rule for further discussion on the definition of 
performance years.
    We propose to update historical CCJR episode payments by applying 
separate Medicare payment system update factors each January 1 and 
October 1 to each of the following six components of each hospital's 
historical CCJR payments:
     Inpatient acute.

[[Page 41228]]

     Physician.
     IRF.
     SNF.
     HHA.
     Other services.
    A different set of update factors would be calculated for January 1 
through September 30 versus October 1 through December 31 episodes each 
performance year. The six update factors for each of the aforementioned 
components would be hospital-specific and would be weighted by the 
percent of the Medicare payment for which each of the six components 
accounts in the hospital's historical episodes. The weighted update 
factors would be applied to historical hospital-specific average 
payments to incorporate ongoing Medicare payment system updates. A 
weighted update factor would be calculated by multiplying the 
component-specific update factor by the percent of the hospital's 
historical episode payments the component represents, and summing 
together the results. For example, let us assume 50 percent of a 
hospital's historical episode payments were for inpatient acute care 
services, 15 percent for physician services, 35 percent for SNF 
services, and 0.0 percent for the remaining services. Let us also 
assume for this example that the update factors for inpatient acute 
care services, physician services, and SNF services are 1.02, 1.03, and 
1.01, respectively. The weighted update factor in this example would be 
the following: (0.5 * 1.02) + (0.15 * 1.03) + (0.35 * 1.01) = 1.018. 
The hospital in this example would have its historical average episode 
payments multiplied by 1.018 to incorporate ongoing payment system 
updates. The specific order of steps, and how this step fits in with 
others, is discussed further in section III.C.4.c. of this proposed 
rule.
    Each of a hospital's six update factors would be based on how 
inputs have changed in the various Medicare payment systems for the 
specific hospital. Additional details on these update factors will be 
discussed later in this section.
    Region-specific update factors for each of the aforementioned 
components and weighted update factors would also be calculated in the 
same manner as the hospital-specific update factors. Instead of using 
historical episodes attributed to a specific hospital, region-specific 
update factors would be based on all historical episodes initiated at 
any CCJR eligible hospital within the region. For purposes of this 
rule, CCJR eligible hospitals are defined as hospitals that were paid 
under IPPS and not a participant in BPCI Model 1 or in the risk-bearing 
period of Models 2 or 4 for LEJR episodes, regardless of whether or not 
the MSAs in which the hospitals are located were selected for inclusion 
in the CCJR model. CCJR episodes initiated at a CCJR eligible hospital 
will for purposes of this rule be referred to as CCJR episodes 
attributed to that CCJR eligible hospital.
    We considered an alternative option of trending the historical 
episode payments forward to the upcoming performance year using ratios 
of national average episode payment amounts, similar to how we propose 
to trend the 2 oldest historical years forward to the latest historical 
year for historical CCJR episode payments in section III.C.4.b.(3) of 
this proposed rule. Using ratios of national average episode payment 
amounts would have the advantage of also capturing changes in national 
utilization patterns in addition to payment system updates between the 
historical years and the performance year. However, such an approach 
would need to be done retrospectively, after average episode payments 
can be calculated for the performance year, because it would rely on 
the payments actually incurred in the performance period, data for 
which would be not be available before the performance period. While 
the proposed approach of using component-specific update factors may be 
more complicated than the aforementioned alternative, we believe the 
additional complication is outweighed by the value to hospitals of 
knowing target prices before the start of an episode for which the 
target price would apply. We seek comment on this proposed approach of 
updating historical episode payments for ongoing Medicare payment 
system changes.
    We do not propose to separately and prospectively apply an 
adjustment to account for changes in national utilization patterns 
between the historical and performance years. If a prospective 
adjustment factor for national utilization pattern changes were 
applied, it may only be meaningful in performance years 2 and 4, when 
the historical data used to calculate target prices would not be 
updated, but another year of historical data would be available. In any 
of the other 3 performance years, the latest available historical year 
of data would already be incorporated into the target prices. Given 
that we propose to refresh the historical data used to calculate target 
prices every 2 years, we do not believe an additional adjustment factor 
to account for national practice pattern changes is necessary to 
appropriately incentivize participant hospitals to improve quality of 
care and reduce episode payments.
(a) Proposed Inpatient Acute Services Update Factor
    The proposed inpatient acute services update factor would apply to 
payments for services included in the episode paid under the IPPS. This 
would include payments for the CCJR anchor hospitalization, but not 
payments for related readmissions at CAHs during the episode window. 
Payments for related readmissions at CAHs would be captured under the 
update factor for other services in section III.C.4.b.(f) of this 
proposed rule.
    The update factor applied to the inpatient acute services component 
of each participant hospital and region's historical average episode 
payments would be based on how inputs for the Medicare IPPS have 
changed between the latest year used in the historical 3 years of 
episodes and the upcoming performance period under CCJR. We propose to 
use changes in the following IPPS inputs to calculate the inpatient 
acute services update factor: IPPS base rate and average of MS-DRG 
weights, as defined in the IPPS/LTCH Final Rules for the relevant 
years. The average MS-DRG weight would be specific to each participant 
hospital and region to account for hospital and region-specific 
inpatient acute service utilization patterns. Hospital-specific and 
region-specific average MS-DRG weights would be calculated by averaging 
the MS-DRG weight for all the IPPS MS-DRGs included in the historical 
episodes attributed to each participant hospital and attributed to CCJR 
eligible hospitals in the region, respectively; including MS-DRGs for 
anchor admissions as well as those for subsequent readmissions that 
fall within the episode definition. Expressed as a ratio, the inpatient 
acute services adjustment factor would equal the following:
     The numerator is based on values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.
     The denominator is based on values applicable at the end 
of the latest historical year used in the target price (TP) 
calculations.
    Therefore, the proposed inpatient acute services update factor 
formula is shown as--

[[Page 41229]]

[GRAPHIC] [TIFF OMITTED] TP14JY15.002

(b) Proposed Physician Services Update Factor
    The proposed physician services update factor would apply to 
payments for services included in the episode paid under the Medicare 
PFS for physician services. We propose to use changes in the following 
PFS inputs to calculate the physician services update factor of each 
participant hospital and region's historical average episode payments: 
RVUs; work, practice expense, and malpractice liability geographic 
practice cost indices (GPCIs); and national conversion factor, as 
defined in the PFS Final Rule for the relevant years. Hospital-specific 
and region-specific RVU-weighted GPCIs would be calculated to account 
for hospital and region-specific physician service utilization 
patterns. Hospital-specific and region-specific RVU-weighted GPCIs 
would be calculated by taking the proportion of RVUs for work, practice 
expense, and malpractice liability for physician services included in 
the historical episodes and attributed to each participant hospital and 
attributed to CCJR eligible hospitals in the region, respectively, and 
multiplying each proportion by the relevant GPCI.
    Expressed as a ratio, the physician services update factor would 
equal the following:
     The numerator is based on GPCI values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.
     The denominator is based on GPCI applicable at the end of 
the latest year used in the target price (TP) calculations.
    Therefore, the proposed physician services update factor formula is 
shown as--
[GRAPHIC] [TIFF OMITTED] TP14JY15.003

(c) Proposed IRF Services Update Factor
    The proposed IRF services update factor apply to payments for 
services included in the episode paid under the Medicare inpatient 
rehabilitation facility prospective payment system (IRF PPS). We 
propose to use changes in the IRF Standard Payment Conversion Factor, 
an input for the IRF PPS and defined in the IRF PPS Final Rule for the 
relevant years, to update Medicare payments for IRF services provided 
in the episode. The IRF Standard Payment Conversion Factor is the same 
for all IRFs and IRF services, so there is no need to account for any 
hospital-specific or region-specific IRF utilization patterns; each 
participant hospital and region would use the same IRF services update 
factor.
    Expressed as a ratio, the IRF PPS update factor would equal the 
following:
     The numerator is based on values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.
     The denominator is based on values applicable at the end 
of the latest historical year used in the target price (TP) 
calculations:
    Therefore, the proposed IRF services update factor formula is shown 
as
[GRAPHIC] [TIFF OMITTED] TP14JY15.004

(d) Proposed SNF Services Update Factor
    The proposed SNF services update factor would apply to payments for 
services included in the episode and paid under the SNF PPS, including 
payments for SNF swing bed services. The update factor applied to the 
SNF services component of each participant hospital and region's 
historical average episode payments would be based on how average 
Resource Utilization Group (RUG-IV) Case-Mix Adjusted Federal Rates for 
the Medicare SNF PPS (defined in the SNF PPS Final Rule) have changed 
between the latest year used in the historical 3 years of episodes and 
the upcoming performance period under CCJR. The average RUG-IV Case-Mix 
Adjusted Federal Rates would be specific to each participant hospital 
and region to account for hospital and region-specific SNF service 
utilization patterns. Hospital-specific and region-specific average 
RUG-IV Case-Mix Adjusted Federal Rates would be calculated by averaging 
the RUG-IV Case-Mix Adjusted Federal Rates for all SNF services 
included in the historical episodes attributed to each participant 
hospital and attributed to CCJR eligible hospitals in the region, 
respectively. We note that the RUG-IV Case-Mix Adjusted Federal Rate 
may vary for the same RUG, depending on whether the SNF was categorized 
as urban or rural.
    Expressed as a ratio, the SNF services update factor would equal 
the following:
     The numerator is based on values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.
     The denominator is based on values applicable at the end 
of the latest year used in the target price (TP) calculations:
    Therefore, the proposed SNF services update factor formula is shown 
as
[GRAPHIC] [TIFF OMITTED] TP14JY15.005


[[Page 41230]]


(e) Proposed HHA Services Update Factor
    The proposed HHA services update factor would apply to payments for 
services included in the episode and paid under the HH PPS, but exclude 
payments for Low Utilization Payment Adjustment (LUPA) claims (claims 
with four or fewer home health visits) because they are paid 
differently and would instead be captured in the update factor for 
other services in section III.C.4.b.(f) of this proposed rule. The 
update factor applied to the home health services component of each 
participant hospital and region's historical average episode payments 
would be based on how inputs for the Medicare HH PPS have changed 
between the latest year used in the historical 3 years of episodes and 
the upcoming performance period under CCJR. We propose to use changes 
in the HH PPS base rate and average of home health resource group 
(HHRG) case-mix weight, inputs for the HHA PPS and defined in the HHA 
PPS Final Rule for the relevant years, to calculate the home health 
services update factor. The average HHRG case-mix weights would be 
specific to each participant hospital and region to account for 
hospital and region-specific home health service utilization patterns. 
Hospital-specific and region-specific HHA services update factors would 
be calculated by averaging the HHRG case-mix weights for all home 
health payments (excluding LUPA claims) included in the historical 
episodes attributed to each participant hospital and attributed to CCJR 
eligible hospitals in the region, respectively.
    Expressed as a ratio, the HHA adjustment factor would equal the 
following:
     The numerator is based on values applicable for the 
upcoming performance period (PP) for which a target price is being 
calculated.
     The denominator is based on values applicable at the end 
of the latest historical year used in the target price (TP) 
calculations.
    Therefore, the proposed HHA services update factor formula is shown 
as--
[GRAPHIC] [TIFF OMITTED] TP14JY15.006

(f) Proposed Other Services Update Factor
    The other services update factor would apply to payments for 
services included in the episode and not paid under the IPPS, PFS, IRF 
PPS, or HHA PPS (except for LUPA claims). This component would include 
episode payments for home health LUPA claims and CCJR related 
readmissions at CAHs. For purposes of calculating the other services 
update factor, we propose to use the Medicare Economic Index (MEI), a 
measure developed by CMS for measuring the inflation for goods and 
services used in the provision of physician services.\27\ We would 
calculate the other services update factor as the percent change in the 
MEI between the latest year used in the TP calculation and its 
projected value for the upcoming performance period. Because MEI is not 
hospital or region-specific, each participant hospital and region would 
use the same other services update factor.
---------------------------------------------------------------------------

    \27\ Medicare Market Basket Data. http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketData.html.
---------------------------------------------------------------------------

(5) Blend Hospital-specific and Regional Historical Data
    We propose to calculate CCJR episode target prices using a blend of 
hospital-specific and regional historical average CCJR episode 
payments, including CCJR episode payments for all CCJR eligible 
hospitals in the same U.S. Census division as discussed further in 
section III.C.4.b.(6) of this proposed rule. Specifically, we propose 
to blend two-thirds of the hospital-specific episode payments and one-
third of the regional episode payment to set a participant hospital's 
target price for the first 2- performance years of the CCJR model (CY 
2016 and CY 2017). For performance year 3 of the model (CY 2018), we 
propose to adjust the proportion of the hospital-specific and regional 
episode payments used to calculate the episode target price from two-
thirds hospital-specific and one-third regional to one-third hospital-
specific and two-thirds regional. Finally, we propose to use only 
regional historical CCJR episode payments for performance years 4 and 5 
of the model (CY 2019 and CY 2020) to set a participant hospital's 
target price, rather than a blend between the hospital-specific and 
regional episode payments. The specific order of steps, and how this 
step fits in with others, is discussed further in section III.C.4.c. of 
this proposed rule. We welcome comment on the appropriate blend between 
hospital-specific and regional episode payments and the change in that 
blend over time.
    We considered establishing episode target prices using only 
historical CCJR hospital-specific episode payments for all 5 
performance years of the model (that is, episode payments for episodes 
attributed to the participant hospital, as previously described in 
section III.C.2. of this proposed rule). Using hospital-specific 
historical episodes may be appropriate in other models such as BPCI 
Model 2 where participation is voluntary and setting a region-wide 
target price could lead to a pattern of selective participation in 
which inefficient providers decline to participate, undermining the 
model's ability to improve the efficiency and quality of care delivered 
by those providers, while already-efficient providers receive windfall 
gains even if they do not further improve efficiency. Because CCJR 
model participants will be required to participate in the model, solely 
using hospital-specific historical episode data is not necessary to 
avoid this potential concern. Furthermore, using only hospital-specific 
historical CCJR episode payments may provide little incentive for 
hospitals that already cost-efficiently deliver high quality care to 
maintain or further improve such care. These hospitals could receive a 
relatively low target price because of their historical performance but 
have fewer opportunities for achieving additional efficiency under 
CCJR. They would not receive reconciliation payments for maintaining 
high quality and efficiency, while other hospitals that were less 
efficient would receive reconciliation payments for improving, even if 
the less historically efficient hospitals did not reach the same level 
of high quality and efficiency as the more historically efficient 
hospitals. Using only hospital-specific historical CCJR episode 
payments may also not be sufficient to curb inefficient care or 
overprovision of services for hospitals with historically high CCJR 
episode payments. In such instances, using hospital-specific historical 
episode payments for the CCJR model could result in Medicare continuing 
to pay an excessive amount for episodes of care provided by inefficient 
hospitals, and inefficient hospitals would stand to

[[Page 41231]]

benefit from making only small improvements. Thus, we do not propose to 
set target prices based solely on hospital-specific data for any 
performance years of the model.
    We considered establishing the episode target price using only 
historical CCJR regional episode payments for all 5 performance years 
of the model. Though regional target pricing would reward the most 
efficient hospitals for continuing to provide high quality and cost 
efficient care, we are concerned about providing achievable incentives 
under the model for hospitals with high historical CCJR average episode 
payments. We believe a lower regional price for such hospitals would 
leave them with little financial incentive in performance year 1, 
especially without any responsibility to repay payments in excess of 
the target price as described in section III.C.3. of this proposed 
rule. Thus, we do not propose to set target prices solely on regional 
data for the entire duration of the model.
    Therefore, we propose initially to blend historical hospital-
specific and regional-historical episode payments and then transition 
to using regional-only historical episode payments in establishing 
target prices to afford early and continuing incentives for both 
historically efficient and less efficient hospitals to furnish high 
quality, efficient care in all years of the model. Our proposal more 
heavily weights a hospital's historical episode data in the first 2 
years of the model (two-thirds hospital-specific, one-third regional), 
providing a reasonable incentive for both currently efficient and less 
efficient hospitals to deliver high quality and efficient care in the 
early stages of model implementation. Beginning in performance year 3, 
once hospitals have engaged in care redesign and adapted to the model 
parameters, we propose to shift to a more heavily weighted regional 
contribution (one-third hospital-specific, two-thirds regional in 
performance year 3) and ultimately to a regional target price for 
performance years 4 and 5. We believe that by performance year 4, 
setting target prices based solely on regional historical data would be 
feasible because hospitals would have had 3 years under this model to 
more efficiently deliver high quality care, thereby reducing some of 
the variation across hospitals. We believe transitioning to regional 
only pricing in the latter years of the model would provide important 
information about the reduction in unnecessary variation in LEJR 
episode utilization patterns within a region that can be achieved.
    We believe transitioning to regional-only pricing in the latter 
years of the model may provide valuable information regarding potential 
pricing strategies for successful episode payment models that we may 
consider for expansion in the future. As discussed previously, 
substantial regional and hospital-specific variation in Medicare LEJR 
episode spending currently exists for beneficiaries with similar 
demographic and health status, so we are proposing that the early CCJR 
model years will more heavily weight historical hospital-specific 
experience in pricing episode for a participant hospital. Once the 
hospital has substantial experience with care redesign, we expect that 
unnecessary hospital-specific variation in episode spending will be 
minimized so that regional-only pricing would be appropriate as we have 
proposed. We note that, like episode payment under the CCJR model, 
Medicare's current payment systems make payments for bundles of items 
and services, although of various breadths and sizes depending on the 
specific payment system. For example, the IPPS pays a single payment, 
based on national prices with geography-specific labor cost 
adjustments, for all hospital services furnished during an inpatient 
hospital stay, such as nursing services, medications, medical 
equipment, operating room suites, etc. Under the IPPS, the national 
pricing approach incentivizes efficiencies and has, therefore, led to a 
substantial reduction in unnecessary hospital-specific variation in 
resource utilization for an inpatient hospital stay. On the other hand, 
the episode payment approach being tested under BPCI Model 2 relies 
solely on provider-specific pricing over the lifetime of the model, 
assuming the number of episode cases is sufficient to establish a 
reliable episode price, an approach that has potential limitations were 
expansion to be considered. Thus, we believe our proposal for CCJR will 
provide new, important information regarding pricing for even larger 
and broader bundles of services once unnecessary provider-specific 
variation has been minimized that would supplement our experience with 
patterns and pricing under existing payment systems and other episode 
payment models. We expect that testing of CCJR will contribute further 
information about efficient Medicare pricing strategies that result in 
appropriate payment for providers' resources required to furnish high 
quality, efficient care to beneficiaries who receive LEJR procedures. 
This is essential information for any consideration of episode payment 
model expansion, including nationally, in the future, where 
operationally feasible and appropriate pricing strategies, including 
provider-specific, regional, and national pricing approaches would need 
to be considered.
    We propose an exception to the blended hospital-specific and 
regional pricing approach for hospitals with low historical CCJR 
episode volume. We propose to define hospitals with low CCJR episode 
volume as those with fewer than 20 CCJR episodes in total across the 3-
historical-years used to calculate target prices. We believe 
calculating the hospital-specific component of the blended target price 
for these historically low CCJR episode volume hospitals may be subject 
to a high degree of statistical variation. Therefore, for each 
performance year, we propose to use 100 percent regional target pricing 
for participant hospitals who have fewer than twenty historical CCJR 
episodes in the 3-historical-years used to calculate target prices, as 
described in section III.C.4.b.(2) of this proposed rule. We note that 
the 3-historical-years used to calculate target prices would change 
over the course of the model, as described in section III.C.4.b.(2) of 
this proposed rule, and when that happens, the twenty episode threshold 
would be applied to the new set of historical years. If all IPPS 
hospitals nationally participated (for estimation purposes, only) in 
CCJR, we estimate about 5 percent of hospitals would be affected by 
this proposed low historical CCJR episode volume provision. \28\ A 
minimum threshold of twenty episodes is almost equal to the minimum 
number of admissions required in the Medicare HRRP. HRRP payment 
adjustment factors are, in part, determined by procedure/condition-
specific readmission rates for a hospital. HRRP requires at least 25 
procedure/condition-specific admissions to calculate the procedure/
condition-specific readmission rate and to be included in the 
hospital's overall HRRP payment adjustment factor. Though the proposed 
minimum threshold of twenty episodes is slightly less than the 25 
admissions required for HRRP, we believe that because we would not be 
calculating infrequent events such as readmissions, we can achieve a 
stable price with slightly fewer episodes.
---------------------------------------------------------------------------

    \28\ Medicare FFS Parts A and B claims, CCJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    We also propose an exception to the blended hospital-specific and 
regional

[[Page 41232]]

pricing approach for participant hospitals that received new CMS 
Certification Numbers (CCNs) during the 24 months prior to the 
beginning of, or during, the performance year for which target prices 
are being calculated. These participant hospitals with new CCNs may 
have formed due to a merger between or split from previously existing 
hospitals, or may be new hospitals altogether. As a general principle, 
we aim to incorporate into the target prices all the historical 
episodes that would represent our best estimate of CCJR historical 
payments for these participant hospitals with new CCNs. For participant 
hospitals with new CCNs that formed from a merger between or split from 
previously existing hospitals, we propose to calculate hospital-
specific historical payments using the episodes attributed to the 
previously existing hospitals. These hospital-specific historical 
payments would then be blended with the regional historical payments 
according to the approach previously described in this section. For 
participant hospitals with new CCNs that are new hospitals altogether, 
we propose to use the approach previously described in this section for 
hospitals with fewer than 20 CCJR episodes across the 3 historical 
years used to calculate target prices. In other cases, due to an 
organizational change a hospital may experience a change to an already 
existing CCN during the 24 months prior to the beginning of, or during, 
the performance year for which target prices are being calculated. For 
example, one hospital with a CCN may merge with a second hospital 
assigned a different CCN, and both hospitals would then be identified 
under the single CCN of the second hospital. While there may be more 
than 20 CCJR episodes under the second hospital's CCN in total across 
the 3 historical years used to calculate target prices, in this 
scenario our use of only those cases under the second hospital's CCN in 
calculating hospital-specific historical payments would fail to meet 
our general principle of incorporating into target prices all the 
historical episodes that would represent our best estimate of CCJR 
historical payments for these now merged hospitals. In this scenario, 
we propose to calculate hospital-specific payments for the remaining 
single CCN (originally assigned to the second hospital only) using the 
historical episodes attributed to both previously existing hospitals. 
These hospital-specific historical payments would then be blended with 
the regional historical payments according to the approach previously 
described in this section in order to determine the episode price for 
the merged hospitals bearing a single CCN.
    We seek comment on this proposed approach for blending hospital-
specific and regional historical payments.
(6) Define Regions as U.S. Census Divisions
    In all 5 performance years we propose to define ``region'' as one 
of the nine U.S. Census divisions \29\ in Figure 3.
---------------------------------------------------------------------------

    \29\ There are four census regions--Northeast, Midwest, South, 
and West. Each of the four census regions is divided into two or 
more ``census divisions''. Source: https://www.census.gov/geo/reference/gtc/gtc_census_divreg.html. Accessed on April 15, 2015.
    \30\ http://www.eia.gov/consumption/commercial/censusmaps.cfm.
    [GRAPHIC] [TIFF OMITTED] TP14JY15.007
    
    We considered using states, HRRs, and the entire U.S. as 
alternative options to U.S. Census divisions in defining the region 
used in blending provider-specific and regional historical episode data 
for calculating target prices. However, HRR definitions are 
specifically based on referrals for cardiovascular surgical procedures 
and neurosurgery, and may not reflect referral patterns for orthopedic 
procedures. Using the entire U.S. would not account for substantial 
current regional variation in utilization, which is significant for 
episodes that often involve PAC use, such as lower extremity joint 
replacement procedures \31\. Finally, we considered

[[Page 41233]]

using states as regions but were concerned that doing so would not 
allow for sufficient LEJR episode volume to set stable regional 
components of target prices, especially for participant hospitals in 
small states. We believe U.S. Census divisions provide the most 
appropriate balance between very large areas with highly disparate 
utilization patterns and very small areas that would be subject to 
price distortions due to low volume or hospital-specific utilization 
patterns.
---------------------------------------------------------------------------

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

    We seek comment on our proposal to define a region as the U.S. 
Census division for purposes of the regional component of blended 
target prices under CCJR.
(7) Normalize for Provider-Specific Wage Adjustment Variations
    We note that some variation in historical CCJR episode payments 
across hospitals in a region may be due to wage adjustment differences 
in Medicare's payments. In setting Medicare payment rates, Medicare 
typically adjusts facilities' costs attributable to wages and wage-
related costs (as estimated by the Secretary from time to time) by a 
factor (established by the Secretary) reflecting the relative wage 
level in the geographic area of the facility or practitioner (or the 
beneficiary residence, in the case of home health and hospice services) 
compared to a national average wage level. Such adjustments are 
essential for setting accurate payments, as wage levels vary 
significantly across geographic areas of the country. However, having 
the wage level for one hospital influence the regional-component of 
hospital-specific and regional blended target prices for another 
hospital with a different wage level would introduce unintended pricing 
distortions not based on utilization pattern differences.
    In order to preserve how wage levels affect provider payment 
amounts, while minimizing the distortions introduced when calculating 
the regional-component of blended target prices, we propose to 
normalize for wage index differences in historical episode payments 
when calculating and blending the regional and hospital-specific 
components of blended target prices. Calculating blended target prices 
from historical CCJR episodes would help ensure we incentivize 
hospitals based on historical utilization and practice patterns, not 
Medicare payment system rate changes that are beyond hospitals' 
control.
    We propose to normalize for provider-specific wage index variations 
using the IPPS wage index applicable to the anchor hospitalization 
(that is, the IPPS wage index used in the calculation of the IPPS 
payment for the anchor hospitalization). The anchor hospitalization 
accounts for approximately 50 percent of the total episode 
expenditures, and the IPPS wage index is applied to IPPS payments in a 
similar manner as wage indices for other Medicare payment systems are 
applied to their respective payments.\32\ Therefore, we propose that 
the IPPS wage index applicable to the anchor hospitalization for each 
historical episode be used to normalize for wage index variations in 
historical episode payments across hospitals when calculating blended 
target prices. We propose to specifically perform this normalization 
using the wage normalization factor (0.7 * IPPS wage index + 0.3) to 
adjust the labor-related portion of payments affected by wage indices. 
The 0.7 approximates the labor share in IPPS, IRF PPS, SNF, and HHA 
Medicare payments. We would normalize for provider-specific wage index 
variations by dividing a hospital's historical episode payments by the 
wage normalization factor.
---------------------------------------------------------------------------

    \32\ Medicare FFS Parts A and B claims, CCJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    We propose to reintroduce the hospital-specific wage variations by 
multiplying episode payments by the wage normalization factor when 
calculating the target prices for each participant hospital, as 
described in section III.C.4.c. of this proposed rule. When 
reintroducing the hospital-specific wage variations, the IPPS wage 
index would be the one that applies to the hospital during the period 
for which target prices are being calculated (for example, FY 2016 wage 
indices for the target price calculations for episodes that begin 
between January 1 and September 30, 2016). The specific order of steps, 
and how this step fits in with others, is discussed further in section 
III.C.4.c. of this proposed rule. We seek comment on our proposal to 
normalize for wage index differences using participant hospitals' wage 
indices in order to calculate blended target prices.
(8) Proposed Combination of CCJR Episodes Anchored by MS-DRGs 469 and 
470
    We propose to pool together CCJR episodes anchored by MS-DRGs 469 
and 470 for target price calculations to use a greater historical CCJR 
episode volume and set more stable target prices. We note that we would 
still calculate separate target prices for episodes anchored by MS-DRGs 
469 versus 470, described later in this section.
    To pool together MS-DRG 469 and 470 anchored episodes, we propose 
to use an anchor factor and hospital weights. The anchor factor would 
equal the ratio of national average historical MS-DRG 469 anchored 
episode payments to national average historical MS-DRG 470 anchored 
episode payments. The national average would be based on episodes 
attributed to any CCJR eligible hospital. The resulting anchor factor 
would be the same for all participant hospitals. For each participant 
hospital, a hospital weight would be calculated using the following 
formula, where episode counts are participant hospital-specific and 
based on the episodes in the 3 historical years used in target price 
calculations:
[GRAPHIC] [TIFF OMITTED] TP14JY15.008

    A hospital-specific pooled historical average episode payment would 
be calculated by multiplying the hospital's hospital weight by its 
combined historical average episode payment (sum of MS-DRG 469 and 470 
anchored historical episode payments divided by the number of MS-DRG 
469 and 470 historical episodes).
    The calculation of the hospital weights and the hospital-specific 
pooled historical average episode payments would be comparable to how 
case mix indices are used to generate case mix-

[[Page 41234]]

adjusted Medicare payments. The hospital weight essentially would count 
each MS-DRG 469 triggered episode as more than one episode (assuming 
MS-DRG 469 anchored episodes have higher average payments than MS-DRG 
470 anchored episodes) so that the pooled historical average episode 
payment, and subsequently the target price, is not skewed by the 
hospital's relative breakdown of MS-DRG 469 versus 470 anchored 
historical episodes.
    The hospital-specific pooled historical average payments would be 
modified by blending and discount factors, as described in section 
III.C.4.c. of this proposed rule. Afterwards, the hospital-specific 
pooled calculations would be ``unpooled'' by setting the MS-DRG 470 
anchored episode target price to the resulting calculations, and by 
multiplying the resulting calculations by the hospital weight to 
produce the MS-DRG 469 anchored target prices.
    We would calculate region-specific weights and region-specific 
pooled historical average payments following the same steps proposed 
for hospital-specific weights and hospital-specific pooled average 
payments. Instead of grouping episodes by the attributed hospital as is 
proposed for hospital-specific calculations, region-specific 
calculations would group together episodes that were attributed to any 
CCJR eligible hospital located within the region. The hospital-specific 
and region-specific pooled historical average payments would be blended 
together as discussed in section III.C.4.b.(3) of this proposed rule. 
The specific order of steps, and how this step fits in with others, is 
discussed further in section III.C.4.c. of this proposed rule.
    We considered an alternative option of independently setting target 
prices for MS-DRG 470 and 469 anchored episodes without pooling them. 
However, hospital volume for MS-DRG 469 was substantially less than for 
MS-DRG 470. In 2013 across all IPPS hospitals, there were more than 10 
times as many MS-DRG 470 anchored episodes as compared to MS-DRG 469 
anchored episodes. \33\ In the same analysis, the median number of 
episodes for a hospital with at least 1 episode for the MS-DRG anchored 
episode was more than 80 for MS-DRG 470 anchored episodes, though fewer 
than 10 for MS-DRG 469 anchored episodes. Calculating target prices for 
MS-DRG 469 anchored episodes separately for each participant hospital 
may result in too few historical episodes to calculate reliable target 
prices. We also considered pooling together MS-DRG 469 and 470 anchored 
episodes without any anchor factor or hospital weights. However, 
internal analyses suggest that average episode payments for these two 
MS-DRG anchored episodes significantly differed; CCJR episodes 
initiated by MS-DRG 469 had payments almost twice as large as those 
initiated by MS-DRG 470.\34\ This difference is reasonable given that 
Medicare IPPS payments differ for MS-DRG 469 and 470 admissions, and 
inpatient payments comprise approximately 50 percent of CCJR episode 
payments. Thus, pooling together MS-DRG 469 and 470 anchored episodes 
without any anchor factor or hospital weights would introduce 
distortions due only to case-mix differences.
---------------------------------------------------------------------------

    \33\ Source: CCW Part A and Part B claims for CCJR episodes 
beginning in CY 2013.
    \34\ Medicare FFS Parts A and B claims, CCJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

(9) Discount Factor
    When setting an episode target price for a participant hospital, we 
propose to apply a discount to a hospital's hospital-specific and 
regional blended historical payments for a performance period to 
establish the episode target price that would apply to the participant 
hospital's CCJR episodes during that performance period and for which 
the hospital would be fully, or partly, accountable for episode 
spending in relationship to the target price, as discussed in section 
III.C.3. of this proposed rule. We expect participant hospitals to have 
significant opportunity to improve the quality and efficiency of care 
furnished during episodes in comparison with historical practice, 
because this model would facilitate the alignment of financial 
incentives among providers caring for beneficiaries throughout the 
episode. This discount would serve as Medicare's portion of reduced 
expenditures from the CCJR episode, with any episode expenditure below 
the target price potentially available as reconciliation payments to 
the participant hospital where the anchor hospitalization occurred. We 
propose to apply a 2 percent discount for performance years 1 through 5 
when setting the target price. We believe that applying a 2 percent 
discount in setting the episode target price allows Medicare to partake 
in some of the savings from the CCJR model, while leaving considerable 
opportunity for participant hospitals to achieve further episode 
savings below the target price that they would be paid as 
reconciliation payments, assuming they meet the quality requirements as 
discussed in section III.C.5 of this proposed rule.
    The proposed 2 percent discount is similar to the range of the 
discounts used for episodes in the Medicare Acute Care Episode (ACE) 
demonstration.\35\ In the Medicare ACE, a demonstration program that 
included orthopedic procedures such as those included in CCJR, 
participant hospitals negotiated with Medicare discounts of 2.5 to 4.4 
percent of all Part A orthopedic services and 0.0 to 4.4 percent of all 
Part B orthopedic services during the inpatient stay (excluding PAC). 
Hospitals received the discounted payment and reported that they were 
still able to achieve savings.\36\ We believe there is similar, if not 
potentially more, opportunity for savings in the CCJR payment model 
because it includes acute inpatient, as well as PAC, an area of episode 
spending that accounts for approximately 25 percent of CCJR episode 
payments and exhibits more than 2 times the episode payment variation 
\37\ than that of acute inpatient hospitalization.\38\ We believe that 
with the proposed 2 percent discount, participant hospitals have an 
opportunity to create savings for themselves as well as Medicare, while 
also maintaining or improving quality of care for beneficiaries.
---------------------------------------------------------------------------

    \35\ IMPAQ International. Evaluation of the Medicare Acute Care 
Episode (ACE) Demonstration: Final Evaluation Report. Columbia, MD: 
IMPAQ International; May 2013. http://downloads.cms.gov/files/cmmi/ACE-EvaluationReport-Final-5-2-14.pdf. Accessed April 1 6, 2015.
    \36\ IMPAQ International. Evaluation of the Medicare Acute Care 
Episode (ACE) Demonstration: Final Evaluation Report. Columbia, MD: 
IMPAQ International; May 2013. http://downloads.cms.gov/files/cmmi/ACE-EvaluationReport-Final-5-2-14.pdf. Accessed April 1 6, 2015.
    \37\ Variation for purposes of this calculation refers to 
standard deviation of inpatient and institutional post-acute episode 
payments as a percentage of average inpatient and post-acute episode 
payments, respectively.
    \38\ Medicare FFS Parts A and B claims, CCJR episodes, as 
proposed in this rule, between October 2013 and September 2014.
---------------------------------------------------------------------------

    The proposed 2 percent discount also matches the discount used in 
the BPCI Model 2 90-day episodes, and is less than the discount used in 
BPCI Model 2 30-day and 60-day episodes (3 percent). Hundreds of 
current BPCI participants have elected to take on responsibility for 
repayment in BPCI Model 2 with a 2 to 3 percent discount. Because many 
BPCI participants volunteered to participate in a bundled payment model 
with a discount, we believe that a discount percent that is within, and 
especially a discount of 2 percent that is at the lower end of, the 
BPCI discount range would allow CCJR

[[Page 41235]]

participant hospitals to create savings for both themselves and 
Medicare.
    As mentioned previously in section III.C.3. of this proposed rule, 
we propose to phase in the financial responsibility of hospitals for 
repayment of actual episode spending that exceeds the target price 
starting in performance year 2. In order to help hospitals transition 
to taking on this responsibility, we propose to apply a reduced 
discount of one percent in performance year 2 for purposes of 
determining the hospital's responsibility for excess episode spending, 
but maintain the 2 percent discount for purposes of determining the 
hospital's opportunity to receive reconciliation payment for actual 
episode spending below the target price. For example, under this 
proposal in performance year 2, a hospital that achieves CCJR actual 
episode payments below a target price based on a 2 percent discount 
would retain savings below the target price, assuming the quality 
thresholds for reconciliation payment eligibility are met (discussed in 
section III.C.5. of this proposed rule) and the proposed performance 
year stop-gain limit (discussed in section III.C.8. of this proposed 
rule) does not apply. Medicare would hold responsible for repayment 
hospitals whose CCJR actual episode payments exceed a target price 
based on a one percent discount, assuming the proposed performance year 
2 stop-loss limit (discussed in section III.C.8. of this proposed rule) 
does not apply. Hospitals that achieve CCJR actual episode payments 
between a 2 percent-discounted target price and 1 percent-discounted 
target price would neither receive reconciliation payments nor be held 
responsible for repaying Medicare. The decision on which percent-
discounted target price applies will be made by evaluating actual 
episode payments in aggregate after the completion of performance year 
2, and the same percent-discounted target price would apply to all 
episodes that are initiated in performance year 2. We propose to apply 
this reduced one percent discount for purposes of hospital repayment 
responsibility only in performance year 2 and apply the 2 percent 
discount for excess episode spending repayment responsibility for 
performance years 3 through 5. Under this proposal, the discount for 
determination of reconciliation payment for episode actual spending 
below the target price would not deviate from 2 percent through 
performance years 1 through 5.
    In section III.C.5. of this proposed rule, we propose voluntary 
submission of data for a patient-reported outcome measure. We propose 
to incent participant hospitals to submit data on this measure by 
reducing the discount percentage by 0.3 percentage points for 
successfully submitting data, as defined in section III.D. of this 
proposed rule. By successfully submitting data on this metric for 
episodes ending in performance years 1, 2, 3, 4, and or 5, we would 
adjust the discount percentage in the corresponding year(s) as follows:
     For episodes beginning in performance year 2, set the 
discount percentage in a range from 2 percent to 1.7 percent for 
purposes of determining the hospital's opportunity to receive 
reconciliation payment for actual episode spending below the target 
price, and set the discount percentage in a range from 1 percent to 0.7 
percent for purposes of determining the amount the hospital would be 
responsible for repaying Medicare for actual episode spending above the 
target price.
     For episodes beginning in performance years 3 through 5, 
set the discount percentage in a range from 2 percent to 1.7 percent 
for purposes of reconciliation payment and Medicare repayment 
calculations.
    The determination of whether the hospital successfully submitted 
data on the patient-reported outcome measure cannot be made until after 
the performance year ends and data is reported. Therefore, participant 
hospitals would be provided target prices for both scenarios whether 
the successfully submit data or not and such determination will happen 
at the time of payment reconciliation (discussed further in section 
III.C.6. of this proposed rule).
    We seek comment on our proposed discount percentage of 2 percent 
for CCJR episodes, our proposal to reduce the discount to 1 percent on 
a limited basis in performance year 2, and our proposal to reduce the 
discount by 0.3 percentage points for successfully reporting patient-
reported outcomes data in the corresponding year.
c. Proposed Approach to Combine Pricing Features
    In section III.C.4.(b) of this proposed rule we discuss the various 
features we propose to incorporate into our approach to set target 
prices. We refer readers to that section for more information on 
rationale and alternatives considered for each feature. In this section 
we discuss how the different pricing features, as well as the episode 
definition (section III.B. of this proposed rule) and adjustments to 
payments included in the episodes (section III.C.3. of this proposed 
rule), would fit together and be sequenced to calculate CCJR episode 
target prices for participant hospitals. As previously discussed in 
sections III.C.4.a and III.C.4.b of this proposed rule, we propose to 
calculate sixteen target prices for performance year 2, and eight 
target prices for each of the other 4 performance years. The following 
steps would be used to calculate MS-DRG 469 and 470 anchored episode 
target prices for both January 1 through September 30 and October 1 
through December 31 each performance year. The output of each step 
would be used as the input for the subsequent step, unless otherwise 
noted.
     Calculate historical CCJR episode payments for episodes 
that were initiated during the 3- historical-years (section 
III.C.4.b.(2) of this proposed rule) for all CCJR eligible hospitals 
for all Medicare Part A and B services included in the episode. We note 
that specific PBPM payments may be excluded from historical episode 
payment calculations as discussed in section III.C.7.d. of this 
proposed rule.
     Remove effects of special payment provisions (section 
III.C.3.a. of this proposed rule).
     Prorate Medicare payments for included episode services 
that span a period of care that extends beyond the episode (section 
III.C.3.b of this proposed rule.).
     Normalize for hospital-specific wage adjustment variation 
by dividing the episodes outputted in step (3) by the hospital's 
corresponding wage normalization factor described in section 
III.C.4.b.(7) of this proposed rule.
     Trend forward 2 oldest historical years of data to the 
most recent year of historical data. As discussed in section 
III.C.4.b.(3) of this proposed rule, separate national trend factors 
would be applied to episodes anchored by MS-DRG 469 versus MS-DRG 470.
     Cap high episode payment episodes with a region and MS-DRG 
anchor-specific high payment ceiling as discussed in section III.C.3.c. 
of this proposed rule, using the episode output from the previous step.
     Calculate anchor factor and participant hospital-specific 
weights (section III.C.4.b.(8) of this proposed rule) using the episode 
output from the previous step to pool together MS-DRG 469 and 470 
anchored episodes, resulting in participant hospital-specific pooled 
historical average episode payments. Similarly, calculate region-
specific weights to calculate region-specific pooled historical average 
episode payments. We have posted region-specific pooled historical 
average

[[Page 41236]]

episode payments on the CCJR proposed rule Web site at http://innovation.cms.gov/initiatives/ccjr/.
     Calculate participant hospital-specific and region-
specific weighted update factors as described in section III.C.4.b.(4) 
of this proposed rule. Multiply each participant hospital-specific and 
region-specific pooled historical average episode payment by its 
corresponding participant hospital-specific and region-specific 
weighted update factors to calculate participant hospital-specific and 
region-specific updated, pooled, historical average episode payments.
     Blend together each participant hospital-specific updated, 
pooled, historical average episode payment with the corresponding 
region-specific updated, pooled, historical average episode payment 
according to the proportions described in section III.C.4.b.(5) of this 
proposed rule. Participant hospitals that do not have the minimum 
episode volume across the historical 3 years would use 0.0 percent and 
100 percent as the proportions for hospital and region, respectively.
     Reintroduce hospital-specific wage variations by 
multiplying the participant hospital-specific blended, updated, and 
pooled historical average episode payments by the corresponding 
hospital-specific wage normalization factor, using the hospital's IPPS 
wage index that applies to the hospital during the period for which 
target prices are being calculated (section III.C.4.b.(7) of this 
proposed rule).
     Multiply the appropriate discount factor, as discussed in 
section III.C.4.b.(9) of this proposed rule to each participant 
hospital's wage-adjusted, blended, updated, and pooled historical 
average episode payment. For performance years 1, 3, 4, and 5, two 
discount factors would be used, one if the hospital successfully 
submits data on the patient-reported outcomes measure proposed in 
section III.C.5 of this proposed rule, and one if the hospital does not 
successfully submit the data. For performance year 2, 4 discount 
factors would be used to account for the 4 combinations of the 
following: a) whether or not the hospital successfully submits data on 
the patient-reported outcomes measure; and b) for the different 
discount factors proposed for purposes of calculating reconciliation 
payments vs. calculating repayment amounts. The result of this 
calculation would be the participant hospital-specific target prices 
for MS-DRG 470 anchored episodes.
     Multiply participant hospitals' target prices for MS-DRG 
470 anchored episodes by the anchor factor (section III.C.4.b.(8) of 
this proposed rule) to calculate hospitals' target prices for MS-DRG 
469 anchored episodes.
    The aforementioned steps would be used to calculate target prices 
for episodes that begin between January 1 and September 30, as well as 
for episodes that begin between October 1 and December 31, for each 
performance year. The target price calculations for the two different 
time periods each performance year would differ by the IPPS wage index 
used in step (11) and the update factors used in step (8). By following 
these eight steps, we would calculate eight target prices for each 
participant hospital for performance years 1, 3, 4, and 5, and 16 
target prices for performance year 2. We refer readers to section 
III.C.4.b. of this proposed rule for further details on each of the 
specific steps.
    We seek comment on the proposed approach to sequence and fit 
together the different pricing features, the episode definition 
(section III.B. of this proposed rule), and adjustments to payments 
included in the episodes (section III.C.3. of this proposed rule) to 
calculate CCJR episode target prices for participant hospitals.
5. Proposed Use of Quality Performance in the Payment Methodology
a. Background
    Over the past several years Medicare payment policy has moved away 
from FFS payments unlinked to quality and towards payments that are 
linked to quality of care. Through the Affordable Care Act, we have 
implemented specific IPPS programs like the HVBP (subsection (o) of 
section 1886 of the Act), the Hospital Acquired Conditions Reduction 
Program (HACRP) (subsection (q) of section 1886) and the HRRP 
(subsection (p) of section 1886), where quality of care is linked with 
payment. We have also implemented the MSSP, an accountable care 
organization program that links shared savings payment to quality 
performance. Since the implementation of the HRRP in October 2012, 
readmission rates for various medical conditions like THA and TKA (THA/
TKA) have improved. Trend analyses show a decrease in readmission rates 
and specifically with THA/TKA risk-standardized readmissions rates 
(RSRR) from 5.4 percent (July 2010-June 2011) to 4.8 percent (July 
2012-June 2013).\39\ Additionally, hospital THA/TKA RSCR decreased from 
3.4 percent (April 2010 through March 2011) to 3.1 percent (April 2012 
through March 2013). Despite the downward trend of THA/TKA RSRRs and 
RSCRs, the wide dispersion in these readmission rates suggests there is 
still room for hospitals to improve their performance on these measures 
as illustrated by a THA/TKA RSRR distribution of 2.8 to 9.4 percent 
(July 2010-June 2013) and a THA/TKA RSCR distribution of 1.5 to 6.4 
percent (April 2010-March 2013). We believe that the CCJR Model 
provides another mechanism for hospitals to improve quality of care, 
while also achieving cost efficiency. Incentivizing high-value care 
through episode-based payments for LEJR procedures is a primary 
objective of CCJR. Therefore, incorporating quality performance into 
the episode payment structure is an essential component of the CCJR 
model. We also believe that the financial opportunity proposed in 
section III.C.3. of this proposed rule provides the appropriate 
incentives necessary to reward a participant hospital's achievement of 
episode savings when the savings are greater than the discounted target 
price. For the reasons stated previously, we believe it is important 
for the CCJR model to link the financial reward opportunity with 
achievement in quality of care for Medicare beneficiaries undergoing 
LEJR.
---------------------------------------------------------------------------

    \39\ Hospital Quality Initiatives. CMS Hospital Quality 
Chartbook 2014. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf . Accessed 
April 21, 2015.
---------------------------------------------------------------------------

    As discussed in section III.C of this proposed rule, which outlines 
the payment structure for the CCJR model, each participant hospital 
will have target prices calculated for MS-DRG 469 and 470 anchored 
episodes; each anchored episode includes an anchor hospitalization for 
an LEJR procedure and a 90-day period after the date of discharge from 
the anchor hospitalization. These episode target prices represent 
expected spending all related Part A and Part B spending for such 
episodes, with a discount. Hospitals who achieve actual episode 
spending below a target price for a given performance period would be 
eligible for a reconciliation payment from CMS, subject to the proposed 
stop-gain limit policy as discussed in section III.C.8. of this 
proposed rule.
    In the next section of this proposed rule, we propose quality 
performance standards that must also be met in order for a hospital to 
be eligible to receive a reconciliation payment under CCJR. 
Specifically, we describe our proposal to include a performance measure 
result threshold on select outcomes-based quality measures as a 
requirement for participants to receive a reconciliation payment if 
actual episode spending is

[[Page 41237]]

less than the target price under CCJR in a performance year, in 
addition to a payment adjustment for successful reporting of a 
voluntary measure in development. Beginning in performance year one and 
continuing throughout the duration of the model, we propose to make 
reconciliation payments only to those CCJR hospital participants that 
meet or exceed a minimum measure result threshold. We also discuss an 
alternative approach to determining CCJR reconciliation payment 
eligibility and adjusting payment based on a quality score developed 
from performance on three outcomes-based quality measures and success 
in reporting the voluntary measurement in development.
b. Proposed Implementation of Quality Measures for Reconciliation 
Payment Eligibility
    In section III.D. of this proposed rule we propose three measures 
to assess quality of care of the hospitals participating in the CCJR 
Model. We also propose voluntary data submission for a patient-reported 
outcome measure. In this section we propose using three measures to 
determine eligibility for a reconciliation payment, as well as propose 
rewarding hospitals that voluntarily submit data for the patient- 
reported outcome measure. We also discuss an alternative approach to 
determining reconciliation payment eligibility and adjusting payment 
based on a composite quality score calculated from the three required 
outcome measures and success on reporting voluntary data on the 
patient-reported outcome measure.
(1) General Selection of Proposed Quality Measures
    The CCJR model is designed to provide financial incentives to 
improve coordination of care for beneficiaries that we expect to lead 
to avoidance of post-surgical complications and hospital readmissions, 
as well as to improve patient experience through care redesign and 
coordination. Furthermore, we acknowledge that achievement of savings 
while ensuring high-quality care for Medicare FFS beneficiaries in LEJR 
episodes will require close collaboration among hospitals, physicians, 
PAC providers, and other providers. In order to encourage care 
collaboration among multiple providers of patients undergoing THA and 
TKA, we propose three measures, as described in detail in section 
III.D.2. of this proposed rule, to determine hospital quality of care 
and to determine eligibility for a reconciliation payment under the 
CCJR model. The measures we are proposing are as follows:
     Hospital-level 30-day, all-cause RSRR following elective 
primary THA and/or TKA (NQF #1551), an administrative claims-based 
measure.
     Hospital-level RSCR following elective primary THA and/or 
TKA (NQF #1550), an administrative claims-based measure.
     HCAHPS Survey measure.
    Beginning in performance year 1 and continuing throughout the 
duration of the model, we propose to make reconciliation payments only 
to those CCJR participant hospitals that meet or exceed a minimum 
performance threshold on the measures previously listed. We propose 
that hospitals must meet or exceed the measure reporting thresholds and 
other requirements described in section III.C and III.D. of this 
proposed rule on all three measures in order to be eligible for a 
reconciliation payment.
    These three outcome measures were chosen due to their: (1) 
Alignment with the goals of the CCJR model; (2) hospitals' familiarity 
with the measures due to their use in other CMS hospital quality 
programs, including programs that tie payment to performance such as 
HVBP and HRRP; and (3) assessment of CMS priorities to improve the rate 
of LEJR complications and readmissions, while improving patient 
experience. We believe the three quality measures we propose for 
reconciliation payment eligibility reflect these goals and accurately 
measure hospitals' level of achievement on such goals.
(2) Proposal To Adjust the Payment Methodology for Voluntary Submission 
of Data for Patient-Reported Outcome Measure
    During our consideration of quality metrics for the CCJR model, we 
examined the feasibility of linking voluntary data submission of 
patient-reported outcomes, beyond the current three required measures 
proposed in section III.D.2. of this proposed rule for use in the 
model, with the possibility of incentivizing participant hospitals 
under the episode payment model to participate in this voluntary 
submission of data. We specifically examined potential patient-reported 
outcome measures since this type of outcome measure aligns with the 
CCJR model goal of improving LEJR episode quality of care, including a 
heightened emphasis on patient-centered care where patients provide 
meaningful input to their care. Furthermore, the availability of 
patient reported outcome data would provide additional information on a 
participant hospital's quality performance, especially with respect to 
a patient's functional status, beyond the current three required 
measures proposed in section III.D.2. of this proposed rule for use in 
the model. We note that we have a measure in development, the Hospital-
Level Performance Measure(s) of Patient-Reported Outcomes Following 
Elective Primary THA or TKA measure or both (hence forth referred to as 
``THA/TKA patient-reported outcome-based measure''), that would support 
the National Quality Strategy domain of patient and family engagement, 
and could capture meaningful information that would not otherwise be 
available on patient outcomes that are related to the quality of LEJR 
episodes under CCJR. We believe that incorporating this measure into 
CCJR by adjusting the payment methodology for successful voluntary data 
submission on the THA/TKA patient-reported outcome-based measure 
(henceforth referred to as ``THA/TKA voluntary data'') would provide 
participant hospitals with valuable information on functional outcomes 
that would assist them in assessing an important patient-centered 
outcome, engaging other providers and suppliers in care redesign for 
LEJR episodes, as well as provide them with the potential for greater 
financial benefit from improved LEJR episode efficiencies. We do not 
believe it would be appropriate at this time to hold any participant 
hospitals financially accountable for their actual THA/TKA voluntary 
data, as we have proposed for the three required measures described in 
section III.C.5.b.(2) of this proposed rule.
    Instead, we propose to adjust the episode payment methodology for 
participant hospitals that successfully submit THA/TKA voluntary data 
by reducing the discount percentage used to set the target price from 
2.0 percent to 1.7 percent of expected episode spending based on 
historical CCJR episode data, hereinafter referred to as the voluntary 
reporting payment adjustment. The proposed payment policies with 
respect to reconciliation payment eligibility and the discount 
percentage based on hospital voluntary data submission are summarized 
in Table 7 for performance years 3 through 5 where hospitals have full 
repayment responsibility. The specific percentages that would apply for 
purposes of the repayment amount and reconciliation payment are 
outlined for performance years 1 and 2 in the discussion that follows.

[[Page 41238]]



   Table 7--Reconciliation Payment Eligibility and Discount Percentage
   Included in the Target Price for Each Participant Hospital Based on
              Quality Performance in Performance Years 3-5
------------------------------------------------------------------------
                                                         Does not meet
 Discount percentage included in   Meets thresholds   thresholds for one
   target price/reconciliation    for all 3 required     or more of  3
       payment eligibility         quality measures    required quality
                                                           measures
------------------------------------------------------------------------
Successfully submits THA/TKA      1.7%/eligible.....  1.7%/ineligible.
 voluntary data.
Does not successfully submit THA/ 2.0%/eligible.....  2.0%/ineligible.
 KA voluntary data.
------------------------------------------------------------------------

    We refer readers to section III.D.3. of this proposed rule for 
further discussion of the THA/TKA patient-reported outcome-based 
measure and our proposed definition of successful reporting. In 
addition, we refer readers to section III.C.4.b.(9) of this proposed 
rule for discussion of the proposed discount of 2.0 percent (without 
the voluntary reporting payment adjustment) to establish the target 
price. We believe that a voluntary reporting payment adjustment of 0.3 
percent of expected episode spending would, on average, cover the 
participant hospitals' additional administrative costs of voluntarily 
reporting patient risk variables and patient-reported reported function 
for outcome calculation. We estimate the value of this discount 
reduction, on average, to be about $75 per LEJR episode at a 
participant hospital, which we believe would be sufficient to pay 
hospitals for the resources required to survey beneficiaries pre- and 
post-operatively about functional status and report this information 
required for measure development to CMS. We also believe that voluntary 
reporting on this patient-reported outcome measure is integral to 
implementation of the CCJR model, as it will allow us to further 
develop and evaluate the measure for potential use in this model in the 
future as a measure of quality that is important and not captured in 
any other available measures.
    The voluntary reporting payment adjustment would be available for 
all years of the model, unless we find the measure to be unfeasible or 
have adequately developed the measure such that continued voluntary 
data collection is no longer needed for measure development during the 
course of the model. In those situations, we would notify participant 
hospitals that the voluntary reporting payment adjustment was no longer 
available as we would cease collecting the data.
    When we provide the episode target price to each participant 
hospital at 2 times during the performance year, we would provide 
different target prices reflecting the 2.0 percent and 1.7 percent 
discounts. At the time of reconciliation for the performance year, we 
would determine which participant hospitals successfully reported the 
THA/TKA voluntary data for that performance year. The effects of this 
voluntary reporting payment adjustment would vary for each year of the 
model, depending on the proposed reconciliation payment and repayment 
policies for that performance year. For hospitals that achieved 
successful reporting of the THA/TKA voluntary data in performance year 
3, 4, or 5,we would use the target price reflecting the 1.7 percent 
discount (compared with the 2.0 percent discount for nonreporting or 
unsuccessfully reporting hospitals) to calculate the hospital's 
reconciliation payment or repayment amount. Based on this comparison, 
consistent with the proposal described in section III.C.6. of this 
proposed rule, we would make a reconciliation payment if actual episode 
spending is less than the target price (and the thresholds for 
reconciliation payment eligibility are met for the three required 
quality measures) or make participant hospitals responsible for 
repaying Medicare if actual episode spending exceeds the target price. 
For performance year 2, when repayment responsibility is being phased-
in, for participant hospitals with successful THA/TKA voluntary data 
reporting, we would use a target price reflecting the 1.7 percent 
discount (compared with the 2.0 percent discount for nonreporting or 
unsuccessfully reporting hospitals) to determine if actual episode 
spending was below the target price, whereupon the participant hospital 
would receive a reconciliation payment if the quality thresholds on the 
three required measures are met. In order to help hospitals transition 
to taking on repayment responsibility, we propose to apply a reduced 
discount of 0.7 percent for successful THA/TKA voluntary data reporting 
hospitals (compared with 1.0 percent for nonreporting or unsuccessfully 
reporting hospitals) in performance year 2 for purposes of determining 
the hospital's repayment responsibility for excess episode spending. 
For performance year 1, when there is no repayment responsibility, for 
participant hospitals with successful THA/TKA voluntary data reporting, 
we would use a target price reflecting the 1.7 percent discount 
(compared with the 2.0 percent discount for nonreporting or 
unsuccessfully reporting hospitals) to determine if actual episode 
spending was below the target price, whereupon the participant hospital 
would receive a reconciliation payment if the quality thresholds on the 
three required measures are met. We believe this proposed voluntary 
reporting payment adjustment provides the potential for increased 
financial benefit for participant hospitals due to a higher target 
price (that reflects a lower discount percentage) that successfully 
report the measure. Participant hospitals that successfully report the 
voluntary data would be subject to a lower repayment amount (except for 
performance year 1 when hospitals have no repayment responsibility) or 
a higher reconciliation payment (assuming the thresholds are met on the 
three required measures for reconciliation payment eligibility), than 
hospitals that do not successfully report the voluntary data.
    In general, participant hospitals that meet the performance 
thresholds for the three required quality measures and reduce actual 
episode spending below the target price, as well as successfully report 
the THA/TKA voluntary data, would be eligible to retain an additional 
0.3 percent of the reduced episode expenditures relative to participant 
hospitals that successfully report the three required quality measures 
but do not report voluntary data, funds which would offset additional 
administrative costs that the participant hospitals would incur in 
reporting on the measure. Additionally, for performance years 2-5 where 
participant hospitals have payment responsibility, participant 
hospitals with increased actual episode spending above the target price 
would not be required to repay 0.3 percent of the increased episode 
expenditures (relative to participant hospitals that do not report 
voluntary data), funds that would offset additional administrative 
costs that the participant hospitals would incur in reporting on the 
measure. These costs would include the hospital staff time required for 
training on the measure, as well as then gathering and reporting on 
multiple patient risk variables from LEJR episode

[[Page 41239]]

beneficiaries' medical records and locating beneficiaries and 
administering via phone survey questions on functional status, which 
would also then be reported to CMS. Thus, we expect that the proposal 
would encourage reporting by a number of participant hospitals, and it 
has the potential to benefit those hospitals that successfully report 
on the measure. Therefore, this proposal could financially benefit 
reporting hospitals that would also collect valuable information on 
patient functional outcomes that could inform their LEJR care redesign. 
While this measure remains in development from our perspective to 
ensure translation of data across care settings and the respective 
hospital communities during the 90-day post-discharge episode of care, 
participant hospitals would gain anecdotal, locally relevant 
information regarding the patient-reported outcomes of their own 
patients that could inform participant hospitals' continuous quality 
improvement efforts.
    We considered two alternative options to adjust the CCJR payment 
methodology by modifying the required quality measure thresholds for 
reconciliation payment eligibility for those participant hospitals that 
successfully submit the THA/TKA voluntary data. First, we considered 
adjusting the threshold that hospitals must meet on the three required 
quality measures for reconciliation payment eligibility if reduced 
episode spending is achieved from the unadjusted 30th percentile 
threshold to the adjusted 20th percentile threshold for performance 
years 1, 2, and 3, and from the unadjusted 40th percentile to the 
adjusted 30th percentile for performance years 4 and 5. Second, we 
considered only requiring hospitals to meet the 30th percentile 
threshold on two of three outcome measures for performance years 1, 2, 
and 3, and the 40th percentile threshold on two of three outcome 
measures for performance years 4 and 5. These options would provide the 
opportunity for some participant hospitals, specifically those that 
missed the unadjusted percentile for one or more of the three required 
quality measures by a specified margin, to receive reconciliation 
payments if actual episode spending was less than the target price. 
However, these options could benefit only a subset of participant 
hospitals that successfully reported the THA/TKA voluntary data. For 
the majority of participant hospitals that we expect would meet the 
unadjusted thresholds for all three required measures, these options do 
not provide any incentive to voluntarily report the data because the 
hospitals would not benefit from voluntarily reporting the additional 
measure. We decided not to propose either of these options to adjust 
the CCJR payment methodology for participant hospitals that voluntarily 
report data on the new measure because the limited benefit could result 
in few hospitals choosing to report on the measure, thereby limiting 
our progress in developing the measure. We note that these two 
considered options and our proposal are not mutually exclusive.
    We seek comment on the proposed voluntary reporting payment 
adjustment of reducing the discount percentage from 2.0 percent to 1.7 
percent for CCJR participant hospitals that voluntarily and 
successfully report on the THA/TKA voluntary data. Given our interest 
in robust hospital participation in reporting on the THA/TKA voluntary 
data under CCJR, we are specifically interested in information on the 
additional resources and their associated costs that hospitals would 
incur to report THA/TKA voluntary data, as well as the relationship of 
these costs to the potential financial benefit participant hospitals 
could receive from the proposed reduced discount of 1.7 percent. Based 
on such information, we would consider whether a change from the 
proposed discount factor reduction due to successful voluntary data 
submission would be appropriate. We also seek comment on whether the 
alternative payment methodology adjustments considered, or combination 
of adjustments, would more appropriately incentivize CCJR participant 
hospitals to submit THA/TKA voluntary data. We believe that development 
of the THA/TKA patient-reported outcome measure would benefit from 
reporting by a broad array of participant hospitals, including those 
that currently deliver high quality, efficient LEJR episode care and 
those that have substantial room for improvement on quality and or 
cost-efficiency.
    Furthermore, in light of our interest in encouraging CCJR 
participant hospital THA/TKA voluntary data reporting, we also 
considered alternative approaches to collect this information or 
provide hospitals with funds to help cover their associated 
administrative costs other than adjustments to the CCJR model payment 
methodology. One alternative would be for hospitals to collect and 
report on patient pre-operative information collected 0 to 90 days 
before surgery, while CMS would engage a contractor to collect and 
report the post-operative information collected 9 to 12 months after 
surgery. This approach would reduce some of the administrative burden 
of collection and reporting on hospitals, although participant 
hospitals would need to provide CMS with certain beneficiary 
information, including contact information that would be needed for a 
CMS contractor to contact the beneficiary at a later date. We seek 
comment on this alternative, including whether hospitals would incur 
significant additional administrative costs to report on the data prior 
to surgery and how CMS could best provide funds to offset some of those 
costs, through an adjustment to the CCJR payment methodology or other 
means. We also seek comment on the information participant hospitals 
would need to provide to CMS so a CMS contractor could collect and 
report the post-operative data, and the most efficient ways for 
hospitals to provide this information to us. Finally, we considered an 
approach that would provide hospitals with separate payment outside of 
an adjustment to the CCJR payment methodology to specifically assist in 
covering their administrative costs of reporting THA/TKA voluntary 
data, in order to achieve robust hospital participation in reporting. 
We seek comment on the hospital administrative costs that would be 
incurred for reporting, as well as on approaches we could take to 
ensure that hospitals achieved successful reporting under such an 
approach if separate payment was made. Finally, we are interested in 
comments regarding the comparative strength of these various 
alternatives in encouraging hospitals to participate in reporting THA/
TKA voluntary data.
    For a detailed description of this measure see section III.D.3 of 
this proposed rule
(3) Measure Risk-Adjustment and Calculations
    All three proposed outcome measures are risk-adjusted and we refer 
readers to section III.D.2 of this proposed rule for a full discussion 
of these measures and risk-adjustment methodologies. We believe that 
risk-adjustment for patient case-mix is important when assessing 
hospital performance based on patient outcomes and experience and 
understanding how a given hospital's performance compares to the 
performance of other hospitals with similar case-mix.
(4) Applicable Time Period
    We propose to use a 3-year rolling performance or applicable period 
for the

[[Page 41240]]

Hospital-level 30-day, all-cause RSRR following elective primary THA 
and/or TKA (NQF #1551) and the Hospital-level RSCR following elective 
primary THA and/or TKA (NQF #1550) measures. We also specifically 
propose to align with the HIQR program's 3-year rolling performance 
period for the RSSR and RSCR measures since we believe that a 3-year 
performance period yields the most consistently reliable and valid 
measure results (FY 2015 IPPS/LTCH 70 FR 50208 through 50209). For the 
HCAHPS Survey measure, we propose to follow the same performance period 
as in the HIQR program (FY 2015 IPPS/LTCH Final rule 79 FR 50259). 
HCAHPS scores are created from 4 consecutive quarters of survey data; 
publicly reported HCAHPS results are also based on 4 quarters of data. 
For the voluntary data collection for the proposed THA/TKA patient-
reported outcome-based performance measure, the optimal reporting time 
period has not been determined. Therefore, we propose defining the 
applicable time period as 12 month intervals that may begin between 
July 1, 2016 and December 31, 2016, and continue in subsequent 
performance years for a total of four or fewer performance periods. 
Participant hospitals will submit required data to CMS in a mechanism 
similar to the data submission process for the HIQR program within 
sixty days of the end of each 12 month period. As described in section 
III.C.5.b.(3) of this proposed rule, the proposed voluntary reporting 
payment adjustment of reducing the discount percentage from 2.0 percent 
to 1.7 percent for CCJR participant hospitals that successfully report 
on the THA/TKA voluntary data would begin in year 2 and also apply to 
subsequent years of the model.
(5) Criteria for Applicable Hospitals and Performance Scoring
(a) Identification of Participant Hospitals for the CCJR Model
    As discussed in section III.A.2 of this proposed rule, all CCJR 
participant hospitals would be IPPS hospitals.
(b) Methodology to Determine Performance on the Quality Measures
    To determine performance on the quality measures, we propose to 
calculate measure results for all three measures as outlined in the 
Quality Measures section III.D.2 of this proposed rule. Performance on 
the three measures for the CCJR model participant hospitals would be 
compared to the national distribution of measure results for each of 
these measures obtained through the HIQR program. The HIQR program is 
an IPPS program in which public reporting is a focus of the program for 
the nation's acute care hospitals, and we propose using the absolute 
value of the CCJR model participant hospital's result to determine if 
that participant hospital is eligible for a reconciliation payment. In 
essence we intend to take the HIQR program measure results (also posted 
publicly) for the proposed measures, identify the threshold as outlined 
in section III.C.5.b.(3) of this proposed rule, and apply the 
thresholds also outlined in section III.C.5.b.(7) of this proposed 
rule. We believe it is reasonable to use the HIQR program distribution 
of measure results to identify a measure result threshold because--(1) 
the hospitals in the HIQR program represent most acute care hospitals 
in the nation; (2) the CCJR model participant hospitals are a subset of 
the hospitals in the HIQR program; and (3) the expectation that the 
CCJR model participant hospitals meet a measure result threshold based 
on a national distribution of measure results will encourage the CCJR 
model participant hospitals to strive to attain measure results 
consistent with or better than hospitals across the nation. For a 
detailed description of how we will determine the measure result 
thresholds for consideration of a reconciliation payment adjustment see 
section III.C.5.b.(3) and III.C.7.of this proposed rule. We would not 
want to encourage CCJR model participant hospitals to strive for 
measure results or quality of care performance that may be lower than 
the national measure results. Given that the CCJR participant hospitals 
are a subset of the HIQR program participant hospitals, they are 
familiar with these three measures and may have put into place 
processes that will help to improve quality of care in the LEJR patient 
population. Finally, once the measure results are calculated, we 
propose to use these results to determine eligibility for 
reconciliation payment, which is discussed in detail in the next 
section.
    To be considered to have successfully reported the voluntary data 
collection and submission for the THA/TKA voluntary data, we propose 
that successfully reporting will mean participant hospitals must meet 
all of the following:
     Submit the data elements listed in section III.D.3.a.(2) 
of this proposed rule.
     Data elements listed in section III.D.3.a.(2) of this 
proposed rule must be submitted on at least 70 percent of their 
eligible elective primary THA/TKA patients (patients eligible for pre-
operative THA/TKA voluntary data submission are those described in 
section III.D.3.a.(3)of this proposed rule); patients eligible for 
post-operative THA/TKA voluntary data submission are those described in 
section III.D.3.a(3) of this proposed rule and also having a THA/TKA 
procedure date during the anchor hospitalization at least 366 days 
prior to the end of the data collection period. Therefore, hospitals 
are not expected to collect and submit post-operative THA/TKA voluntary 
data on patients who are fewer than 366 days from the date of surgery.
     THA/TKA voluntary data submission must occur within 60 
days of the end of the most recent 12 month period.
    Hospitals meeting these three standards, and have successfully 
submitted THA/TKA voluntary data, will be eligible for the proposed 
voluntary reporting payment adjustment of reducing the discount 
percentage from 2.0 percent to 1.7 percent for CCJR participant 
hospitals that voluntarily and successfully report on the THA/TKA 
voluntary data. Encouraging collection and submission of the THA/TKA 
voluntary data through the CCJR model will increase availability of 
patient-reported outcomes to both participant hospitals that collect 
and submit data on their own patients in the model (and their patients 
as well); further development of an outcomes measure that provides 
meaningful information on patient-reported outcomes for THA/TKA 
procedures that are commonly furnished to Medicare beneficiaries; 
provide another quality measure that may be incorporated into the CCJR 
model policy linking quality to payment in future performance years, 
pending successful development of the measure; and inform the quality 
strategy of future payment models. Collecting data on at least 70 
percent of hospital's eligible THA/TKA patients would provide 
sufficiently representative data to allow for development and testing 
of the THA/TKA patient-reported outcome-based performance measure.
    We invite public comment on the proposal to calculate measure 
results for all three measures as outlined in the Quality Measures 
section III.D.2 of this proposed rule. We also seek public comment on 
our proposal for hospitals to meet three requirements, previously 
outlined, in order to be considered as successfully submitting THA/TKA 
voluntary data.

[[Page 41241]]

(c) Proposed Methodology To Link Quality and Payment
(i) Background
    In proposing a methodology for linking payment for LEJR episodes to 
quality under this model, we considered several alternatives. 
Specifically, we considered making reconciliation payments to hospitals 
tied to achievement and improvement in quality performance or, 
alternatively, establishing minimum quality performance thresholds for 
selected quality measures from the beginning of the model or a later 
year, which would reward achievement but not necessarily improvement. 
While we propose in section III.C.5.b.(6)(c) of this proposed rule to 
establish minimum thresholds for participant hospital performance on 
three selected quality measures for reconciliation payment eligibility 
each performance year from the beginning of the model, we also discuss 
in detail an alternative we considered, which would make quality 
incentive payments related to hospital achievement and improvement on 
the basis of a composite quality score developed for each performance 
year. The composite quality score would affect reconciliation payment 
eligibility and change the effective discount included in the target 
price experienced by a participant hospital at reconciliation.
    Similar to the proposal described in section III.C.5.b.(6)(c) of 
this proposed rule, the alternatives considered would require a 
determination of participant hospital performance on all three required 
quality measures, described in section III.D. of this proposed rule, 
based on the national distribution of hospital measure result 
performance, but instead of identifying the participant hospital's 
performance percentile for comparison with a threshold requirement, we 
would do so for purposes of assigning points toward a hospital 
composite quality score. Both the hospital-level 30-day, all cause 
Risk-Standardized Readmission Rate (RSRR) following elective primary 
THA and/or TKA (NQF #1551) measure and the hospital-level Risk-
Standardized Complication Rate (RSCR) following elective primary THA 
and/or TKA (NQF #1550) measure directly yield rates for which a 
participant hospital performance percentile could be determined and 
compared to the national distribution in a straightforward manner. As 
discussed in section III.D.2.c.of this proposed rule, we propose to use 
the HCAHPS Linear Mean Roll Up (HLMR) score calculated using the HCAHPS 
Survey (NQF #1661) measure. Once the HLMR scores are calculated, the 
participant hospital performance percentile could also be determined 
and compared to the national distribution in a straightforward manner. 
In addition, the alternatives considered would account for the 
successful submission of voluntary THA/TKA data on the patient-reported 
outcome measure, as discussed in section III.C.5.b.(2) of this proposed 
rule, in the calculation of the composite quality score.
(ii) Alternatives Considered To Link Quality and Payment
    We considered assigning each participant hospital a composite 
quality score, developed as the sum of the individual quality measure 
scores described later in this section, which were set to reflect the 
intended weights for each of the quality measures and the successful 
submission of THA/TKA voluntary data in the composite quality score. 
The participant hospital's composite quality score would affect 
reconciliation payment eligibility and could also provide the 
opportunity for quality incentive payments under the CCJR model. Each 
quality measure would be assigned a weight in the composite quality 
score and possible scores for the measures would be set to reflect 
those weights. A composite quality score for each performance year 
would be calculated for each participant hospital based on its own 
performance that would affect reconciliation payment eligibility and 
the hospital's opportunity to receive quality incentive payments under 
the model. The composite quality score would also change the effective 
discount included in the target price experienced by the hospital at 
reconciliation for that performance year. We would weigh participant 
hospital performance on each of the three measures and successful 
submission of voluntary THA/TKA data according to the measure weights 
displayed in Table 8.

       Table 8--Quality Measure Weights in Composite Quality Score
------------------------------------------------------------------------
                                                             Weight in
                                                             composite
                     Quality measure                       quality score
                                                                 %
------------------------------------------------------------------------
Hospital[dash]level 30[dash]day, all[dash]cause RSRR                  20
 following elective primary THA and/or TKA (NQF #1551)..
Hospital[dash]level RSCR following elective primary THA               40
 and/or TKA (NQF #1550).................................
HCAHPS survey (NQF #1661)...............................              30
Voluntary THA/TKA data submission on                                  10
 patient[dash]reported outcome measure..................
------------------------------------------------------------------------

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

[[Page 41242]]

weight of 30 percent to the HCAHPS survey measure because we believe 
that incorporating this quality measure, which reflects performance 
regarding patients' perspectives on care, including communication, care 
transitions, and discharge information, is a highly meaningful outcome 
measure of LEJR episode quality under the CCJR model. However, we do 
not propose to assign the HCAHPS survey measure the highest weight of 
the four measures, as the measure is not specific to LEJR episode care, 
but rather to all clinical conditions treated by participant hospitals. 
Finally, we would assign the highest weight, 40 percent, to the 
complications measure. We believe this measure should be weighted the 
most because it is specific to meaningful outcomes for primary THA and 
TKA that are the major procedures included in LEJR episodes under the 
CCJR model. The measure includes important complications of LEJR 
episodes, such as myocardial infarction, pneumonia, surgical site 
bleeding, pulmonary embolism, death, mechanical joint complications, 
and joint infections occurring within various periods of time during 
the LEJR episode. LEJR episodes under the CCJR model are broadly 
defined so that reducing complications should be a major focus of care 
redesign that improves quality and efficiency under this model, yet 
because complications may not be as costly as readmissions, the payment 
incentives under the model do not as strongly target reducing 
complications as reducing readmissions. We seek comment on this 
weighting of the individual quality scores in developing a composite 
quality score for each participant hospital.
    Under such an approach, we would first score individually each 
participant hospital on the Hospital-level 30-day, all-cause RSRR using 
the elective primary THA and/or TKA (NQF #1551) measure; Hospital-level 
RSCR following using the elective primary THA and/or TKA (NQF #1550) 
measure; and HCAPHS survey (NQF #1661) measure based on the participant 
hospital's performance percentile as compared to the national 
distribution of hospitals' measure performance, assigning scores 
according to the point values displayed in Table 9 These individual 
measure scores have been set to reflect the measure weights included in 
Table 9 so they can ultimately be summed without adjustment in 
calculating the composite quality score.

                         Table 9--Individual Scoring for Three Required Quality Measures
----------------------------------------------------------------------------------------------------------------
                                                           Complications      HCAHPS survey       Readmissions
                 Performance percentile                   measure  quality    quality score     measure  quality
                                                          score  (points)        (points)       score  (points)
----------------------------------------------------------------------------------------------------------------
>=90\th\...............................................               8.00               6.00               4.00
>=80\th\ and <90\th\...................................               7.40               5.55               3.70
>=70\th\ and <80\th\...................................               6.80               5.10               3.40
>=60\th\ and <70\th\...................................               6.20               4.65               3.10
>=50\th\ and <60\th\...................................               5.60               4.20               2.80
>=40\th\ and <50\th\...................................               5.00               3.75               2.50
>=30\th\ and <40\th\...................................               4.40               3.30               2.20
<30\th\................................................               0.00               0.00               0.00
----------------------------------------------------------------------------------------------------------------

    Given the current national distribution of hospital performance on 
these measures, we believe that small point increments related to 
higher measure performance deciles would be the most appropriate way to 
assign more points to reflect meaningfully higher quality performance 
on the measures. The absolute differences for each decile among the 
three measures reflect the intended weight of the measure in the 
composite quality score. We would assign any low volume participant 
hospital without a reportable value for the measure to the 50th 
performance percentile of the measure, so as not to disadvantage a 
participant hospital based on its low volume alone because that 
hospital may in actuality provide high quality care. These three 
measures are well-established measures in use under CMS hospital 
programs, so we do not believe that scores below the 30th percentile 
reflect quality performance such that they should be assigned any 
individual quality measure score points for LEJR episodes under CCJR. 
However, we also considered reducing scores incrementally across the 
bottom three deciles in order to provide greater incentives for quality 
improvement for hospitals that may not believe they can attain the 30th 
performance percentile on one or more of the three measures and to 
avoid creating a ``cliff'' at the 30th performance percentile. We seek 
comment on this scoring approach to the three required quality 
measures.
    Additionally, we would assign a measure quality score of one point 
for participant hospitals that successfully submit THA/TKA voluntary 
data and 0 points for participant hospitals that do not successfully 
submit these data. Because we would not use the actual THA/TKA 
voluntary data on the patient-reported outcome measure in assessing 
LEJR episode quality performance under the model, we propose this 
straightforward binary approach to scoring the submission of THA/TKA 
voluntary data for the patient-reported outcome measure development.
    We note that the MSSP utilizes a similar scoring and weighting 
methodology, which is described in detail in the CY2011 Shared Savings 
Program Final Rule (see Sec.  425.502). The HVBP and HACRP programs 
also utilize a similar scoring methodology, which applies weights to 
various measures and assigns an overall score to a hospital (79 FR 
50049 and 50102).
    We would sum the score on the three quality measures and the score 
on successful submission of THA/TKA voluntary data to calculate a 
composite quality score for each participant hospital. Then we would 
incorporate this score in the model payment methodology by first, 
requiring a minimum composite quality score for reconciliation payment 
eligibility if the participant hospital's actual episode spending is 
less than the target price and second, by making quality incentive 
payments that change the effective discount percentage included in the 
target price experienced by the hospital in the reconciliation process. 
The payment policies we would apply are displayed in Tables 10, 11, and 
12 for the performance years of the model. Under the CCJR model as 
proposed, there is no participant hospital repayment responsibility in 
performance year 1 and this responsibility begins to be phased-in in

[[Page 41243]]

performance year 2, with full implementation in performance year 3.

 Table 10--Performance Year 1: Relationship of Composite Quality Score to Reconciliation Payment Eligibility and
                         the Effective Discount Percentage Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                               Effective
                                      Eligible for        Eligible for          discount      Effective discount
     Composite quality score         reconciliation     quality incentive    percentage for      percentage for
                                        payment              payment         reconciliation    repayment amount
                                                                                payment
----------------------------------------------------------------------------------------------------------------
<=5.00..........................  No.................  No................                3.0  Not applicable.
>5.00 and <=9.25................  Yes................  No................                3.0  Not applicable.
>9.25 and <=15.20...............  Yes................  Yes...............                2.0  Not applicable.
>15.20..........................  Yes................  Yes...............                1.5  Not applicable.
----------------------------------------------------------------------------------------------------------------


 Table 11--Performance Year 2: Relationship of Composite Quality Score to Reconciliation Payment Eligibility and
                         the Effective Discount Percentage Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                Effective
                                      Eligible for         Eligible for          discount          Effective
     Composite quality score         reconciliation     quality incentive     percentage for        discount
                                        payment              payment          reconciliation     percentage for
                                                                                 payment        repayment amount
----------------------------------------------------------------------------------------------------------------
<=5.00..........................  No.................  No.................                3.0                2.0
>5.00 and <=9.25................  Yes................  No.................                3.0                2.0
>9.25 and <=15.20...............  Yes................  Yes................                2.0                1.0
>15.20..........................  Yes................  Yes................                1.5                0.5
----------------------------------------------------------------------------------------------------------------


 Table 12--Performance Years 3-5: Relationship of Composite Quality Score to Reconciliation Payment Eligibility
                       and the Effective Discount Percentage Experienced at Reconciliation
----------------------------------------------------------------------------------------------------------------
                                                                                Effective
                                      Eligible for         Eligible for          discount          Effective
     Composite quality score         reconciliation     quality incentive     percentage for        discount
                                        payment              payment          reconciliation     percentage for
                                                                                 payment        repayment amount
----------------------------------------------------------------------------------------------------------------
<=5.00..........................  No.................  No.................                3.0                3.0
>5.00 and <=9.25................  Yes................  No.................                3.0                3.0
>9.25 and <=15.20...............  Yes................  Yes................                2.0                2.0
>15.20..........................  Yes................  Yes................                1.5                1.5
----------------------------------------------------------------------------------------------------------------

    Under this approach, the CCJR model discount included in the target 
price without consideration of the composite quality score would be 3.0 
percent, not the 2.0 percent described under our payment proposal in 
section III.C.4.b.(9) of this proposed rule. We believe that a discount 
percentage of 3.0 percent without explicit consideration of episode 
quality is reasonable as it is within the range of discount percentages 
included in the ACE demonstration and it is the Model 2 BPCI discount 
factor for 30 and 60 day episodes, where a number of BPCI participants 
are testing LEJR episodes subject to the 3.0 percent discount factor. 
Hospitals that provide high quality episode care would have the 
opportunity to receive quality incentive payments that would reduce the 
effective discount percentage as displayed in Tables 10, 11, and 12. 
Depending on the participant hospital's actual composite quality score, 
quality incentive payments could be valued at 1.0 percent to 1.5 
percent of the hospital's benchmark episode price (that is, of the 
expected episode spending prior to application of the discount factor 
to calculate a target price).
    Under this methodology, we would require hospitals to achieve a 
minimum composite quality score of greater than 5.00 to be eligible for 
a reconciliation payment if actual episode spending was less than the 
target price. Participant hospitals with below acceptable quality 
performance reflected in a composite quality score less than or equal 
to 5.00 would not be eligible for a reconciliation payment if actual 
episode spending was less than the target price. A level of quality 
performance that is below acceptable would not affect participant 
hospitals' repayment responsibility if actual episode spending exceeds 
the target price. We believe that excessive reductions in utilization 
that lead to low actual episode spending and that could result from the 
financial incentives of an episode payment model would be limited by a 
requirement that this minimum level of LEJR episode quality be achieved 
for reconciliation payments to be made. This policy would encourage 
hospitals to focus on appropriate reductions or changes in utilization 
to achieve high quality care in a more efficient manner. Therefore, 
these hospitals would be ineligible to receive a reconciliation payment 
if actual episode spending was less than the target price.
    For hospitals with composite quality scores of less than or equal 
to 5.00, we also considered a potential alternative approach. Under 
this approach, we would still permit this group of hospitals to receive 
reconciliation payments but would impose a quality penalty that would 
reduce their effective discount percentage to 4.0 percent for purposes 
of calculating the reconciliation payment or recoupment amount in 
performance years 3 through 5, 4.0 percent for calculating the 
reconciliation payment and 3.0 percent for calculating the repayment 
amount in performance year 2, and 4.0 percent for calculating the 
reconciliation payment in performance year 1 where participant

[[Page 41244]]

hospitals have no repayment responsibility. A potential advantage of 
this approach is that it would provide stronger incentives for quality 
improvement for participant hospitals with low performance on quality, 
even if they did not expect to be able to reduce actual episode 
spending below the target price. In addition, this approach would 
provide financial incentives to improve the efficiency of care even for 
hospitals that did not expect to meet the minimum quality score for 
reconciliation payment eligibility, while still providing strong 
incentives to provide high-quality care. The disadvantage of this 
approach is that it could provide reconciliation payments even to 
hospitals that did not achieve acceptable quality performance.
    Participant hospitals with an acceptable composite quality score of 
>5.00 and <=9.25 would be eligible for a reconciliation payment if 
actual episode spending was less than the target price because their 
quality performance was at the acceptable level established for the 
CCJR model. They would not be eligible for a quality incentive payment 
at reconciliation because their episode quality performance, while 
acceptable, was not good or excellent. Therefore, these hospitals would 
be eligible to receive a reconciliation payment if actual episode 
spending was less than the target price.
    Participant hospitals with a good composite quality score of >9.25 
and <=15.20 would be eligible for a quality incentive payment at 
reconciliation if actual episode spending was less than the target 
price because their quality performance exceeded the acceptable level 
required for reconciliation payment eligibility under the CCJR model. 
In addition, they would be eligible for a quality incentive payment at 
reconciliation for good quality performance that equals 1.0 percent of 
the participant hospital's benchmark price, thereby changing the 
effective discount percentage included in the target price experienced 
by the hospital at reconciliation. Thus, participant hospitals 
achieving this level of quality for LEJR episodes under CCJR would 
either have less repayment responsibility (that is, the quality 
incentive payment would offset a portion of their repayment 
responsibility) or receive a higher payment (that is, the quality 
incentive payment would add to the reconciliation payment) at 
reconciliation than they would have otherwise based on a comparison of 
actual episode spending to the target price that reflects a 3.0 percent 
discount. Therefore, these hospitals would be eligible to receive a 
reconciliation payment if actual episode spending was less than the 
target price and would also receive a quality incentive payment.
    Finally, hospitals with an excellent composite score quality score 
of >15.20 would be eligible to receive a reconciliation payment if 
actual episode spending was less than the target price because their 
quality performance exceeded the acceptable level required for 
reconciliation payment eligibility under the CCJR model. In addition, 
they would be eligible for a higher quality incentive payment at 
reconciliation for excellent quality performance that equals 1.5 
percent of the participant hospital's benchmark price, thereby changing 
the effective discount percentage included in the target price 
experienced by the hospital at reconciliation. Thus, participant 
hospitals achieving this level of quality for LEJR episodes under CCJR 
would either have less repayment responsibility (that is, the quality 
incentive payment would offset a portion of their repayment 
responsibility) or receive a higher payment (that is, the quality 
incentive payment would add to the reconciliation payment) at 
reconciliation than they would have otherwise based on a comparison of 
actual episode spending to the target price that reflects a 3.0 percent 
discount. Therefore, these hospitals would be eligible to receive a 
reconciliation payment if actual episode spending was less than the 
target price and would also receive a quality incentive payment.
    Under this methodology, the proposed stop-loss and stop-gain limits 
discussed in section III.C.8 of this proposed rule would not change. We 
believe this approach to quality incentive payments based on the 
composite quality score could have the effect of increasing the 
alignment of the financial and quality performance incentives under the 
CCJR model to the potential benefit of participant hospitals and their 
collaborators as well as CMS, although it would substantially increase 
the complexity of the methodology to link quality and payment. We seek 
comment on this alternative approach to basing reconciliation payment 
eligibility and quality incentive payments on the participant 
hospital's composite quality score under the CCJR model, as well as the 
composite quality scoring ranges applicable to the respective payment 
policies.
    While we describe in detail this alternative considered to link 
quality to payment under CCJR, we are not proposing this methodology 
for several reasons. First, the MSSP and HVBP program utilize many more 
measures than we are proposing for the CCJR model. For example, the 
MSSP incorporates thirty three measures across four quality domains (79 
FR 67916 and 67917). The range of measures in the MSSP and the HVBP 
program lends itself to a scoring approach, which can account for many 
measures and allows providers to achieve a high score despite 
performing well on some measures but achieving lower performance on 
others. There is a detailed description of the MSSP scoring methodology 
in the 2011 Shared Savings Program Final rule (76 FR 67895 through 
67900). We believe that given the more limited set of measures chosen 
for the CCJR model, a scoring approach such as the alternative 
described in this section could diminish the importance of each 
measure. Use of a scoring approach would not allow hospital performance 
on two different outcomes to be easily reviewed and understood with 
respect to the impact of individual measure performance on Medicare's 
actual payment for the episode under the model. Second, we believe the 
measures proposed for this model represent goals of clinical care that 
should be achievable by all hospitals participating in the model that 
heighten their focus on these measures, especially the readmissions and 
complications measures, for LEJR episodes based on the financial 
incentives in the model. Finally, we believe that a methodology that 
assesses performance based on absolute values of a specific set of 
measures that are already in use, as we are proposing for the CCJR 
model, is the most appropriate methodology to provide achievable and 
predictable quality targets for participant hospitals on measures that 
monitor the most meaningful quality of care outcomes in a model where 
some acute care hospitals that might not choose to participate in a 
voluntary model are also included. Our proposed method as discussed in 
the next section reflects our expectation that hospitals achieve a 
certain level of performance on measures to ensure that hospitals 
provide high-quality care under the model.
    Finally, we also considered an approach whereby participant 
hospitals would not be penalized with regard to their eligibility for 
reconciliation payments in CCJR for failure to meet the specified 
thresholds for the quality measures in performance year 1 of the model; 
in other words, we would delay the proposal described in the next

[[Page 41245]]

section to performance year 2 rather than beginning in performance year 
1. We considered calculating participant hospital performance on the 
required measures for the model, and, if actual episode spending was 
less than the target price, the participant hospital would receive a 
full reconciliation payment of savings achieved beyond the target 
price, regardless of performance on the quality measures. However, we 
do not believe this would be appropriate for the CCJR model, given that 
two of the measures are administrative claims-based and thus impose no 
additional reporting burden on hospitals; rather, these two measures 
are established measures in existing CMS quality programs, and a 
central goal of the model is improving care for Medicare beneficiaries 
in LEJR episodes. We note that the HCAHPS survey measure is also an 
established measure in HIQR and would not impose additional reporting 
burden on hospitals.
(iii) Proposal To Link Quality and Payment Through Thresholds for 
Reconciliation Payment Eligibility
    For the reasons outlined in the previous section, we do not propose 
to use similar methodologies to other CMS programs that would tie CCJR 
episode reconciliation payment eligibility and reconciliation payment 
and Medicare repayment amounts to a composite quality score on 
specified quality measures, but as discussed later in this section, we 
instead propose to simply assess performance or achievement on a 
quality measure by setting a measure result threshold for each measure 
beginning in performance year 1 of the model.
    The CCJR measure result threshold would be based on the measure 
results from the HIQR program, a nationally-established program, and 
would use its national distribution of measure results. These are the 
same measure results posted on Hospital Compare or in the Hospital 
Compare downloadable database (https://data.medicare.gov/data/hospital-compare) for the HIQR program. We refer readers to the earlier 
discussion of the HIQR Program, which utilizes measures to assess most 
acute care hospitals in the nation. Determining the CCJR model target 
thresholds are discussed in the next section.
    As previously described, the CCJR model proposes the following 
three required measures to assess LEJR episode quality of care:
     Hospital-level 30-day, all-cause RSRR following elective 
primary THA and/or TKA (NQF #1551).
     Hospital-level RSCR following elective primary THA and/or 
TKA (NQF #1550).
     HCAHPS survey (NQF #0166).
    We also propose to make a voluntary reporting payment adjustment 
for CCJR participant hospitals who successfully and voluntarily submit 
data for the THA/TKA patient-reported outcome-based performance measure 
(henceforth referred to as ``THA/TKA voluntary data'') as described in 
sections III.C.5.b.(3) and III.D.3.a.(2) of this proposed rule. We 
propose that participant CCJR hospitals must meet or surpass a 
specified threshold for each required measure beginning for performance 
year 1 of the model in order to be eligible for a reconcilation payment 
if actual episode payments are less than the target price. The 
calculation of the HCAHPS survey measure is described in section 
III.D.2.c.of this proposed rule. We propose to use the individual 
measure results calculated as specified in section III.D. of this 
proposed rule for the three required measures to determine hospital 
eligibility for reconciliation payment for each performance year of the 
CCJR model. Also, as discussed in section III.C.4 of this proposed 
rule, which outlines the payment structure for the CCJR model, target 
prices for MS-DRG 470 anchored episodes and for MS-DRG 469 anchored 
episodes will be calculated for hospitals participating in the model 
for an episode of care extending 90-days after discharge from the 
anchor hospitalization. Participant hospitals that achieve actual 
episode payment below the specified target price for a given 
performance period would be eligible for a reconciliation payment, 
provided that the participant hospital also met episode quality 
thresholds on the three required measures for the performance period.
    We propose to use the following quality criterion to determine if a 
participant hospital qualifies for a reconciliation payment based on 
the episode quality thresholds on the three required measures:
    The hospital's measure result is at or above the 30th percentile of 
the national hospital measure results calculated for all HIQR-program 
participant hospitals for each of the three required measures for each 
performance period (for a detailed description of how we determined the 
performance period and reconciliation payment eligibility, see section 
III.C.5. of this proposed rule).
    Using HIQR program's 3 year rolling period as outlined in section 
III.D.2.a.(6) and III.D.2.b.(6) of this proposed rule, if a participant 
hospital performed at or above the 30th percentile of all HIQR program 
hospitals for each of the three required measures and if actual episode 
payment was less than the target price for the specified performance 
year, we would make a reconciliation payment to the hospital. Failure 
to achieve the threshold on one or more measures would result in the 
participant hospital not receiving a reconciliation payment regardless 
of whether the actual episode payment was less than the target price 
for that performance period. We propose that for hospitals with 
insufficient volume to determine performance on an individual measure, 
these hospitals will be considered to be performing at the threshold 
level and their results will be publicly posted with all other 
participant hospitals' measure results (for a detailed summary of 
public reporting, see section III.D.5. of this proposed rule). We do 
not believe it would be appropriate to potentially penalize high 
quality, efficient hospitals due to their low volume, given that 
meeting the required quality measure thresholds is required for 
reconciliation payment eligibility.
    We also propose for performance years 4 and 5 to increase the 
measure result threshold to the 40th percentile. We believe that 
increasing the measure result threshold to the 40th percentile would 
encourage participants to strive for continued quality improvement 
throughout the 5 performance years of the model. We seek comment on our 
proposal to make a reconciliation payment to a participant hospital 
that achieves actual episode spending below the target price for a 
performance year and performs at or above the 30th percentile of HIQR 
program participant hospitals for all three required quality measures 
in performance years 1 through 3 or the 40th percentile in performance 
years 4 and 5, as well as our proposal to consider low volume hospitals 
to be performing at the threshold level.
    We propose to require hospitals to meet the threshold for all three 
measures for the following reasons. The measures chosen for this model 
are fully developed, NQF-endorsed, and implemented measures in CMS IPPS 
programs. These measures are also publicly reported on the Hospital 
Compare Web site. Hospitals are familiar with the complications and 
readmissions quality measures and with the HCAHPS Survey, as they are 
currently included in HIQR, HVBP, and HRRP (79 FR 50031, 50062, 50208, 
50209 and 50259), and we believe that there is minimal additional 
administrative burden for hospitals. All three measures are widely 
utilized nationally; thus, a nationally-based

[[Page 41246]]

threshold is an appropriate benchmark. In addition, the goal of the 
CCJR model is LEJR episode care redesign that includes effective care 
coordination and management of care transitions. Strategies to prevent 
and efficiently manage post-procedure complications and hospital 
readmissions following an LEJR procedure are consistent with the goals 
of the model; a hospital cannot succeed in this model without engaging 
in care redesign efforts that would address aspects of care included in 
these measures. Failure to perform successfully on these key quality 
measures (defined by meeting the minimum thresholds) would indicate 
that hospitals are not achieving quality consistent with the goals of 
the model to specifically incentivize greater improvement on these 
measures than hospitals not participating in the CCJR model, and should 
not be eligible to receive a reconciliation payment from Medicare even 
if reduced episode spending is achieved. Finally, the approach we 
propose is consistent with CMS' goal of moving hospitals and other 
providers to value-based payment that ties payment to quality. In the 5 
performance years of this model, performance on quality measures would 
only be applied to determining eligibility for a reconciliation 
payment; quality measures would not be used to determine participant 
hospitals' financial responsibility, except for the proposed voluntary 
reporting payment adjustment described in described in section 
III.C.5.b.(3) of this proposed rule. In essence, participant hospitals' 
responsibility to repay Medicare the difference between their target 
price and their actual episode payment, should actual episode payments 
exceed the target price, would not be impacted by performance on 
quality measures.
    Finally, we propose to increase the measure result thresholds for 
the final 2 performance years of the model, to ensure that CCJR 
participant hospitals continue to maintain a high level of quality 
performance or improve performance on these measures as they gain 
experience with implementation of this payment model. More 
specifically, we propose that in order for a participant hospital to 
receive a reconciliation payment for actual episode spending that is 
less than the target price for performance years 4 and 5, the 
participant hospital's measure result must be at or above the 40th 
percentile of the national hospital measure results calculated for all 
HIQR- program participant hospitals for each of the three required 
measures for each performance period. As previously noted, we propose 
to use the most recently available HCAHPS 4-quarter roll-up to 
calculate the HLMR. We believe that holding the participant hospitals 
to a set measure result threshold for the first 3 years, and increasing 
this threshold for performance years 4 and 5, emphasize the need to 
maintain and improve quality of care while cost efficiencies are 
pursued. We seek comment on our proposed approach to incorporating 
quality performance into eligibility for reconciliation payments under 
the CCJR model for participant hospitals.
    Table 13 displays the proposed thresholds that participant 
hospitals must meet on the various measures over the 5 model 
performance years.

      Table 13--PROPOSED THRESHOLDS for Required Quality Measures To Determine Participant Hospital Reconciliation Payment Eligilbity Over 5 Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Measure                     PY1 threshold           PY2 threshold          PY3 threshold          PY4 threshold          PY5 threshold
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital[dash]level 30[dash]day,     30th percentile.......  30th percentile.......  30th percentile......  40th percentile......  40th percentile.
 all[dash]cause RSRR following
 elective primary THA and/or TKA
 (NQF #1551).
Hospital[dash]level RSCR following   30th percentile.......  30th percentile.......  30th percentile......  40th percentile......  40th percentile.
 elective primary THA and/or TKA
 (NQF #1550).
HCAHPS survey (NQF #0166)..........  30th percentile.......  30th percentile.......  30th percentile......  40th percentile......  40th percentile.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We seek comment on our proposed methodology to utilize quality 
measure performance in the payment methodology for CCJR, as well as the 
proposed thresholds for participant hospital reconciliation payment 
eligibility over the performance years of the model.
    As discussed in section III.C.5.c.(3) of this proposed rule, we 
also believe that hospitals that choose to submit THA/TKA voluntary 
data should have the potential to benefit financially through an 
adjustment to the payment methodology of the model. We propose a 
voluntary reporting payment adjustment for hospitals that successfully 
submit the THA/TKA voluntary data by reducing the discount percentage 
incorporated into the target price from 2.0 percent to 1.7 percent. 
This voluntary reporting payment adjustment would start in performance 
year 1 and would be available through performance year 5 of the model 
for each year that the hospital successfully reports THA/TKA voluntary 
data. As proposed, reporting THA/TKA voluntary data would not affect 
eligibility for a reconciliation payment if actual episode payments are 
less than the target price. Participant hospitals would still need to 
meet the 30th or 40th percentile threshold, as applicable to the given 
performance year, on all three required quality measures (Table 13).
    We considered, but are not proposing, two other alternatives to 
adjust the payment methodology for participant hospitals that 
successfully report the THA/TKA voluntary data as described in section 
III.C.5.c.(3) of this proposed rule. These alternatives would change 
the threshold percentile for the three required quality measures or, 
alternatively, reduce the number of required measures in which the 
threshold must be met provided that successful THA/TKA voluntary data 
were reported for a performance year. First, we considered reducing the 
threshold for reconciliation payment eligibility that participant 
hospitals must meet on the three required quality measures from the 
30th percentile threshold to the 20th percentile threshold for 
performance years 1, 2, and 3, and from the 40th percentile to the 30th 
percentile for performance year. Second, we considered only requiring 
hospitals to meet the 30th percentile threshold on two of three outcome 
measures for performance years 1, 2, and 3, and the 40th percentile 
threshold on two of three outcome measures in performance years 4 and 
5. Under both of these alternatives, the eligibility for reconciliation 
payments could change based on the THA/TKA voluntary data. We seek 
comment on these alternative payment methodology

[[Page 41247]]

adjustments that could impact reconciliation payment eligibility, 
unlike the proposed voluntary reporting payment adjustment. We note 
that the other alternative approaches to encouraging THA/TKA voluntary 
data reporting for CCJR beneficiaries as discussed in section 
III.C.5.c.(3) of this proposed rule that would not require adjustments 
to the CCJR payment methodology would also not affect reconciliation 
payment eligibility.
6. Proposed Process for Reconciliation
    This section outlines our proposals on how we intend to reconcile 
aggregate related Medicare payments for a hospital's beneficiaries in 
CCJR episodes during a performance year against the applicable target 
price in order to determine if reconciliation payment (or Medicare 
repayment, beginning in performance year 2) is applicable under this 
model. We refer readers to section III.B of this proposed rule for our 
proposed definition of related services for lower extremity joint 
replacement episodes under CCJR, to section III.C.2.a. of this proposed 
rule for our proposed definition of performance years, and to section 
III.C.4 of this proposed rule for our proposed approach to establish 
target prices.
a. Net Payment Reconciliation Amount
    After the completion of a performance year, we propose to 
retrospectively calculate a participant hospital's actual episode 
performance based on the episode definition. We note that episode 
payments for purposes of the CCJR model would exclude the effects of 
special payment provisions under existing Medicare payment systems 
(section III.C.3.a. of this proposed rule), be subject to proration for 
services that extend beyond the episode (section III.C.3.b. of this 
proposed rule), and exclude PBPM payments for programs and models 
specified in section III.C.7.d. of this proposed rule. Some episodes 
may be excluded entirely from the CCJR model due to overlap with BPCI 
episodes, as discussed in section III.C.7.b. of this proposed rule. 
Finally, actual episode payments calculated for purposes of CCJR would 
be capped at anchor MS-DRG and region-specific high episode payment 
ceilings (section III.C.3.c. of this proposed rule). We would apply the 
high episode payment ceiling policy to episodes in the performance year 
similarly to how we propose to apply it to historical episodes (section 
III.C.4.c. of this proposed rule). Episode payments for episodes 
attributed to CCJR eligible hospitals would be divided by the wage 
normalization factor, using the IPPS wage index applicable to the 
anchor admission, and for each MS-DRG anchor and region, the high 
episode payment ceiling would be calculated as two standard deviations 
above the mean. Any actual episode payment amount above the high 
payment ceiling would be capped at said ceiling. After applying the 
cap, wage variations would be reapplied to episodes by multiplying them 
by the same wage normalization factor, using the IPPS wage index 
applicable to the anchor admission.
    Each participant hospital's actual episode payment performance 
would be compared to its target prices. We note that, as discussed in 
section III.C.4. of this proposed rule, a participant hospital would 
have multiple target prices for episodes ending in a given performance 
year, based on the MS-DRG anchor (MS-DRG 469 versus MS-DRG 470), the 
performance year when the episode was initiated, when the episode was 
initiated within a given performance year (January 1 through September 
30 of the performance year, October 1 through December 31 of the 
performance year, October 1 through December 31 of the prior 
performance year), and whether the participant hospital successfully 
submitted THA/TKA voluntary data. The applicable target price for each 
episode would be determined using the aforementioned criteria, and the 
difference between each CCJR episode's actual payment and the relevant 
target price (calculated as target price subtracted by CCJR actual 
episode payment) would be aggregated for all episodes for a participant 
hospital within the performance year, representing the raw Net Payment 
Reconciliation Amount (NPRA). This amount would be adjusted per the 
steps discussed later in this section, creating the NPRA.
    The NPRA would include adjustments to account for post-episode 
payment increases (section III.C.8.e. of this proposed rule). The NPRA 
would also include adjustments for stop-loss and stop-gain limits 
(section III.C.8.b. of this proposed rule), after adjustments are made 
for the aforementioned post-episode payment increases. Any NPRA amount 
greater than the proposed stop-gain limit would be capped at the stop-
gain limit, and any NPRA amount less than the proposed stop-loss limit 
would be capped at the stop-loss limit.
    We do not propose to include any CCJR reconciliation payments or 
repayments to Medicare under this model for a given performance year in 
the NPRA for a subsequent performance year. We want to incentivize 
providers to provide high quality and efficient care in all years of 
the model. If reconciliation payments for a performance year are 
counted as Medicare expenditures in a subsequent performance year, a 
hospital would experience higher Medicare expenditures in the 
subsequent performance year as a consequence of providing high quality 
and efficient care in the prior performance year, negating some of the 
incentive to perform well in the prior year. Therefore, we propose to 
not have the NPRA for a given performance year be impacted by CCJR 
Medicare repayments or reconciliation payments made in a prior 
performance year. However, as discussed in section III.C.6.b, during 
the following performance year's reconciliation process, we propose to 
account for additional claims run-out and overlap from the prior 
performance year, and net that amount with the subsequent performance 
year's NPRA to determine the reconciliation or repayment amount for the 
current reconciliation.
b. Payment Reconciliation
    We propose to reconcile payments retrospectively through the 
following reconciliation process. We would reconcile a participant 
hospital's CCJR actual episode payments against the target price 2 
months after the end of the performance year. More specifically, we 
would capture claims submitted by March 1st following the end of the 
performance year and carry out the NPRA calculation as described 
previously to make a reconciliation payment or hold hospitals 
responsible for repayment, as applicable, in quarter 2 of that calendar 
year.
    To address issues of overlap with other CMS programs and models 
that are discussed in section III.C.7. of this proposed rule, we also 
propose that during the following performance year's reconciliation 
process, we would calculate the prior performance year's episode 
spending a second time to account for final claims run-out, as well as 
overlap with other models as discussed in section III.C.7 of this 
proposed rule. This would occur approximately 14 months after the end 
of the prior performance year. As discussed later in this section, the 
amount from this calculation, if different from zero, would be applied 
to the NPRA for the subsequent performance year in order to determine 
the amount of the payment Medicare would make to the hospital or the 
hospital's repayment amount. We note that the subsequent reconciliation 
calculation would be applied to the previous calculation of NPRA for a 
performance year to ensure the stop loss and stop gain limits discussed 
in section

[[Page 41248]]

III.C.8. of this proposed rule are not exceeded for a given performance 
year.
    For the performance year 1 reconciliation process, we would 
calculate a participant's NPRA, as described above, and if positive, 
the hospital would receive the amount as a reconciliation payment from 
Medicare. If negative, the hospital would not be responsible for 
repayment to Medicare, consistent with our proposal to phase in 
financial responsibility beginning in performance year 2. Starting with 
the CCJR reconciliation process for performance year 2, in order to 
determine the reconciliation or repayment amount, the amount from the 
subsequent reconciliation calculation would be applied to the NPRA. If 
the amount is positive, and if the hospital meets the quality 
thresholds for that performance year (discussed further in section 
III.C.5. of this proposed rule), the hospital would receive the amount 
as a reconciliation payment from Medicare. If the amount is negative, 
Medicare would hold the participant hospital responsible for repaying 
the absolute value of the repayment amount following the rules and 
processes for all other Medicare debts. Note that given our proposal to 
not hold participant hospitals financially responsible for repayment 
for the first performance year, during the reconciliation process for 
performance year 2 only, the subsequent calculation amount (for 
performance year 1) would be compared against the performance year 1 
NPRA to ensure that the sum of the NPRA calculated for performance year 
1 and the subsequent reconciliation calculation for year 1 is not less 
than zero. For performance years 2 through 5, though, Medicare would 
hold the participant hospital responsible for repaying the absolute 
value of the repayment amount following the rules and processes for all 
other Medicare debts.
    This reconciliation process would account for overlaps between the 
CCJR model and other CMS models and programs as discussed in section 
III.C.7 of this proposed rule, and would also involve updating 
performance year episode claims data. For example, for performance year 
1 for the CCJR model in 2016, we would capture claims submitted by 
March 1st, 2017, and reconcile payments for participant hospitals 
approximately 6 months after the end of the performance year in quarter 
2 of calendar year 2017. We would carry out the subsequent calculation 
in the following year in quarter 2 of calendar 2018, simultaneously 
with the reconciliation process for the second performance year, 2017. 
Table 14 provides the proposed reconciliation timeframes for the model. 
Lastly, we propose that the reconciliation payments to or repayments 
from the participant hospital would be made by the Medicare 
Administrative Contractor (MAC) that makes payment to the hospital 
under the IPPS. This approach is consistent with BPCI Model 2 
operations.
    We believe our proposed approach balances our goals of providing 
reconciliation payments in a reasonable timeframe, while being able to 
account for overlap and all Medicare claims attributable to episodes. 
We believe that pulling claims 2 months after the end of the 
performance year provides sufficient claims run-out to conduct the 
reconciliation in a timely manner, given that our performance year 
includes episodes ending, not beginning, by December 31st. We note that 
in accordance with the regulations at Sec.  424.44 and the Medicare 
Claims Processing Manual (Pub. L. 100-04), Chapter 1, Section 70, 
Medicare claims can be submitted no later than 1 calendar year from the 
date of service. We recognize that by pulling claims 2 months after the 
end of the performance year to conduct reconciliation, we would not 
have complete claims run-out. However, we believe that the 2 months of 
claims run out would be an accurate reflection of episode spending and 
consistent with the claims run-out timeframes used for reconciliation 
in other payment models, such as BPCI Models 2 and 3. The alternative 
would be to wait to reconcile until we have full claims run out 12 
months after the end of the performance year, but we are concerned that 
this approach would significantly delay earned reconciliation payments 
under this model. Because we propose to conduct a second calculation to 
account for overlap with other CMS models and programs, we can 
incorporate updated claims data with 14 months run out at that time. 
However, we do not expect that the updated data should substantially, 
in and of itself, affect the reconciliation results assuming hospitals 
and other providers furnishing services to Medicare beneficiaries in 
CCJR episodes follow usual patterns of claims submission and do not 
alter their billing practices due to this model.

                             Table 14--Proposed Timeframe for Reconciliation in CCJR
----------------------------------------------------------------------------------------------------------------
                                                                                 Second             Second
                         Model        Reconciliation      Reconciliation     calculation to       calculation
Model performance     performance    claims submitted       payment or      address overlaps     adjustment to
       year             period              by              repayment        and claims run-    reconciliation
                                                                                   out              amount
----------------------------------------------------------------------------------------------------------------
Year 1*..........  Episodes ending   March 1, 2017...  Q2 2017............  March 1, 2018...  Q2 2018
                    March 31, 2016
                    to December 31,
                    2016.
Year 2...........  Episodes ending   March 1, 2018...  Q2 2018............  March 1, 2019...  Q2 2019
                    January 1, 2017
                    through
                    December 31,
                    2017.
Year 3...........  Episodes ending   March 1, 2019...  Q2 2019............  March 2, 2020...  Q2 2020
                    January 1, 2018
                    through
                    December 31,
                    2018.
Year 4...........  Episodes ending   March 2, 2020...  Q2 2020............  March 1, 2021...  Q2 2021
                    January 1, 2019
                    through
                    December 31,
                    2019.
Year 5...........  Episodes ending   March 1, 2021...  Q2 2021............  March 1, 2022...  Q2 2022
                    January 1, 2020
                    through
                    December 31,
                    2020.
----------------------------------------------------------------------------------------------------------------
* Note that the reconciliation for Year 1 would not include repayment responsibility from CCJR hospitals.


[[Page 41249]]

7. Proposed Adjustments for Overlaps With Other Innovation Center 
Models and CMS Programs
a. Overview
    We acknowledge that there may be circumstances where a Medicare 
beneficiary in a CCJR episode may also be assigned to an ACO 
participating in the MSSP or otherwise accounted for in a payment model 
being tested by the Innovation Center. Current or forthcoming programs 
and models with potential overlap with CCJR are displayed in Table 15. 
For purposes of this proposed rule, ``total cost of care'' models refer 
to models in which episodes or performance periods include participant 
financial responsibility for all Part A and Part B spending, as well as 
some Part D spending in select cases. We use the term ``shared 
savings'' in this proposed rule to refer to models in which the payment 
structure includes a calculation of total savings and CMS and the model 
participants each retain a particular percentage of that savings. We 
note that there exists the possibility for overlap between CCJR 
episodes and shared savings models such as the Pioneer ACO Model, other 
total cost of care models such as the Oncology Care Model (OCM), other 
Innovation Center payment models such as BPCI, and other models or 
programs that incorporate per-beneficiary-per-month fees or other 
payment structures.

              Table 15--Current Programs and Models With Potential Overlap With Proposed CCJR Model
----------------------------------------------------------------------------------------------------------------
                                                                                      Per[dash]beneficiary-per-
            Program/model                Brief description       Shared savings?       month (PBPM)  payments?
----------------------------------------------------------------------------------------------------------------
Pioneer.............................  ACO shared savings       Yes................  No.
                                       program.
Medicare Shared Savings Program       ACO shared savings       Yes................  No.
 (MSSP).                               program.
Next Generation ACO.................  ACO shared savings       Yes................  No.
                                       program.
Comprehensive Primary Care            Pays primary care        Yes................  Yes.
 initiative (CPCi).                    providers for improved
                                       and comprehensive care
                                       management.
Multi[dash]payer Advanced Primary     Multi[dash]payer model   Yes................  Yes.
 Care Practice (MAPCP).                for advanced primary
                                       care practices, or
                                       ``medical homes''.
Bundled Payments for Care             Bundled payment program  No.................  No.
 Improvement (BPCI).                   for acute or
                                       post[dash]acute
                                       services or both.
Oncology Care Model (OCM)...........  Multi[dash]payer model   No.................  Yes.
                                       for oncology physician
                                       group practices.
Comprehensive ESRD Care Initiative    ACO for ESRD Medicare    Yes................  No.
 (CEC).                                beneficiaries.
Million Hearts......................  Model targeting          No.................  Yes.
                                       prevention of heart
                                       attack and stroke.
Medicare Care Choices Model.........  Hospice concurrent care  No.................  Yes.
                                       model.
----------------------------------------------------------------------------------------------------------------

    Four different issues may arise in such overlap situations that 
must be addressed under CCJR. First, beneficiaries in CCJR episodes 
could also be part of BPCI Model 2 or 3 LEJR episodes, and the clinical 
services provided as part of each episode may overlap entirely or in 
part. Second, CCJR reconciliation payments and Medicare repayments that 
are made under Part A and B and attributable to a specific 
beneficiary's episode may be at risk of not being accounted for by 
other models and programs when determining the cost of care under 
Medicare for that beneficiary. Third, some Innovation Center models 
make PBPM payments to entities for care coordination and other 
activities, either from the Part A or B Trust or both, or from the 
Innovation Center's own appropriation (see section 1115A(f) of the 
Act). These payments may occur during a CCJR episode. Finally, there 
could be instances when the expected Medicare savings for a CCJR 
beneficiary's episode is not achieved by Medicare because part of that 
savings is paid back to the hospital or another entity under a shared 
savings program or other model in which the beneficiary is also 
included. We seek comment on our proposals to account for overlap with 
other models, including those listed in Table 15 as well as other CMS 
models or programs.
b. CCJR Beneficiary Overlap With BPCI Episodes
    BPCI is an episode payment model testing LEJR episodes, as well as 
47 other episodes, in acute or PAC or both (Models 1, 2, 3 or 4). As 
discussed in section III.A. of this proposed rule, we propose to 
exclude from selection for participation in the CCJR payment model 
those geographic areas where 50 percent or more of LEJR episodes are 
initiated at acute care hospitals testing the LEJR episode in BPCI in 
Models 1, 2 or 4 as of July 1, 2015. In that same section, we propose 
that acute care hospitals in selected geographic areas participating in 
BPCI under Model 1 (acute care only) and those participating as episode 
initiators for the LEJR episode in Model 2 (acute and PAC from 30 to 90 
days post-discharge) or Model 4 (prospective episode payment for the 
LEJR anchor hospital stay and related readmissions for 30 days post-
discharge) be excluded from CCJR.
    While we believe these proposals will mitigate the overlap of CCJR 
beneficiaries with BPCI episodes, there may still be instances of model 
overlap that we need to account for under CCJR. These include 
circumstances when a beneficiary is admitted to a participating CCJR 
hospital for an LEJR procedure where the beneficiary would also be in a 
BPCI Model 2 episode under a physician group practice that would 
initiate the episode under BPCI. In another example, a beneficiary 
discharged from an anchor hospitalization under CCJR could enter a BPCI 
Model 2 LEJR episode at another hospital for a phased second joint 
replacement procedure or enter a BPCI Model 3 LEJR episode upon 
initiation of PAC services at a BPCI post-acute provider episode 
initiator for the LEJR episode. Similarly, a beneficiary in a BPCI 
Model 2 or Model 3 LEJR episode could be admitted to a CCJR participant 
hospital for a phased second joint replacement. In all such scenarios 
in which there is overlap of CCJR beneficiaries with any BPCI LEJR 
episodes, we propose that the BPCI LEJR episode under Models 1, 2, 3, 
or 4 take precedence and we would cancel (or never initiate) the CCJR 
episode. Because the cancellation (or lack of initiation) would only 
occur for overlap with BPCI LEJR episodes, we expect that the 
participant hospital and treating physician would generally be aware of 
the beneficiary's care pathway that

[[Page 41250]]

would cancel or not initiate the CCJR episode. Therefore, we would 
exclude the CCJR episode from the CCJR participant hospital's 
reconciliation calculations where we compare actual episode payments to 
the target price under the CCJR model. If we were to allow both CCJR 
and BPCI LEJR episodes to overlap, we would have no meaningful way to 
apply the payment policies in two models with overlapping care redesign 
interventions and episodes. Participants in BPCI have an expectation 
that eligible episodes will be part of the BPCI model test, whereas 
based on our proposal CCJR participants would be aware that episodes 
may be canceled when there is overlap with BPCI episodes as previously 
discussed in this section. We aim to preserve the integrity of ongoing 
model tests without introducing major modifications (that is, CCJR 
episode precedence) that could make evaluation of existing models more 
challenging.
    We considered that there may also be instances of overlap between 
CCJR and BPCI Model 3 LEJR episodes where our proposal to give 
precedence to all BPCI episodes could lead to undesirable patient 
steering because the BPCI Model 3 episode does not begin until care is 
initiated at an episode-initiating PAC provider. It could be possible 
for a participating CCJR hospital to purposefully guide a beneficiary 
to a BPCI Model 3 LEJR episode initiating PAC provider to exclude that 
beneficiary's episode from CCJR. We considered giving precedence to the 
CCJR episode in overlap with Model 3 beneficiaries because the CCJR 
episode begins with admission for the anchor hospitalization and thus 
includes more of the episode services. However, we believe the steering 
opportunities would be limited due to the preservation of beneficiary 
choice of provider in this model (as discussed in section III.E. of 
this proposed rule). As outlined in section III.E. of this proposed 
rule, CCJR hospitals must provide patients with a complete list of all 
available PAC options. Moreover, BPCI Model 3 post-acute providers are 
actively involved in the decision to admit patients to their 
facilities. As episode initiators in BPCI, such providers are subject 
to monitoring and evaluation under that model and would be vigilant 
about not engaging in steering themselves or spurred by other 
providers. Nevertheless, we will monitor CCJR hospitals to ensure 
steering or other efforts to limit beneficiary access or move 
beneficiaries out of the model are not occurring (see section III.F. of 
this proposed rule).
    We seek comment on the proposed approach to address overlap between 
CCJR and BPCI episodes.
c. Accounting for CCJR Reconciliation Payments and Repayments in Other 
Models and Programs
    Under CCJR, we would annually, as applicable, make reconciliation 
payments to or receive repayments from participating CCJR hospitals 
based on their quality performance and Medicare expenditures, as 
described in section III.C.6. of this proposed rule. While we propose 
that these reconciliation payments or repayments would be handled by 
MACs, the calculation of these amounts would be done separately before 
being sent through the usual Medicare claims processing systems. 
Nevertheless, it is important that other models and programs in which 
providers are accountable for the total cost of care be able to account 
for the full Medicare payment, including CCJR-related reconciliation 
payments and repayments as described in section III.C.6. of this 
proposed rule, for beneficiaries who are also in CCJR episodes. 
Accordingly, it is necessary to have beneficiary-specific information 
on CCJR-related reconciliation payments and repayments available when 
those models and programs make their financial calculations. Thus, in 
addition to determining reconciliation payments and repayments for the 
participant hospitals in the CCJR model, we propose to also calculate 
beneficiary-specific reconciliation payment or repayment amounts for 
CCJR episodes to allow for those other programs and models, as their 
reconciliation calculation timeframes permit, to determine the total 
cost of care for overlapping beneficiaries. We would perform the 
reconciliation calculations for CCJR hospitals and make information 
about the CCJR reconciliation or repayment amounts available to other 
programs and models, such as MSSP and Pioneer ACO, that begin 
reconciliation calculations after CCJR. For example, this strategy is 
currently in place to account for overlaps between beneficiaries 
aligned to Pioneer and MSSP ACOs and BPCI model beneficiaries. 
Beneficiary-specific reconciliation payment or repayment amounts are 
loaded into a shared repository for use during each program or model's 
respective reconciliations. However, we note that we would not make 
separate payments to, or collect repayments from, participating CCJR 
hospitals for each individual episode, but, instead, propose to make a 
single aggregate reconciliation payment or repayment determination for 
all episodes for a single performance year, as discussed in section 
III.C.6. of this proposed rule.
    As described in section III.C.6 of this proposed rule on the 
Proposed Process for Reconciliation, we propose to conduct 
reconciliation based on claims data available 2 months after the end of 
the performance year and a second calculation based on claims data 
available 14 months after the end of a performance year to account for 
claims run-out and potential overlap with other models. The rationale 
for this reconciliation process is to be able make payments to, and 
recoup payments from, CCJR participant hospitals in a timely manner and 
to be able to account for overlaps in other models and programs. In 
addition, the timing of the reconciliation was determined giving 
consideration to when the other total cost of care models conduct their 
reconciliations so that when they perform their financial calculations, 
they will have the information necessary to account for beneficiary-
specific payments/repayments made under the CCJR model. We intend to 
report beneficiary-specific payments and repayment amounts made for the 
CCJR model in the CMS Master Database Management System that generally 
holds payments/repayment amounts made for CMS models and programs. 
Other total cost of care models and programs can use the information on 
CCJR payment/repayment amounts reported in the Master Database 
Management System in their financial calculations such as in their 
baseline or benchmark calculations or reconciliations, to the extent 
that is consistent with their policies.
    We seek comment on our proposed approach to ensuring that the full 
CCJR episode payment for a beneficiary is accounted for when performing 
financial calculations for other total cost of care and episode-based 
payment models and programs.
d. Accounting for PBPM Payments in the Episode Definition
    There are currently five CMS models that pay PBPM payments to 
providers for new or enhanced services as displayed in Table 15. These 
PBPM payments vary as to their funding source (Medicare Trust Funds or 
Innovation Center appropriation), as well as to their payment 
methodology.
    In general, these PBPM payments are for new or enhanced provider or 
supplier services that share the goal of improving quality of care 
overall and reducing Medicare expenditures for services that could be 
avoided through improved care coordination. Some of

[[Page 41251]]

these PBPM payments may be made for services furnished to a beneficiary 
that is in another Innovation Center model at the that same time that 
the beneficiary is in a CCJR LEJR episode, but the clinical 
relationship of services paid by the PBPM payments to the CCJR episode 
will vary. For purposes of CCJR, we consider clinically related those 
services paid by PBPMs that are for the purpose of care coordination 
and care management of any beneficiary diagnosis or hospital 
readmission not excluded from the CCJR episode definition, as discussed 
in section III.B.2 of this proposed rule.
    We would determine whether the services paid by PBPM payments are 
excluded from the CCJR episode on a model by model basis based on their 
funding source and clinical relationship to CCJR episodes. If we 
determine a model's PBPM payments are for new or enhanced services that 
are clinically related to the CCJR episode and the PBPM payment is 
funded through the Medicare Part A or B Trust Fund, we would include 
the services paid by the PBPM payment to the extent they otherwise meet 
the proposed episode definition for the CCJR model. That is, we would 
include the clinically related services paid by a PBPM payment if the 
services would not otherwise be excluded based on the principal 
diagnosis code on the claim, as discussed in section III.B.2 of this 
proposed rule. The PBPM payments for clinically related services would 
not be excluded from the historical CCJR episodes used to calculate 
target prices when the PBPM payments are present on Part A or Part B 
claims, and they would not be excluded from calculation of episode 
actual expenditures during the performance period. PBPM model payments 
that we determine are clinically unrelated would be excluded, 
regardless of the funding mechanism or diagnosis codes on claims for 
those payments. We note that in the case of PBPM model payments, 
principal diagnosis codes on a Part B claim (which are used to identify 
exclusions from CCJR episodes, as discussed in section III.B.), would 
not denote the only mechanism for exclusion of a service from the CCJR 
episode. All such PBPM model payments we determine are clinically 
unrelated would be excluded as discussed in this proposal. Finally, all 
services paid by PBPM payments funded through the Innovation Center's 
appropriation under section 1115A of the Act would be excluded from 
CCJR episodes, without a specific determination of their clinical 
relationship to CCJR episodes. We believe including such PBPM payments 
funded under the Innovation Center's appropriation and not included on 
claims would be operationally burdensome and could significantly delay 
any reconciliation payments and repayments for the CCJR model. In 
addition, because these services are not paid for from the Medicare 
Part A or B Trust Fund, we are not confident that they would be covered 
by Medicare under existing law. Therefore, we believe the services paid 
by these PBPM payments are most appropriately excluded from CCJR 
episodes. Our proposal for the treatment of services paid through model 
PBPM payments in CCJR episodes would pertain to all existing models 
with PBPM payments, as well as future models and programs that 
incorporate PBPM payments. We believe that this proposal is fully 
consistent with our goal of including all related Part A and Part B 
services in the CCJR episodes, as discussed in section III.B.2. of this 
proposed rule.
    Under this proposal, only one of the four existing models displayed 
in Table 15 include services paid by PBPM payments that would not be 
excluded from CCJR episodes. The MAPCP model makes PBPM payments that 
are funded through the Trust Fund for new or enhanced services that 
coordinate care, improve access, and educate patients with chronic 
illnesses. We expect these new or enhanced services to improve quality 
and reduce spending for services that may have otherwise occurred, such 
as hospital readmissions, and consider them to be clinically related to 
CCJR episodes because the PBPM payments would support care coordination 
for medical diagnoses that are not excluded from CCJR episodes. Thus, 
we propose that services paid by PBPM payments under the MAPCP model 
not be excluded from CCJR episodes to the extent they otherwise meet 
the proposed episode definition. While the OCM model will pay for new 
or enhanced services through PBPM payments funded by the Medicare Part 
B Trust Fund, we do not believe these services are clinically related 
to CCJR episodes. The OCM model incorporates episode-based payment 
initiated by chemotherapy treatment, a service generally reported with 
ICD-9-CM codes that are specifically excluded from the proposed CCJR 
episode definition in section III.B.2. of this proposed rule. We 
believe the care coordination and management services paid by OCM PBPM 
payments would be focused on chemotherapy services and their 
complications, so the services would be clinically unrelated to CCJR 
episodes. Therefore, we propose that services paid by PBPM payments 
under the OCM model be excluded from CCJR episodes. Similarly, we 
propose to exclude services paid by PBPM payments under the Medicare 
Care Choices model, because the model's focus on palliative care for 
beneficiaries with a terminal illness means the PBPM payments would pay 
for services that are clinically unrelated to CCJR episodes. The 
services paid by PBPM payments under this model would commonly pertain 
to diagnoses that are excluded from the proposed CCJR episode 
definition. Finally, new or enhanced services paid by PBPM payments 
under the Comprehensive Primary Care initiative (CPCi) are paid out of 
the Innovation Center's appropriation and thus would be excluded from 
CCJR episodes according to this proposal.
    We acknowledge there may be new models not included Table 15 that 
could incorporate a PBPM payment for new or enhanced services. We would 
plan to make our determination about whether services paid by a new 
model PBPM payment that is funded under the Medicare Trust Funds are 
clinically related to CCJR episodes through the same subregulatory 
approach that we are proposing to use to update the episode definition 
(excluded MS-DRGs and ICD-9-CM diagnosis codes). We would assess each 
model's PBPM payment to determine if it would be primarily used for 
care coordination or care management services for excluded clinical 
conditions under the LEJR episode definition for CCJR based on the 
standards we propose to use to update the episode definition that are 
discussed in section III.B.2 of this proposed rule.
    If we determine that the PBPM payment would primarily be used to 
pay for services to manage an excluded clinical condition, we would 
exclude the PBPM payment from the CCJR episode on the basis that it 
pays for unrelated services. If we determine that the PBPM payment 
could primarily be used for services to manage an included clinical 
condition, we would include the PBPM payment in the CCJR episode if the 
diagnosis code on the claim for the PBPM payment was not excluded from 
the episode, following our usual process for determining excluded 
claims for Part B services in accordance with the episode definition 
discussed in section III.C.2 of this proposed rule. We would post our 
proposed determination about whether the PBPM payment would be included 
in the episode to the CMS Web site to allow for public input on our 
planned application of these standards, and then adopt changes to

[[Page 41252]]

the overlap list with posting to the CMS Web site of the final updated 
list after our consideration of the public input.
    We seek comment on our proposals to account for Innovation Center 
model PBPM payments under CCJR.
e. Accounting for Overlap With Shared Savings Programs and Total Cost 
of Care Models
    In addition to the Medicare Shared Savings Program (MSSP) under 
section 1899 of the Act, there are several ACO and other Innovation 
Center models that make or will make, once implemented, providers 
accountable for total cost of care over 6 to 12 months, including the 
Pioneer ACO Model, Next Generation ACO, Comprehensive ESRD Care (CEC) 
Model, CPCi, OCM, and the Multi-payer Advanced Primary Care Practice 
(MAPCP) Demonstration. Some of these are shared savings models (or 
programs, in the case of MSSP), while others are not shared savings but 
hold participating providers accountable for the total cost of care 
during a defined episode of care, such as OCM. Note that as discussed 
in section III.C.7.a. of this proposed rule, for purposes of this 
proposed rule, ``total cost of care'' models refer to models in which 
episodes or performance periods include participant financial 
responsibility for all Part A and Part B spending, as well as some Part 
D spending in select cases. Each of these payment models holds 
providers accountable for the total cost of care over the course of an 
extended period of time or episode of care by applying various payment 
methodologies. We believe it is important to simultaneously allow 
beneficiaries to participate in broader population-based and other 
total cost of care models, as well as episode payment models that 
target a specific episode of care with a shorter duration, such as 
CCJR. Allowing beneficiaries to receive care under both types of models 
may maximize the potential benefits to the Medicare Trust Funds and 
participating providers and suppliers, as well as beneficiaries. 
Beneficiaries stand to benefit from care redesign that leads to 
improved quality for LEJR episodes of care even while also receiving 
care under these broader models, while entities that participate in 
other models and programs that assess total cost of care stand to 
benefit, at least in part, from the cost savings that accrue under 
CCJR. For example, a beneficiary receiving an LEJR procedure may 
benefit from a hospital's care coordination efforts with regard to care 
during the inpatient hospital stay. The same beneficiary may be 
attributed to a primary care physician affiliated with an ACO who is 
actively engaged in coordinating care for all of the beneficiary's 
clinical conditions throughout the entire performance year, beyond the 
90-day post-discharge LEJR episode.
    We propose that a beneficiary could be in a CCJR episode, as 
defined in section III.B. of this proposed rule, by receiving an LEJR 
procedure at a CCJR hospital, and also attributed to a provider 
participating in a model or program in Table 15. For example, a 
beneficiary may be attributed to a provider participating in the 
Pioneer ACO model for an entire performance year, as well as have a 
CCJR episode during the ACO's performance year. Each model incorporates 
a reconciliation process, where total included spending during the 
performance period or episode are calculated, as well as any potential 
savings achieved by the model or program. Given that we are proposing 
to allow for such beneficiary overlap, we believe it is important to 
account for savings under CCJR and the other models and programs with 
potential overlap in order that CMS can apply the respective individual 
savings-related payment policies of the model or program, without 
attributing the same savings to more than one model or program.
    We believe that when overlap occurs, it is most appropriate to 
attribute Medicare savings accrued during the CCJR time period 
(hospital stay plus 90 days post-discharge) to CCJR to the extent 
possible. The CCJR episode has a shorter duration and is initiated by a 
major surgical procedure, requiring an inpatient hospitalization. In 
contrast, the total cost of care models listed in Table 15 incorporate 
6 to 12 month performance periods for participants and, in general, 
have a broader focus on beneficiary health. Our intention is to ensure 
that CCJR episodes are attributed the full expected savings to Medicare 
to the extent possible. As such, we propose the following policies to 
ensure that other models are able to account for the reconciliation 
payments paid to CCJR hospitals to the extent possible prior to 
performing their own reconciliation calculations and that, in all 
appropriate circumstances, the CCJR model or the other model would make 
an adjustment for savings achieved under the CCJR model and partially 
paid back through shared savings/performance payments under other 
initiatives to ensure that the full CCJR model savings to Medicare is 
realized.
    We propose that the total cost of care calculations under non-ACO 
total cost of care models would be adjusted to the extent feasible to 
account for beneficiaries that are aligned to participants in the model 
and whose care is included in CCJR in order to ensure that the savings 
to Medicare achieved under CCJR (the discount percentage) are not paid 
back under these other models through shared savings or other 
performance-based payment. Thus, the non-ACO total cost of care models 
would adjust their calculations to ensure the CCJR discount percentage 
is not paid out as savings or other performance-based payment to the 
other model participants. As previously discussed, we believe that the 
efficiencies achieved during the CCJR episode should be credited to the 
entity that is closest to that care for the episode of care in terms of 
time, location, and care management responsibility, rather than the 
broader entity participating in a total cost of care model that spans a 
longer duration. We propose that the non-ACO total cost of care models 
to which this policy would apply would include CPCi, OCM, and MAPCP. We 
seek comment on our proposal to account for overlap with those non-ACO 
total cost of care models and any other current or forthcoming models.
    We propose a different policy for accounting for overlap with MSSP 
and other ACO models. We note that given the operational complexities 
and requirements of the MSSP reconciliation process, it is not feasible 
for MSSP to make an adjustment to account for the discount to Medicare 
under a CCJR episode under existing program rules and processes. 
Additionally, for programmatic consistency among ACO models and 
programs, given that our ACO models generally are tested for the 
purpose of informing future potential changes to MSSP, we believe that 
the ACO model overlap adjustment policy should be aligned with the MSSP 
policy. Thus, we propose that under CCJR, we would make an adjustment 
to the reconciliation amount if available to account for any of the 
applicable discount for an episode resulting in Medicare savings that 
is paid back through shared savings under MSSP or any other ACO model, 
but only when a CCJR participant hospital also participates in the ACO 
and the beneficiary in the CCJR episode is also aligned to that ACO. 
This adjustment would be necessary to ensure that the applicable 
discount under CCJR is not reduced because a portion of that discount 
is paid out in shared savings to the ACO and thus, indirectly, back to 
the hospital.
    However, we propose not to make an adjustment under CCJR when a

[[Page 41253]]

beneficiary receives an LEJR procedure at a participant hospital and is 
aligned to an ACO in which the hospital is not participating. While 
this proposal would leave overlap unaccounted for in such situations, 
we do not believe it would be appropriate to hold responsible for 
repayment the hospital that managed the beneficiary during the episode 
through a CCJR adjustment, given that the participant hospital may have 
engaged in care redesign and reduced spending during the CCJR episode. 
The participant hospital may be unaware that the beneficiary is also 
aligned to an ACO. However, we recognize that as proposed this policy 
would allow an unrelated ACO full credit for the Medicare savings 
achieved during the episode. The evaluation of the CCJR model, as 
discussed in section IV of this proposed rule, would examine overlap in 
such situations and the potential effect on Medicare savings.
    We note that our proposed policy as outlined in this proposed rule 
would entail CCJR reclaiming from the participant hospital any discount 
percentage paid out as shared savings for MSSP or ACO models only when 
the hospital is an ACO participant and the beneficiary is aligned with 
that ACO, while other total cost of care models such as CPCi would 
adjust for the discount percentage in their calculations. While it is 
operationally feasible for smaller total cost of care models in 
testing, such as CPCi, to make an adjustment to account for any CCJR 
discount percentage paid out as sharing savings or other performance-
based payments, the operational complexities and requirements of the 
large permanent Medicare ACO program, MSSP, make it infeasible for that 
program to make an adjustment in such cases, and we believe that other 
ACO models in testing that share operating principles with the MSSP 
should follow the same policies as the CCJR MSSP adjustment for certain 
overlapping ACO beneficiaries. As the landscape of CMS models and 
programs changes, we may revisit this policy through future rulemaking.
    We seek comment on our proposals for adjustments to account for 
overlap between CCJR and shared savings programs and total cost of care 
models.
8. Proposals To Limit or Adjust Hospital Financial Responsibility
a. Overview
    As discussed in section III.A of this proposed rule, we propose 
designating as the financially responsible providers in CCJR all acute 
care hospitals paid under the IPPS that are located in the selected 
geographic areas for this test of 90-day post-discharge LEJR episodes, 
with the exception of some hospitals that we propose to exclude because 
of participation in BPCI (Models 1, 2, or 4) for LEJR episodes. We are 
interested in ensuring a broad test of episode payment for this 
clinical condition among different types of hospitals, including those 
who may not otherwise choose to participate in an episode payment 
model. Many of the participant hospitals would likely be key service 
providers in their communities for a variety of medical and surgical 
conditions extending well beyond orthopedic procedures. We want to gain 
experience with this model before extending it to hospitals in uncommon 
circumstances. In addition, we acknowledge that hospitals designated 
for participation in CCJR currently vary with respect to their 
readiness to function under an episode payment model with regard to 
their organizational and systems capacity and structure, as well as 
their beneficiary population served. Some hospitals may more quickly be 
able to demonstrate high quality performance and savings than others, 
even though we propose that the episode target prices be based 
predominantly on the hospital's own historical episode utilization in 
the early years of CCJR.
    We also note that providers may be incentivized to excessively 
reduce or shift utilization outside of the CCJR episode, even with the 
quality requirements discussed in section III.C.5 of this proposed 
rule. In order to mitigate any excessive repayment responsibility for 
hospitals or reduction or shifting of care outside the episode, 
especially beginning in performance year 2 of the model when we propose 
to begin to phase in responsibility for repaying Medicare for excess 
episode spending, we propose several specific policies that are also 
referenced in section III.C.6.b. of this proposed rule.
b. Proposed Limit on to Raw NPRA Contribution to Repayment Amounts and 
Reconciliation Payments
(1) Proposed Limit on Raw NPRA Contribution to Repayment Amounts
    When hospital repayment responsibility begins in the second 
performance year of CCJR, under this proposed rule, hospitals would be 
required to repay Medicare for episode expenditures that are greater 
than the applicable target price. As discussed in the section III.C.3.c 
of this proposed rule regarding our proposed pricing adjustment for 
high payment episodes, hospitals participating in CCJR would not bear 
financial responsibility for actual episode payments greater than a 
ceiling set at two standard deviations above the mean regional episode 
payment. Nevertheless, hospitals would begin to bear repayment 
responsibility beginning in performance year 2 for those episodes where 
actual episode expenditures are greater than the target price up to the 
level of the regional episode ceiling. In aggregate across all 
episodes, the money owed to Medicare by a hospital for actual episode 
spending above the applicable target price could be substantial if a 
hospital's episodes generally had high payments. As an extreme example, 
if a hospital had all of its episodes paid at two standard deviations 
above the mean regional episode payment, the hospital would need to 
repay Medicare a large amount of money, especially if the number of 
episodes was large.
    To limit a hospital's overall repayment responsibility for the raw 
NPRA contribution to the repayment amount under this model, we propose 
a 10 percent limit on the raw NPRA contribution to the repayment amount 
in performance year 2 and a 20 percent limit on the raw NPRA 
contribution to the repayment amount in performance year 3 and 
subsequent years. Hereinafter we refer to these proposed repayment 
limits as stop-loss limits. In performance year 2 as we phase in 
repayment responsibility, the hospital would owe Medicare under the 
proposed CCJR payment model no more than 10 percent of the hospital's 
target price for the anchor MS-DRG multiplied by the number of the 
hospital's CCJR episodes anchored by that MS-DRG during the performance 
year, for each anchor MS-DRG in the model. Ten percent provides an even 
transition with respect to maximum repayment amounts from performance 
year 1, where the hospital bears no repayment responsibility, to the 
proposed stop-loss limit in performance years 3 through 5 of 20 
percent. In performance years 3 through 5 when repayment responsibility 
is fully phased in, no more than 20 percent of the hospital's target 
price for the MS-DRG multiplied by the number of the hospital's CCJR 
episodes with that MS-DRG in that performance year would be owed by the 
hospital to Medicare under the proposed CCJR payment model. The 
proposed stop-loss percentage of 20 percent would be symmetrical in 
performance years 3 through 5 with the proposed limit on the raw NPRA 
contribution to reconciliation payments discussed in the following 
section.
    We believe that a stop-loss limit of 20 percent is appropriate when 
the hospital bears full repayment responsibility,

[[Page 41254]]

based on our assessment of the changes in practice pattern and 
reductions in quality of care that could lead to significant repayment 
responsibility under the CCJR model, as compared to historical LEJR 
episode utilization. We estimate that the IPPS payment for the anchor 
hospital stay makes up approximately 50 percent of the episode target 
price, and we expect that the anchor hospital stay offers little 
opportunity for efficiencies to be achieved by reducing Medicare 
expenditures. In contrast, we expect significant episode efficiencies 
could be achieved in the 90 days following discharge from the anchor 
hospital stay through reductions in related hospital readmissions and 
increased utilization of appropriate lower intensity PAC providers, 
specifically increased utilization of home health services and 
outpatient therapy and reduced utilization of SNFs and IRFs. Hospital 
readmissions and facility-based PAC increase the typical Medicare 
episode payment by 30 to 45 percent over episodes that do not include 
these services. The proposed 20 percent stop-loss limit related to the 
total episode payment corresponds to approximately 40 percent of 
episode payment for the post-discharge period only, where the major 
opportunities for efficiency through care redesign occur. Thus, taking 
into consideration the historical patterns used to set target prices, 
we believe it is reasonable to hold participant hospitals responsible 
for repayment of actual episode spending that is up to 20 percent 
greater than the target price. If a participant hospital's repayment 
amount due to the raw NPRA would otherwise have exceeded the stop-loss 
limit of 20 percent (comparable to 40 percent of Medicare payment for 
the post-discharge period), the hospital's episodes would include much 
poorer episode efficiency as compared to the hospital's historical 
episodes, with large proportions of episodes including related 
readmissions and facility-based PAC, costly services that we do not 
expect to be necessary for most beneficiaries whose care is well-
coordinated and appropriate throughout a high quality LEJR episode.
    The following hypothetical example illustrates how the proposed 
stop-loss percentage would be applied in a given performance year for 
the episodes of a participant hospital. In performance year 3, a 
participant hospital had ten episodes triggered by MS-DRG 469, with a 
target price for these episodes of $50,000. The hospital's episode 
actual spending for these ten episodes was $650,000. The hospital's raw 
NPRA that would otherwise be $150,000 ((10 x $50,000)-$650,000) would 
be capped at the 20 percent stop-loss limit of $100,000 (.2 x 10 x 
$50,000) so the hospital would owe CMS $100,000, rather than $150,000. 
In performance year 3, the same participant hospital also has 100 
episodes triggered by MS-DRG 470, with a target price for these 
episodes of $25,000. The hospital's episode actual spending for these 
100 episodes was $2,800,000. The hospital's raw NPRA would be $300,000 
((100 x $25,000)-$2,800,000), an amount that would be due to CMS in 
full as it would not be subject to the 20 percent stop-loss limit of 
$500,000 (.2 x 100 x $25,000).

[[Page 41255]]

[GRAPHIC] [TIFF OMITTED] TP14JY15.009

    As illustrated in Figure 4 where we display results from our 
national model for the proposed CCJR performance year 2 policies when 
the phase-in of repayment responsibility begins and under the 
assumption that utilization remains constant, we estimate that the 10 
percent stop-loss limit would impact the amount of repayment due to the 
raw NPRA for about 11 percent of hospitals. For performance year 3, the 
20 percent stop-loss limit would affect significantly fewer hospitals, 
only about 3 percent. We note that the stop-loss limit for years 3 
through 5 where repayment responsibility is fully implemented is 
consistent with the BPCI Model 2 policy. While Figure 3 assumes no 
change in utilization patterns, under the model test we expect that the 
proposed stop-loss limits could actually affect a smaller percentage of 
hospitals in each performance year because we expect LEJR episode care 
redesign incentivized by the model's financial opportunities to 
generally reduce unnecessary utilization, thereby reducing actual 
episode spending and, correspondingly, any associated repayment amounts 
due to the raw NPRA. We note that we would include any post-episode 
spending amount due to Medicare according to the policy proposed in 
section III.C.8.d of this proposed rule in assessing the total 
repayment amount due to the raw NPRA against the stop-loss limit for 
the performance year to determine a hospital's total payment due to 
Medicare, if applicable.
    We seek comment on our proposal to adopt a 10 percent stop-loss 
limit in performance year 2 and 20 percent stop-loss limit in 
performance year 3 and beyond in CCJR as hospital repayment 
responsibility for excess episode spending above the target price is 
phased in and then maintained in the model.
(2) Proposed Limit on Raw NPRA Contribution to Reconciliation Payments
    We believe a limit on reconciliation payments for CCJR would be 
appropriate for several reasons. Due to the proposed nature of the CCJR 
model during performance year 1, when hospitals have no repayment 
responsibility for excess episode spending above the target price, CMS 
bears full financial responsibility for Medicare actual episode 
payments for an episode that exceed the target price, and we believe 
our responsibility should have judicious limits. Therefore, we believe 
it would be reasonable to cap a hospital's reconciliation payment due 
to the raw NPRA as a percentage of episode payment on the basis of 
responsible stewardship of CMS resources. In addition, we note that 
beginning in performance year 1, participant hospitals would be 
eligible for reconciliation payments due to the NPRA if actual episode 
expenditures are

[[Page 41256]]

less than the target price, assuming the proposed quality thresholds 
are met. This proposal for reconciliation payments due to the NPRA 
provides a financial incentive to participant hospitals from the 
beginning of the model to manage and coordinate care throughout the 
episode with a focus on ensuring that beneficiaries receive the lowest 
intensity, medically appropriate care throughout the episode that 
results in high quality outcomes. Therefore, we also believe it would 
be reasonable to cap a hospital's reconciliation payment due to the raw 
NPRA based on concerns about potential excessive reductions in 
utilization under the CCJR model that could lead to beneficiary harm.
    In determining what would constitute an appropriate reconciliation 
payment limit due to the raw NPRA, we believe it should provide 
significant opportunity for hospitals to receive reconciliation 
payments for greater episode efficiency that includes achievement of 
quality care and actual episode payment reductions below the target 
price, while avoiding creating significant incentives for sharply 
reduced utilization that could be harmful to beneficiaries. Thus, for 
all 5 performance years of the model, we propose a limit on the raw 
NPRA contribution to the reconciliation payment of no more than 20 
percent of the hospital's target prices for each MS-DRG multiplied by 
the number of the hospital's episodes for that MS-DRG. Hereinafter we 
refer to this proposed reconciliation payment limit as the stop-gain 
limit. This proposed stop-gain limit is parallel to the 20 percent 
stop-loss limit proposed for performance year 3 and beyond. We believe 
that a parallel stop-gain and stop-loss limit is important to provide 
proportionately similar protections to CMS and participant hospitals 
for their financial responsibilities under CCJR, as well as to protect 
the health of beneficiaries.
    As illustrated in Figure 3 where we display results from our 
national model for the proposed CCJR performance year 2 policies under 
the assumption that utilization remains constant, we estimate that the 
20 percent stop-gain limit would impact the reconciliation payment 
amount due to the raw NPRA of almost no hospitals. We note that a stop-
gain limit of 20 percent is consistent with BPCI Model 2 policy. While 
Figure 3 assumes no change in utilization patterns, under the model 
test we expect that the proposed stop-gain limit could actually affect 
a few hospitals in each performance year because we expect LEJR episode 
care redesign incentivized by the model's financial opportunities to 
generally reduce unnecessary utilization, thereby reducing actual 
episode spending and, correspondingly, increasing any associated 
reconciliation payment amounts due to the raw NPRA. Nevertheless, we 
believe the proposed stop-gain limit of 20 percent provides substantial 
opportunity for hospitals to achieve savings over the target price 
without excessive reductions in utilization, and those savings would be 
paid back to hospitals fully in most cases without being affected by 
the stop-gain limit. We seek comment on our proposal to adopt a 20 
percent stop-gain limit for all performance years of CCJR.
    We note that we plan to monitor beneficiary access and utilization 
of services and the potential contribution of the stop-gain limit to 
any inappropriate reduction in episode services. We refer readers to 
section III.F. of this proposed rule for our proposals on monitoring 
and addressing hospital performance under CCJR.
c. Proposed Policies for Certain Hospitals To Further Limit Repayment 
Responsibility
    As discussed in section III.C.3. of this proposed rule, we propose 
that participant hospitals would be subject to repayment responsibility 
for episode actual spending in excess of the applicable target price 
beginning in performance year 2. Hospitals participating in CCJR would 
not be responsible for actual episode payments greater than a ceiling 
set at two standard deviations above the mean regional episode payment 
as described earlier in this section. Additionally, we propose a 10 
percent limit on the raw NPRA contribution to the repayment mount in 
performance year 2 and a 20 percent limit on the raw NPRA contribution 
to the repayment amount in performance year 3 and beyond, as described 
in the previous section of this proposed rule.
    Though our proposals provide several safeguards to ensure that 
participant hospitals have limited repayment responsibility due to the 
raw NPRA, we are proposing additional protections for certain groups of 
hospitals that may have a lower risk tolerance and less infrastructure 
and support to achieve efficiencies for high payment episodes. 
Specifically, we are proposing additional protections for rural 
hospitals, SCHs, Medicare Dependent Hospitals and Rural Referral 
Centers (RCCs). We note that these categories of hospitals often have 
special payment protections or additional payment benefits under 
Medicare because we recognize the importance of preserving Medicare 
beneficiaries' access to care from these hospitals. In MedPAC's Report 
to the Congress in June 2012, MedPAC examined issues related to rural 
Medicare beneficiaries and found that ``The primary objective of rural 
special payments is to ensure that Medicare does its part to support 
the financial viability of rural providers that are necessary for 
beneficiaries' access to care. Some form of special payments will be 
needed to maintain access in areas with low population density where 
providers inevitably have low patient volumes and lack economies of 
scale.'' \40\
---------------------------------------------------------------------------

    \40\ MedPAC Report to Congress June 2012, Chapter 5, page 121.
---------------------------------------------------------------------------

    We propose that a rural hospital would have additional protections 
under the stop-loss limit proposal. For the purpose of this model, we 
are proposing to define a rural hospital as an IPPS hospital that is 
either located in a rural area in accordance with Sec.  412.64(b) or in 
a rural census tract within an MSA defined at Sec.  412.103(a)(1) or 
has reclassified to rural in accordance with Sec.  412.103 Such rural 
hospitals would have additional protections under the stop-loss limit 
proposal. Consistent with the findings in MedPAC's June 2012 Report to 
the Congress, we believe rural hospitals may have a lower risk 
tolerance and less infrastructure and support to achieve efficiencies 
for high payment episodes, particularly if they are the rural hospital 
is the only hospital in an area.
    Our preliminary analysis examining national spending for MS-DRGs 
469 and 470 from October 1, 2013 to September 30, 2014 showed that MS-
DRGs 469 and 470 cases represent a slightly higher proportion of cases 
and spending for rural hospitals than the national average (for 
example, MS-DRG 470 episode spending represents 12 percent of IPPS 
spending for rural hospitals and represents 9 percent of IPPS spending 
nationally).\41\ Additionally, our analysis on the distribution of 
national spending of MS-DRGs 469 and 470 episodes by service type (that 
is inpatient, outpatient, SNF, Home Health, Physician Part B, DME), 
found that on average, inpatient services account for the most spending 
for an MS-DRGs 469 and 470 episode (53 percent of spending for an MS-
DRG 469 episode and 55 percent of spending for MS-DRG 470 episode). SNF 
services account for 27 percent of spending for MS-DRG 469 and 18 
percent of spending for MS-DRG 470. The spending distribution for all 
rural IPPS hospitals also differs from the

[[Page 41257]]

national average. For rural hospitals, inpatient services for CCJR 
episodes account for more spending than the national average (56 
percent for MS-DRG 469 and 57 percent for MS-DRG 470 for rural 
hospitals) and SNF spending is higher than the national average (29 
percent for MS-DRG 469 and 21 percent for MS-DRG 470 for rural 
hospitals). It is evident that this category of hospitals has different 
spending patterns than the national average. Furthermore, hospitals in 
rural areas often face other unique challenges. Rural hospitals may be 
the only source of healthcare services for beneficiaries living in 
rural areas, and beneficiaries have limited alternatives should rural 
hospitals be subject to financial changes under this model. 
Additionally, because rural hospitals may be in areas with fewer 
providers including fewer physicians and PAC facilities, rural 
hospitals may have more limited options in coordinating care and 
reducing spending while maintain quality of care under this model. We 
believe that urban hospitals may not have similar concerns as they are 
often in areas with many other providers and have greater opportunity 
to develop efficiencies under this model. Given that rural hospitals 
have different episode spending patterns, have different challenges in 
coordinating care and reducing cost than urban hospitals and serve as a 
primary access to care for beneficiaries, we believe that we should 
have a more protective stop-loss limit policy as described later in 
this section.
---------------------------------------------------------------------------

    \41\ Medicare FFS Parts A and B claims, CCJR episodes as 
proposed, between October 1, 2013 and September 30, 2014.
---------------------------------------------------------------------------

    Additionally, we propose to provide additional protections for SCHs 
as defined in Sec.  412.92, Medicare Dependent Hospitals as defined in 
Sec.  412.108 and RRCs as defined in Sec.  412.96. Hospitals paid under 
the IPPS can qualify for SCH status if they meet one of the following 
criteria:
     Located at least 35 miles from other like hospitals.
     Located in a rural area, located between 25 and 35 miles 
from other like hospitals, and no more than 25 percent of residents or 
Medicare beneficiaries who become hospital inpatients in the hospital's 
service area are admitted to other like hospitals located within a 35-
mile radius of the hospital or the hospital has fewer than 50 beds and 
would meet the 25 percent criterion if not for the fact that some 
beneficiaries or residents were forced to seek specialized care outside 
of the service area due to the unavailability of necessary specialty 
services at the hospital.
     Hospital is rural and located between 15 and 25 miles from 
other like hospitals but because of local topography or periods of 
prolonged severe weather conditions, the other like hospitals are 
inaccessible for at least 30 days in each of 2 out of 3 years.
     Hospital is rural and the travel time between the hospital 
and the nearest like hospital is at least 45 minutes.
    If an IPPS hospital qualifies to be a SCH, the hospital can be paid 
the higher of the federal payment rate paid to IPPS hospitals or a 
cost-based hospital-specific rate as described in Sec.  412.78. Under 
OPPS, a rural SCH can receive a 7.1 percent add on payment for most 
services with certain exceptions, in accordance with Sec.  419.43(g). 
These criteria to qualify for SCH status demonstrate that SCHs are 
likely to be the sole hospital in an area. Furthermore, additional 
payments provided under Medicare FFS for SCHs, demonstrates Medicare's 
interest in ensuring these hospitals are able to provide services to 
the Medicare beneficiaries who may have limited access to providers in 
their area. As a result, we believe that we should provide SCHs 
additional protections from hospital responsibility for repayment in 
this model. We note that we propose to exclude these add-on payments 
for SCHs, as described in section III.C.3.a of this proposed rule.
    MDHs are defined as a hospital that meets the following criteria:
     Located in a rural area.
     Has 100 beds or less.
     Is not a SCH.
     Sixty percent of the hospital's inpatient days or 
discharges were attributable to individuals entitled to Medicare Part A 
benefits during specified time periods as provided in Sec.  412.108.
    MDHs also qualify for special additional payments under the IPPS 
where an MDH can receive the higher of a payment under the federal 
standard rate for IPPS hospitals or the payment under federal standard 
rate for IPPS hospitals plus 75 percent of the difference in payments 
between a cost based hospital-specific rate and the federal standard 
rate as described in Sec.  412.108(c). These criteria demonstrate that 
MDHs are small, rural hospitals that have a high Medicare case mix 
percentage and receive additional payments under the IPPS to ensure 
financial stability and preserve beneficiary access to care to these 
hospitals. Thus, we believe these factors demonstrate that we should 
provide additional safeguards from hospital responsibility for 
repayment in order to preserve access to care. We note that we propose 
to exclude these payment enhancements for MDHs, as described in section 
III.C.3.a. of this proposed rule.
    RRCs are defined as IPPS hospitals with at least 275 beds that meet 
the following criteria:
     Fifty percent of the hospital's Medicare patients are 
referred from other hospitals or from physicians who are not on the 
staff of the hospital.
     At least 60 percent of the hospital's Medicare patients 
live more than 25 miles from the hospital.
     At least 60 percent of all services the hospital furnishes 
to Medicare patients are furnished to patients who live more than 25 
miles from the hospital.
    If a hospital does not meet the criteria described previously, a 
hospital can also qualify for RRC status if a hospital meets the 
following criteria:
     For specified period of time, the hospital has a case-mix 
that equals the lower of the median case mix index (CMI) value for all 
urban hospitals nationally; or the median CMI value for urban hospitals 
located in its region, excluding those hospitals receiving indirect 
medical education payments.
     Its number of discharges is at least--
    ++ 5,000 (or 3,000 for an osteopathic hospital); or
    ++ The median number of discharges for urban hospitals in the 
census region in which it is located, set by the CMS through IPPS 
rulemaking.
     Additionally, a hospital must meet one of the following 
criteria:
    ++ More than 50 percent of its active medical staff are specialists 
who meet the conditions specified at Sec.  412.96(c)(3).
    ++ At least 60 percent of all discharges are for inpatients who 
reside more than 25 miles from the hospital.
    ++ At least 40 percent of all inpatients treated are referred from 
other hospitals or from physicians who are not on the hospital's staff.
    As an RRC, a hospital can qualify for several additional payments 
under the IPPS. For example, an RRC is not subject to the 12 percent 
cap on Medicare Disproportionate Share Hospital payments that a rural 
hospital would otherwise be subject to, in accordance with Sec.  
412.106(d). Although RRCs are larger and have a higher Medicare patient 
mix, they often serve as the sole provider to treat higher acuity 
cases, as demonstrated by the RRC qualification criteria. As a result 
of these unique characteristics of these hospitals, RRCs can receive 
additional payments under Medicare FFS. Thus, it is also important to 
provide additional protections for RRCs such that participation in this 
model does not

[[Page 41258]]

result in significant financial loss that may reduce access for 
Medicare beneficiaries.
    For these reasons, we propose a stop-loss limit of 3 percent of 
episode payments for these categories of hospitals in performance year 
2 and a stop-loss limit of 5 percent of episode payments for 
performance years 3 through 5. More specifically, in performance year 
2, a rural hospital, SCH, RRC or MDH that is a participant hospital 
would owe Medicare due to the raw NPRA no more than 3 percent of the 
hospital's target price for the anchor MS-DRG multiplied by the number 
of the hospital's CCJR episodes with that anchor MS-DRG in the 
performance year. Additionally, in performance years 3 through 5, a 
rural hospital, SCH, RRC or MDH that is a participant hospital would 
owe Medicare due to the raw NPRA no more than 5 percent of the 
hospital's target price for the anchor MS-DRG multiplied by the number 
of the hospital's CCJR episodes with that anchor MS-DRG in the 
performance year. We believe a different stop-loss limit policy is 
warranted given the different spending patterns and the unique hospital 
characteristics for these groups of hospitals as described earlier. We 
believe this proposal strikes an appropriate balance between protecting 
hospitals that often serve as the only access of care for Medicare 
beneficiaries and having these hospitals meaningfully participate in 
the model. We note that this proposal does not impact the proposed 
stop-gain policy for these categories of hospitals. Rural hospitals, 
SCHs, MDHs and RRCs still have the opportunity to participate in full 
gains at 20 percent similar to other hospitals.
    Hospitals can apply for SCH, MDH and RRC status through their MACs 
and Regional Office at any time. MACs maintain the list of SCHs, MDHs, 
and RRCs in the CMS Provider Specific File, which they update on a 
quarterly basis. The special hospital designations recorded in the 
Provider Specific File are used in Medicare claims pricing to ensure 
that these hospitals are paid according to their special hospital 
designation. Additionally, CMS can identify which hospitals are 
considered rural for the purpose of this policy, using the Provider 
Specific File to identify physical geographic location of a hospital 
and the MACs to identify whether an urban hospital has reclassified to 
rural under 42 CFR 412.103 or located in a rural census tract of an MSA 
defined under 42 CFR 412.103(a)(1). Thus, we propose to identify rural 
hospitals, MDHs, SCHs and RRCs at the time of reconciliation using the 
Provider Specific File updated in December of the end of the 
performance year and information from the MACs, and those hospitals 
would be subject to the 3 percent stop-loss limit policy for that 
performance year 2, and 5 percent stop-loss limit policy in performance 
years 3 through 5. For example, to identify the hospitals that would 
receive a 3 percent stop-loss limit for performance year 2, we would 
use the Provider Specific File updated in December 2017. We note that 
the special Medicare payment designation of MDH status has been 
extended through FY 2017 by legislation under the Medicare Access and 
CHIP Reauthorization Act of 2015. As a result, the proposed additional 
protections for hospital responsibility for repayment for MDHs would 
only apply to the extent that MDH status exists under Medicare. In 
other words, should MDH expire on or after September 30, 2017, we would 
not identify hospitals as MDHs to receive the 5-percent stop-loss limit 
policy for performance year 3. Though MDH status is set to expire after 
the third quarter of 2017, we would still identify MDHs to receive the 
3-percent stop loss limit policy for all of performance year 2.
    We note that we also considered excluding rural hospitals, SCHs, 
MDHs and RRCs from the CCJR model altogether due to our concerns of 
placing significant responsibility for actual episode payment above the 
target price on these hospitals. Additionally, we were also concerned 
that from an evaluation perspective, we would not have sufficient 
sample size of CCJR episodes from these categories of hospitals to have 
significant results of how these groups of hospitals perform under this 
model. We weighed our reasons for excluding these hospitals with the 
potential qualitative information we would gain from payment innovation 
tests on rural hospitals in this model. We concluded that because the 
CCJR model strives to test episode payment for a broad variety of 
hospitals, it would be preferable to include these hospitals in the 
CCJR model and provide additional protections from a large repayment 
responsibility. We welcome public comment on our proposed stop-loss 
limit for rural hospitals, SCHs, MDHs and RRCs and on our alternative 
consideration to exclude these hospitals entirely from the CCJR model.
d. Proposed Hospital Responsibility for Increased Post-Episode Payments
    We noted that while the proposed CCJR episode would extend 90-days 
post-discharge from the anchor hospitalization, some hospitals may have 
an incentive to withhold or delay medically necessary care until after 
an episode ends to reduce their actual episode payments. We do not 
believe this would be likely, especially given the relatively long 
episode duration. However, in order to identify and address such 
inappropriate shifting of care, we propose to calculate for each 
performance year the total Medicare Parts A and B expenditures in the 
30-day period following completion of each episode for all services 
covered under Medicare Parts A and B, regardless of whether or not the 
services are included in the proposed episode definition (section III.B 
of this proposed rule), as is consistent with BPCI Model 2. Because we 
base the proposed episode definition on exclusions, identified by MS-
DRGs for readmissions and ICD-9-CM diagnosis codes for Part B services 
as discussed in section III.B. of this proposed rule, and Medicare 
beneficiaries may typically receive a wide variety of related (and 
unrelated) services during the CCJR episode that extends 90 days 
following discharge from the anchor hospitalization, there is some 
potential for hospitals to inappropriately withhold or delay a variety 
of types of services until the episode concludes, without attending 
carefully to the episode definition, especially for Part B services 
where diagnosis coding on claims may be less reliable. This 
inappropriate shifting could include both those services that are 
related to the episode (for which the hospital would bear financial 
responsibility as they would be included in the actual episode spending 
calculation) and those that are unrelated (which would not be included 
in the actual episode spending calculation), because a hospital engaged 
in shifting of medically necessary services outside the episode for 
potential financial reward may be unlikely to clearly distinguish 
whether the services were related to the episode or not in the 
hospital's decisions.
    This calculation would include prorated payments for services that 
extend beyond the episode as discussed in section III.C.3.b. of this 
proposed rule. Specifically, we would identify whether the average 30-
day post-episode spending for a participant hospital in any given 
performance year is greater than three standard deviations above the 
regional average 30-day post-episode spending, based on the 30-day 
post-episode spending for episodes attributed to all CCJR eligible 
hospitals in the same region as the participant hospital. We propose 
that beginning in performance year 2, if the hospital's average post-
episode spending exceeds

[[Page 41259]]

this threshold, the participant hospital would repay Medicare for the 
amount that exceeds such threshold, subject to the stop-loss limits 
proposed elsewhere in this proposed rule. We seek comment on this 
proposal to make participant hospitals responsible for making 
repayments to Medicare based on high spending in the 30 days after the 
end of the episode and for our proposed methodology to calculate the 
threshold for high post-episode spend.
9. Proposed Appeal Procedures
    Under the CCJR model, we propose that we would determine target 
prices for episodes of care using the methodology described in section 
III.C. of this proposed rule. We propose to institute a reconciliation 
payment process as described in section III.C.6, of this proposed rule, 
and we propose to retrospectively calculate a participant hospital's 
actual episode performance relative to its target price after the 
completion of each performance year. The difference between the actual 
episode spending of each CCJR episode and the target price of that 
episode (calculated as target price subtracted by CCJR actual episode 
payment) would be aggregated for all episodes initiated at a 
participant hospital during each performance year. This calculation for 
a participant hospital would be adjusted for post-episode payment 
increases and stop gain and stop loss limits, as described in section 
III.C.6.a. of this proposed rule. We propose to use quality measure 
percentiles to determine hospital eligibility to receive the 
reconciliation payment and use the successful reporting of the 
voluntary PRO THA/TKA data to adjust the reconciliation payment, as 
described in section III.C.5. of this proposed rule. The NPRA would be 
reflected in a report sent to the participant hospital called the CCJR 
Reconciliation Report.
    We also propose to institute appeals processes for the CCJR model 
that would allow participant hospitals to appeal matters related to 
reconciliation and payment (that are previously discussed in this 
section), as well as non-payment related issues, such as enforcement 
matters detailed in section III.C.12.
a. Payment Processes
    The proposed processes with regard to reconciliation, payment, use 
of quality measures to determine payment, and stop-loss and stop-gain 
policies are set forth in detail in sections III.C.5-8. In this 
section, we propose an appeals processes that will apply to the matters 
addressed in sections III.C.5-8, as well as matters not related to 
payment or reconciliation. These appeals processes will apply to the 
following payment and reconciliation processes:
     Starting with the CCJR Reconciliation Report for 
performance year 1, if the CCJR Reconciliation Report indicates the 
reconciliation amount is positive, CMS would issue a payment, in a form 
and manner specified by CMS, for that amount to the awardee within 30 
calendar days from the issue date of the CCJR Reconciliation Report, 
unless the participant hospital selects to pursue the calculation error 
and reconsideration review processes, in which case payment will be 
delayed as detailed later in this section.
     For performance year 1, if the CCJR reconciliation report 
indicates a repayment amount, the participant hospital would not be 
required to make payment for that amount to CMS, as we have proposed 
not to hold hospitals financially responsible for negative NPRAs for 
the first performance year. In addition, if it is determined that a 
CCJR hospital has a positive NPRA for performance year 1, and the 
subsequent calculation for performance year 1 the following year, as 
described in section III.C.6. of this proposed rule, determines that in 
aggregate the performance year 1 NPRA and the subsequent calculation 
amount for performance year 1 is a negative value (adding together the 
NPRA amount from the reconciliation for performance year 1 as well as 
the amount determined in the subsequent calculation, which would be 
detailed on the CCJR reconciliation report for performance year 2), the 
hospital would only be financially responsible for a repayment amount 
that would net the performance year 1 NPRA and subsequent calculation 
for year 1 to zero. This would be true for performance year 1 only, 
given our proposal to begin phasing in financial responsibility in year 
2 of the model as discussed in section III.C.2.c. of this proposed 
rule. For performance years 2 through 5 of the model, for example, if 
the NPRA for performance year 1 for a given hospital were $3,000, and 
the subsequent calculation performed in Q2 2018 to account for claims 
run-out and overlaps determined a repayment amount of $3,500 for claims 
incurred and overlap during performance year 1, $3,000 would be applied 
to the CCJR reconciliation report for performance year 2. If the NPRA 
for performance year 2 were $5,000, the repayment amount of $3,000 
would be netted against the $5,000, and the reconciliation payment for 
performance year 2 would be $2,000. Given that downside risk has been 
waived for performance year 1, the remaining $500 would not be added to 
the CCJR reconciliation report for performance year 2. However, 
beginning with the reconciliation process for performance year 3, any 
repayment amounts generated through the subsequent calculation process 
detailed in section III.C.6.b. would be netted against any repayment or 
reconciliation amount on the respective CCJR reconciliation reports for 
performance years 2, 3, 4, and 5. Starting with the reconciliation for 
performance year 2, if the CCJR Reconciliation Report indicates the 
NPRA is negative, the participant hospital would make payment for the 
absolute value of that amount to CMS within 30-calendar days from the 
issue date of the CCJR Reconciliation Report, in a form and manner 
specified by CMS. Where the participant hospital does not issue payment 
within 30-calendar days, we will issue a demand letter requiring 
payment be made immediately.
     The reconciliation or repayment amount may include 
adjustments, arising from matters from the previous performance year, 
as necessary to account for subsequent calculations performed for 
performance years that were specified in earlier CCJR Reconciliation 
Reports, as discussed in section III.C.6. of this proposed rule. For 
example, we would potentially make determinations of additional monies 
owed by Medicare to participant hospitals or vice versa in subsequent 
periods based on the availability of updated Medicare administrative 
data. These subsequent calculations would be contained in the 
succeeding reconciliation report. For example, the subsequent 
calculations applicable to performance year 1 would be contained in the 
reconciliation report for performance year 2.
     If the participant hospital fails to pay CMS the amount 
owed by the date indicated in the demand letter, CMS will recoup owed 
monies from participant hospital's present and future Medicare payments 
to collect all monies due to CMS. While we propose that a participant 
hospital may enter into financial arrangements with CCJR collaborators 
that allow for some risk-sharing, as discussed in section III.C. of 
this proposed rule, the participant hospital would be solely liable for 
the repayment of the negative repayment amount to CMS. Where the 
participant hospital fails to repay CMS in full for all monies owed, 
CMS would invoke all legal means to collect the debt, including 
referral of the remaining debt to the United States Department of the 
Treasury, pursuant to 31 U.S.C. 3711(g).

[[Page 41260]]

b. Calculation Error
    We propose the following calculation error process for participant 
hospitals to contest matters related to payment or reconciliation, of 
which the following is a non-exhaustive list: The calculation of the 
participant hospital's reconciliation amount or repayment amount as 
reflected on a CCJR reconciliation report; the calculation of NPRA; the 
calculation of the percentiles of quality measure performance to 
determine eligibility to receive a reconciliation payment; and the 
successful reporting of the voluntary PRO THA/TKA data to adjust the 
reconciliation payment. Participant hospitals would review their CCJR 
reconciliation report and be required to provide written notice of any 
error, in a calculation error form that must be submitted in a form and 
manner specified by CMS. Unless the participant provides such notice, 
the reconciliation report would be deemed final within 30 calendar days 
after it is issued, and CMS would proceed with payment or repayment. If 
CMS receives a timely notice of an error in the calculation, CMS would 
respond in writing within 30 calendar days to either confirm or refute 
the calculation error, although CMS would reserve the right to an 
extension upon written notice to the participant hospital. We propose 
that if a participant hospital does not submit timely notice of 
calculation error in accordance with the timelines and processes 
specified by CMS, the participant hospital would be precluded from 
later contesting any of the following matters contained in the CCJR 
reconciliation report for that performance year: any matter involving 
the calculation of the participant hospital's reconciliation amount or 
repayment amount as reflected on a CCJR reconciliation report; any 
matter involving the calculation of NPRA; the calculation of the 
percentiles of quality measure performance to determine eligibility to 
receive a reconciliation payment; and the successful reporting of the 
voluntary PRO THA/TKA data to adjust the reconciliation payment.
c. Dispute Resolution
(1) Limitations on Review
    In accordance with section 1115A(d) of the Act, there is no 
administrative or judicial review under sections 1869 or 1878 of the 
Act or otherwise for the following:
     The selection of models for testing or expansion under 
section 1115A of the Act.
     The selection of organizations, sites or participants to 
test those models selected.
     The elements, parameters, scope, and duration of such 
models for testing or dissemination.
     Determinations regarding budget neutrality under 
subsection 1115A(b)(3).
     The termination or modification of the design and 
implementation of a model under subsection 1115A(b)(3)(B).
     Decisions about expansion of the duration and scope of a 
model under subsection 1115A(c), including the determination that a 
model is not expected to meet criteria described in paragraph (1) or 
(2) of such subsection.
(2) Matters Subject to Dispute Resolution
    We propose that a participant hospital may appeal an initial 
determination that is not precluded from administrative or judicial 
review by requesting reconsideration review by a CMS official. The 
request for review must be submitted for receipt by CMS within 10 days 
of the notice of the initial determination. Initial determinations that 
are not precluded from administrative or judicial review would include 
the involuntary termination of a participant hospital's participation 
in the CCJR model.
(3) Dispute Resolution Process
    We propose the following dispute resolution process. First, we 
propose that only a participant hospital may utilize the dispute 
resolution process. Second, in order to access the dispute resolution 
process a participant hospital must have timely submitted a calculation 
error form, as previously discussed, for any matters related to 
payment. We propose these matters would include any amount or 
calculation indicated on a CCJR reconciliation report, including 
calculations not specifically reflected on a CCJR reconciliation report 
but which generated figures or amounts reflected on a CCJR 
reconciliation report. The following is a non-exhaustive list of the 
matters we propose would need to be first adjudicated by the 
calculation error process as previously detailed: calculations of 
reconciliation or repayment amounts; calculations of NPRA; and any 
calculations or percentile distribution involving quality measures that 
we propose could affect reconciliation or repayment amounts. If a 
participant hospital wants to engage in the dispute resolution process 
with regard to one of these matters, we propose it would first need to 
submit a calculation error form. Where the participant hospital does 
not timely submit a calculation error form, we propose the dispute 
resolution process would not be available to the participant hospital 
with regard to those matters for the reconciliation report for that 
performance year.
    If the participant hospital did timely submit a calculation error 
form and the participant hospital is dissatisfied with CMS's response 
to the participant hospital's notice of calculation error, the hospital 
would be permitted to request reconsideration review by a CMS 
reconsideration official. The reconsideration review request would be 
submitted in a form and manner and to an individual or office specified 
by CMS. The reconsideration review request would provide a detailed 
explanation of the basis for the dispute and include supporting 
documentation for the participant hospital's assertion that CMS or its 
representatives did not accurately calculate the NPRA or post-episode 
spending amount in accordance with CCJR rules. The following is a non-
exhaustive list of representative payment matters:
     Calculations of NPRA, post-episode spending amount, target 
prices or any items listed on a reconciliation report.
     The application of quality measures to a reconciliation 
payment, including the calculation of the percentiles thresholds of 
quality measure performance to determine eligibility to receive 
reconciliation payments, or the successful reporting of the voluntary 
PRO THA/TKA data to adjust the reconciliation payment.
     Any contestation based on the grounds that CMS or its 
representative made an error in calculating or recording such amounts.
    Where the matter is unrelated to payment, such as termination from 
the model, the participant hospital need not submit a calculation error 
form. We propose to require the participant hospital to timely submit a 
request for reconsideration review, in a form and manner to be 
determined by CMS. Where such request is timely received, we propose 
CMS would process the request as discussed later in this section.
    We propose that the reconsideration review would be an on-the-
record review (a review of briefs and evidence only). The CMS 
reconsideration official would make reasonable efforts to notify the 
hospital in writing within 15 calendar days of receiving the 
participant hospital's reconsideration review request of the date and 
time of the review, the issues in dispute, the review procedures, and 
the procedures (including format and deadlines) for submission of 
evidence (the ``Scheduling Notice''). The CMS reconsideration official 
would make reasonable efforts to schedule the

[[Page 41261]]

review to occur no later than 30 days after the date of the Scheduling 
Notice. The provisions at Sec.  425.804(b), (c), and (e) (as in effect 
on the publication date of this proposed rule) would apply to reviews 
conducted pursuant to the reconsideration review process for CCJR. The 
CMS reconsideration official would make reasonable efforts to issue a 
written determination within 30 days of the review. The determination 
would be final and binding.
    We solicit comment on our proposals related to appeals rights under 
this model. The two-step appeal process for payment matters--(1) 
calculation error form, and (2) reconsideration review--is used broadly 
in other CMS models. We seek comment on whether we should develop an 
alternative appeal process. We are also interested in whether there 
should be appeal rights for reductions or eliminations of NPRA as a 
result of enforcement actions, as discussed in section III.C.12 of this 
proposed rule, and if so, whether the process for such appeals should 
differ from the processes proposed here.
    In accordance with section 1115A of the Act, we are proposing to 
codify these proposals in regulation in the new proposed part 510 of 
the CFR.
10. Proposed Financial Arrangements and Beneficiary Incentives
a. Financial Arrangements and Beneficiary Incentives
    As discussed earlier in this proposed rule, we propose that CCJR 
would be a retrospective episode payment model, under which Medicare 
payments for services included in an episode of care would continue to 
be made to all providers and suppliers under the existing payment 
systems, and episode payment would be based on later reconciliation of 
episode actual spending under those Medicare payment systems to the 
episode target price. If the episode actual spending is less than the 
target price, the participant hospital would receive a reconciliation 
payment, assuming quality performance thresholds are met and the stop-
gain threshold is not exceeded. If the episode actual spending exceeds 
the target price, beginning in performance year 2 hospitals would repay 
the difference to Medicare up to the stop-loss threshold.
    We believe that participant hospitals may wish to enter into 
financial arrangements with providers and suppliers caring for 
beneficiaries in CCJR episodes in order to align the financial 
incentives of those providers and suppliers with the model goals of 
improving quality and efficiency for LEJR episodes. For example, given 
that the proposed episode duration is 90 days following discharge from 
the anchor hospital stay and the episodes are broadly defined (see 
section III.B of this proposed rule), many providers and suppliers 
other than the participant hospital will furnish related services to 
beneficiaries during episodes. Those providers and suppliers may 
include physicians, physician group practices, skilled nursing 
facilities (SNFs), home health agencies (HHAs), inpatient 
rehabilitation facilities (IRFs), long term care hospitals (LTCHs), 
outpatient therapy providers, and others. We expect that participant 
hospitals will identify key providers and suppliers for CCJR 
beneficiaries in their communities and then establish close 
partnerships with them to assist the hospital in redesigning care for 
LEJR episodes to improve quality and efficiency, coordinating and 
managing care for beneficiaries, monitoring episode performance, and 
refining care pathways. These providers and suppliers may invest 
substantial time and other resources in these activities, yet they 
would neither be the direct recipients of any reconciliation payments 
from Medicare, nor directly responsible for repaying Medicare for 
excess episode spending. Therefore, we believe it is possible that a 
participant hospital that may receive a reconciliation payment from 
Medicare or may need to repay Medicare may want to enter into financial 
arrangements with other providers and suppliers to share risks and 
rewards under CCJR.
    In addition to providers and suppliers with which the participant 
hospital may want to enter into financial arrangements to share risks 
and reward, we expect that participant hospitals may choose to engage 
with organizations that are neither providers nor suppliers to assist 
with matters such as: episode data analysis; local provider and 
supplier engagement; care redesign planning and implementation; 
beneficiary outreach; CCJR beneficiary care coordination and 
management; monitoring participant hospital compliance with the terms 
and conditions of the CCJR model; or other model-related activities. 
These organizations may play important roles in a hospital's plans to 
implement the CCJR model based on the experience these organizations 
may bring to the hospital's successful participation in the model, such 
as prior experience with bundled payment initiatives, care coordination 
expertise, familiarity with the local community, and knowledge of 
Medicare claims data. We expect that all relationships established 
between participant hospitals and these organizations for purposes of 
the CCJR model would only be those permitted under existing law and 
regulation, including any relationships that would include the 
participant hospital's sharing of CCJR model risks and rewards with 
these organizations. We would expect that all of these relationships 
would solely be based on the level of engagement of the organization's 
resources to directly support the participant hospitals' CCJR model 
implementation.
    Additionally, because the proposed broadly defined LEJR episodes 
extend 90-days post-discharge from the anchor hospital stay, we believe 
that participant hospitals caring for CCJR beneficiaries may want to 
offer beneficiary incentives to encourage beneficiary adherence to 
recommended treatment and active patient engagement in recovery. Such 
incentives should be closely related to the provision of high quality 
care during the episode and advance a clinical goal for a CCJR 
beneficiary, and should not serve as inducements to beneficiaries to 
seek care from the participant hospital or other specific suppliers and 
providers. Such incentives may help participant hospitals reach their 
quality and efficiency goals for CCJR episodes, while benefitting 
beneficiaries' health and the Medicare Trust Fund if hospital 
readmissions and complications are reduced while recovery continues 
uninterrupted or accelerates.
(1) Financial Arrangements Under the CCJR Model
    As previously noted, we believe that given the financial incentives 
of episode payment in CCJR, participant hospitals in the model may want 
to engage in financial arrangements to share reconciliation payments or 
hospital internal cost savings or both, as well as responsibility for 
repaying Medicare, with providers and suppliers making contributions to 
the hospital's episode performance on spending and quality. Such 
arrangements would allow the participant hospitals to share all or some 
of the reconciliation payments they may be eligible to receive from 
CMS, or the participant hospital's internal cost savings that result 
from care for beneficiaries during a CCJR episode. Likewise, such 
arrangements could allow the participant hospitals to share the 
responsibility for the funds needed to repay Medicare with providers 
and suppliers engaged in caring for CCJR beneficiaries, if those 
providers and suppliers have a role in the hospital's episode spending 
or quality performance. We propose to use the term ``CCJR 
collaborator'' to refer to

[[Page 41262]]

such providers and suppliers, who may include the following:
     SNFs.
     HHAs.
     LTCHs.
     IRFs.
     Physician Group Practices (PGPs).
     Physicians, nonphysician practitioners, and outpatient 
therapy providers.
    We believe that CCJR collaborators should have a role in the 
participant hospital's episode spending or quality performance. 
Accordingly, we propose that the CCJR collaborator would directly 
furnish related items or services to a CCJR beneficiary during the 
episode and/or specifically participate in CCJR model LEJR episode care 
redesign activities, such as attending CCJR meetings and learning 
activities; drafting LEJR episode care pathways; reviewing CCJR 
beneficiaries' clinical courses; developing episode analytics; or 
preparing reports of episode performance, under the direction of the 
participant hospital or another CCJR collaborator that directly 
furnishes related items and services to CCJR beneficiaries. Note that 
we propose later in this section a limit on Gainsharing Payments (as 
that term is defined later in this section) to physician or 
nonphysician CCJR collaborators, as well as to physician group 
practices, related to PFS payments for services furnished to CCJR 
beneficiaries. Therefore, in addition to playing a role in the 
participant hospital's episode spending or quality performance, 
physician, nonphysician, and physician group practice CCJR 
collaborators must additionally directly furnish services to CCJR 
beneficiaries in order to receive a Gainsharing Payment as result of 
their financial arrangement with the participant hospital. We seek 
comment on our proposed definition of CCJR collaborators, as well as 
our proposed definition of a provider's or supplier's role in the 
participant hospital's episode spending or quality performance.
    We propose that certain financial arrangements between a 
participant hospital and a CCJR collaborator be termed a ``CCJR Sharing 
Arrangement,'' and that the terms of each CCJR Sharing Arrangement be 
set forth in a written agreement between the participant hospital and 
the CCJR collaborator. We propose to use the term ``Participation 
Agreement'' to refer to such agreements. We propose that a ``CCJR 
Sharing Arrangement'' would be a financial arrangement contained in a 
Participation Agreement to share only the following: (1) CCJR 
reconciliation payments (as that term is defined in section III.C of 
this proposed rule); (2) the participant hospital's internal cost 
savings (as that term is defined later in this section); and (3) the 
participant hospital's responsibility for repayment to Medicare, as 
discussed later in this section. Where a payment from a participant 
hospital to a CCJR collaborator is made pursuant to a CCJR Sharing 
Arrangement, we propose to define that payment as a ``Gainsharing 
Payment.'' A Gainsharing Payment may only be only composed of the 
following: (1) Reconciliation payments; (2) internal cost savings; or 
(3) both. Where a payment from a CCJR collaborator to a participant 
hospital is made pursuant to a CCJR Sharing Arrangement, we propose to 
define that payment as an ``Alignment Payment.'' We propose that CCJR 
Sharing Arrangements that provide for Alignment Payments would not 
relieve the participant hospital of its ultimate responsibility for 
repayment to CMS. Many of the programmatic requirements discussed later 
in this proposed rule for Gainsharing Payments and Alignment Payments 
are similar to those in Model 2 of the BPCI initiative.
    The CCJR Sharing Arrangements between participant hospitals and 
CCJR collaborators must be solely related to the contributions of the 
CCJR collaborators to care redesign that achieve quality and efficiency 
improvements under this model for CCJR beneficiaries. All Gainsharing 
Payments or Alignment Payments between participant hospitals and CCJR 
collaborators resulting from these arrangements must be auditable by 
HHS, as discussed later in this section, to ensure their financial and 
programmatic integrity. We emphasize that any CCJR collaborator that 
receives a Gainsharing Payment or makes an Alignment Payment must have 
furnished services included in the episode to CCJR beneficiaries. 
Furthermore, the payment arrangements for Gainsharing Payments or 
Alignment Payments contained in a CCJR Sharing Arrangement must be 
actually and proportionally related to the care of beneficiaries in a 
CCJR episode, and the CCJR collaborator must be contributing to the 
care redesign strategies of the participant hospital.
    We considered whether CCJR collaborators should be termed 
``participants'' in this model, or whether the term ``participant'' 
should refer only to the participant hospitals located in MSAs selected 
for participation. If CCJR collaborators are participants in the model, 
we propose that their activities with regard to CCJR beneficiaries 
would be regulated directly by CMS. However, if CCJR collaborators are 
not participants, but rather are participating entities and individuals 
in the CCJR model through signed agreements with participant hospitals, 
their activities with regard to CCJR beneficiaries would be governed by 
the Participation Agreement between a CCJR collaborator and a 
participant hospital. Given the large number of potential CCJR 
collaborators, the expected varied nature of their respective 
arrangements with participant hospitals, and the potential 
administrative burden in reporting information to CMS, we believe the 
activities of CCJR collaborators with regard to CCJR beneficiaries 
would be best managed by participant hospitals. As we discussed earlier 
in this proposed rule, one justification for proposing that acute care 
hospitals be the provider type financially responsible under the CCJR 
model is the position of the hospital with respect to other providers 
and suppliers, in terms of coordinating care for CCJR beneficiaries. 
Given that position, we propose that where participant hospitals enter 
into Participation Agreements that contain CCJR Sharing Arrangements 
with CCJR collaborators, the participant hospital must also be 
responsible for ensuring that those providers and suppliers comply with 
the terms and requirements of this proposed rule. We seek comments on 
this proposal; specifically, whether CCJR collaborators should be 
termed participants in this model and subject to the applicable 
requirements, or whether the responsibility for compliance with the 
model's requirements is better managed by participant hospitals. We are 
particularly interested in comments that address the advantages and 
disadvantages of making CCJR collaborators participants in the model, 
and whether there are certain provider or supplier types that CMS 
should consider including as ``participants'' in the model.
    The following discussion outlines our proposed requirements and 
responsibilities of participant hospitals that engage in such CCJR 
Sharing Arrangements. We believe these proposed requirements and 
responsibilities are essential to ensuring that all CCJR Sharing 
Arrangements are for the sole purpose of aligning the financial 
incentives of collaborating providers and suppliers with those of the 
participant hospital toward the CCJR model goals of improved LEJR 
episode care quality and efficiency. We believe that the rationale for 
and details of these arrangements must be documented and auditable by 
HHS, with a direct tie between the arrangements and the

[[Page 41263]]

participant hospital's episode performance. Finally, we believe that 
the proposed limitations to the arrangements, as described later in 
this section, are necessary to ensure the integrity of the CCJR model 
by minimizing incentives for problematic behaviors, such as patient 
steering. We seek comments on all proposed requirements regarding CCJR 
Sharing Arrangements.
    With respect to whether certain entities or individuals should be 
prevented from participating in the CCJR model, either as participant 
hospitals or CCJR collaborators, we considered whether CMS should 
conduct screening for program integrity purposes. Many CMS models 
conduct screening during the application process and periodically 
thereafter. These screenings examine provider and supplier program 
integrity history, including any history of Medicare program exclusions 
or other sanctions and affiliations with individuals or entities that 
have a history of program integrity issues. Where a screening reveals 
that a provider or supplier has a history of program integrity issues 
or affiliations with individuals or entities that have a history of 
program integrity issues, we may remove that provider or supplier from 
the model. We utilize these screening processes for many CMS models, 
including the BPCI initiative.
    For several reasons, we believe that this type of screening for 
participant hospitals is inapplicable to the CCJR model. Most 
importantly, this model seeks to evaluate the performance in the model 
of hospitals located in a particular MSA. We believe it is important 
that all hospitals that meet the criteria for participation in the 
model be included, even if those hospitals have a history of program 
integrity issues. Further, we propose that CMS would evaluate the 
quality of care and institute beneficiary protections in ways that 
would go beyond some of the efforts of previous or existing CMS models. 
We solicit comments on this proposal, including whether screening of 
participant hospitals or CCJR collaborators might be appropriate or 
useful in aiding HHS' program integrity efforts and identifying 
untrustworthy parties or parties with program integrity history 
problems.
(a) CCJR Sharing Arrangement Requirements
    We propose that each CCJR Sharing Arrangement must include and set 
forth in writing at a minimum--
     A specific methodology and accounting formula for 
calculating and verifying internal cost savings, if the participant 
hospital elects to share internal cost savings through Gainsharing 
Payments with CCJR collaborators. We propose to define internal cost 
savings as the measurable, actual, and verifiable cost savings realized 
by the participant hospital resulting from care redesign undertaken by 
the participant hospital in connection with providing items and 
services to beneficiaries within specific CCJR episodes of care. 
Internal cost savings would not include savings realized by any 
individual or entity that is not the participant hospital. Each CCJR 
Sharing Arrangement must include specific methodologies for accruing 
and calculating internal cost savings of the participant hospital, 
where the hospital intends to share internal cost savings through a 
CCJR Sharing Arrangement with a CCJR collaborator. The specific 
methodologies for accruing and calculating internal cost savings must 
be transparent, measurable, and verifiable in accordance with Generally 
Accepted Accounting Principles (GAAP) and Government Auditing Standards 
(The Yellow Book). The methodology must set out the specific care 
redesign elements to be undertaken by the participant hospital or the 
CCJR collaborator or both;
     A description of the methodology and accounting formula 
for calculating the percentage or dollar amount of a reconciliation 
payment received from CMS that will be paid as a Gainsharing Payment 
from the participant hospital to the CCJR collaborator;
     A description of the methodology, frequency or dates of 
distribution, and accounting formula for distributing and verifying any 
and all Gainsharing Payments;
     A description of the arrangement between the participant 
hospital and the CCJR collaborator regarding Alignment Payments, where 
the hospital and CCJR collaborator agree through a CCJR Sharing 
Arrangement to share risk for repayment amounts due to CMS, as 
reflected on a CCJR reconciliation report. The description of this 
arrangement must include safeguards to ensure that such Alignment 
Payments are made solely for purposes related to sharing responsibility 
for funds needed to repay Medicare in the CCJR model. This description 
should also include a methodology, frequency of payment, and accounting 
formula for payment and receipt of any and all Alignment Payments;
     A provision requiring the participant hospital to recoup 
Gainsharing Payments paid to CCJR collaborators if Gainsharing Payments 
were based on the submission of false or fraudulent data;
     Plans regarding care redesign, changes in care 
coordination or delivery that are applied to the participant hospital 
or CCJR collaborators or both, and any description of how success will 
be measured;
     Management and staffing information, including type of 
personnel or contactors that will be primarily responsible for carrying 
out changes to care under the model;
     The participant hospital must maintain records identifying 
all CCJR collaborators, and the participant hospital's process for 
determining and verifying the eligibility of CCJR collaborators to 
participate in Medicare; and
     All CCJR Sharing Arrangements must require compliance, 
from both the participant hospital and the CCJR collaborator, with the 
proposed polices regarding beneficiary notification set forth in 
section III.F of this proposed rule.
    With respect to these requirements for Participation Agreements and 
CCJR Sharing Arrangements, we considered whether we should require 
participant hospitals and CCJR collaborators to periodically report 
this information to CMS for purposes of enforcement of these proposed 
regulations. However, we are mindful of the administrative burden in 
reporting this information as well as the challenges associated with 
creating a universal collection tool that would account for all the 
various iterations of financial arrangements into which participant 
hospitals and CCJR collaborators may enter. Therefore, we are proposing 
to require participant hospitals to retain this documentation as 
previously described, as well as in section III.C.10(d) of this 
proposed rule. We seek comment on this proposal as well as whether CMS 
should require participant hospitals and CCJR collaborators to 
periodically report data such as: Gainsharing Payments and/or Alignment 
Payments distributed and received; name and identifier (NPI, CCN, TIN) 
of all CCJR collaborators; and any other relevant information related 
to Participation Agreements and CCJR Sharing Arrangements that would 
assist HHS with enforcement of these regulations.
    We solicit comments about all of the requirements set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the model are met.

[[Page 41264]]

(b) Participation Agreement Requirements
    We propose that the Participation Agreement must obligate the 
parties to comply, and must obligate the CCJR collaborator to require 
any of its employees, contractors or designees to comply, without 
limitation, to with the following requirements:
     Each individual's or entity's participation in the CCJR 
Sharing Arrangement is voluntary and without penalty for 
nonparticipation.
     Any Gainsharing Payments made pursuant to a CCJR Sharing 
Arrangement must be made only from the participant hospital to the CCJR 
collaborator with whom the participant hospital has signed a 
Participation Agreement containing a CCJR Sharing Arrangement. 
Additionally, we propose to require the following for all CCJR Sharing 
Arrangements between a participant hospital and a CCJR collaborator 
that is a physician group practice:
    ++ Where a Gainsharing Payment is made to a CCJR collaborator that 
is a physician group practice, all monies contained in such a 
Gainsharing Payment must be shared only with physician or nonphysician 
practitioners that furnished a service to a CCJR beneficiary during an 
episode of care in the calendar year from which the Net Payment 
Reconciliation Amount (NPRA), as that term is defined in section 
III.C.6. of this proposed rule, or internal cost savings was generated, 
either or both of which are the only permitted sources of funds for a 
Gainsharing Payment. We further propose that each CCJR Sharing 
Arrangement between a participant hospital and a CCJR collaborator that 
is physician group practice must stipulate that the physician group 
practice may not retain any portion of a Gainsharing Payment or 
distribute, by any method, any portion of a Gainsharing Payment to 
physician or nonphysician practitioners who did not furnish a service 
to a CCJR beneficiary during an episode of care in the calendar year 
from which the NPRA or internal cost savings was generated.
     Any Alignment Payments made pursuant to a CCJR Sharing 
Arrangement may be made only to the participant hospital from the 
entity or individual with whom the participant hospital has signed a 
Participation Agreement containing a CCJR Sharing Arrangement.
     Each CCJR Sharing Arrangement must require that the CCJR 
collaborator be in compliance with all Medicare provider enrollment 
requirements at Sec.  424.500 et seq., including having a valid and 
active TIN or NPI.
     Any internal cost savings or reconciliation payments that 
the participant hospital seeks to share through CCJR Sharing 
Arrangements must meet the requirements set forth in the final CCJR 
rule (as finalized) and be administered by the participant hospital in 
accordance with GAAP. In no event may the participant hospital 
distribute any amounts pursuant to a CCJR Sharing Arrangement that are 
not comprised of either internal cost savings or a reconciliation 
payment, as those terms are defined in this proposed rule. All amounts 
determined to be internal cost savings by the participant hospital must 
reflect actual, internal cost savings achieved by the participant 
hospital through implementation of care redesign elements identified 
and documented by the participant hospital. In no case may internal 
cost savings reflect ``paper'' savings from accounting conventions or 
past investment in fixed costs.
     Any Alignment Payments that the participant hospital 
receives through a CCJR Sharing Arrangement must meet the requirements 
set forth in the final CCJR rule (as finalized) and be administered by 
the participant hospital in accordance with GAAP.
     CCJR Sharing Arrangements must not include any amounts 
that are not Alignment Payments or Gainsharing Payments.
     Further, we propose that each Participation Agreement--
    ++ Between the participant hospital and a CCJR collaborator must 
obligate the CCJR collaborator to provide the participant hospital and 
HHS access to the CCJR collaborator's records, information, and data 
for purposes of monitoring and reporting and any other lawful purpose. 
Records, information, and data regarding the CCJR Sharing Arrangement 
must have sufficient detail to verify compliance with all material 
terms of the CCJR Sharing Arrangement and the terms of the CCJR model;
    ++ Must require the participant hospital and the CCJR collaborator 
to include in their compliance programs specific oversight of their 
CCJR participation agreements and compliance with the requirements of 
the CCJR mode;
    ++ Must require compliance, from both the participant hospital and 
the CCJR collaborator, with the proposed polices regarding beneficiary 
notification set forth in section III.F; and
    ++ Must require the board or other governing body of the 
participant hospital to have responsibility for overseeing the 
participant hospital's participation in the model, its arrangements 
with CCJR collaborators, its payment of Gainsharing Payments and 
receipt of Alignment Payments, and its use of beneficiary incentives in 
the CCJR model.
     Participation Agreements must require all CCJR 
collaborators to comply with any evaluation, monitoring, compliance, 
and enforcement activities performed by HHS or its designees for the 
purposes of operating the CCJR model.
     Each Participation Agreement must require the CCJR 
collaborator to permit site visits from CMS, or one of its designees, 
for purposes of evaluating the model.
    We solicit comments about all of the requirements set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the model are met.
(c) Gainsharing Payment and Alignment Payment Conditions and 
Restrictions
    We propose the following conditions and restrictions concerning 
Gainsharing Payments and Alignment Payments made pursuant to a CCJR 
Sharing Arrangement:
     No entity or individual, whether or not a party to a 
Participation Agreement, may condition the opportunity to receive 
Gainsharing Payments in CCJR on the volume or value of past or 
anticipated referrals or other business generated to, from, or among a 
participant hospital, any CCJR collaborators, and any individual or 
entity affiliated with a participant hospital or CCJR collaborator.
     Participant hospitals would not be required to share 
reconciliation payments, internal cost savings, or responsibility for 
repayment to CMS with other providers and suppliers. However, where a 
participant hospital elects to engage in those activities, we propose 
that such activities be limited to the provisions prescribed in this 
proposed rule.
     We propose that Gainsharing Payments must be distributed 
on an annual basis, and are required to meet the following criteria:
    ++ Must be clearly identified and comply with all provisions in 
this proposed rule, as well as all applicable laws, statutes, and 
rules;
    ++ Must not be a loan, advance payments, or payments for referrals 
or other business; and
    ++ Must be made by electronic funds transfer (EFT).
     We propose that Alignment Payments from a CCJR 
collaborator to a

[[Page 41265]]

participant hospital may be made at any interval, and are required to 
meet the following criteria:
    ++ Must be clearly identified and comply with all provisions in 
this proposed rule, as well as all applicable laws, statutes, and 
rules;
    ++ Must not be issued, distributed, or paid prior to the 
calculation by CMS of a reconciliation report reflecting a negative Net 
Payment Reconciliation Amount (NPRA);
    ++ Must not be a loan, advance payments, or payments for referrals 
or other business; and
    ++ Must be made by electronic funds transfer (EFT).
     We propose that each CCJR Sharing Arrangement stipulate 
that any CCJR collaborator that is subject to any action involving 
noncompliance with the provisions of this propose rule, engaged in 
fraud or abuse, providing substandard care, or have other integrity 
problems not be eligible to receive any Gainsharing Payments related to 
NPRA generated during the time that coincides with the action involving 
any of the issues previously listed until the action has been resolved.
     No entity or individual, as whether or not a party to a 
Participation Agreement, may condition the opportunity to make or 
receive Alignment Payments in CCJR on the volume or value of past or 
anticipated referrals or other business generated to, from, or among a 
participant hospital, any CCJR collaborators, and any individual or 
entity affiliated with a participant hospital or CCJR collaborator.
     In a calendar year, the aggregate amount of the total 
Gainsharing Payments distributed by the participant hospital that are 
derived from a CCJR reconciliation payment may not exceed the amount of 
the reconciliation payment that the participant hospital received from 
CMS.
     In a calendar year, the aggregate amount of the total 
Alignment Payments received by the participant hospital may not exceed 
50 percent of the participant hospital's repayment amount due to CMS. 
If no repayment amount is due, then no Alignment Payments may be 
received by the participant hospital.
     We propose that the participant hospital must retain at 
least 50 percent of its responsibility for repayment to CMS, pursuant 
to the repayment amount reflected in each annual reconciliation report, 
under the CCJR model. Given that the participant hospital will be 
responsible for developing and coordinating care redesign strategies in 
response to its participation in the CCJR model, we believe it is 
important that the participant hospital retain a significant portion of 
its responsibility for repayment to CMS. For example, upon receipt of a 
reconciliation report indicating that the participant hospital owes 
$100 to CMS, the participant hospital would be permitted to receive no 
greater than $50 in Alignment Payments, in the aggregate, from its CCJR 
collaborators.
     Further, we propose that a CCJR Sharing Arrangement must 
limit the amount a single CCJR collaborator may make in Alignment 
Payments to a single participant hospital. We propose that a single 
CCJR collaborator not make an Alignment Payment to a participant 
hospital that represents an amount greater than 25 percent of the 
repayment amount reflected on the participant hospital's annual 
reconciliation report. For example, upon receipt of a reconciliation 
report indicating that the participant hospital owes $100 to CMS, the 
participant hospital would be permitted to receive no more than $25 in 
an Alignment Payment from a single entity or individual who is a CCJR 
collaborator of the participant hospital.
     Gainsharing Payments and Alignment Payments must not 
induce the participant hospital, CCJR collaborators, or the employees, 
contractors, or designees of the participant hospital or CCJR 
collaborators to reduce or limit medically necessary services to any 
Medicare beneficiary.
     Individual physician and nonphysician practitioners, 
whether or not a party to a CCJR Sharing Arrangement, must retain their 
ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
     Entities furnishing services to beneficiaries during a 
CCJR episode, whether or not a party to a CCJR Sharing Arrangement, 
must retain their ability to make decisions in the best interests of 
the patient, including the selection of devices, supplies, and 
treatments.
     Gainsharing methodologies for calculating Gainsharing 
Payments and Alignment Payments must not directly account for volume or 
value of referrals, or business otherwise generated, between or among a 
participant hospital, any CCJR collaborators, and any individual or 
entity affiliated with a participant hospital or CCJR collaborator.
     Gainsharing Payments must be derived solely from 
reconciliation payments or internal cost savings or both.
     The total amount of Gainsharing Payments for a calendar 
year paid to an individual physician or nonphysician practitioner who 
is a CCJR collaborator must not exceed a cap. The cap is 50 percent of 
the total Medicare approved amounts under the Physician Fee Schedule 
(PFS) for services furnished to the participant hospital's CCJR 
beneficiaries during a CCJR episode by that physician or nonphysician 
practitioner. This cap of 50 percent on Gainsharing Payments to 
individual physician or nonphysician practitioner is consistent with 
the same policy for the BPCI initiative. The purpose of this cap is to 
limit the amount of Gainsharing Payments an individual practitioner may 
receive due to his/her provision of services included in the CCJR 
model.
     The total amount of Gainsharing Payments for a calendar 
year paid to an physician group practice that is a CCJR collaborator 
must not exceed a cap. The cap is 50 percent of the sum of the total 
Medicare approved amounts under the Physician Fee Schedule (PFS) for 
services furnished by physician or nonphysician practitioner members of 
the physician group practice to the participant hospital's CCJR 
beneficiaries during a CCJR episode by those physicians or nonphysician 
practitioners.
    We solicit comments about all of the requirements set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the model are met.
(d) Documentation and Maintenance of Records
    We propose to require participant hospitals and CCJR collaborators 
to comply with audit and document retention requirements similar to 
those required by the Medicare Shared Savings Program, BPCI Model 2, 
and other Innovation Center models. Specifically, with respect to all 
Participation Agreements and CCJR Sharing Arrangements, the participant 
hospital and CCJR collaborator must:
     Comply with the retention requirements regarding 
Participation Agreements and CCJR Sharing Arrangements set forth in 
subsection III.C.10(a)-(d).
     Maintain and give CMS, the Office of Inspector General of 
the Department of Health and Human Services (OIG), and the Comptroller 
General or their designee(s) access to all books, contracts, records, 
documents, and other evidence (including data related to utilization 
and payments, quality performance measures, billings, and CCJR Sharing 
Arrangements related to

[[Page 41266]]

CCJR) sufficient to enable the audit, evaluation, inspection, or 
investigation of the participant hospital's compliance, as well as the 
compliance of any CCJR collaborator that has a CCJR Sharing Arrangement 
with the participant hospital, with CCJR requirements, the 
Participation Agreement, the quality of services furnished, the 
obligation to repay any reconciliation payments owed to CMS, the 
calculation, distribution, receipt, or recoupment of Gainsharing 
Payments or Alignment Payments.
     Maintain such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the 
participant hospital's participation in the CCJR model or from the date 
of completion of any audit, evaluation, inspection, or investigation, 
whichever is later, unless--
    ++ CMS determines there is a special need to retain a particular 
record or group of records for a longer period and notifies the 
participant hospital or CCJR collaborator at least 30 calendar days 
before the normal disposition date; or
    ++ There has been a dispute or allegation of fraud or similar fault 
against the participant hospital or any CCJR collaborator in which case 
the records must be maintained for an additional 6 years from the date 
of any resulting final resolution of the dispute or allegation of fraud 
or similar fault.
     Notwithstanding any CCJR Sharing Arrangements between the 
participant hospital and CCJR collaborators, the participant hospital 
must have ultimate responsibility for adhering to and otherwise fully 
complying with all provisions of the CCJR model.
     OIG Authority is not limited or restricted by the 
provisions of the CCJR model, including the authority to audit, 
evaluate, investigate, or inspect the participant hospital, CCJR 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.
     None of the provisions of the CCJR model limits or 
restricts any other government authority permitted by law to audit, 
evaluate, investigate, or inspect the participant hospital, CCJR 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.
    We solicit comments about all of the requirements set out in the 
preceding discussion, including whether additional or different 
safeguards would be needed to ensure program integrity, protect against 
abuse, and ensure that the goals of the model are met.
(2) Beneficiary Incentives Under the CCJR Model
    We believe that the CCJR model will incent participant hospitals to 
furnish directly and otherwise coordinate services throughout the 
episode that lead to higher quality care for the beneficiary and lower 
episode spending. We believe that one mechanism that may be useful to 
the participant hospital in achieving these goals is the provision of 
certain items and services to the beneficiary during the episode of 
care. We also considered whether this policy on beneficiary incentives 
should extend to providers and suppliers, other than the participant 
hospital, that furnish services during the CCJR episode of care. 
However, as discussed in section III.A, given our belief that the 
participant hospital is best positioned to coordinate the care of 
beneficiaries, we believe they are also better suited than other 
providers and suppliers to provide beneficiary incentives. Thus, we 
propose to include in the CCJR model certain in-kind patient engagement 
incentives to the beneficiary, subject to the following conditions:
     The incentive must be provided by the participant hospital 
to the beneficiary during CCJR episode of care.
     There must be a reasonable connection between the item or 
service and the beneficiary's medical care.
     The item or service must be a preventive care item or 
service or an item or service that advances a clinical goal for a CCJR 
beneficiary, including the following: Increasing the beneficiary's 
engagement in the management of his or her own health care; adherence 
to a treatment or drug regimen; adherence to a follow-up care plan; 
reduction of readmissions and complications resulting from LEJR 
procedures; and management of chronic diseases and conditions that may 
be affected by the LEJR procedure.
     Items of technology comply with certain safeguards 
regarding value, as discussed later in this section.
     The participant hospital must maintain contemporaneous 
documentation of the incentives provided to beneficiaries for a period 
of 10 years.
     The cost of the incentives is not shifted to another 
federal health care program.
    For example, under this proposal, participant hospitals could 
provide incentives such as post-surgical monitoring equipment to track 
patient weight and vital signs for post-surgical patients discharged 
directly to home, but they could not provide theater tickets, which 
would bear no reasonable connection to the patient's medical care. 
Similarly, we are proposing that participant hospitals might provide 
post-surgical monitoring equipment, but not broadly used technology 
that is more valuable to the beneficiary than equipment that is 
reasonably necessary for the patient's post-surgical care. In such 
circumstances, a reasonable inference arises that the technology would 
not be reasonably connected to the medical care of the patient. Among 
other things, this safeguard precludes incentives that might serve to 
induce beneficiaries inappropriately to receive other medical care that 
is not included in the episode.
    We propose that participant hospitals would be required to maintain 
contemporaneous documentation of such items and services furnished that 
exceed $10, including the date and identity of the beneficiary to whom 
the item or service was provided. We further propose that the required 
documentation be maintained for a period of 10 years.
    We propose that items and services involving technology provided to 
beneficiaries may not exceed $1,000 in retail value at the time of 
donation for any one beneficiary in any one CCJR episode. Items of 
technology exceeding $50 in retail value at the time of donation must 
remain the property of the participant hospital and must be retrieved 
from the beneficiary at the end of the episode, with the documentation 
of the date of retrieval. In addition, the amount and nature of the 
technology must be the minimum necessary to achieve the goals 
previously noted earlier in this section. Finally, we propose that 
beneficiary incentives may not be tied to the receipt of services 
outside the episode of care and that the cost of the incentives cannot 
be shifted to a federal health care program. The aforementioned 
proposals regarding beneficiary incentives are consistent with the 
policies on beneficiary incentives in other CMS models, such as the 
BPCI initiative.
    We seek comment on our proposal for beneficiary incentives under 
CCJR. In addition to general comments on the proposal, we are 
interested in comments on whether the $1,000 limit on technology items 
and services is necessary, reasonable, and appropriate. We also solicit 
comment on whether retrieving technology valued at more than $50 is too 
burdensome and whether elimination of that requirement will prevent 
abuse. We also solicit comment on the documentation requirement for 
items and services furnished that exceed $10, or whether a different 
amount would be more

[[Page 41267]]

appropriate and less burdensome. We welcome comments on additional 
program integrity safeguards for these arrangements.
(3) Compliance With Fraud and Abuse Laws
    Certain arrangements between and among participant hospitals and 
third parties or beneficiaries may implicate the civil monetary penalty 
(CMP) law (sections 1128A(a)(5), (b)(1) and (b)(2) of the Act), the 
Federal Anti-kickback statute (section 1128B(b)(1) and (2) of the Act), 
or the physician self-referral prohibition (section 1877 of the Act). 
In many cases, arrangements that implicate these laws can be structured 
to comply with them by using existing safe harbors and exceptions. 
Section 1115A(d)(1) of the Act authorizes the Secretary to waive 
certain specified fraud and abuse laws as may be necessary solely for 
purposes of testing of payment models under section 1115A(b) of the 
Act. A waiver is not needed for an arrangement that does not implicate 
the fraud and abuse laws or that implicates the fraud and abuse laws 
but either fits within an existing exception or safe harbor, as 
applicable, or does not otherwise violate the law. Accordingly, 
pursuant to section 1115A(d)(1) of the Act, the Secretary will consider 
whether waivers of certain fraud and abuse laws are necessary to test 
the CCJR model as the model develops. The vehicle for promulgating 
waivers, if any, is under consideration. Such waivers, if any, would be 
promulgated separately from this proposed regulation by OIG (as to 
sections 1128A and 1128B of the Act) and CMS (as to section 1877 of the 
Act), to which the respective authorities have been delegated.
    The requirements of the CCJR final rule will bear on the need for 
and scope of any fraud and abuse waivers that might be granted for the 
CCJR model. Because of the close nexus between the final regulations 
governing the structure and operations of the CCJR model and the 
development of any fraud and abuse waivers necessary to carry out the 
provisions of the model, CMS and OIG may, when considering the need for 
or scope of any waivers, consider comments submitted in response to 
this proposed rule and the provisions of the CCJR final rule.
11. Proposed Waivers of Medicare Program Rules
a. Overview
    We believe it may be necessary and appropriate to provide 
additional flexibilities to hospitals participating in CCJR, as well as 
other providers that furnish services to beneficiaries in CCJR 
episodes. The purpose of such flexibilities would be to increase LEJR 
episode quality and decrease episode spending or internal costs or both 
of providers and suppliers that results in better, more coordinated 
care for beneficiaries and improved financial efficiencies for 
Medicare, providers, and beneficiaries. These possible additional 
flexibilities could include use of our waiver authority under section 
1115A of the Act, which provides authority for the Secretary to waive 
such requirements of title XVIII of the Act as may be necessary solely 
for purposes of carrying out section 1115A of the Act with respect to 
testing models described in section 1115A(b) of the Act. This provision 
affords broad authority for the Secretary to waive statutory Medicare 
program requirements as necessary to carry out the provisions of 
section 1115A of the Act.
    As we have stated elsewhere in sections I.B and III.A of this 
proposed rule, our previous and current efforts in testing episode 
payment models have led us to believe that models where entities bear 
financial responsibility for total Medicare spending for episodes of 
care hold the potential to incentivize the most substantial 
improvements in episode quality and efficiency. As discussed in section 
III.C of this proposed rule, we are proposing that hospitals 
participating in this model be eligible for reconciliation payments 
based on improved performance starting in performance year 1, and we 
would phase-in repayment responsibility for excess episode spending 
starting in performance year 2. We believe that where participant 
hospitals bear repayment responsibility for excess episode spending 
beyond the target price while high quality care is valued, they will 
have an increased incentive to coordinate care furnished by the 
hospital and other providers and suppliers throughout the episode to 
improve the quality and efficiency of care. With these incentives 
present, there may be a reduced likelihood of over-utilization of 
services that could otherwise result from waivers of Medicare program 
rules. Given these circumstances, waivers of certain program rules for 
providers and suppliers furnishing services to CCJR beneficiaries may 
be appropriate to offer more flexibility than under existing Medicare 
rules for such providers and suppliers, so that they may provide 
appropriate, efficient care for beneficiaries. An example of such a 
program rule that could be waived to potentially allow more efficient 
LEJR episode care would be the 3-day inpatient hospital stay 
requirement prior to a covered SNF stay for beneficiaries who could 
appropriately be discharged to a SNF after less than a 3-day inpatient 
hospital stay.
    In addition, we believe that waivers of certain Medicare program 
rules are necessary to make reconciliation payments to or recoup 
payments from participant hospitals as a result of the Net Payment 
Reconciliation Amount (NPRA) for each performance year as discussed in 
section III.C.6.a. of this proposed rule, as well as to exclude 
beneficiary cost-sharing from these reconciliation payments or 
recoupments.
    We welcome comments on possible waivers under section 1115A of the 
Act of certain Medicare program rules beyond those specifically 
discussed in this proposed rule that might be necessary to test this 
model. We will consider the comments that are received during the 
public comment period and our early model implementation experience and 
may make future proposals regarding program rule waivers during the 
course of the model test. We are especially interested in comments 
explaining how such waivers could provide providers and suppliers with 
additional ways that are not permitted under existing Medicare rules to 
increase quality of care and reduce unnecessary episode spending, but 
that could be appropriately used in the context of CCJR where 
participant hospitals bear full responsibility for total episode 
spending by performance year 3. We are also interested in receiving 
comments regarding the timing and manner in which such waivers, were 
they to be offered, would be implemented. For example, would it be 
necessary and appropriate to offer program waivers early in the model 
test to allow providers and suppliers adequate time to adjust their 
care coordination strategies to implement changes permitted by the 
waivers, despite there being no full repayment responsibility for 
excess episode spending until performance year 3? What program 
integrity and beneficiary protection risks could be introduced by 
waivers of the program rules described later in this section of this 
proposed rule and how could we mitigate those risks? What other issues 
should be considered when making use of waiver authority with respect 
to program rules? What operational issues do CMS and providers and 
suppliers furnishing services to beneficiaries in the model need to 
consider and what processes would need to be in place to implement 
these alternative program policies?

[[Page 41268]]

What implications would there be for provider and supplier 
infrastructure, including IT and other systems and processes? What 
provider education would be needed? We note that any waivers included 
in a final rule would be offered to participant hospitals, but 
depending on the specifics of each waiver, might be applied to services 
furnished by providers and suppliers other than the hospital. Where 
that is the case, we seek input on how we may best educate and 
disseminate information using methods effective in reaching providers 
and suppliers. Additionally, we seek comment on how we would 
appropriately and accurately track the use of waivers by providers and 
suppliers other than participant hospitals.
    Specific program rules for which we propose waivers under the CCJR 
model to support provider and supplier efforts to increase quality and 
decrease episode spending and for which we invite comments are included 
in the sections that follow. We propose that these waivers of program 
rules would apply to the care of beneficiaries who are in CCJR episodes 
at the time when the waiver is used to bill for a service that is 
furnished to the beneficiary, even if the episode is later cancelled as 
described in section III.B.3.b of this proposed rule. If a service is 
found to have been billed and paid by Medicare under circumstances only 
allowed by a program rule waiver for a beneficiary not in the CCJR 
model at the time the service was furnished, CMS would recoup payment 
for that service from the provider or supplier who was paid, and 
require that provider and supplier to repay the beneficiary for any 
coinsurance previously collected.
    We also generally seek comment on any additional Medicare program 
rules that it may be necessary to waive using our authority under 
section 1115A of the Act in order to effectively test the CCJR model 
that we could consider in the context of our early model implementation 
experience to inform any future proposals we may make.
b. Post-Discharge Home Visits
    We expect that the broadly defined LEJR episodes with a duration of 
90 days following hospital discharge as we propose in section III.B. of 
this proposed rule will result in participant hospitals redesigning 
care by increasing care coordination and management of beneficiaries 
following surgery. This will require participant hospitals to pay close 
attention to any underlying medical conditions that could be affected 
by the anchor hospitalization and improving coordination of care across 
care settings and providers. Beneficiaries may have substantial 
mobility limitations during LEJR episodes following discharge to their 
home or place of residence that may interfere with their ability to 
travel easily to physicians' offices or other health care settings. 
Adopting new strategies to increase beneficiary adherence to and 
engagement with recommended treatment and follow-up care following 
discharge from the hospital or PAC setting will also be important to 
high quality episode care. Scientific evidence exists \42\ to support 
the use of home nursing visits among Medicare beneficiaries in 
improving care coordination following hospital discharge. In addition, 
we believe the financial incentives in this episode payment model will 
encourage hospitals to closely examine the most appropriate PAC 
settings for beneficiaries so that the clinically appropriate setting 
of the lowest acuity is recommended following discharge from the anchor 
hospitalization. We expect that all these considerations will lead to 
greater interest on the part of hospitals and other providers and 
suppliers caring for CCJR beneficiaries in furnishing services to 
beneficiaries in their home or place of residence. Such services could 
include visits by licensed clinicians other than physicians and 
nonphysician practitioners
---------------------------------------------------------------------------

    \42\ Naylor MD, Brooten D, Campbell R, Jacobsen BS, Mezey MD, 
Pauly MV, Schwartz JS. JAMA. 1999:281(7):613-620. doi:10/1001/
jama.281.7.613
---------------------------------------------------------------------------

    In order for Medicare to pay for home health services, a 
beneficiary must be determined to be ''home-bound''. Specifically, 
sections 1835(a) and 1814(a) of the Act require that a physician 
certify (and recertify) that in the case of home health services under 
the Medicare home health benefit, such services are or were required 
because the individual is or was ''confined to the home'' and needs or 
needed skilled nursing care on an intermittent basis, or physical or 
speech therapy or has or had a continuing need for occupational 
therapy. A beneficiary is considered to be confined to the home if the 
beneficiary has a condition, due to an illness or injury, that 
restricts his or her ability to leave home except with the assistance 
of another individual or the aid of a supportive device (that is, 
crutches, a cane, a wheelchair or a walker) or if the beneficiary has a 
condition such that leaving his or her home is medically 
contraindicated. While a beneficiary does not have to be bedridden to 
be considered confined to the home, the condition of the beneficiary 
must be such that there exists a normal inability to leave home and 
leaving home requires a considerable and taxing effort by the 
beneficiary. Absent this condition, it would be expected that the 
beneficiary could typically get the same services in an outpatient or 
other setting. Thus, the homebound requirement provides a way to help 
differentiate between patients that require medical care at home versus 
patients who could more appropriately receive care in a less costly 
outpatient setting. Additional information regarding the homebound 
requirement is available in the Medicare Benefit Manual (Pub 100-02); 
Chapter 7, ``Home Health Services,'' Section 30.1.1, ``Patient Confined 
to the Home.''
    We considered whether a waiver of the homebound requirement would 
be appropriate under the CCJR model, particularly beginning in 
performance year 2, where hospitals begin to bear repayment 
responsibility for excess episode spending. Waiving the homebound 
requirement would allow additional beneficiaries to receive home health 
care services in their home or place of residence. As previously 
discussed, physician certification that a beneficiary meets the 
homebound requirement is a prerequisite for Medicare coverage of home 
health services, and waiving the homebound requirement could result in 
lower episode spending in some instances. For example, if a beneficiary 
is allowed to have home health care visits, even if the beneficiary is 
not considered homebound, the beneficiary may avoid a hospital 
readmission. All other requirements for the Medicare home health 
benefit would remain unchanged. Thus, under such a waiver, only 
beneficiaries who otherwise meet all program requirements to receive 
home health services would be eligible for coverage of home health 
services without being homebound.
    However, we are not proposing to waive the homebound requirement 
under CCJR for several reasons. Based on the typical clinical course of 
beneficiaries after LEJR procedures, we believe that many beneficiaries 
would meet the homebound requirement for home health services 
immediately following discharge from the anchor hospitalization or 
following discharge to their home or place of residence from a SNF that 
furnished PAC services immediately following the hospital discharge, so 
they could receive medically necessary home health services under 
existing program rules. Home health episodes are 60 days in duration, 
and payment adjustments are made for beneficiaries who require only a 
few visits during the episode or who

[[Page 41269]]

are discharged during the episode. For those CCJR beneficiaries who 
could benefit from home visits by a licensed clinician for purposes of 
assessment and monitoring of their clinical condition, care 
coordination, and improving adherence with treatment but who are not 
homebound, we do not believe that paying for these visits as home 
health services under Medicare is necessary or appropriate, especially 
given that Medicare payments for home health services are set based on 
the clinical care furnished to beneficiaries who are truly homebound. 
Finally, in other CMS episode payment models, such as BPCI, we have not 
waived the homebound requirement for home health services.
    In BPCI, we have provided a waiver of the ``incident to'' rule to 
allow a physician or nonphysician practitioner participating in care 
redesign under a participating BPCI provider to bill for services 
furnished to a beneficiary who does not qualify for Medicare coverage 
of home health services as set forth under Sec.  409.42 where the 
services are furnished in the beneficiary's home during the episode 
after the beneficiary's discharge from an acute care hospital. The 
``incident to'' rules are set forth in Sec.  410.26(b)(5), which 
requires services and supplies furnished incident to the service of a 
physician or other practitioner must be provided under the direct 
supervision (as defined at Sec.  410.32(b)(3)(ii)) of a physician or 
other practitioner.
    In BPCI, the waiver is available only for services that are 
furnished by licensed clinical staff under the general supervision (as 
defined at Sec.  410.32(b)(3)(i)) of a physician (or other 
practitioner), regardless of whether the individual is an employee, 
leased employee, or independent contractor of the physician (or other 
practitioner), or of the same entity that employs or contracts with the 
physician (or other practitioner), and while the services may be 
furnished by licensed clinical staff they must be billed by the 
physician (or other practitioner) in accordance with CMS instructions 
using a Healthcare Common Procedures Coding System (HCPCS) G-code 
created by CMS specifically for the BPCI initiative. As discussed in 
section III.B of this proposed rule, participants in the BPCI 
initiative are permitted to select the duration of an episode as either 
30 days, 60 days or 90 days. In the case of the incident to waiver 
under BPCI, the waiver allows physician and nonphysician practitioners 
to furnish the services not more than once in a 30-day episode, not 
more than twice in a 60-day episode, and not more than three times in a 
90-day episode. All other Medicare coverage and payment criteria must 
be met.
    For the CCJR model, we propose to waive the ``incident to'' rule 
set forth in Sec.  410.26(b)(5), to allow a CCJR beneficiary who does 
not qualify for home health services to receive post-discharge visits 
in his or her home or place of residence any time during the episode. 
The waiver would not apply for beneficiaries who would qualify for home 
health services under the Medicare program, as set forth under Sec.  
409.42. Therefore these visits could not be billed for such 
beneficiaries. We propose to allow licensed clinicians, such as nurses, 
either employed by a hospital or not, to furnish the service under the 
general supervision of a physician, who may be either an employee or a 
contractor of the hospital. We propose to allow services furnished 
under such a waiver to be billed under the PFS by the physician or 
nonphysician practitioner or by the hospital to which the supervising 
physician has reassigned his or her benefits. In the latter scenario, 
we note that the post-discharge home visit services would not be 
``hospital services,'' even when furnished by clinical staff of the 
hospital.
    We propose that up to 9 post-discharge home visits could be billed 
and paid during each 90-day post-anchor hospitalization CCJR episode. 
Given the average PAC length of stay of approximately 45 days for these 
episodes and the incentives under CCJR to improve efficiency, which may 
shorten PAC stays, 9 visits would represent a home visit on average of 
once per week for two-thirds of the 90-day episode duration, the period 
of time when the typical beneficiary may have concluded PAC in an 
efficient episode. We believe that a home visit of once a week to a 
non-homebound beneficiary who has concluded PAC and who could also 
receive services in the physician's office or hospital outpatient 
department as needed, along with telehealth visits in the home from a 
physician or NPP as proposed in the next section, should be sufficient 
to allow comprehensive assessment and management of the beneficiary 
throughout the LEJR episode. We propose that the service be billed with 
HCPCS code GXXXX (Coordinated quality care--joint replacement model 
home visit for patient assessment performed by a qualified health care 
professional for an individual not considered homebound, including, but 
not necessarily limited to patient assessment of clinical status, 
safety/fall prevention, functional status/ambulation, medication 
reconciliation/management, compliance with orders/plan of care, 
performance of activities of daily living, and making beneficiary 
connections to community and other services; (for use only in the 
Medicare-approved coordinated quality care--joint replacement model); 
may not be billed for a 30-day period covered by a transitional care 
management code) and paid at approximately $50 under the PFS. The 
standard PFS ratesetting methodologies establish relative value units 
(RVUs) based on the resources required to furnish the typical service. 
Final RVUs under the CY 2016 PFS for the proposed new HCPCS code for 
CCJR home visits will be included in the CCJR final rule. In addition, 
we propose to update the values each year to correspond to final values 
established under the PFS.
    The waiver would not apply with respect to a CCJR beneficiary who 
has qualified, or would qualify, for home health services when the 
visit was furnished. We expect that the visits by licensed clinicians 
could include patient assessment, monitoring, assessment of functional 
status and fall risk, review of medications, assessment of adherence 
with treatment recommendations, patient education, communication and 
coordination with other treating clinicians, care management to improve 
beneficiary connections to community and other services, etc. These 
post-discharge home visits would remove barriers to follow-up care 
outside of the home with providers and suppliers and allow the 
beneficiary to be treated in his or her home environment or place of 
residence, where potential safety concerns, such as tripping hazards, 
could quickly be identified and remediated. Given these occasions for 
further patient assessment and intervention, we believe that where such 
post-discharge home visits are furnished, there are opportunities to 
increase patient-centered care coordination and decrease episode 
spending, potentially resulting in higher quality care for 
beneficiaries and increased episode efficiency which may benefit the 
beneficiaries, the Medicare Trust Fund, and participant hospitals.
    We also propose to waive current Medicare billing rules in order to 
allow the separate reporting of these post-discharge home visits during 
surgical global periods. The PFS payment for the surgical procedure 
includes 90 days of post-operative care furnished by the surgeon. Post-
operative follow-up care is not separately billable by the surgeon or, 
unless there is a transfer of care, by another practitioner. The 
current construction of the global packages included in PFS payments 
reflects a

[[Page 41270]]

narrow view of surgical follow-up care that does not encompass broader, 
more comprehensive models of post-operative care, such as an episode 
model like CCJR. As we have noted in the past, it is also difficult to 
determine the appropriate valuation of the various components of the 
current global packages (2015 Physician Fee Schedule 79 FR 67584). We 
do not believe that the CCJR post-discharge home visits, which can 
include nursing assessments for chronic conditions for which care may 
be affected by the surgery, would replace or substantially duplicate 
the kind of post-operative visits involved in furnishing post-operative 
follow-up care for the global surgery procedure under the PFS. Instead, 
we anticipate that the work of these post-discharge visits will be 
similar to the work furnished by the physician coordinating the 
patient's overall episode care. Therefore, we propose to waive the 
global surgery billing rules to allow the surgeon or other 
practitioners to furnish and bill for the post-discharge home visits 
during surgical global periods.
    We plan to monitor utilization patterns of post-discharge home 
visits under CCJR to monitor for overutilization and significant 
reductions in medical home health services. We seek comments on the 
proposed waiver of the ``incident to'' rule to pay for a maximum number 
of post-discharge home visits to beneficiaries who do not qualify for 
home health services by licensed clinicians under the general 
supervision of a physician.
c. Billing and Payment for Telehealth Services
    As discussed in the previous section, we expect that the CCJR model 
design features will lead to greater interest on the part of hospitals 
and other providers and suppliers caring for CCJR beneficiaries in 
furnishing services to beneficiaries in their home or place of 
residence, including physicians' professional services. While 
physicians may furnish and be paid by Medicare for home visits under 
the PFS, few visits are actually furnished to Medicare beneficiaries 
because of the significant physician resources required for such visits 
and the general structure of most physician office-based practices. For 
example, in 2014 only 2.6 million physician or nonphysician 
practitioner home visits were furnished to Medicare beneficiaries in 
contrast to almost 250 million office or other outpatient evaluation 
and management visits furnished by physicians or nonphysician 
practitioners. CCJR would create new incentives for comprehensive 
episode care management for beneficiaries, including early 
identification and intervention regarding changes in health status 
following discharge from the anchor hospitalization. We understand that 
participant hospitals may want to engage physicians in furnishing 
timely visits to homebound or non-homebound CCJR beneficiaries in their 
homes or places of residence to address concerning symptoms or 
observations raised by beneficiaries themselves, clinicians furnishing 
home health services, or licensed clinicians furnishing post-discharge 
home visits, while physicians committed to LEJR care redesign may not 
be able to revise their practice patterns to meet this home visit need 
for CCJR beneficiaries.
    Under section 1834(m) of the Act, Medicare pays for telehealth 
services furnished by a physician or practitioner under certain 
conditions even though the physician or practitioner is not in the same 
location as the beneficiary. The telehealth services must be furnished 
to a beneficiary located in one of the eight types of originating sites 
specified in section 1834(m)(4)(C)(ii) of the Act and the site must 
satisfy at least one of the requirements of section 1834(m)(4)(C)(i)(I) 
through (III) of the Act. Generally, for Medicare payment to be made 
for telehealth services under the Physician Fee Schedule several 
conditions must be met, as set forth under Sec.  410.78(b). 
Specifically, the service must be on the Medicare list of telehealth 
services and meet all of the following other requirements for payment:
     The service must be furnished via an interactive 
telecommunications system.
     The service must be furnished to an eligible telehealth 
individual.
     The individual receiving the services must be in an 
eligible originating site.
    When all of these conditions are met, Medicare pays a facility fee 
to the originating site and provides separate payment to the distant 
site practitioner for the service. Section 1834(m)(4)(F)(i) of the Act 
defines Medicare telehealth services to include professional 
consultations, office visits, office psychiatry services, and any 
additional service specified by the Secretary, when furnished via a 
telecommunications system. For the list of approved Medicare telehealth 
services, see the CMS Web site at www.cms.gov/Medicare/Medicare-General-information/telehealth/. Under section 1834(m)(4)(F)(ii) of the 
Act, CMS has an annual process to consider additions to and deletions 
from the list of telehealth services. We do not include any services as 
telehealth services when Medicare does not otherwise make a separate 
payment for them.
    Some literature suggests that technologies that enable health care 
providers to deliver care to patients in locations remote from 
providers are being increasingly used to complement face-to-face 
patient-provider encounters in both urban and rural areas.\43\ In these 
cases, the use of remote access technologies may improve the 
accessibility and timeliness of needed care, increase communication 
between providers and patients, enhance care coordination, and improve 
the efficiency of care. We note that certain professional services that 
are commonly furnished remotely using telecommunications technology are 
paid under the same conditions as in-person physicians' services, and 
thus do not require a waiver to be considered as telehealth services. 
Such services that do not require the patient to be present in person 
with the practitioner when they are furnished are covered and paid in 
the same way as services delivered without the use of 
telecommunications technology when the practitioner is in person at the 
medical facility furnishing care to the patient.
    In other CMS episode payment models, such as BPCI Models 2 and 3, 
we determined it was necessary to waive the geographic site 
requirements of section 1834(m)(4)(C)(i)(I) through (III) of the Act. 
This waiver allows telehealth services to be furnished to eligible 
telehealth individuals when they are located at one of the eight 
originating sites at the time the service is furnished via a 
telecommunications system but without regard to the site meeting one of 
the geographic site requirements. For CCJR, we propose a waiver of this 
same provision as well as waiver of the requirement that the eligible 
telehealth individual be in an originating site when the otherwise 
eligible individual is receiving telehealth services in his or her home 
or place of residence. This waiver would allow providers and suppliers 
furnishing services to CCJR beneficiaries to utilize telemedicine for 
beneficiaries that are not classified as rural and to allow the 
greatest degree of efficiency and communication between providers and 
suppliers and beneficiaries by allowing beneficiaries to receive 
telehealth services at their home or place of residence. We believe 
that these waivers are essential to maximize the opportunity to improve 
the quality of care and efficiency for LEJR episodes under CCJR.

[[Page 41271]]

    Specifically, like the telehealth waiver for BPCI, we propose to 
waive the geographic site requirements of section 1834(m)(4)(C)(i)(I) 
through (III) of the Act that limit telehealth payment to services 
furnished within specific types of geographic areas or in an entity 
participating in a federal telemedicine demonstration project approved 
as of December 31, 2000. Waiver of this requirement would allow 
beneficiaries located in any region to receive services related to the 
episode to be furnished via telehealth, as long as all other Medicare 
requirements for telehealth services are met. Any service on the list 
of Medicare approved telehealth services and reported on a claim with 
an ICD-9 principal diagnosis code that is not excluded from the 
proposed CCJR episode definition (see section III.B.2 of this proposed 
rule) could be furnished to a CCJR beneficiary, regardless of the 
beneficiary's geographic location. Under CCJR, this waiver would 
support care coordination and increasing timely access to high quality 
care for all CCJR beneficiaries, regardless of geography. Additionally, 
we propose, only for the purpose of testing the CCJR model, waiving the 
originating site requirements of section 1834(m)(4)(C)(ii)(I)-(VIII) of 
the Act that specify the particular sites at which the eligible 
telehealth individual must be located at the time the service is 
furnished via a telecommunications system. Specifically, we propose to 
waive the requirement only when telehealth services are being furnished 
in the CCJR' beneficiary's home or place of residence during the 
episode. Any service on the list of Medicare approved telehealth 
services and reported on a claim with an ICD-9 principal diagnosis code 
that is not excluded from the proposed CCJR episode definition (see 
section III.B.2 of this proposed rule) could be furnished to a CCJR 
beneficiary in his or her home or place of residence, unless the 
service's HCPCS code descriptor precludes delivering the service in the 
home or place of residence. For example, subsequent hospital care 
services could not be furnished to beneficiaries in their home since 
those beneficiaries would not be inpatients of the hospital.
    The existing set of codes used to report evaluation and management 
(E/M) visits are extensively categorized and defined by the setting of 
the service, and the codes describe the services furnished when both 
the patient and the practitioner are located in that setting. Section 
1834(m) of the Act provides for particular conditions under which 
Medicare can make payment for office visits when a patient is located 
in a health care setting (the originating sites authorized by statute) 
and the eligible practitioner is located elsewhere. However we do not 
believe that the kinds of E/M services furnished to patients outside of 
health care settings via real-time, interactive communication 
technology are accurately described by any existing E/M codes. This 
would include circumstances when the patient is located in his or her 
home and the location of the practitioner is unspecified. Therefore, in 
order to create a mechanism to report E/M services accurately under the 
CCJR model, we propose to create a specific set of HCPCS G-codes to 
describe the E/M services furnished to CCJR beneficiaries in their 
homes via telehealth.
    Among the existing E/M visit services, we envision these services 
would be most similar to those described by the office and other 
outpatient E/M codes. Therefore, we propose to structure the new codes 
similarly to the office/outpatient E/M codes but adjusted to reflect 
the location as the beneficiary's residence and the virtual presence of 
the practitioner. Specifically, we propose to create a parallel 
structure and set of descriptors currently used to report office or 
other outpatient E/M services, (CPT codes 99201 through 99205 for new 
patient visits and CPT codes 99212 through 99215 for established 
patient visits.) For example, the proposed G-code for a level 3 E/M 
visit for an established patient would be a telehealth visit for the 
evaluation and management of an established patient in the patient's 
home, which requires at least 2 of the following 3 key components:
     An expanded problem focused history;
     An expanded problem focused examination;
     Medical decision making of low complexity.
    Counseling and coordination of care with other physicians, other 
qualified health care professionals or agencies are provided consistent 
with the nature of the problem(s) and the patient's or family's needs 
or both. Usually, the presenting problem(s) are of low to moderate 
severity. Typically, 15 minutes are spent with the patient or family or 
both via real-time, audio and video intercommunications technology.
    We note that we are not proposing a G-code to parallel the level 1 
office/outpatient visit for an established patient, since that service 
does not require the presence of the physician or other qualified 
health professional. We also believe this would duplicate the home 
visits for non-homebound beneficiaries previously proposed in this 
section.
    We propose to develop payment rates for these new telehealth G-
codes for E/M services in the patient's home that are similar to the 
payment rates for the office/outpatient E/M services, since the codes 
will describe the work involved in furnishing similar services. 
Therefore, we propose to include the resource costs typically incurred 
when services are furnished via telehealth. In terms of the relative 
resource costs involved in furnishing these services, we believe that 
the efficiencies of virtual presentation generally limit resource costs 
other than those related to the professional time, intensity, and 
malpractice risk to marginal levels. Therefore, we propose to adopt 
work and malpractice (MP) RVUs associated with the corresponding level 
of office/outpatient codes as the typical service because the 
practitioner's time and intensity and malpractice liabilities when 
conducting a visit via telehealth are comparable to the office visit. 
Final RVUs under the CY 2016 PFS will be included in the CCJR final 
rule. Additionally, we propose to update these values each year to 
correspond to final values established under the PFS. We considered 
whether each level of visit typically would warrant support by 
auxiliary licensed clinical staff within the context of the CCJR model. 
The cost of such staff and any associated supplies, for example, would 
be incorporated in the practice expense (PE) RVUs under the PFS. For 
the lower level visits, levels 1 through 3 for new and 2 and 3 for 
established visits, we did not believe that the visit would necessarily 
require auxiliary medical staff to be available in the patient's home. 
We anticipate these lower level visits would be the most commonly 
furnished and would serve as a mechanism for the patient to consult 
quickly with a practitioner for concerns that can be easily described 
and explained by the patient. We do not propose to include PE RVUs for 
these services, since we do not believe that virtual visits envisioned 
for this model typically incur the kinds of costs included in the PE 
RVUs under the PFS. For higher level visits, we typically would 
anticipate some amount of support from auxiliary clinical staff. For 
example, wound examination and minor wound debridement would be 
considered included in an E/M visit and would require licensed clinical 
staff to be present in the beneficiary's home during the telehealth 
visit in order for

[[Page 41272]]

the complete service to be furnished. We believe it would be rare for a 
practitioner to conduct as complex and detailed a service as a level 4 
or 5 E/M home visit via telehealth for CCJR beneficiaries in LEJR 
episodes without licensed clinical staff support in the home.
    However, we also note that this proposed model already includes 
several avenues for licensed clinical staff to be in the patient's 
home, either through a separately paid home visit as proposed for the 
model or through home health services as discussed earlier in this 
section of this proposed rule. Therefore, although we consider support 
by auxiliary clinical staff to be typical for level 4 or 5 E/M visits 
furnished to CCJR beneficiaries in the home via telehealth, we do not 
propose to incorporate these costs through PE RVUs. Given the 
anticipated complexity of these visits, we would expect to observe 
level 4 and 5 E/M visits to be reported on the same claim with the same 
date of service as a home visit or during a period of authorized home 
health care. If neither of these occurs, we propose to require the 
physician to document in the medical record that auxiliary licensed 
clinical staff were available on site in the patient's home during the 
visit and if they were not, to document the reason that such a high-
level visit would not require such personnel.
    We note that because the services described by the proposed G-
codes, by definition, are furnished remotely using telecommunications 
technology, they therefore are paid under the same conditions as in-
person physicians' services and they do not require a waiver to the 
requirements of section 1834(m) of the Act. We also note that because 
these home telehealth services are E/M services, all other coverage and 
payment rules regarding E/M services would continue to apply.
    Under CCJR, this proposal to waive the originating site 
requirements and create new home visit telehealth HCPCS codes would 
support the greatest efficiency and timely communication between 
providers and beneficiaries by allowing beneficiaries to receive 
telehealth services at their places of residence.
    With respect to home health services paid under the home health 
prospective payment system (HH PPS), we emphasize that telehealth 
visits under this model cannot substitute for in-person home health 
visits per section 1895(e)(1)(A) of the Act. Furthermore, telehealth 
services by social workers cannot be furnished for CCJR beneficiaries 
who are in a home health episode of care because medical social 
services are included as home health services per section 1861(m) of 
the Act and paid for under the Medicare HH PPS. However, telehealth 
services permitted under section 1834 of the Act and furnished by 
physicians or other practitioners, specifically physician assistants, 
nurse practitioners, clinical nurse specialists, certified nurse 
midwives, nurse anesthetists, psychologists, and dieticians, can be 
furnished for CCJR beneficiaries who are in a home health episode of 
care. Finally, sections 1835(a) and 1814(a) of the Act require that the 
patient has a face-to-face encounter with the certifying physician or 
an allowed nonphysician practitioner (NPP) working in collaboration 
with or under the supervision of the certifying physician before the 
certifying physician certifies that the patient is eligible for home 
health services. Under Sec.  424.22(a)(1)(v), the face-to-face 
encounter can be performed up to 90 days prior to the start of home 
health care or within 30 days after the start of home health care. 
Section 424.22(a)(1)(v)(A) also allows a physician, with privileges, 
who cared for the patient in an acute or PAC setting (from which the 
patient was directly admitted to home health) or an allowed NPP working 
in collaboration with or under the supervision of the acute or PAC 
physician to conduct the face-to-face encounter.
    Although sections 1835(a) and 1814(a) of the Act allow the face-to-
face encounter to be performed via telehealth, we are not proposing 
that the waiver of the telehealth geographic site requirement for 
telehealth services and the the originating site requirement for 
telehealth services furnished in the CCJR beneficiary's home or place 
of residence would apply to the face-to-face encounter required as part 
of the home health certification when that encounter is furnished via 
telehealth. In other words, when a face-to-face encounter furnished via 
telehealth is used to meet the requirement for home health 
certification, the usual Medicare telehealth rules apply with respect 
to geography and eligibility of the originating site. We expect that 
this policy will not limit CCJR beneficiaries' access to medically 
necessary home health services because beneficiaries receiving home 
health services during a CCJR episode will have had a face-to-face 
encounter with either the physician or an allowed NPP during their 
anchor hospitalization or a physician or allowed NPP during a post-
acute facility stay prior to discharge directly to home health 
services.
    Under the proposed waiver of the geographic site requirement and 
originating site requirement, all telehealth services would be required 
to be furnished in accordance with all Medicare coverage and payment 
criteria, and no additional payment would be made to cover set-up 
costs, technology purchases, training and education, or other related 
costs. The facility fee paid by Medicare to an originating site for a 
telehealth service would be waived if there is no facility as an 
originating site (that is, the service was originated in the 
beneficiary's home). Finally, providers and suppliers furnishing a 
telehealth service to a CCJR beneficiary in his or her home or place of 
residence during the episode would not be permitted to bill for 
telehealth services that were not fully furnished when an inability to 
provide the intended telehealth service is due to technical issues with 
telecommunications equipment required for that service. Beneficiaries 
would be able to receive services furnished pursuant to the telehealth 
waivers only during the CCJR LEJR episode.
    We plan to monitor patterns of utilization of telehealth services 
under CCJR to monitor for overutilization or reductions in medically 
necessary care, and significant reductions in face-to-face visits with 
physicians and NPPs. We plan to specifically monitor the distribution 
of new telehealth home visits that we are proposing, as we anticipate 
greater use of lower level visits. Given our concern that auxiliary 
licensed clinical staff be present for level 4 and 5 visits, we will 
monitor our proposed requirement that these visits be billed on the 
same claim with the same date of service as a home nursing visit, 
during a period authorized home health care, or that the physician 
document the presence of auxiliary licensed clinical staff in the home 
or an explanation as to the specific circumstances precluding the need 
for auxiliary staff for the specific visit. We seek comments on the 
proposed waivers with respect to telehealth services, and the proposed 
creation of the home visit telehealth codes.
d. SNF 3-Day Rule
    We expect that the CCJR model will encourage participant hospitals 
and their provider and supplier partners to redesign care for LEJR 
episodes across the continuum of care extending to 90 days post-
discharge from the anchor hospital stay. We believe that hospitals will 
seek to develop and refine the most efficient care pathways so 
beneficiaries

[[Page 41273]]

receive the lowest intensity, clinically appropriate care at each point 
in time throughout the episode. We understand that in some cases, 
particularly younger beneficiaries undergoing total knee replacement, 
certain beneficiaries receiving LEJR procedures may be appropriately 
discharged from the acute care hospital to a SNF in less than the 3 
days required under the Medicare program for coverage of the SNF stay. 
While total knee arthroplasty (TKA) remains payable by Medicare to the 
hospital only when furnished to hospital inpatients, we have heard from 
some stakeholders that these procedures may be safely furnished to 
hospital outpatients with a hospital outpatient department stay of only 
24 hours. Finally, we note that the current geometric mean hospital 
length of stay for LEJR procedures for beneficiaries without major 
complications or comorbidities (MS-DRG 470) is only 3 days and that for 
MS-DRG 469 for beneficiaries with such complications or comorbidities 
is 6 days. Thus, we believe it is possible that hospitals working to 
increase episode efficiency may identify some CCJR beneficiaries who 
could be appropriately discharged from the hospital to a SNF in less 
than 3 days, but that early discharge would eliminate Medicare coverage 
for the SNF stay unless a waiver of Medicare requirements were provided 
under CCJR.
    The Medicare SNF benefit is for beneficiaries who require a short-
term intensive stay in a SNF, requiring skilled nursing or skilled 
rehabilitation care or both. Pursuant to section 1861(i) of the Act, 
beneficiaries must have a prior inpatient hospital stay of no fewer 
than 3-consecutive days in order to be eligible for Medicare coverage 
of inpatient SNF care. We refer to this as the SNF 3-day rule. We note 
that the SNF 3-day rule has been waived or is not a requirement for 
Medicare SNF coverage under other CMS models or programs, including 
BPCI Model 2. BPCI Model 2 awardees that request and are approved for 
the waiver can discharge Model 2 beneficiaries in less than 3 days from 
an anchor hospital stay to a SNF, where services are covered under 
Medicare Part A as long as all other coverage requirements for such 
services are satisfied.
    Currently, FFS Medicare beneficiary discharge patterns to a SNF 
immediately following hospitalization for an LEJR procedure vary 
regionally across the country, from a low of approximately 10 percent 
of Medicare beneficiaries to a high of approximately 85 percent.\44\ 
Additionally, a study of Medicare beneficiaries has shown that over the 
period of time between 1991 and 2008, as the inpatient hospital length-
of-stay for total hip arthroplasty (THA) decreased from an average of 
9.1 days to an average of 3.7 days, the average percentage of primary 
THA patients discharged directly to home declined from 68 percent to 48 
percent while the proportion discharged directly to skilled care 
(primarily SNFs) increased from 17.8 percent to 34.3 percent.\45\ 
During this same period of time, 30-day all-cause readmission increased 
from 5.8 percent to 8.5 percent. Similar to the CCJR payment policies 
we propose in section III.C of this proposed rule, which would require 
participating CCJR hospitals to repay Medicare for excess episode 
spending beginning in performance year 2, participants in BPCI Model 2 
assume financial responsibility for episode spending for beneficiaries 
included in a Model 2 episode. Episode payment models like BPCI and 
CCJR have the potential to mitigate the existing incentives under the 
Medicare program to overuse SNF benefits for beneficiaries, as well as 
to furnish many fragmented services that do not reflect significant 
coordinated attention to and management of complications following 
hospital discharge. The removal of these incentives in an episode 
payment model lays the groundwork for offering participant hospitals 
greater flexibility around the parameters that determine SNF stay 
coverage. BPCI participants considering the early discharge of a 
beneficiary pursuant to the waiver during a Model 2 episode must 
evaluate whether early discharge to a SNF is clinically appropriate and 
SNF services are medically necessary. Next, they must balance that 
determination and the potential benefits to the hospital in the form of 
internal cost savings due to greater financial efficiency with the 
understanding that a subsequent hospital readmission, attributable to 
premature discharge or low quality SNF care, could substantially 
increase episode spending while also resulting in poorer quality of 
care for the beneficiary. Furthermore, early hospital discharge for a 
beneficiary who would otherwise not require a SNF stay (that is, the 
beneficiary has no identified skilled nursing or rehabilitation need 
that cannot be provided on an outpatient basis) following a hospital 
stay of typical length does not improve episode efficiency under an 
episode payment model such as BPCI or CCJR.
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    \44\ ``Analysis of Medicare claims with admission dates from 
July 1, 2013 through June 30, 2014 accessed through the Chronic 
Conditions Warehouse.''
    \45\ Cram P, Lu X, Kaboli PJ, et al. Clinical Characteristics 
and Outcomes of Medicare Patients Undergoing Total Hip Arthroplasty, 
1991-2008. JAMA. 2011;305(15):1560-1567.
---------------------------------------------------------------------------

    Because of the potential benefits we see for participating CCJR 
hospitals, their provider partners, and beneficiaries, we propose to 
waive in certain instances the SNF 3-day rule for coverage of a SNF 
stay following the anchor hospitalization under CCJR beginning in 
performance year 2 of the model when repayment responsibility for 
actual episode spending that exceeds the target price begins. We 
propose to use our authority under section 1115A of the Act with 
respect to certain SNFs that furnish Medicare Part A post-hospital 
extended care services to beneficiaries included in an episode in the 
CCJR model. We believe this waiver is necessary to the model test so 
that participant hospitals can redesign care throughout the episode 
continuum of care extending to 90 days post-discharge from the anchor 
hospital stay in order to maximize quality and hospital financial 
efficiency, as well as reduce episode spending under Medicare. However, 
we are not proposing to waive this requirement in performance year 1, 
when participating hospitals are not responsible for excess actual 
episode spending. We believe that there is some potential for early 
hospital discharge followed by a SNF stay to increase actual episode 
spending over historical patterns unless participant hospitals are 
particularly mindful of this potential unintended consequence. Without 
participant hospital repayment responsibility in performance year 1, we 
are concerned that Medicare would be at full risk under the model for 
increased episode spending because, without a financial incentive to 
closely manage care, hospitals might be more likely to discharge 
beneficiaries to SNFs early leading to increased episode spending for 
which the hospital would bear no responsibility. Beginning in 
performance year 2 and continuing through performance year 5, we 
propose to waive the SNF 3-day rule because participant hospitals will 
bear partial or full responsibility (capped at the proposed stop-loss 
limit described in section III.C. of this proposed rule) for excess 
episode actual spending, thereby providing a strong incentive in those 
years for participant hospitals to redesign care with both quality and 
efficiency outcomes as priorities. All other Medicare rules for 
coverage and payment of Part A-covered SNF services would continue to 
apply to CCJR

[[Page 41274]]

beneficiaries in all performance years of the model.
    In addition, because the average length of stay for Medicare 
beneficiaries hospitalized for LEJR procedures without major 
complications or comorbidities is already relatively short at 3 days 
and in view of our concerns over protecting immediate CCJR beneficiary 
safety and optimizing health outcomes, we propose to require that 
participant hospitals may only discharge a CCJR beneficiary under this 
proposed waiver of the SNF 3-day rule to a SNF rated an overall of 
three stars or better by CMS based on information publicly available at 
the time of hospital discharge. Problem areas due to early hospital 
discharge may not be discovered through model monitoring and evaluation 
activities until well after the episode has concluded, and the 
potential for later negative findings alone may not afford sufficient 
beneficiary protections. CMS created a Five-Star Quality Rating System 
for SNFs to allow SNFs to be compared more easily and to help identify 
areas of concerning SNF performance. The Nursing Home Compare Web site 
(www.medicare.gov/NursingHomeCompare/) gives each SNF an overall rating 
of between 1 and 5 stars. Skilled nursing facilities with 5 stars are 
considered to have much above average quality, and SNFs with one star 
are considered to have quality much below average. Published SNF 
ratings include distinct ratings of health inspection, staffing, and 
quality measures, with ratings for each of the three sources combined 
to calculate an overall rating. These areas of assessment are all 
relevant to the quality of SNF care following discharge from the anchor 
hospitalization initiating a CCJR episode, especially if that discharge 
occurs after less than three days in the hospital. A study of the 
clinical factors that kept patients in a Danish hospital unit dedicated 
to discharge in three days or fewer following total hip and knee 
arthroscopy procedures found that that pain, dizziness, and general 
weakness were the main clinical reasons for longer hospitalization, as 
well as problems with personal care and walking 70 meters with 
crutches.\46\ Medicare beneficiaries discharged from the hospital to a 
SNF in less than three days may be at higher risk of these 
uncomfortable symptoms and disabling functional problems not being 
fully resolved at hospital discharge, although we expect that under the 
CCJR episode payment model participant hospitals will have a strong 
interest in ensuring appropriate discharge timing so that hospital 
readmissions and complications are minimized. Nevertheless, because of 
the potential greater risks following early inpatient hospital 
discharge, we believe it is appropriate that all CCJR beneficiaries 
discharged from the participant hospital to a SNF in less than 3 days 
be admitted to a SNF that has demonstrated that it is capable of 
providing quality care to patients with significant unresolved post-
surgical symptoms and problems. We believe such a SNF would need to 
provide care of at least average overall quality, which would be 
represented by an overall SNF 3-star or better rating.
---------------------------------------------------------------------------

    \46\ Husted H, Lunn TH, Troelsen A, Gaarm-Larsen L, Kristensen 
BB, Kehlet H. Why still in hospital after fast-track hip and knee 
arthroplasty? Acta Orthopaedica. 2011; 82(6)679-684.
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    We propose that the waiver be available for the CCJR beneficiary's 
care. The SNF would insert a Treatment Authorization Code on the claim 
for a beneficiary in the model where the SNF seeks to the use the 
waiver. This process would promote coordination between the SNF and the 
participant hospital, as the SNF would need to be in close 
communication with the participant hospital to ensure that the 
beneficiary is in the model at the time the waiver is used. We propose 
that where the beneficiary would be eligible for inclusion in a CCJR 
episode of care at the time of hospital discharge, use of the waiver 
would be permitted where it is medically necessary and appropriate to 
discharge the beneficiary to a SNF prior to a 3-day inpatient stay.
    Beneficiaries would be eligible to receive services furnished under 
the 3-Day Rule waiver only during the CCJR episode. We plan to monitor 
patterns of SNF utilization under CCJR, particularly with respect to 
hospital discharge in less than 3 days to a SNF, to ensure that 
beneficiaries are not being discharged prematurely to SNFs and that 
they are able to exercise their freedom of choice without patient 
steering. We seek comment on our proposal to waive the SNF 3-day stay 
rule for stays in SNFs rated overall as three stars or better following 
discharge from the anchor hospitalization in CCJR episodes.
e. Waivers of Medicare Program Rules To Allow Reconciliation Payment or 
Repayment Actions Resulting From the Net Payment Reconciliation Amount
    In order to make reconciliation payment to or carry out recoupment 
from a participant hospital that results from the NPRA calculation for 
each performance year as discussed in section III.C.6.a. of this 
proposed rule, we believe we would need to waive certain Medicare 
program rules. Therefore, in accordance with the authority granted to 
the Secretary in section 1115A(d)(1) of the Act, we would waive 
requirements of the Act for all Medicare Part A and Part B payment 
systems only to the extent necessary to make reconciliation payments or 
receive repayments based on the NPRA that reflect the episode payment 
methodology under this proposed payment model for CCJR participant 
hospitals selected in accordance with CMS's proposed selection 
methodology. In addition, we do not propose that reconciliation 
payments or repayments change beneficiary cost-sharing from the regular 
Medicare program cost-sharing for the related Part A and Part B 
services that were paid for CCJR beneficiaries and aggregated to 
determine actual episode spending in the calculation of the NPRA. We 
therefore would waive the requirements of sections 1813 and 1833(a) of 
the Act to the extent that they would otherwise apply to reconciliation 
payments or repayments from a participant hospital under the CCJR 
model. We seek comment on our proposed waivers related to repayment and 
recoupment actions as a result of the NRPA calculated.
12. Proposed Enforcement Mechanisms
    CMS must have certain mechanisms to enforce compliance with the 
requirements of the model, either by the participant hospital, or by an 
entity or individual participating in the CCJR model by furnishing a 
service to a beneficiary during a CCJR episode. The following 
discussion details the enforcement mechanisms we propose to make 
available to CMS for the CCJR model.
    We propose an enforcement structure that would be consistent with 
other CMMI models. We believe that Model 2 of the BPCI initiative is an 
appropriate model for comparison, given that Model 2 and CCJR share 
many of the same policy characteristics, particularly with respect to 
episode definition. For example, the participation agreement between 
CMS and a participant (called an Awardee) in BPCI Model 2 provides that 
CMS may immediately or with advance notice terminate the awardee's 
participation in the model or require the Awardee to terminate its 
agreement (``participant agreement'') with a participating provider or 
supplier that is not in compliance with BPCI requirements. In such 
circumstances, CMS may direct the Awardee to terminate its participant 
agreement with a participating provider or supplier because the Awardee 
has a participation agreement with CMS, whereas the participating 
provider or supplier does

[[Page 41275]]

not. CMS may require termination of the Awardee or a participating 
provider or supplier if--
     CMS determines that it no longer has the funds to support 
the BPCI model;
     CMS terminates the model pursuant to section 
1115A(b)(3)(B) of the Act; or
     The BPCI awardee or an individual or entity participating 
in BPCI under the awardee does any of the following:
    ++ Takes any action that threatens the health or safety of 
patients; avoids at-risk Medicare beneficiaries, as this term is 
defined in Sec.  425.20; or avoids patients on the basis of payer 
status.
    ++ Is subject to sanctions or final actions of an accrediting 
organization or federal, state or local government agency that could 
lead to the inability to comply with the requirements and provisions of 
the BPCI agreement.
    ++ Takes or fails to take any action that CMS determines for 
program integrity reasons is not in the best interests of the BPCI 
initiative.
    ++ Is subject to action by HHS (including OIG and CMS) or the 
Department of Justice to redress an allegation of fraud or significant 
misconduct, including intervening in a False Claims Act qui tam matter, 
issuing a pre-demand or demand letter under a civil sanction authority, 
or similar actions.
    Under the terms of the BPCI agreement, upon CMS's termination of 
the agreement for any of the reasons previously listed in this section, 
CMS may immediately cease the distribution of positive reconciliation 
payments to the awardee and the awardee must immediately cease the 
distribution of any gainsharing payments.
    Many CMMI models also allow for CMS to impose remedial actions to 
address noncompliance by either a participant that has a direct 
relationship (participation agreement) with CMS, or by any individual 
or entity participating in the CMMI model pursuant to an agreement with 
the participant hospital. For example, with respect to the BPCI Model 
2, where CMS determines that there may be noncompliance, CMS may take 
any or all of the following actions:
     Notify the BPCI awardee of the specific performance 
problem.
     Require the awardee to provide additional data to CMS or 
its designees.
     Require the awardee to stop distributing funds to a 
particular individual or entity.
     Require the awardee to forego the receipt of any positive 
reconciliation payments from CMS.
     Request a corrective action plan from the awardee.
    ++ If CMS requests a corrective action plan, then the following 
requirements apply to awardees in the BPCI initiative:

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

    Under the CCJR model, we propose that CMS would have the 
enforcement mechanisms detailed in this section available for use 
against participant hospitals and any entity or individual furnishing a 
service to a beneficiary during a CCJR episode, where the participant 
hospital or such entity or individual: (1) Does not comply with the 
CCJR model requirements; or (2) are identified as noncompliant via CMS' 
monitoring of the model or engage in behavior related to any of the 
reasons previously described that apply to the BPCI initiative. These 
mechanisms will support the goals of CCJR to maintain or improve 
quality of care. Given that participant hospitals may receive 
reconciliation payments, and choose to distribute or share those 
payments with other providers or suppliers (``CCJR collaborators'') we 
believe that enhanced scrutiny and monitoring of participant hospitals 
and CCJR collaborators under the model is necessary and appropriate. 
Participant hospitals and CCJR collaborators will also be subject to 
all existing requirements and conditions for Medicare participation not 
otherwise waived under section 1115A(d)(1) of the Act.
    We propose that CMS would have the option to use any one or more of 
the following enforcement mechanisms for participant hospitals in CCJR. 
We further propose that these enforcement mechanisms could be 
instituted and applied in any order, as is consistent with other CMMI 
models:
     Warning letter--We propose to give CMS the authority to 
issue a warning letter to participant hospitals to put them on notice 
of behavior that may warrant additional action by CMS. This letter 
would inform participant hospitals of the issue or issues identified by 
CMS leading to the issuance of the warning letter.
     Corrective Action Plan--We propose to give CMS the 
authority to request a corrective action plan from participant 
hospitals. We propose the following requirements for corrective action 
plans:
    ++ The participant hospital would be required to submit a 
corrective action plan for CMS approval by the deadline established by 
CMS.
    ++ The corrective action plan would be required to address what 
actions the participant hospital will take within a specified time 
period to correct the issues identified by CMS.
    ++ The corrective action plan could include provisions requiring 
that the participant hospital terminate Participation Agreements with 
CCJR collaborators that are determined by HHS to be engaging in 
activities involving noncompliance with the provisions of this proposed 
rule, engaged in fraud or abuse, providing substandard care, or 
experiencing other integrity problems.
    ++ The participant hospital's failure to comply with the corrective 
action plan within the specified time period could result in additional 
enforcement action, including: (1) Termination; (2) automatic 
forfeiture of all or a portion of any reconciliation payments as that 
term is defined in section III.C. of this proposed rule; (3) CMS's 
discretionary reduction or elimination of all or a portion of the 
hospital's reconciliation payment; or (4) a combination of such 
actions.
     Reduction or elimination of reconciliation amount--We 
propose to give CMS the authority to reduce or eliminate a participant 
hospital's reconciliation amount based on noncompliance with the 
model's requirements, negative results found through CMS' monitoring 
activities, or the participant hospital's noncompliance associated with 
a corrective action plan (as noted previously). For example, where CMS 
requires a participant hospital to submit a corrective action plan, the 
result of the participant hospital's failure to timely comply with that 
requirement could be a 50 percent reduction in the reconciliation 
amount due to the participant hospital at the end a performance year, 
where the participant hospital's reconciliation report reflects a 
positive reconciliation amount. We solicit comments on whether negative 
monitoring results and noncompliance with program requirements or 
corrective action plans should result in automatic forfeiture of all or 
a portion of positive NPRA, the amount that could be forfeited or 
reduced, the number of performance periods over which NPRA may be 
forfeited or reduced per instance or episode of noncompliance, whether 
the amount should be a fixed percentage of NPRA or a variable amount 
depending on the nature and severity of the noncompliance, and the 
criteria

[[Page 41276]]

CMS should use in deciding the severity of noncompliance.
    Where the participant hospital's reconciliation report reflects a 
repayment amount, forfeiture of a reconciliation amount would not be an 
option for that performance year. In such a case, we considered whether 
CMS would require the participant hospital to forfeit a certain 
percentage of a reconciliation amount in the reconciliation report for 
a future performance year. However, in the case of a failure to comply 
with the model's requirements, presence of negative results found 
through CMS's monitoring activities, or noncompliance associated with a 
corrective action plan, we believe a policy that would increase the 
amount of repayment amount on the reconciliation report for the 
performance year in which the noncompliance occurred by the participant 
hospital is more likely to result in compliance from the hospital. 
Therefore, we propose to add 25 percent to a repayment amount on a 
reconciliation report, where the participant hospital fails to timely 
comply with a corrective action plan or is noncompliant with the 
model's requirements, We seek comments on this forfeiture policy, 
including the percentage to be added to a repayment amount on a 
reconciliation report; the number of performance periods over which a 
reconciliation amount may be forfeited or reduced per instance or 
episode of noncompliance; whether the amount should be a fixed 
percentage of a reconciliation amount or repayment amount, as 
applicable, or a variable amount depending on the nature and severity 
of the noncompliance; and the criteria CMS should use in deciding the 
severity of noncompliance.
     Termination from the model--Given the provisions we have 
proposed outlining the participation of hospitals in the model, we 
believe that, in contrast to other CMS models, termination from the 
CCJR model would contradict the model's design. As a result, in some 
circumstances termination from the model may be unlikely to be a 
sufficient mechanism to deter noncompliance by participant hospitals. 
While we believe termination is a remedy unlikely to be frequently used 
by CMS in this model, we nonetheless leave open the possibility that in 
extremely serious circumstances termination might be appropriate, and 
for that reason, we propose to include it as an available enforcement 
option. Where a participant hospital is terminated from the CCJR model, 
we propose that the hospital would remain liable for all negative NPRA 
generated from episodes of care that occurred prior to termination. We 
propose that CMS may terminate the participation in CCJR of a 
participant hospital when the participant hospital, or a CCJR 
collaborator that has a Participation Agreement with a participant 
hospital and performs functions or services related to CCJR activities, 
fails to comply with any of the requirements of the CCJR model. We 
further propose that CMS could terminate the participant hospital's 
participation in the model, or require a participant hospital to 
terminate a Participation Agreement with a CCJR collaborator for 
reasons including, but not limited to the following:
     CMS determines that it no longer has the funds to support 
the CCJR model.
     CMS terminates the model pursuant to section 
1115A(b)(3)(B) of the Act.
     The CCJR participant hospital, or an individual or entity 
participating in CCJR under the participant hospital does any of the 
following:
    ++ Takes any action that threatens the health or safety of 
patients; avoids at-risk Medicare beneficiaries, as this term is 
defined in Sec.  425.20; or avoids patients on the basis of payor 
status.
    ++ Is subject to sanctions or final actions of an accrediting 
organization or federal, state or local government agency that could 
lead to the inability to comply with the requirements and provisions of 
this proposed rule.
    ++ Takes or fails to take any action that CMS determines for 
program integrity reasons is not in the best interests of the CCJR 
model.
    ++ Is subject to action by HHS (including OIG and CMS) or the 
Department of Justice to redress an allegation of fraud or significant 
misconduct, including intervening in a False Claims Act qui tam matter, 
issuing a pre-demand or demand letter under a civil sanction authority, 
or similar actions.
    ++ Is subject to action involving violations of the physician self-
referral prohibition, civil monetary penalties law, federal anti-
kickback statute, antitrust laws, or any other applicable Medicare 
laws, rules, or regulations that are relevant to the CCJR model
     Other Enforcement Mechanisms--We seek to incorporate 
policies regarding enforcement mechanisms that are necessary and 
appropriate to test the CCJR model. Thus, we seek public comment on 
additional enforcement mechanisms that would contribute to the 
following goals:
    ++ Allow CMS to better operate or monitor the model.
    ++ Appropriately engage and encourage all entities and individuals 
furnishing a service to a beneficiary during a CCJR episode to comply 
with the requirements and provisions of the CCJR model.
    ++ Preserve the rights of Medicare beneficiaries to receive 
medically necessary care, to not be endangered by providers and 
suppliers engaging in noncompliant activities, and to be able to choose 
from whom they want to receive care.
    We seek public comment on these proposals and invite commenters to 
propose additional safeguards we should consider in this proposed rule.

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

1. Background
a. Purpose of Quality Measures in the CCJR Model
    The priorities of the National Quality Strategy \47\ include making 
care safer and more affordable, promoting effective communication and 
coordination as well as engaging patients and families in their care. 
We believe quality measures that encourage providers to focus on the 
National Quality Strategy priorities will ultimately improve quality of 
care and cost efficiencies. As described earlier in section III.C.5 of 
this proposed rule, we are proposing that in order for a hospital in 
the CCJR model to receive a reconciliation payment for the applicable 
performance year, the participant hospital's measure results must meet 
or exceed certain thresholds compared to the national hospital measure 
results calculated for all HIQR-participant hospitals for all three 
measures for each performance period. More specifically, for 
performance years 1 through 3, a participant hospital's measure results 
must be at or above the 30th percentile of the national hospital 
measure results calculated for all hospitals under the HIQR Program for 
each of the three measures for each performance period (for a detailed 
discussion see section III.C.5.b of this proposed rule. For performance 
years 4 and 5, a participant hospital's measure results must be at or 
above the 40th percentile of the national hospital measure results (for 
a detailed discussion see section III.C.5.b. of this proposed rule). In 
this section, we fully describe the proposed quality measures that will 
be used for public reporting and to determine whether a participant

[[Page 41277]]

hospital is eligible for the reconciliation payment under the CCJR 
model. We are proposing a complication measure, readmission measure, 
and a patient experience survey measure for the CCJR model. We note 
that these measures will assess the priorities of safer care, 
transitions of care and effective communication, and engagement of 
patients in their care, respectively. Specifically, we are proposing 
the following three CMS outcome measures:
---------------------------------------------------------------------------

    \47\ National Quality Strategy. Working for Quality: About the 
National Quality Strategy. Available at: http://www.ahrq.gov/workingforquality/about.htm#develnqs. Accessed on April 15, 2015.
---------------------------------------------------------------------------

     The Hospital-level risk-standardized complication rate 
(RSCR) following elective primary total hip arthroplasty (THA) and/or 
total knee arthroplasty (TKA) (NQF #1550) (as referred to as THA/TKA 
Complications measure (NQF #1550)).
     The Hospital-level 30-day, all-cause risk-standardized 
readmission rate (RSRR) following elective primary total hip 
arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1551) (as 
referred to as THA/TKA Readmissions measure (NQF #1551)).
     HCAHPS Survey (NQF #0166).
    For the inpatient hospital settings, these fully developed measures 
are endorsed by the National Quality Forum (NQF), and recommended by 
the NQF Measure Application Partnership (MAP) with subsequent 
implementation in the HIQR Program, HVBP Program, and the HRRP (see FY 
2015 IPPS/LTCH final rule 79 FR 50031, 50062, 50208 and 50209, and 
50259). These measures are also publicly reported on Hospital Compare.

An important purpose of the proposed quality measures for the CCJR 
model is to provide transparent information on hospital performance for 
the care of patients undergoing eligible elective joint replacement 
surgery and to ensure that care quality is either maintained or 
improved. The proposed measures assess the following key outcomes for 
patients undergoing elective joint replacement surgery:
     Serious medical and surgical complications.
     Unplanned readmissions.
     Patient experience.
    We note that complications and unplanned readmissions result in 
excess inpatient and post-acute spending, and reductions in these 
undesirable events will improve patient outcomes while simultaneously 
lowering healthcare spending. The THA/TKA Complications measure (NQF 
#550) will inform quality improvement efforts targeted towards 
minimizing medical and surgical complications during surgery and the 
postoperative period. The THA/TKA Readmission measure (NQF #1551) 
captures the additional priorities of care provided in the transition 
to outpatient settings and communication with patients and providers 
during and immediately following inpatient admission. Improved quality 
of care, specifically achieved through coordination and communication 
among providers and with their patients and their caregivers, can 
favorably influence performance on these measures. We believe 
improvement in measure performance will also mean improved quality of 
care and reduced cost.
    Additionally, we continue to focus on patient experience during 
hospitalizations, and believe that the HCAHPS Survey measure provides 
not only the opportunity for patients to share their lower extremity 
joint replacement hospital experience, but also for hospitals to 
improve quality of care based on patient experience. For example, the 
HCAHPS Survey ``categories of patient experience'' specifically 
provides areas (for example, communication with doctors and nurses, 
responsiveness of hospital staff, pain management) in which a hospital 
could improve transition of care and increase patient safety (for 
detailed description of patient experience areas covered by HCAHPS 
surveys see section III.D.2.c. of this proposed). Additionally, the 
survey includes measures related to nurse and physician communication, 
pain management, timeliness of assistance, explanation of medications, 
discharge planning and cleanliness of the hospitals to provide specific 
areas for hospitals to improve on.\48\ Specific questions on provider 
communication include the following:
---------------------------------------------------------------------------

    \48\ Manary MP, Boulding W, Staelin R, Glickman SW. The Patient 
Experience and Health Outcomes. New England Journal of Medicine. Jan 
2013; 368(3):201-203.
---------------------------------------------------------------------------

     How often the patient believed providers listened 
carefully to his or her questions?
     Whether the purpose of medications and associated adverse 
events were explained?
     Whether discussions on post-discharge instructions and 
plans occurred so that the patient had a clear understanding of how to 
take medications and an understanding of his or her responsibilities in 
managing his or her health post-discharge?
    All of these areas of patient experience would be invaluable to 
improving hospital quality of care. We note that Manary, et al.\2\ 
suggest that by focusing on patient outcomes we can improve patient 
experience and that timeliness of measuring patient experience is 
important due to the potential for recall inaccuracies; survey 
administration for HCAHPS surveys must begin between 2 and 42 days 
after discharge from a hospital.
    We are aware that there is concern whether there is a relationship 
between patient satisfaction and quality of surgical care. To address 
this question Tsai et al.\49\ recently assessed patient satisfaction 
using the HCAHPS Survey results and correlated quality performance 
using nationally implemented structural, process and outcome surgical 
measures (that is, structural, process and outcome surgical measures in 
the Hospital Value Based Purchasing, and the Hospital Readmission 
Reduction Programs). The study found a positive relationship between 
patient experience of care and surgical quality of care, among the 
2,953 hospitals that perform six high cost and high frequency surgical 
procedures that are also associated with morbidity and mortality in 
Medicare beneficiaries. The study included hip replacement procedures, 
and specifically noted that those hospitals with high patient 
satisfaction also had high performance on nationally implemented 
surgical quality measures (such as the Surgical Care Improvement 
Project measures and 30-day risk-adjusted readmission and peri-
operative mortality outcome measures). Finally, we note that although 
the HCAHPS Survey measure is not specific to joint replacements, the 
survey provides all patients the opportunity to comment on their 
hospital experience, including patients who have received lower 
extremity joint replacements, which helps to inform hospitals on areas 
for improvement. While HCAHPS scores are aggregated at the hospital 
level, the surgical service line is one of three service lines 
encompassed by the survey.\50\
---------------------------------------------------------------------------

    \49\ Tsai TC, Orav EJ, Jha AK. Patient Satisfaction and quality 
of surgical care in US hospitals. Annals of Surgery. 2015; 261:2-8.
    \50\ Giordano LA, Elliott MN, Goldstein E, Lehrman WG, Spencer 
PA. Development, Implementation, and Public Reporting of the HCAHPS 
Survey. Medical Care Research and Review. 2010;67(1):27-37.
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    We strive to align as many measures and programs as is feasibly 
possible. We believe proposing fully developed measures that are used 
in other CMS hospital quality programs will minimize the burden on 
participant hospitals for having to become familiar with new measures 
and will allow us to appropriately capture quality data for the CCJR 
model.

[[Page 41278]]

b. Public Display of Quality Measures in the CCJR Model
    We believe that the display of measure results is an important way 
to educate the public on hospital performance and increase the 
transparency of the model. As discussed later in this section of this 
proposed rule, for the CCJR model, we are proposing to display quality 
measure results on the Hospital Compare Web site (http://www.hospitalcompare.hhs.gov/). We believe that the public and hospitals 
are familiar with this Web site and how the information is displayed. 
The proposed measures have been displayed on Hospital Compare over the 
past few years. Finally, while also aligning the display of data for 
the CCJR model with other CMS hospital quality programs, we believe 
that the public and 'hospitals' familiarity with the Hospital Compare 
Web site will make it simpler to access data.
2. Proposed Quality Measures for Performance Year 1 (CY 2016) and 
Subsequent years
a. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1550)
(1) Background
    THA and TKA are commonly performed procedures for the Medicare 
population that improve quality of life. Between 2009 and 2012, there 
were 337,419 total hip arthroplasty (THA) procedures and 750,569 total 
knee arthroplasty (TKA) procedures for Medicare FFS patients 65 years 
and older.\51\ The post-operation complications of these procedures are 
high considering these are elective procedures, and usually, the 
complications are devastating to patients. For example, rates for 
periprosthetic joint infection, a rare but devastating complication, 
have been reported at 2.3 percent for THA/TKA patients with rheumatoid 
arthritis after 1 year of follow-up \52\ and 1.6 percent in Medicare 
patients undergoing TKA after 2 years of follow up.\53\ Two studies 
reported 90-day death rates following THA at 0.7 percent \54\ and 2.7 
percent, respectively.\55\ Reported rates for pulmonary embolism 
following TKA range from 0.5 percent to 0.9 percent.56 57 58 
Reported rates for septicemia range from 0.1 percent, during the index 
admission\59\ to 0.3 percent, 90 days following discharge for primary 
TKA.\60\ Rates for bleeding and hematoma following TKA have been 
reported at 0.94 percent \61\ to 1.7 percent.\62\ Combined, THA and TKA 
procedures account for the largest payments for procedures under 
Medicare.\63\ Both hip and knee arthroplasty procedures improve the 
function and quality of life of patients with disabling arthritis, and 
the volume and cost associated with these procedures are very high. We 
believe it is important to assess the quality of care provided to 
Medicare beneficiaries who undergo one or both of these procedures.
---------------------------------------------------------------------------

    \51\ Suter L, Grady JL, Lin Z et al.: 2013 Measure Updates and 
Specifications: Elective Primary Total Hip Arthroplasty (THA) And/Or 
Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-
Standardized Readmission Measure (Version 2.0). 2013. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \52\ Bongartz, T, Halligan CS, Osmon D, et al. Incidence and 
risk factors of prosthetic joint infection after total hip or knee 
replacement in patients with rheumatoid arthritis. Arthritis Rheum. 
2008; 59(12): 1713-1720.
    \53\ Kurtz S, Ong K, Lau E, Bozic K, Berry D, Parvizi J. 
Prosthetic joint infection risk after TKA in the Medicare 
population. Clin Orthop Relat Res. 2010;468:5.
    \54\ Cram P, Vaughan-Sarrazin MS, Wolf B, Katz JN, Rosenthal GE. 
A comparison of total hip and knee replacement in specialty and 
general hospitals. J Bone Joint Surg Am. Aug 2007;89(8):1675-1684. 
Soohoo NF, Farng E, Lieberman JR, Chambers L, Zingmond, DS. Factors 
That Predict Short-term Complication Rates After Total Hip 
Arthroplasty. Clin Orthop Relat Res. Sep 2010;468(9):2363-2371.
    \55\ Soohoo NF, Farng E, Lieberman JR, Chambers L, Zingmond, DS. 
Factors That Predict Short-term Complication Rates After Total Hip 
Arthroplasty. Clin Orthop Relat Res. Sep 2010;468(9):2363-2371. Cram 
P, Vaughan-Sarrazin MS, Wolf B, Katz JN, Rosenthal GE. A comparison 
of total hip and knee replacement in specialty and general 
hospitals. J Bone Joint Surg Am. Aug 2007;89(8):1675-1684.
    \56\ Mahomed NN, Barrett JA, Katz JN, et al. Rates and outcomes 
of primary and revision total hip replacement in the United States 
medicare population. J Bone Joint Surg Am. Jan 2003;85- A(1):27-32.
    \57\ Khatod M, Inacio M, Paxton EW, et al. Knee replacement: 
epidemiology, outcomes, and trends in Southern California: 17,080 
replacements from 1995 through 2004. Acta Orthop. Dec 
2008;79(6):812-819.
    \58\ Solomon DH, Chibnik LB, Losina E, et al. Development of a 
preliminary index that predicts adverse events after total knee 
replacement. Arthritis & Rheumatism. 2006;54(5):1536-1542.
    \59\ Browne, JA, Cook C, Hofmann A, Bolognesi MP. Postoperative 
morbidity and mortality following total knee arthroplasty with 
computer navigation. Knee. 2010;17(2): 152-156.
    \60\ Cram P, Vaughan-Sarrazin MS, Wolf B, Katz JN, Rosenthal GE. 
A comparison of total hip and knee replacement in specialty and 
general hospitals. J Bone Joint Surg Am. Aug 2007;89(8):1675-1684.
    \61\ Browne, JA, Cook C, Hofmann A, Bolognesi MP. Postoperative 
morbidity and mortality following total knee arthroplasty with 
computer navigation. Knee. 2010;17(2): 152-156.
    \62\ Huddleston JI, Maloney WJ, Wang Y, Verzier N, Hunt DR, 
Herndon JH. Adverse Events After Total Knee Arthroplasty: A National 
Medicare Study. The Journal of Arthroplasty. 2009;24(6, Supplement 
1): 95-100.
    \63\ Bozic KJ, Rubash HE, Sculco TP, Berry DJ., An analysis of 
Medicare payment policy for total joint arthroplasty. J 
Arthroplasty. Sep 2008; 23(6 Suppl 1):133-138.
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    The proposed measure developed by CMS, and currently implemented in 
the Hospital IQR and Hospital Value-Based Purchasing Program, assesses 
a hospital's risk standardized complication rate, which is the rate of 
complications occurring after elective primary THA and TKA surgery. The 
measure outcome is the rate of complications occurring after THA and 
TKA during a 90-day period that begins with the date of the index 
admission for a specific hospital; an index admission is the 
hospitalization to which the complications outcome is attributed. The 
following outcomes (either one or more) are considered complications in 
this measure: Acute myocardial infarction, pneumonia, or sepsis/
septicemia within 7 days of admission; surgical site bleeding, 
pulmonary embolism or death within 30 days of admission; or mechanical 
complications, periprosthetic joint infection or wound infection within 
90 days of admission. The data indicated that the median hospital-level 
risk-standardized complication rate for 2008 was 4.2 percent, with a 
range from 2.2 percent to 8.9 percent in hospitals. The variation in 
complication rates suggests that there are important differences in the 
quality of care delivered across hospitals, and that there is room for 
quality improvement. In 2010, we developed the proposed measure of 
hospital-level risk-standardized complication rate (RSCR) following 
elective primary THA and TKA surgery, which was later endorsed by the 
NQF (NQF #1550). In its Pre-Rulemaking Report for 2012,\64\ the Measure 
Application Partnership (MAP) also recommended the inclusion of this 
measure in the HIQR Program; we have not submitted this measure for use 
in the post-acute care settings as the measure was developed for the 
acute care hospital setting. This measure has been publicly reported on 
Hospital Compare since FY 2014 and in the HIQR Program since FY 2015 
(FY 2015 IPPS/LTCH final rule 79 FR 50062). Finally, we note a 
comparison of the median hospital-level risk-standardized complication 
rates for hospitals between April 1, 2011 and March 31, 2014 
illustrates a performance gap (median RSCR of 3.1 percent with a range 
from 1.4 percent to 6.9 percent) indicating

[[Page 41279]]

there is still room for quality improvement.\65\
---------------------------------------------------------------------------

    \64\ National Quality Forum. MAP Final Reports. Available at: 
http://www.qualityforum.org/Publications/2012/02/MAP_Pre-Rulemaking_Report__Input_on_Measures_Under_Consideration_by_HHS_for_2012_Rulemaking.aspx. Accessed on April 1 6, 2015, page 78.
    \65\ Suter L, Zang W, Parzynski C, et al. 2015 Procedure-
Specific Complication Measures Update and Specifications: Elective 
Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty 
(TKA) Risk-Standardized Complication Measure (Version 4.0). 2015.
---------------------------------------------------------------------------

(2) Data Sources
    We propose to use Medicare Part A and Part B FFS claims submitted 
by the participant hospital as the data source to calculate the 
measure. Index admission diagnoses and in-hospital comorbidities are 
assessed using Medicare Part A claims. Additional comorbidities prior 
to the index admission are assessed using Part A inpatient, outpatient, 
and Part B office visit Medicare claims in the 1 to 2 months prior to 
the index (initial) admission. Enrollment and post-discharge mortality 
status are obtained from Medicare's enrollment database which contains 
beneficiary demographic, benefits/coverage, and vital status 
information.
(3) Cohort
    The THA/TKA Complication measure (NQF #1550) includes Medicare FFS 
beneficiaries, aged 65 years or older, admitted to non-federal acute 
care hospitals for elective primary THA or TKA. THA and TKA procedures 
eligible for inclusion are defined using ICD-9-CM codes 81.51 and 
81.54, respectively. We propose that the cohort will include all 
hospitals included in the CCJR model, but the CCJR model cohort may 
differ slightly from the hospital cohort that is currently captured in 
the measures through the HIQR program. That is, the CCJR model cohort 
is a randomly selected group of acute care hospitals and therefore may 
not include all of the HIQR program acute care hospitals (for a 
detailed discussion on selection of hospitals for the model see section 
III.A.4. of this proposed rule).
(4) Inclusion and Exclusion Criteria
    An index admission is the hospitalization to which the complication 
outcome is attributed. The measure includes the following index 
admissions for patients:
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Enrolled in Part A and Part B Medicare for the 12 months 
prior to the date of index admission and during the index admission.
     Having a qualifying elective primary THA/TKA procedure; 
elective primary THA/TKA procedures are defined as those procedures 
without any of the following:
    ++ Femur, hip, or pelvic fractures coded in principal or secondary 
discharge diagnosis fields of the index admission.
    ++ Partial hip arthroplasty (PHA) procedures with a concurrent THA/
TKA.
    ++ Revision procedures with a concurrent THA/TKA.
    ++ Resurfacing procedures with a concurrent THA/TKA.
    ++ Mechanical complication coded in the principal discharge 
diagnosis field.
    ++ Malignant neoplasm of the pelvis, sacrum, coccyx, lower limbs, 
or bone/bone marrow or a disseminated malignant neoplasm coded in the 
principal discharge diagnosis field.
    ++ Removal of implanted devices/prostheses.
    ++ Transfer from another acute care facility for the THA/TKA.
    The following admissions would be excluded from the measure:
     Admissions for patients discharged against medical advice 
(AMA).
     Admissions for patients with more than two THA/TKA 
procedure codes during the index hospitalization.
     Consistent with the FY 2016 IPPS/LTCH proposed rule, 
admissions for patients without at least 90 days post-discharge 
enrollment in FFS Medicare; this exclusion is an update to the measure 
signaled in the HIQR program section of the FY2016 IPPS/LTCH proposed 
rule (80 FR 24572 through 24574) to ensure that disproportionate 
Medicare FFS disenrollment does not bias the measure results.
    After applying these exclusion criteria, we randomly select one 
index admission for patients with multiple index admissions in a 
calendar year. Therefore, we exclude the other eligible index 
admissions in that year. Identification and use of a single index 
admission in a calendar year is done because this measure includes 
mortality as an outcome and the probability of death increases with 
each subsequent admission, preventing each episode of care from being 
mutually independent. Therefore only one index admission is selected to 
maintain measure integrity.
    We note that THA/TKA Complication measure (NQF #1550) does not 
capture patients undergoing partial hip arthroplasty procedures. We 
excluded partial hip arthroplasty procedures primarily because partial 
hip arthroplasty procedures are done for hip fractures. Therefore, they 
are not elective procedures. Also, partial hip arthroplasty procedures 
are typically performed on patients who are older, frailer, and have 
more comorbid conditions. Although this exclusion is not fully 
harmonized with MS-DRG 469 and 470, which includes partial hip 
arthroplasty procedures, this measure will still provide strong 
incentive for improving and maintaining care quality across joint 
replacement patients as hospitals typically develop protocols for lower 
extremity joint arthroplasty that will address peri-operative and post-
operative care for both total and partial hip arthroplasty procedures. 
As previously cited in the Episode Definition of the CCJR model 
(section III.B. of this proposed rule) the frequency of administrative 
claims data using ICD-9 codes for 2014 indicated that partial hip 
arthroplasty (ICD-9 code: 81.52) accounted for 12 percent of the 
administrative claims, while Total Hip replacement (ICD-9 code: 81.51) 
and Total Knee replacement (ICD-9 code: 81.54) accounted for 87 percent 
of the administrative claims for 2014. We also note that the same 
surgeons and care teams frequently perform both procedures. Therefore, 
quality improvement efforts initiated in response to the THA/TKA 
Complication measure (NQF #1550) are likely to benefit patients 
undergoing similar elective procedures, such as partial hip 
arthroplasty and revision THA/TKA procedures, and possibly even non-
elective THA/TKA procedures, such as fracture-related THA.
(5) Risk-Adjustment
    We note that CCJR-we chose to align this measure with the risk-
adjustment methodologies adopted for the HIQR program and the HRRP in 
accordance with section 1886(b)(3)(B)(viii)(VIII) of the Act (FY 2013 
IPPS/LTCH final rule 77 FR 53516 through 53518 and FY 2015 IPPS/LTCH 
final rule; 79 FR 50024, 50031, and 50202). We note that the risk-
adjustment takes into account the patient case-mix to assess hospital 
performance. The patient risk factors are defined using the 
Hierarchical Condition Categories (CC), which are clinically relevant 
diagnostic groups of ICD-9-CM codes.\66\ The CCs used in the risk 
adjustment model for this measure, are provided on the CMS QualityNet 
Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772783162). We note that the measure uses all Part A and B administrative 
claims ICD-9 codes for the year prior to and including the index 
admission. The Part A and B administrative claims ICD-9 codes are

[[Page 41280]]

used to inform the risk prediction for each patient; diagnostic codes 
from post-acute care settings are included in the measure, but this 
information is only used to identify a hospital's patient case mix in 
order to adequately adjust for differences in case mix across 
hospitals. Use of the Part A and B data does not mean the measures are 
applicable to post-acute care settings, only that they use 
comprehensive data to predict the risk of the outcome and adjust for 
hospital patient case mix. The measure would meet the requirement if it 
applied since risk-adjustment adjusts for hospital patient mix, 
including age and comorbidities, to ensure that hospitals that care for 
a less healthy patient population are not penalized unfairly. The 
measure methodology defines ''complications'' as acute myocardial 
infarction (AMI); pneumonia; sepsis/septicemia; pulmonary embolism; 
surgical site bleeding; death; wound infection; periprosthetic joint 
infection; and mechanical complication within 0 to 90 days post the 
index date of admission, depending on the complication. The decision on 
the appropriate follow-up period of 0 to 90 days was based on our 
analysis of 90-day trends in complication rates using the 2008 Medicare 
FFS Part A Inpatient Data. We found that rates for mechanical 
complications are elevated until 90 days post the date of index 
admission. We found that the rates for four other complications--death, 
surgical site bleeding, wound infection, and pulmonary embolism--are 
elevated for 30 days, and that rates for AMI, pneumonia, and sepsis/
septicemia level off 7 days after the date of index admission.
---------------------------------------------------------------------------

    \66\ Pope G, Ellis R, Ash A, et al., Principal Inpatient 
Diagnostic Cost Group Models for Medicare Risk Adjustment. Health 
Care Financing Review. 2000;21(3):26.
---------------------------------------------------------------------------

(6) Calculating the Risk-Standardized Complication Rate and Performance 
Period
    Analogous to how we calculate hospital risk-standardized 
readmission rates with all readmission measures and risk-standardized 
mortality rates with the mortality measures used in CMS hospital 
quality programs, we calculate the hospital risk-standardized 
complication rate by producing a ratio of the number of ``predicted'' 
complications (that is, the adjusted number of complications at a 
specific hospital based on its patient population) to the number of 
``expected'' complications (that is, the number of complications if an 
average quality hospital treated the same patients) for each hospital 
and then multiplying the ratio by the national raw complication rate. 
The 3-year rolling performance period would be consistent with that 
used for HIQR (FY 2015 IPPS/LTCH final rule 79 FR 50208 and 50209). For 
performance year-one of the CCJR model, we propose that the performance 
period for the THA/TKA Complication measure (NQF #1550) we propose to 
be April 2013 through March 2016. As noted in this proposed rule, the 
THA/TKA Readmissions measure (NQF #1551) uses a 30-day window of 
follow-up, which is different from the 90-day window of follow-up used 
in the THA/TKA Complications measure (NQF #1550). Section III.D.4. of 
this proposed rule, Form and Manner, summarizes performance periods for 
years 1 through 5 of the CCJR JR model.
    We seek public comment on this proposal to assess quality 
performance through implementation of the Hospital-level risk-
standardized complication rate (RSCR) following elective primary total 
hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550) 
measure.
b. Hospital-Level 30-Day, All-Cause Risk-Standardized Readmission Rate 
(RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or 
Total Knee Arthroplasty (TKA) (NQF #1551)
(1) Background
    The objective of CMS's Hospital-level 30-day, all-cause risk-
standardized readmission rate (RSRR) following elective primary total 
hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1551) 
(as referred to as THA/TKA Readmission measure (NQF #1551)) measure is 
to assess readmission from any cause within 30 days of discharge from 
the hospital following elective primary THA and TKA. As previously 
stated, outcome measures such as complications and readmissions are the 
priority areas for the HIQR Program. Elective primary THA and TKA are 
commonly performed procedures that improve quality of life. THA and TKA 
readmissions are disruptive to patients' quality of life, costly to the 
Medicare program, and data support that readmission rates can be 
improved through better care coordination and other provider 
actions.\67\ Furthermore, we believe that there is an opportunity for 
hospitals to improve quality of life for the patient. From July 1, 2011 
to June 30, 2014, Medicare FFS claims data indicate that 30-day 
hospital-level risk-standardized readmission rates ranged from 2.6 
percent to 8.5 percent among hospitals with a median rate of 4.8 
percent. The mean risk-standardized readmission rate was 4.9 
percent.\68\ This variation suggests there are important differences in 
the quality of care received across hospitals, and that there is room 
for improvement. A measure that addresses readmission rates following 
THA and TKA provides an opportunity to provide targets for efforts to 
improve the quality of care and reduce costs for patients undergoing 
these elective procedures. The measure also increases transparency for 
consumers and provides patients with information that could guide their 
choices. We believe that a risk-adjusted readmission outcome measure 
can provide a critical perspective on the provision of care, and 
support improvements in care for the Medicare patient population 
following THA/TKA hospitalization. We note that the THA/TKA Readmission 
measure (NQF #1551) has wide stakeholder support, with NQF endorsement 
in January 2012, and support by the MAP for the HIQR Program (2012 Pre-
Rulemaking report \19\), and for HRRP (2013 Pre-Rulemaking report 
\69\). Finally, THA/TKA Readmission Measure (NQF #1551) has been 
publicly reported since FY 2014 (79 FR 50062), and was implemented in 
both the HIQR program (77 FR 53519 through 53521) and HRRP (78 FR 50663 
and 50664).
---------------------------------------------------------------------------

    \67\ Mistiaen P, Francke AL, Poot E. Interventions aimed at 
reducing problems in adult patients discharged from hospital to 
home: a systematic meta-review. BMC Health Services Research. 
2007;7:47.
    \68\ Suter L, Desai N, Zang W, et al. 2015 2015 Procedure-
Specific Readmission Measures Updates and Specifications Report: 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) Risk-Standardized Readmission Measure (Version 
4.0), Isolated Coronary Artery Bypass Graft (CABG) Surgery--Version 
2.0. 2015; http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \69\ National Quality Forum. MAP Final Reports. Available at: 
http://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_-_February_2013.aspx. Accessed on April 16, 2015, 
page 143.
---------------------------------------------------------------------------

(2) Data Sources
    We propose to use Medicare Part A and Part B FFS claims submitted 
by the participant hospital as the data source for calculation of the 
THA/TKA Readmission measure (NQF #1551). Index admission diagnoses and 
in-hospital comorbidity data are assessed using Medicare Part A claims. 
Additional comorbidities prior to the index admission are assessed 
using Part A inpatient, outpatient, and Part B office visit Medicare 
claims in the 12 months prior to index (initial) admission. Enrollment 
status is obtained from Medicare's enrollment database which contains 
beneficiary demographic,

[[Page 41281]]

benefit/coverage, and vital status information.
(3) Cohort
    The THA/TKA Readmission measure (NQF #1551) includes Medicare FFS 
beneficiaries, aged 65 years or older, admitted to non-federal acute 
care hospitals for elective primary THA or TKA. THA and TKA procedures 
eligible for inclusion are defined using ICD-9-CM codes 81.51 and 
81.54, respectively. We propose that the cohort will include all 
hospitals included in the CCJR model, but the CCJR model cohort may 
differ slightly from the hospital cohort that is currently captured in 
the measures through the HIQR program. That is, the CCJR model cohort 
is a randomly selected group of acute care hospitals and therefore may 
not include all of the HIQR program acute care hospitals (for a 
detailed discussion on selection of hospitals for the model see section 
III.A. of this proposed rule.)
(4) Inclusion and Exclusion Criteria
    We propose that an index admission is the anchor hospitalization to 
which the readmission outcome is attributed. The measure includes index 
admissions for patients:
     Enrolled in Medicare FFS.
     Aged 65 or over.
     Discharged from non-federal acute care hospitals alive.
     Enrolled in Medicare Part A and Part B for the 12 months 
prior to the date of index admission and during the index admission.
     Having a qualifying elective primary THA/TKA procedure; 
elective primary THA/TKA procedures are defined as those procedures 
without any of the following:
    ++ Femur, hip, or pelvic fractures coded in principal or secondary 
discharge diagnosis fields of the index admission.
    ++ Partial hip arthroplasty (PHA) procedures with a concurrent THA/
TKA.
    ++ Revision procedures with a concurrent THA/TKA.
    ++ Resurfacing procedures with a concurrent THA/TKA.
    ++ Mechanical complication coded in the principal discharge 
diagnosis field.
    ++ Malignant neoplasm of the pelvis, sacrum, coccyx, lower limbs, 
or bone/bone marrow or a disseminated malignant neoplasm coded in the 
principal discharge diagnosis field.
    ++ Removal of implanted devices/prostheses.
    ++ Transfer from another acute care facility for the THA/TKA.
     This measure excludes index admissions for patients:
    ++ Without at least 30 days post-discharge enrollment in FFS 
Medicare.
    ++ Discharged against medical advice (AMA).
    ++ Admitted for the index procedure and subsequently transferred to 
another acute care facility.
    ++ With more than two THA/TKA procedure codes during the index 
hospitalization.
    Finally, for the purpose of this measure, admissions within 30 days 
of discharge from an index admission are not eligible to also be index 
admissions. Thus, no hospitalization will be counted as both a 
readmission and an index admission in this measure.
    This measure does not capture patients undergoing partial hip 
arthroplasty procedures, as partial hip arthroplasties are primarily 
done for hip fractures and are typically performed on patients who are 
older, frailer, and have more comorbid conditions. Although this 
exclusion is not fully harmonized with MS-DRG 469 and 470, which 
includes partial hip arthroplasty procedures, this measure would still 
provide strong incentive for improving and maintaining care quality 
across joint replacement patients. We believe the THA/TKA Readmission 
measure (NQF #1551) provides strong incentive for quality improvement 
because hospitals typically develop protocols for lower extremity joint 
arthroplasty that will address peri-operative and post-operative care 
for both total and partial hip arthroplasties, and the same surgeons 
and care teams frequently perform both procedures. Therefore, quality 
improvement efforts initiated in response to the THA/TKA Readmission 
measure (NQF #1551) are likely to benefit patients undergoing similar 
elective procedures, such as partial hip arthroplasty and revision THA/
TKA procedures, and possibly even non-elective THA/TKA procedures, such 
as fracture-related THA.
(5) Risk-Adjustment
    We note that CCJR-we chose to align this measure with the risk-
adjustment methodologies adopted for Readmission measure (NQF #1551) 
under the HIQR Program in accordance with section 
1886(b)(3)(B)(viii)(VIII) of the Act, as finalized in FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53519 through 53521). We also note that the 
measure risk- adjustment takes into account patient age and 
comorbidities to allow a fair assessment of hospital performance. The 
measure defines the patient risk factors for readmission using 
diagnosis codes collected from all patient claims 1 year prior to 
patient index hospitalization for THA and TKA. As previously noted in 
the THA/TKA Complication measure (NQF #1550), Part A and B 
administrative claims ICD-9 codes are used to inform the risk 
prediction for each patient; diagnostic codes from post-acute care 
settings are included in the measure, but this information is only used 
to identify a hospital's patient case mix in order to adequately adjust 
for differences in case mix across hospitals. Use of the Part A and B 
data does not mean the measures are applicable to post-acute care 
settings, only that they use comprehensive data to predict the risk of 
the outcome and adjust for hospital patient case mix. We note that the 
patient diagnosis codes are grouped using Hierarchical Condition 
Categories (CCs), which are clinically relevant diagnostic groups of 
ICD-9-CM codes.\70\ The CCs used in the risk adjustment model for this 
measure, are provided on the CMS QualityNet Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069856694). In summary, age and comorbidities present at the time of 
admission are adjusted for differences in hospital case mix (patient 
risk factors). The measure uses the hierarchical logistic regression 
model (HLM) statistical methodology for risk adjustment.
---------------------------------------------------------------------------

    \70\ Pope G, Ellis R, Ash A, et al., Principal Inpatient 
Diagnostic Cost Group Models for Medicare Risk Adjustment. Health 
Care Financing Review. 2000;21(3):26.
---------------------------------------------------------------------------

(6) Calculating the Risk-Standardized Readmission Rate and Performance 
period
    We propose to calculate hospital risk-standardized readmission 
rates consistent with the methodology used to risk standardize all 
readmission measures and mortality measures used in CMS hospital 
quality programs. Using HLM, we calculate the hospital-level elective 
primary THA/TKA risk-standardized readmission rate by producing a ratio 
of the number of ''predicted'' readmissions (that is, the adjusted 
number of readmissions at a specific hospital) to the number of 
''expected'' readmissions (that is, the number of readmissions if an 
average quality hospital treated the same patients) for each hospital 
and then multiplying the ratio by the national raw readmission rate. 
The 3-year rolling performance period would be consistent with that 
used for the HIQR program (FY 2015 IPPS/LTCH final rule 79 FR 50208 and 
50209). For performance year-one of the CCJR model, we propose that the 
performance period for the THA/TKA Readmission measure (NQF

[[Page 41282]]

#1551) would be July 2013 through June 2016. As noted in this proposed 
rule for the section on the THA/TKA Complications measure (NQF #1550), 
there is a 90-day window of follow-up which is different from the THA/
TKA Readmissions measure (NQF #1551). Section III.D.4.Form and Manner, 
of this proposed rule summarizes performance periods for years 1 
through 5 of the CCJR model years.
    We invite public comments on this proposal to include Hospital-
level 30-day, all-cause risk-standardized readmission rate (RSRR) 
following elective primary total hip arthroplasty (THA) and/or total 
knee arthroplasty (TKA) (NQF #1551) or both in the CCJR model to assess 
quality performance. We also invite public comment on inclusion of 
other potential quality measures in the model.
c. Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) Survey
(1) Background
    The HCAHPS Survey (NQF #0166) is a CMS survey and a national, 
standardized, publicly reported survey of patients' experience of 
hospital care. The HCAHPS Survey is endorsed by the NQF (#0166); CMS is 
the measure steward. The HCAHPS survey, also known as CAHPS[supreg] 
Hospital Survey, is a survey instrument and data collection methodology 
for measuring patients' perceptions of their hospital experience. The 
HCAHPS Survey asks recently discharged patients 32 questions about 
aspects of their hospital experience that they are uniquely suited to 
address. The core of the survey contains 21 items that ask ``how 
often'' or whether patients experienced a critical aspect of hospital 
care. The survey also includes four items to direct patients to 
relevant questions, five items to adjust for the mix of patients across 
hospitals, and two items that support Congressionally-mandated reports 
(see 77 FR 53513 through 53515). Eleven HCAHPS measures (seven 
composite measures, two individual items and two global items) are 
currently publicly reported on the Hospital Compare Web site for each 
hospital participating in the HIQR Program (see 79 FR 50259.) Each of 
the seven currently reported composite measures is constructed from two 
or three survey questions. The seven composites summarize the 
following:
     How well doctors communicate with patients.
     How well nurses communicate with patients.
     How responsive hospital staff are to patients' needs.
     How well hospital staff helps patients manage pain.
     How well the staff communicates with patients about 
medicines.
     Whether key information is provided at discharge.
     How well the patient was prepared for the transition to 
post-hospital care.
    Lastly, the two individual items address the cleanliness and 
quietness of patients' rooms, while the two global items report 
patients' overall rating of the hospital, and whether they would 
recommend the hospital to family and friends. We propose to adopt a 
measure in the CCJR model that uses HCAHPS survey data to assess 
quality performance and capture patient experience of care.
(2) Data Sources
    The HCAHPS Survey is administered to a random sample of adult 
inpatients between 48 hours and 6 weeks after discharge. As previously 
discussed in section III.D.5. of this proposed rule, the HCAHPS survey 
data is collected on inpatient experience, is not limited to Medicare 
beneficiaries, and does not distinguish between types of Medicare 
beneficiaries. Patients admitted in the medical, surgical and maternity 
care service lines are eligible for the survey; the survey is not 
restricted to Medicare beneficiaries. Hospitals may use an approved 
survey vendor, or collect their own HCAHPS data (if approved by CMS to 
do so) (for a detailed discussion see 79 FR 50259). To accommodate 
hospitals, the HCAHPS Survey can be implemented using one of the 
following four different survey modes:
     Mail.
     Telephone.
     Mail with telephone follow-up.
     Active Interactive Voice Recognition (IVR).
    Regardless of the mode used, hospitals are required to make 
multiple attempts to contact patients. Hospitals may use the HCAHPS 
Survey alone, or include additional questions after the 21 core items 
discussed previously. Hospitals must survey patients throughout each 
month of the year, and hospitals participating in the HIQR Program must 
target at least 300 completed surveys over 4 calendar quarters in order 
to attain the reliability criterion CMS has set for publicly reported 
HCAHPS scores (see 79 FR 50259). The survey itself and the protocols 
for sampling, data collection, coding, and file submission can be found 
in the current HCAHPS Quality Assurance Guidelines manual, available on 
the HCAHPS Web site located at: http://www.hcahpsonline.org. (The 
HCAHPS Survey is available in several languages, and all official 
translations of the HCAHPS Survey instrument are available in the 
current HCAHPS Quality Assurance Guidelines at http://www.hcahpsonline.org/qaguidelines.aspx.)
(3) Cohort
    Hospitals, or their survey vendors, submit HCAHPS data in calendar 
quarters (3 months). Consistent with other quality reporting programs, 
we propose that HCAHPS scores would be publicly reported on Hospital 
Compare based on 4 consecutive quarters of data. For each public 
reporting, the oldest quarter of data is rolled off, and the newest 
quarter is rolled on (see 79 FR 50259).
(4) Inclusion and Exclusion Criteria
    The HCAHPS Survey is broadly intended for patients of all payer 
types who meet the following criteria:
     Eighteen years or older at the time of admission.
     Admission includes at least one overnight stay in the 
hospital.
     Non-psychiatric MS-DRG/principal diagnosis at discharge.
     Alive at the time of discharge.
    There are a few categories of otherwise eligible patients who are 
excluded from the sample frame as follows:
     ``No-Publicity'' patients--Patients who request that they 
not be contacted.
     Court/Law enforcement patients (that is, prisoners); 
patients residing in halfway houses are included.
     Patients with a foreign home address (U.S. territories--
Virgin Islands, Puerto Rico, Guam, American Samoa, and Northern Mariana 
Islands are not considered foreign addresses and are not excluded).
     Patients discharged to hospice care (Hospice-home or 
Hospice-medical facility).
     Patients who are excluded because of state regulations.
     Patients discharged to nursing homes and skilled nursing 
facilities.
    The HCAHPS Survey is intended for short-term, acute care hospitals. 
Both IPPS and Critical Access Hospitals participate in the survey; 
specialty hospitals, psychiatric hospitals and children's hospitals do 
not.
(5) Case-Mix-Adjustment
    To ensure that HCAHPS scores allow fair and accurate comparisons 
among hospitals, CMS adjusts for factors that are not directly related 
to hospital performance but which affect how patients answer survey 
items. This includes the mode of survey administration and 
characteristics of

[[Page 41283]]

patients that are out of a hospital's control. Patient-mix adjustments 
(also known as case-mix adjustment) control for patient characteristics 
that affect ratings and that are differentially distributed across 
hospitals. Most of the patient-mix items are included in the ``About 
You'' section of the survey, while others are taken from hospital 
administrative records. Based on the HCAHPS mode experiment,\71\ and 
consistent with previous studies of patient-mix adjustment in HCAHPS 
and in previous hospital patient surveys, we employ the following 
variables in the patient-mix adjustment model:
---------------------------------------------------------------------------

    \71\ The Effects of Survey Mode, Patient Mix, and Nonresponse on 
CAHPS Hospital Survey Scores.'' M.N. Elliott, A.M. Zaslavsky, E. 
Goldstein, W. Lehrman, K. Hambarsoomian, M.K. Beckett and L. 
Giordano. Health Services Research, 44 (2): 501-518. 2009.
---------------------------------------------------------------------------

     Self-reported general health status (specified as a linear 
variable).
     Education (specified as a linear variable).
     Type of service (medical, surgical, or maternity care).
     Age (specified as a categorical variable).
     Admission through emergency room (discontinued in 2010).
     Lag time between discharge and survey.
     Age by service line interaction.
     Language other than English spoken at home.
    Once the data are adjusted for patient-mix, there is a fixed 
adjustment for the mode of survey administration (mail, telephone, mail 
with telephone follow-up, and active Interactive Voice Response).
    Information on patient-mix adjustment (risk adjustment) and survey 
mode adjustment of HCAHPS scores can be found at http://www.hcahpsonline.org/modeadjustment.aspx.
(6) HCAHPS Scoring
    Regarding the HCAHPS survey measure, we identified the methodology 
used to assess hospitals in the HIQR program as reasonable for use in 
the CCJR model since this is a survey that many hospitals and patients 
are familiar with. In determining HCAHPS performance, we propose to 
utilize the HCAHPS Linear Mean Roll-up (HLMR) score. The HLMR 
summarizes performance across the 11 publicly reported HCAHPS measures 
for IPPS hospitals with 100 or more completed HCAHPS surveys in a 4-
quarter period. The HLMR is calculated by taking the average of the 
linear mean scores (LMS) for each of the 11 publicly reported HCAHPS 
measures. The LMS, which was created for the calculation of HCAHPS Star 
Ratings, summarizes all survey responses for each HCAHPS measure; a 
detailed description of LMS can be found in HCAHPS Star Rating 
Technical Notes, at http://www.hcahpsonline.org/StarRatings.aspx.
    We propose that hospitals participating in the CCJR model also have 
at least 100 completed HCAHPS surveys over a given 4-quarter period to 
be evaluated on HCAHPS for the CCJR model.
    The responses to the survey items used in each of the 11 HCAHPS 
measures described previously are combined and converted to a 0 to 100 
linear-scaled score (LMS) as follows:
     ``Never'' = 0; ``Sometimes'' = 33\1/3\; ``Usually'' = 
66\2/3\; and ``Always'' = 100 (For HCAHPS Survey items 1-9, 11, 13-14, 
and 16-17).
     ``No'' = 0; and ``Yes'' = 100 (For items 19 and 20).
     Overall Rating ``0'' = 0; Overall Rating ``1'' = 10; 
Overall Rating ``2'' = 20; . . .; Overall Rating ``10'' = 100 (For item 
21).
     ``Definitely No'' = 0; ``Probably No'' = 33\1/3\; 
``Probably Yes'' = 66\2/3\; and ``Definitely Yes'' = 100 (For item 22).
     ``Strongly Disagree'' = 0; ``Disagree'' = 33\1/3\; 
``Agree'' = 66\2/3\; and ``Strongly Agree'' = 100 (For items 23, 24, 
and 25).
    The 0 to 100 linear-scaled HCAHPS scores are then adjusted for 
patient mix, survey mode, and quarterly weighting, see http://www.hcahpsonline.org/files/HCAHPS_Stars_Tech_Notes_Apr2015.pdf.
    The HLMR summarizes performance across the 11 HCAHPS measures by 
taking an average of each of the LMS of the 11 HCAHPS measures, using a 
weight of 1.0 for each of the 7 HCAHPS composite measures, and a weight 
of 0.5 for each of the single item measures (Cleanliness, Quietness, 
Overall Hospital Rating and Recommend the Hospital). The HLMR is 
calculated to the second decimal place. Once the HLMR score is 
determined for a participant hospital, the hospital's percentile of 
performance can be determined based on the national distribution of 
hospital performance on the score.
(7) Performance Period
    We propose to be consistent with the HIQR program, which uses four 
quarters of data (79 FR 50259). For the CCJR model, we propose to use 
the most recently available HCAHPS 4-quarter roll-up to calculate the 
HLMR score for the initial year of the CCJR model. The performance 
period would assess data on patients discharged from July 1, 2015 
through June 30, 2016. Section III.D.4 of this proposed rule, Form and 
Manner, summarizes performance periods for years 1 through 5 of the 
CCJR model years.
    We invite public comments on this proposal to include HCAHPS Survey 
in the CCJR model to assess quality performance and capture patient 
experience of care.
d. Applicable Time Period
    In order to align as much as is reasonably possible with other CMS 
hospital quality and public reporting programs in which these three 
measures are implemented, we propose for the THA/TKA Complication 
measure (NQF #1550) and the THA/TKA Readmission measure (NQF #1551) 
performance time periods to be consistent with the HIQR, HVBP and HRRP 
programs. These programs use a 3-year rolling performance (see section 
III.D.2.b.(6). of this proposed rule) or applicable period for the 
Hospital-level 30-day, all-cause risk-standardized readmission rate 
(RSRR) following elective primary total hip arthroplasty (THA) and/or 
total knee arthroplasty (TKA) (NQF #1551) and the Hospital-level risk-
standardized complication rate (RSCR) following elective primary total 
hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550) 
measures. We similarly propose a 3-year rolling performance period for 
the THA/TKA Complication measure (NQF #1550) and the THA/TKA 
Readmission measure (NQF #1551) because a 3-year performance period 
yields the most consistently reliable and valid measure results. We 
also propose the 3-year rolling performance periods for the THA/TKA 
Complication measure (NQF #1550) and the THA/TKA Readmission measure 
(NQF #1551) because hospitals are intimately familiar with these 
measures. We note that reconciliation payments to hospitals as part of 
the CCJR are dependent upon both cost and quality outcome measures, and 
that making reconciliation payments solely based on cost has the 
potential to lead to reduced access and stinting of care. In order to 
address these possibilities the inclusion of performance on outcome 
measures is critical to ensure access and high quality care for 
patients undergoing these procedures. The only way to include reliable 
quality measures in the model upon which to base reconciliation 
payments for 2016 is to use measures that have a performance period 
that precedes the effective date of the model. Furthermore, from a 
measure reliability and validity perspective, it is imperative to have 
at least 4 quarters of data for HCAHPS survey measures and

[[Page 41284]]

3 years of data for the THA/TKA readmission and complications measures. 
We intentionally chose outcome and patient experience measures for 
which hospitals that are already financially accountable in other IPPS 
programs. Consequently, the performance periods are the same periods 
for the THA/TKA readmission and complications measures between the CCJR 
model, HIQR, HVBP and HRRP programs. For the HCAHPS survey measures, 
there is overlap with the performance periods for the CCJR model and 
HIQR. Given that there is no downward payment adjustment associated 
with the CCJR model, that hospitals are already familiar with these 
measures as part of the Hospital IQR program, Hospital VBP program, and 
the Hospital readmission reduction program, and that hospitals are 
already held financially accountable for these measures, we believe it 
is appropriate and necessary to use performance periods that precede 
the effective date of the CCJR model. For the HCAHPS Survey measure, we 
would continue to use a 4 quarter performance period as in the HIQR 
program, but would not align with the Hospital IQR program performance 
period. We initially considered using the same Hospital IQR program 
performance period for the HCAHPS survey measures but realized that 
should we use the same Hospital IQR program performance periods for the 
CCJR model, other CCJR model timeframes and policy goals would not be 
met. Such policy goals like calculating reconciliation payment 
adjustments in a timely fashion during the 2nd quarter of each year. We 
note that HCAPHS survey results are not available until the 3rd quarter 
of each year. For this reason, we are not proposing that the HCAHPS 
survey performance period follow the HIQR program performance periods. 
We also propose that HCAHPS survey scores be calculated from 4 
consecutive quarters of survey data; publicly reported HCAHPS results 
are also based on 4 quarters of data (79 FR 50259).
3. Possible New Outcomes for Future Measures
a. Hospital-Level Performance Measure(s) of Patient-Reported Outcomes 
Following Elective Primary Total Hip and/or Total Knee Arthroplasty
(1) Background
    As part of our goal to move towards outcome measures that assess 
patient reported outcomes, we have begun development on a measure to 
assess improvement in patient-reported outcomes following THA/TKA 
procedures. The Hospital-Level Performance Measure(s) of Patient-
Reported Outcomes Following Elective Primary Total Hip and/or Total 
Knee Arthroplasty (hereinafter referred to as ''THA THA/TKA patient-
reported outcome-based measure'') is currently under development. We 
specifically chose to focus on THA/TKA procedures since THA/TKAs are 
important, effective procedures performed on a broad population, and 
the patient outcomes for these procedures (for example, pain, mobility, 
and quality of life) can be measured in a scientifically sound way and 
are also influenced by a range of improvements in 
care.72 73 74 We also note that THA/TKA procedures are 
specifically intended to improve function and reduce pain, making 
patient-reported outcomes the most meaningful outcome metric to assess 
for these common, costly procedures. Patient-reported outcomes will be 
assessed separately for THA and TKA procedures, though these results 
may be combined into a single composite measure for reporting. 
Therefore, we will refer to a single measure, but acknowledge the 
possibility of two measures, one for THA patients and one for TKA 
patients.
---------------------------------------------------------------------------

    \72\ Monticone M, Ferrante S, Rocca B, et al. Home-based 
functional exercises aimed at managing kinesiophobia contribute to 
improving disability and quality of life of patients undergoing 
total knee arthroplasty: a randomized controlled trial. Archives of 
physical medicine and rehabilitation. Feb 2013;94(2):231-239.
    \73\ Galea MP, Levinger P, Lythgo N, et al. A targeted home- and 
center-based exercise program for people after total hip 
replacement: a randomized clinical trial. Archives of physical 
medicine and rehabilitation. Aug 2008;89(8):1442-1447.
    \74\ Moffet H, Collet JP, Shapiro SH, Paradis G, Marquis F, Roy 
L. Effectiveness of intensive rehabilitation on functional ability 
and quality of life after first total knee arthroplasty: A single 
blind randomized controlled trial. Archives of physical medicine and 
rehabilitation. Apr
    2004;85(4):546-556.
---------------------------------------------------------------------------

    During measure development, we discovered that in order to complete 
measure development, we would need access to a nationally 
representative sample of THA and TKA inpatient surgical procedure 
patient-reported outcome data set that is also consistently collected 
at the hospital-level and contains risk variables identified by 
orthopedists. The rationale for requesting access to a national THA and 
TKA inpatient surgical procedures patient-reported data source are 
twofold: (1) A national data source would provide us with hospital-
level data representative of the total number of THA and TKA procedures 
performed in hospitals, as well as representative data on hospital-
level case-mix; and (2) access to a national THA and TKA inpatient 
surgical procedures patient-reported data source would allow us to 
assess and identify a set of parsimonious data elements that will 
minimize the data collection burden by patients, physicians and 
hospitals. We believe access to such data would allow for completion 
and testing of the current measure under development that can be 
appropriately used for nationwide hospital performance evaluation. We 
also believe the CCJR model provides a unique opportunity to resolve 
these measure development issues through the collection of THA and TKA 
patient--reported outcome data. Access to this data through the CCJR 
Model would address the following:
     Current data sources are not consistently collected nor 
collected in a uniform process and in a standardized format (that is, 
data elements are not consistently defined across different data 
sources). We note that currently available data sources tend to be 
limited to single hospitals or regional registries which are associated 
with complex data access sharing requirements.
     Current lack of uniform hospital-level data that can be 
used in measure development.
     Lack of incentive for physicians and hospitals to collect 
patient-reported outcome data such as that through the model's 
financial incentives associated with voluntary data submission.
     Current lack of a technically simple and feasible 
mechanism for hospitals to submit patient-reported data to CMS. This 
model would help create and optimize such a mechanism, potentially 
enabling future measure implementation.
    In summary, the voluntary data collection initiative in the CCJR 
model would provide data from the patient's perspective that is 
necessary to finalize and test the measure specifications, including 
the risk model. Access to this national representative voluntarily 
submitted data would enable us to do the following:
     Determine a parsimonious set of risk factors that are 
statistically adequate for risk adjustment for patient-reported 
outcome.
     Examine the differences in hospital performance related to 
different components in the patient-reported outcome (such as 
functional status, pain, etc.) to finalize the statistical modeling 
methodology for risk adjustment.
     Evaluate the reliability of the patient-reported outcome 
measure.
     Examine validity of the patient-reported outcome measure 
upon finalization of the risk adjustment

[[Page 41285]]

model via potential testing methods such as face validity testing with 
national experts, comparing the measure results to similar results 
based on other data sources if feasible, etc.
    In order to encourage participation with voluntary data submission 
of patient-reported outcome data, we are proposing to seek and reward 
voluntary participation in submission of THA/TKA patient-reported 
outcome-based measure data as outlined in section III.D.5.b. of this 
proposed rule. We note that we would not publicly report the THA/TKA 
voluntary data.
    Finally, we intend to use a fully tested and completed THA/TKA 
patient-reported outcome-based measure in CMS models or programs when 
appropriate. If there is a decision to implement the fully developed 
THA/TKA patient-reported outcome-based measure, such as in the CCJR 
model, we would propose to adopt the measure through notice and comment 
rulemaking. We refer reviewers to draft measure specifications in the 
downloads section of the Measure Methodology Web page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(2) Data Sources
    As previously discussed, this measure is under development, and we 
are proposing to reward participant hospitals that volunteer to submit 
provider- and patient- level data elements. We note that there is 
currently little uniformity across hospitals regarding collection of 
specific provider- and patient-level data elements that are used to 
assess patient outcomes after THA and TKA inpatient procedures. In the 
voluntary data submission for the THA/TKA patient-reported outcome-
based measure, we are trying to identify a uniform set of provider- and 
patient-level data elements that are accurate, valid, and reliable 
pieces of information that can be used in the determination of 
improvement in various patient characteristics like those previously 
listed (that is, pain, mobility, and quality of life). Furthermore, in 
order to minimize provider and hospital burden associated with data 
collection and submission of provider- and hospital-level data 
elements, we propose using a variety of data sources for measure 
development. We anticipate using the following data sources are:
     Patient-reported data;
     Administrative claims-based data; and
     One or both physician-reported and electronic health 
record data.
    Through this voluntary data submission proposal, we hope to 
identify a uniform set of provider- and patient-level data elements 
while also identifying data sources that are the least burdensome for 
the patients, providers, and hospitals. We propose to request that 
participant hospitals provide administrative claims-based data whenever 
possible, in order to minimize burden on patients, providers, and 
hospitals. Additionally, we propose to request that participant 
hospitals submit either hospital documentation, chart abstraction, or 
abstraction from the electronic health records. We propose to request 
submission of the following data elements:
     Pre-operative Assessments (to be collected between 90 and 
0 days prior to THA/TKA procedure):
    ++ Age.
    ++ Date of Birth.
    ++ Gender.
    ++ Ethnicity.
    ++ THA or TKA procedure.
    ++ Date of admission to anchor hospitalization.
    ++ Date of discharge from anchor hospitalization.
    ++ Date of eligible THA/TKA procedure.
    ++ Medicare Health Insurance Claim Number.

--PROMIS Global (all items).
    ++ VR-12 (all items.)

    ++ For TKA patients Knee injury and Osteoarthritis Outcome Score 
(KOOS \75\) (all items).
---------------------------------------------------------------------------

    \75\ What is the KOOS? Available at: http://www.koos.nu/koospresentation.html. Accessed on April 15, 2015.
---------------------------------------------------------------------------

    ++ For THA patients Hip disability and Osteoarthritis Outcome Score 
(HOOS \76\) (all items).
---------------------------------------------------------------------------

    \76\ What is the HOOS? Available at: http://www.koos.nu/hoospres.html. Accessed on April 15, 2015.
---------------------------------------------------------------------------

    ++ Body Mass Index.
    ++ Presence of live-in home support, including spouse.
    ++ Use of chronic (>= 90 day) narcotics.

--American Society of Anesthesiologists (ASA) physical status 
classification.

    ++ Charnley Classification.
    ++ Presence of retained hardware.

--Total painful joint count.
--Quantified spinal pain.

    ++ Joint range of motion in degrees (specify hip or knee).
    ++ Use of gait aides.
    ++ For THA patients abductor muscles strength.
    ++ For THA patients presence of Trendelenberg gait.
    ++ For THA patients history of congenital hip dysplasia or other 
congenital hip disease.
    ++ For THA patients presence of angular, translational, or 
rotational deformities of the proximal femur (in degrees).
    ++ For TKA patients anatomic angle (femoro-tibial angle) in degrees 
with varus/valgus.
    ++ For TKA patients knee extensor strength.
    ++ Single Item Health Literacy Screening (SILS2) questionnaire.\77\
---------------------------------------------------------------------------

    \77\ Wallace LS, Rogers ES, Roskos SE., Holiday DB, Weiss BD. 
Screening items to identify patients with limited health literacy 
skills. J Gen Intern Med. 2006;21:874-7.
---------------------------------------------------------------------------

     Post-operative Assessments (To be collected between 270 
and 365 days following THA/TKA procedure):
    ++ Age.
    ++ Date of Birth.
    ++ Gender.
    ++ Date of admission to anchor hospitalization.
    ++ Date of discharge from anchor hospitalization.
    ++ Date of eligible THA/TKA procedure
    ++ Medicare Health Insurance Claim Number

--PROMIS Global (all items).

    ++ VR-12 (all items).

--For TKA patients, Knee injury and Osteoarthritis Outcome Score (KOOS 
\78\) (all items).
---------------------------------------------------------------------------

    \78\ Roos EM, Roos HP, Lohmander LS, Ekdahl C, Beynnon BD. Knee 
Injury and Osteoarthritis Outcome Score (KOOS)--development of a 
self-administered outcome measure. J Orthop Sports Phis There. 1998 
Aug;28(2):88-96.
---------------------------------------------------------------------------

--For THA patients, Hip disability and Osteoarthritis Outcome Score 
(HOOS \79\) (all items).
---------------------------------------------------------------------------

    \79\ What is the HOOS? Available at: http://www.koos.nu/hoospres.html. Accessed on April 15, 2015.

    Finally, we note that as the measure continues to undergo 
development that the list of data elements may be simplified. As stated 
earlier in this section entitled Data Sources, we intend identify a 
uniform set of provider- and patient-level data elements that are 
accurate, valid and reliable pieces of information that can be used in 
the determination of improvement in various patient-reported outcomes 
like those previously listed (that is, pain, mobility, and quality of 
life). We anticipate, via public comment and experience with the 
voluntary data submission, that the set of data elements listed 
previously will be simplified.
    In accordance with, and to the extent permitted by, the HIPAA 
Privacy Rule and other applicable law, we propose to request that 
participant hospitals submit

[[Page 41286]]

the data specified in the request, which we would limit to the minimum 
data necessary for us to conduct quality assessment and improvement 
activities. Regarding the process for data collection, we propose the 
THA/TKA voluntary data will be submitted to and collected by a CMS 
contractor in a manner and format similar to existing CMS data 
submission processes. For example, CMS would supply applicable 
hospitals with a file template and instructions for populating the file 
template with data and submitting the data; the hospitals will populate 
the template, log in to a secure portal, and transmit the file to the 
appropriate CMS contractor; the CMS contractor would also match the 
submitted data to Medicare administrative claims-based data and 
calculate completeness for determination of the reconciliation payment 
as noted in section III.C.5 of this proposed rule (or validated 
subscales or abbreviated versions of these instruments). We believe 
that participation in the submission of THA/TKA--voluntary data will 
provide the minimum information we would need that would inform us on 
how to continuously improve the currently specified measure in 
development.
    We note that some of these data elements are closely aligned with 
data elements in e-clinical measures submitted by eligible 
professionals for the Medicare EHR Incentives Program for Eligible 
Professionals. Specifically these EHR Incentives Program measures for 
eligible professionals are: (1) Functional Status Assessment for Knee 
replacement (CMS 66); and (2) Functional Status Assessment for Hip 
replacement (CMS 56). We refer reviewers to CMS.gov EHR Incentives 
Program 2014 Eligible Professional June 2015 zip file update at http://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Downloads/eCQM_2014_EP_June2015.zip for full measure specifications. We 
believe it is possible that many health IT vendors are already 
certified to capture, calculate and report these provider-level 
measures of functional status on total knee and total hip arthroplasty, 
and therefore we anticipate that the provider-level data elements that 
are identical to the THA/TKA patient-reported outcome voluntary data 
elements previously listed may not be as burdensome for the CCJR model 
participant hospitals to voluntarily submit.
(3) Cohort
    The measure cohort(s) includes Medicare FFS beneficiaries, aged 65 
years or older, admitted to non-federal acute care hospitals for 
elective primary THA or TKA. We would exclude from the cohort patients 
with fractures and mechanical complications or those undergoing 
revision procedures. THA and TKA patient-reported outcomes will be 
assessed separately but may be combined into a single composite measure 
for reporting.
(4) Inclusion and Exclusion Criteria
    The measure cohort inclusion criteria are all patients undergoing 
elective primary THA/TKA procedures. Exclusion criteria will consist of 
patients undergoing non-elective procedures (that is, patients with 
fractures resulting in THA/TKA), as it is unfeasible to routinely 
capture pre-operative patient-reported assessments in these patients; 
patients with mechanical complications of prior hip and knee joint 
procedures and those undergoing revision THA/TKA will also be excluded, 
as their patient-reported outcomes may be influenced by prior care 
experiences and therefore may not adequately represent care quality of 
the hospital performing the revision procedure.
(5) Outcome
    The measure will assess change between pre- and post-operative 
patient-reported outcomes for THA and TKA separately or as a composite 
measure for both procedures. The measure will use one or more of the 
following patient-reported outcome instruments (or validated subscales 
or abbreviated versions of these instruments) to calculate the measure 
score: the Patient Reported Outcomes Measurement Information Systems 
(PROMIS)-Global or the Veterans Rand 12 Item Health Survey (VR-12), and 
the Hip dysfunction and Osteoarthritis Outcome Score/Knee injury and 
Osteoarthritis Outcome Score (HOOS/KOOS) instruments to measure pre- 
and postoperative improvement or both. These candidate instruments were 
selected by a Technical Expert Panel based upon their meaningfulness to 
patients and clinicians, performance characteristics such as 
reliability, responsiveness and validity, and their perceived burden to 
both patients and providers. The pre-operative data collection 
timeframe will be 90 to 0 days before surgery, and the post-operative 
data collection timeframe will be 270 to 365 days following surgery. 
The approach to calculating the improvement or worsening of patient 
outcomes represented by the pre- and postoperative patient-reported 
survey results has not yet been determined, but will use one or more 
surveys to define the improvement or worsening of patient-reported 
outcomes to reliably identify differences between hospitals of varying 
performance.
(6) Risk-Adjustment (If Applicable)
    We note that the measure's risk model has yet to be developed. In 
order to develop the risk model, final risk variable selection for the 
risk model will involve empirical testing of candidate risk variables 
as well as consideration of the feasibility and reliability of each 
variable. The risk model will account for the hospital level response 
rate as well as measureable patient-level factors relevant to patient-
reported outcomes following elective THA/TKA procedures. To the extent 
feasible, the risk model methodology will adhere to established 
statistical recommendations.\80\
---------------------------------------------------------------------------

    \80\ Ash AS, Fiengerg SE., Louis TA, Normand ST, Stukel TA, Utts 
J. STATISTICAL ISSUES IN ASSESSING HOSPITAL PERFORMANCE, 
Commissioned by the Committee of Presidents of Statistical 
Societies. Original report submitted to CMS on November 28, 2011, 
Revised on January 27, 2012. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Statistical-Issues-in-Assessing-Hospital-Performance.pdf. Accessed on April 15, 2015.
---------------------------------------------------------------------------

(7) Calculating the Risk-Standardized Rate
    We note that the approach to reporting this measure(s) has yet to 
be developed. The measure will assess change in patient-reported 
outcomes between the pre-operative (90 to 0 days prior to the elective 
primary THA/TKA procedure) and post-operative (270-365 days following 
the elective primary THA/TKA procedure) periods.
    We invite public comments on this proposal to seek voluntary 
participation in submitting data for a Hospital-Level Performance 
Measure of Patient-Reported Outcomes Following Elective Primary Total 
Hip and/or Total Knee Arthroplasty. We also welcome comments on the 
appropriateness of this voluntary data collection for this model and 
the specific data collection requirements (see section III.D.3.a.(9) of 
this proposed rule) and data elements proposed.
(8) Performance Period
    We propose defining performance periods for each year of the model 
as outlined in Table 16. A performance period for the voluntary THA/TKA 
data submission, are those timeframes in which an anchor hospital 
admission occurs for eligible THA/TKA voluntary data submission 
procedure. For the first year of the CCJR model, hospitals voluntarily 
submitting data will only be

[[Page 41287]]

asked to submit data for a 3-month period. The 3-month period for THA/
TKA voluntary data reporting was identified due to data processing and 
coordination of other proposed timelines in this model. Data submitted 
for the first year would be for cases that fulfill the measure 
specifications described in section III.D.3.a. of this proposed rule, 
and would be restricted to the pre-operative data elements on cases 
performed between April 1, 2016 and June 30, 2016. The proposed timing 
allows matching of the patient-reported data with relevant 
administrative claims-based data in order to accurately calculate the 
percent of eligible elective primary THA/TKA patients for which THA/TKA 
voluntary data was successfully submitted. The April 1st date 
acknowledges the measure requirement of the 90-day window prior to 
surgery during which hospitals can collect pre-operative data. The June 
30th end date was selected because it correlates with the THA/TKA 
readmission measure performance period end date currently implemented 
for the HIQR program and the HRRP. Both of these dates provide the 
greatest feasibility for data collection.
    For year 2, THA/TKA voluntary data reporting would be 3 months of 
post-operative data for cases performed between April 1, 2016 and June 
30, 2016, and 12 months of pre-operative data for cases performed 
between July 1, 2016 and June 30, 2017.
    For year 3 and subsequent years of the model, the performance 
periods for submission of voluntary data will consist of 12-month time 
periods.

Table 16--Example of Potential Performance Periods for Pre- and Post-Operative THA/TKA Voluntary Data Submission
----------------------------------------------------------------------------------------------------------------
                                                     Patient population eligible    Requirements for successful
    CCJR model year          Performance period       for THA/TKA voluntary data       THA/TKA voluntary data
                                                              submission                    submission *
----------------------------------------------------------------------------------------------------------------
2016...................  April 1, 2016 through      All patients undergoing        Submit PRE[dash]operative
                          June 30, 2016.             elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     April 1, 2016 and June 30,     procedures performed between
                                                     2016.                          April 1, 2016 and June 30,
                                                                                    2016.
2017...................  April 1, 2016 through      All patients undergoing        Submit POST[dash]operative
                          June 30, 2016.             elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     April 1, 2016 and June 30,     procedures performed between
                                                     2016.                          April 1, 2016 and June 30,
                                                                                    2016.
2017...................  July 1, 2016 through June  All patients undergoing        Submit PRE[dash]operative
                          30, 2017.                  elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2016 and June 30,      procedures performed between
                                                     2017.                          July 1, 2016 and June 30,
                                                                                    2017.
2018...................  July 1, 2016 through June  All patients undergoing        Submit POST[dash]operative
                          30, 2017.                  elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2016 and June 30,      procedures performed between
                                                     2017.                          July 1, 2016 and June 30,
                                                                                    2017.
2018...................  July 1, 2017 through June  All patients undergoing        Submit PRE[dash]operative
                          30, 2018.                  elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2017 and June 30,      procedures performed between
                                                     2018.                          July 1, 2017 and June 30,
                                                                                    2018.
2019...................  July 1, 2017 through June  All patients undergoing        Submit POST[dash]operative
                          30, 2018.                  elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2017 and June 30,      procedures performed between
                                                     2018.                          July 1, 2017 and June 30,
                                                                                    2018.
2019...................  July 1, 2018 through June  All patients undergoing        Submit PRE[dash]operative
                          30, 2019.                  elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2018 and June 30,      procedures performed between
                                                     2019.                          July 1, 2018 and June 30,
                                                                                    2019.
2020...................  July 1, 2018 through June  All patients undergoing        Submit POST[dash]operative
                          30, 2019.                  elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2018 and June 30,      procedures performed between
                                                     2019.                          July 1, 2018 and June 30,
                                                                                    2019.
2020...................  July 1, 2019 through June  All patients undergoing        Submit PRE[dash]operative
                          30, 2020.                  elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2019 and June 30,      procedures performed between
                                                     2020.                          July 1, 2019 and June 30,
                                                                                    2020.
2016...................  3 months.................  All patients undergoing        Submit PRE[dash]operative
                                                     elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     April 1, 2016 and June 30,     procedures performed between
                                                     2016.                          April 1, 2016 and June 30,
                                                                                    2016.
2017...................  15 months................  All patients undergoing        1. Submit POST[dash]operative
                                                     elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     April 1, 2016 and June 30,     procedures performed between
                                                     2017.                          April 1, 2016 and June 30,
                                                                                    2016.
                                                                                   2. Submit PRE[dash]operative
                                                                                    data on primary elective THA/
                                                                                    TKA procedures for >=80% of
                                                                                    procedures performed between
                                                                                    July 1, 2016 and June 30,
                                                                                    2017.
2018...................  24 months................  All patients undergoing        1. Submit POST[dash]operative
                                                     elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2016 and June 30,      procedures performed between
                                                     2018.                          July 1, 2016 and June 30,
                                                                                    2017.

[[Page 41288]]

 
                                                                                   2. Submit PRE[dash]operative
                                                                                    data on primary elective THA/
                                                                                    TKA procedures for >=80% of
                                                                                    procedures performed between
                                                                                    July 1, 2017 and June 30,
                                                                                    2018.
2019...................  24 months................  All patients undergoing        1. Submit POST[dash]operative
                                                     elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2017 and June 30,      procedures performed between
                                                     2019.                          July 1, 2017 and June 30,
                                                                                    2018.
                                                                                   2. Submit PRE[dash]operative
                                                                                    data on primary elective THA/
                                                                                    TKA procedures for >=80% of
                                                                                    procedures performed between
                                                                                    July 1, 2018 and June 30,
                                                                                    2019.
2020...................  24 months................  All patients undergoing        1. Submit POST[dash]operative
                                                     elective primary THA/TKA       data on primary elective THA/
                                                     procedures performed between   TKA procedures for >=80% of
                                                     July 1, 2018 and June 30,      procedures performed between
                                                     2020.                          July 1, 2018 and June 30,
                                                                                    2019.
                                                                                   2. Submit PRE[dash]operative
                                                                                    data on primary elective THA/
                                                                                    TKA procedures for >=80% of
                                                                                    procedures performed between
                                                                                    July 1, 2019 and June 30,
                                                                                    2020.
----------------------------------------------------------------------------------------------------------------
* Requirements for determining successful submission of THA/TKA voluntary data are located in section
  III.D.3.a.(9) of this proposed rule.

    The proposed performance period enables hospitals to receive 
incentives for data collection starting in performance year-one, even 
though complete pre-operative and post-operative data collection 
requires a minimum 9 through 12 month time period. This 9 through 12 
month time period, between the procedure and post-operative data 
collection, was defined through clinician and stakeholder input and 
provides for both sufficient elapsed time for maximum clinical benefit 
of THA/TKA procedures on patient-reported outcomes and accommodates 
common clinical care patterns in which THA/TKA patients return to their 
surgeon one year after surgery. We invite public comments on our 
proposal of defining performance year-one episodes for a participating 
hospital as an anchor hospital admission for an eligible THA/TKA 
procedure between April 1, 2016 and June 30, 2016, with subsequent year 
performance time periods each being 12-month periods and starting every 
July 1st.
(9) Requirements for ``Successful'' Submission of THA/TKA Voluntary 
Data
    In order for CMS to assess if participant hospitals are eligible 
for reconciliation payment after receiving the THA/TKA voluntary data, 
requirements to determine if the submitted data will inform measure 
development have been identified. We believe that the following 
criteria should be used to determine if a participant hospital has 
successfully submitted THA/TKA voluntary data. We note that successful 
THA/TKA voluntary data submission, as stated briefly in section 
III.C.5. of this proposed rule, requires completion of all of the 
following:
     Submission of the data elements listed in section 
III.D.3.a.(2).of this proposed rule.
     Data elements listed in section III.D.3.a.(2) of this 
proposed rule must be submitted on at least 80 percent of their 
eligible elective primary THA/TKA patients (as described in section 
III.D.3.a.(3) of this proposed rule).
     THA/TKA voluntary data submission must occur within 60 
days of the end of the most recent data collection period.
    To fulfill THA/TKA voluntary data collection criteria for 
performance year-one, only pre-operative data collection and submission 
on at least 80 percent of eligible elective primary THA/TKA patients is 
required. To successfully submit THA/TKA voluntary data for performance 
years 2 through 5, hospitals must submit both pre-operative and post-
operative patient reported outcome data on at least 80 percent of 
eligible elective primary THA/TKA patients. A potential example of the 
performance periods for which we would like to have THA/TKA voluntary 
data is summarized in section III.D.3.a.of this proposed rule.
    Table 16 also summarizes the performance periods for pre-operative 
and post-operative THA/TKA voluntary data. Finally, hospitals 
volunteering to submit THA/TKA data will be required to submit pre-
operative data on all eligible patients and post-operative data 
elements only on those patients at least 366 days out from surgery. 
Therefore, hospitals are not expected to collect and submit post-
operative THA/TKA voluntary data on patients who are fewer than 366 
days from the date of surgery.
    We previously described a THA/TKA eligible patient in section 
III.D.3.a.(2) of this proposed rule. This description is important as 
these patients are those in which we seek submission of voluntary data. 
We also selected the requirement of submitting 80 percent of eligible 
elective primary THA/TKA patients' data because this volume of cases 
will result in a high probability that we will have a have a national 
sample of THA/TKA patient data representative of each hospital's 
patient case mix. Having 80 percent of the eligible elective primary 
THA/TKA patients will enable an accurate and reliable assessment of 
patient-reported outcomes for use in measure development. We note that 
data used for outcome measure development must adequately represent the 
population that is anticipated to be measured and in this case that 
population would be those experiencing elective primary THA/TKA 
inpatient surgical procedures. Data that more accurately reflects the 
patient outcomes and case mix of the population to be measured will 
allow, during measure development, a more scientifically accurate and 
reliable measure. Having 80 percent of eligible elective primary THA/
TKA recipient data will result in a more reliable measure that is 
better

[[Page 41289]]

able to assess hospital performance than a measure created from a less 
representative patient sample. Furthermore, we considered setting the 
requirement at 100 percent of the eligible elective primary THA/TKA 
patients, but concluded that a requirement of 100 percent data 
collection may not be feasible for all hospitals or may be excessively 
burdensome to achieve. Therefore we set the requirement at 80 percent 
of the eligible elective primary THA/TKA patients. We believe 
acquisition of 80 percent of the eligible elective primary THA/TKA 
patients will provide representative data for measure development while 
decreasing patient, provider and hospital burden. We seek public 
comment of these requirements to determine successful voluntary 
submission of THA/TKA data. We also seek public comment specifically on 
the requirement for data on 80 percent of the eligible elective primary 
THA/TKA patients.
b. Measure That Captures Shared Decision-Making Related to Elective 
Primary Total Hip and/or Total Knee Arthroplasty
    In addition to the patient-reported functional status outcomes, we 
note that shared-decision making is an important aspect of care around 
elective procedures such as primary total hip and total knee 
arthroplasty. We also note that lower episode expenditures achieved 
through improved efficiency may yield the unintended consequence of a 
compensatory increase in the number of episodes initiated. Use of 
shared decision-making prior to episode initiation can serve as an 
important tool to ensure appropriate care. Though there are no 
developed measures, we seek feedback on the opportunity to capture 
quality data related to shared decision-making between patients and 
providers. Examples of such a measure could include concepts such as a 
trial of conservative medical therapy prior to elective procedures or 
broader shared decision-making measures. We invite public comment on 
whether such a measure concept would be appropriate for the CCJR model. 
If we develop a measure that captures shared decision-making related to 
elective primary total hip and total knee arthroplasty or both, we 
would propose through rulemaking or other means to add that measure to 
the CCJR model.
c. Future Measures Around Care Planning
    The person-centered shared care plan is an important tool that can 
help providers across settings collaborate around a customized plan 
that reflects a patient's goals and offers providers critical 
information about all of the treatment a beneficiary has received. 
Health IT solutions are increasingly supporting the exchange of care 
plan information across settings so that providers and individuals have 
access to necessary information whenever and wherever it is needed. In 
the 2015 Edition of certification criteria for health information 
technology (80 FR 16842) the Office of the National Coordinator for 
Health Information Technology (ONC) has proposed the adoption of a new 
criterion to ensure health IT can capture, display, and exchange a 
robust care plan document in accordance with new standards released in 
the Consolidated Clinical Document Architecture Release 2. While 
further measure development is needed, we are seeking comment on the 
appropriateness of a future quality measure which would assess the use 
of shared care plans in the care of beneficiaries participating in the 
CCJR model.
d. Future Measures for Use of Health IT and Health Information Exchange
    We believe the use of health IT tools is a critical component of 
effective coordination across settings of care. Under bundled payment 
models, in which providers across the continuum of care share 
accountability for the clinical management and total cost of an episode 
of care, the capacity to share information electronically across 
disparate provider systems is essential for delivering efficient, safe, 
high quality care. As discussed in the August 2013 Statement 
``Principles and Strategies for Accelerating Health Information 
Exchange'' (available at http://www.healthit.gov/sites/default/files/acceleratinghieprinciples_strategy.pdf), we believe that all 
individuals, their families, their healthcare and social service 
providers, and payers should have consistent and timely access to 
health information in a standardized format that can be securely 
exchanged between the patient, providers, and others involved in the 
individual's care. ONC has released a draft document entitled 
``Connecting Health and Care for the Nation: A Shared Nationwide 
Interoperability Roadmap'' (available at http://www.healthit.gov/sites/default/files/nationwide-interoperability-roadmap-draft-version-1.0.pdf), which describes barriers to interoperability across the 
current health IT landscape, the desired future state that will be 
necessary according to the industry to enable a learning health system, 
and a suggested path for moving forward. ONC will focus on actions that 
will enable a majority of individuals and providers across the care 
continuum to send, receive, find and use a common set of electronic 
clinical information at the nationwide level by the end of 2017. Under 
section 1833(z)(3)(D)(i)(I) of the Act, as amended by section 101(e) of 
the Medicare Access and CHIP Reauthorization Act, providers 
participating in qualifying alternative payment models under Medicare 
will be required to use certified EHR technology beginning in 2019. As 
this date approaches, we believe it will be important for providers 
working in these models to demonstrate adoption of health information 
technology.
    We believe that use of certified health IT tools and the 
interoperable exchange of health information is a critical capability 
for CCJR model participants to be able to deliver the high-quality care 
and effective coordination across settings that will be required to 
demonstrate success under the model. Moreover, we believe that it will 
be important to incentivize adoption and use of these enabling 
technologies among model participants including post-acute care 
providers, by linking these activities to participant eligibility to 
receive reconciliation payments.
    While we are not proposing to add a measure for certified health IT 
use for the program's initial performance year, we are seeking comment 
on how we might incorporate such a measure beginning in the 2017 
performance year. We invite stakeholder comment on the following 
questions:
     Is successful attestation as part of the EHR Incentive 
Program for Medicare hospitals tin he applicable reporting year the 
most appropriate quality measure for assessing hospital performance on 
the use of health IT and interoperable health information in the CCJR 
model?
     Should the model include a performance measure that would 
be specific to the ability of hospitals to conduct electronic care 
coordination using certified health IT, for instance, the measure of 
transitions of care which hospitals currently report on as part of the 
EHR Incentives Program for Medicare Hospitals?
     What other measures could be used to assess hospital 
performance on the use of health IT and interoperable health 
information while minimizing program and provider collection and 
reporting burden?
    We seek public comments on how we might incorporate an electronic 
measure beginning in the 2017 performance year,

[[Page 41290]]

and public comments on the questions posed previously in this rule.
    We also seek public comment on the appropriateness of quality 
measures for post-acute care patients, physicians and facilities that 
care for THA/TKA surgical procedure patients.
4. Form, Manner and Timing of Quality Measure Data Submission
    We believe it is important to be transparent and to outline the 
form, manner and timing of quality measure data submission so that 
accurate measure results are provided to hospitals, and that timely and 
accurate calculation of measure results are consistently produced to 
determine annual reconciliation payment.
    We propose that data submission for Hospital-Level Risk-
Standardized Complication Rate (RSCR) Following Elective Primary Total 
Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1550) 
and Hospital-Level Risk-Standardized Readmission Rate (RSRR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1551) (or both) be accomplished through the 
existing HIQR program processes. Since these measures are 
administrative claims based measures, hospitals will not need to submit 
data. We propose that the same mechanisms used in the HIQR program to 
collect HCAHPS survey measure data also be used in the CCJR model (79 
FR 50259). For the hospitals that voluntarily submit data for the THA/
TKA patient-reported outcome-based performance measure we anticipate, 
if it is technically feasible, for data submission processes to be 
broadly similar to those summarized for the HIQR program for chart 
abstracted and administrative claims based measures. We would create a 
template for hospitals to complete with the THA/TKA voluntary data, 
provide a secure portal for data submission, and provide education and 
outreach on how to use these mechanisms for data collection and where 
to submit the THA/TKA voluntary data. We describe potential processes 
for voluntary data collection in section III.D.3.a.(2) of this proposed 
rule, Data Sources. These processes are broadly similar to those used 
by the HIQR program.
    We invite public comment on the proposal to collect quality measure 
data through mechanisms similar to those used in the Hospital IQR 
program.
5. Proposed Display of Quality Measures and Availability of Information 
for the Public From the CCJR Model
    We believe display of quality data is an important way to educate 
the public on hospital performance. We have used several methods to 
report quality data to the public, including posting data on the 
Hospital Compare Web site and data.medicare.gov. Data has been 
available for viewing on these Web sites and in downloadable databases 
since 2005, and are well-known mechanisms for providing information to 
the public. We are proposing to post data for measures included in the 
CCJR model for each participant hospital on the Hospital Compare Web 
site in an easily understood format. The applicable time periods for 
the measures during the CCJR model initiative are summarized in Table 
17.

                                   Table 17--Summary of Quality Measure Performance Periods by Year of the CCJR Model
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       CCJR model year
           Measure title            --------------------------------------------------------------------------------------------------------------------
                                               1st                     2nd                    3rd                    4th                    5th
--------------------------------------------------------------------------------------------------------------------------------------------------------
THA/TKA Complication *.............  April 1, 2013-March     April 1, 2014-March     April 1, 2015-March    April 1, 2016-March    April 1, 2017-March
                                      31, 2016.               31, 2017.               31, 2018.              31, 2019.              31, 2020.
THA/TKA ** Readmission.............  July 1, 2013-June 30,   July 1, 2014-June 30,   July 1, 2015-June 30,  July 1, 2016-June 30,  July 1, 2017-June 30,
                                      2016.                   2017.                   2018.                  2020.                  2016.
HCAHPS ***.........................  July 1, 2015-June 30,   July 1, 2016-June 30,   July 1, 2017-June 30,  July 1, 2018-June 30,  July 1, 2019-June 30,
                                      2016.                   2017.                   2018.                  2019.                  2020.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA)
  (NQF #1550).
** Hospital-Level Risk-Standardized Readmission Rate (RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA)
  (NQF #1551).
*** HCAHPS (NQF #0166) Survey.

    The proposed time periods for the THA/TKA Complications measure 
(NQF #1550), and the THA/TKA Readmission measure (NQF #1551) are 
consistent with HIQR program performance periods for July 2017 public 
reporting. The HCAHPS quality information will be the measure results. 
We believe the public is familiar with the proposed measures, which 
have been publicly reported in past releases of Hospital Compare as 
part of the Hospital IQR Program. In order to minimize confusion and 
facilitate access to the data on the measures included in the CCJR 
model, we propose to post the data on each participant hospital's 
performance on each of the 3 proposed quality measures in a 
downloadable format in a section of the Web site specific to the CCJR 
model, similar to what is done for HRRP and the Hospital-Acquired 
Conditions Reduction Program. We also propose to post data on whether 
or not each participant hospital met the proposed threshold (section 
III.C.5.b. of this proposed rule) for receiving a reconciliation 
payment in the same downloadable database.
    In addition, we believe information about functional status both 
pre- and post-operatively is important for hip and knee replacements. 
We are developing a functional status measure that we believe will 
provide this needed information. The measure, Hospital-Level 
Performance Measure(s) of Patient-Reported Outcomes Following Elective 
Primary Total Hip and/or Total Knee Arthroplasty (see section III.D.3 
of this proposed rule for a detailed description), requires 
comprehensive testing before it can be used in a CMS program. As part 
of the effort to collect data on functional status voluntarily from 
hospitals, we are proposing that hospitals that voluntarily submit data 
for this measure be acknowledged through the use of a symbol on 
Hospital Compare. The data submitted voluntarily for the functional 
status measure would not be publicly reported along with the other 
measures in the program.
    We invite public comments on these proposals to post data for 
mandatorily required measures on the Hospital Compare Web site and to 
acknowledge hospitals that voluntarily submit data for the functional 
status measure with an icon on the Hospital Compare Web site.
    Finally, in accordance with section 1115A of the Act, we are 
proposing section III.D. in the new proposed part 510 of the Code of 
Federal Regulations.

[[Page 41291]]

E. Data Sharing

1. Overview
    In this section, we propose to provide data to the hospital 
participants of the CCJR model. CMS has experience with a range of 
efforts designed to improve care coordination for Medicare 
beneficiaries, including the Medicare Shared Savings Program (MSSP), 
Pioneer Accountable Care Organization (ACO) Model, and BPCI, all of 
which make certain data available to participants. The CCJR model 
proposes in section III.C.2. of this proposed rule to financially 
incentivize hospitals, through retrospective bundled payments, to 
engage in care redesign efforts to improve quality of care and reduce 
spending for the aggregate Part A and B FFS (FFS) spending for 
beneficiaries included in the model during the inpatient 
hospitalization and 90 days post-discharge. Given this, we believe it 
is necessary to provide historical and ongoing claims data representing 
care furnished during episodes of care for LEJRs to hospitals so that 
they can, among other things, adequately structure their care pathways, 
coordinate care for beneficiaries, and estimate acute inpatient and 
post-acute spending within LEJR episodes.
    As noted previously, this would not be the first instance in which 
we have provided claims data to entities participating in a CMS model 
or program. For example, participants in MSSP initially receive 
historical aggregate information on their financial performance as well 
as updated financial data throughout their tenure in the program. In 
addition, MSSP participants receive certain beneficiary-identifiable 
claims information in accordance with our regulations (see Medicare 
Program; Medicare Shared Savings Program: Accountable Care 
Organizations, 76 FR 67844 through 67849, November 2, 2011). The MSSP 
regulation noted that while an ACO may have complete information for 
the services it provides or coordinates on behalf of its FFS 
beneficiary population, it may not have complete information on a FFS 
beneficiary who chose to receive services, medications or supplies from 
non-ACO providers and suppliers. Thus, we decided to provide ACOs 
participating in the MSSP with an opportunity to request CMS claims 
data on the premise that more complete beneficiary-identifiable 
information would enable practitioners in an ACO to better coordinate 
and target care strategies. Recently, we noted that the ACOs 
participating in the MSSP have reported how important access to real 
time data is for providers to improve care coordination across all 
sites of care, including outpatient, acute, and post-acute sites of 
care. Furthermore, we noted our view that providers across the 
continuum of care are essential partners to physicians in the 
management of care. (See Medicare Program: Medicare Shared Savings 
Program: Accountable Care Organizations: Proposed Rule, 79 FR 72779).
    Similarly, participants in the Pioneer ACO model can request 
historical claims data of beneficiaries aligned with the particular 
Pioneer ACO entity, and the entities continue to receive certain 
ongoing data regarding the services furnished to those beneficiaries. 
(See http://innovation.cms.gov/Files/fact-sheet/Pioneer-ACO-Model-Beneficiaries-Rights-Fact-Sheet.pdf). In addition, we provide BPCI 
participants with the opportunity to request beneficiary-level claims 
data regarding their own patients, both for the historical period of 
2009-2012 that was used to set baseline prices for entities 
participating in BPCI, as well as ongoing monthly claims feeds 
containing Medicare FFS claims for beneficiaries that could have 
initiated an episode of care for that particular BPCI participant. 
These monthly claims feeds provide BPCI participants with data for both 
acute and post-acute care spending for beneficiaries that could have 
initiated an episode of care at that BPCI participant.
    Based on our experience with these efforts, we believe that 
providing a similar opportunity for hospitals participating in the CCJR 
model to request data is necessary for participant hospitals to have 
the relevant information to allow for practice changes supported by 
CCJR and to identify services furnished to beneficiaries receiving 
LEJRs under the model. Specifically, providing participant hospitals 
with certain claims and summary information on beneficiaries in 
accordance with established privacy and security protections would 
improve their understanding of the totality of care provided during an 
episode of care. With this greater understanding, we anticipate that 
hospitals would be better equipped to evaluate their practice patterns 
and actively manage care delivery so that care for beneficiaries is 
better coordinated, quality and efficiency are improved, and payments 
aligned more appropriately to the medically necessary services 
beneficiaries have a right to receive. We also expect that providing 
this data to CCJR participants will benefit beneficiaries by allowing 
providers to use the data to improve care coordination activities in 
areas that may be currently lacking. However, we also expect that CCJR 
hospitals are able to, or will work toward, independently identifying 
and producing their own data, through electronic health records, health 
information exchanges, or other means that they believe are necessary 
to best evaluate the health needs of their patients, improve health 
outcomes, and produce efficiencies in the provision and use of 
services.
    Accordingly, we believe that making certain data available to CCJR 
hospitals, as we do with ACOs participating in the MSSP and Pioneer 
model, would help them to monitor trends and make needed adjustments in 
their practice patterns. In order for CCJR participants to understand 
and track their care patterns, we propose to provide the participants 
with beneficiary-level claims data for the historical period used to 
calculate a CCJR hospital's target price as well as ongoing quarterly 
beneficiary-identifiable claims data in response to their request for 
such data in accordance with our regulations. Given that the CCJR model 
also proposes to incorporate regional pricing in the calculation of 
target prices, we also propose to provide participants with aggregate 
regional data.
2. Beneficiary Claims Data
    Based on our experience with BPCI participants, we recognize that 
hospitals vary with respect to the kinds of beneficiary claims 
information that would be most helpful. While many hospitals located in 
MSAs that are selected for participation in CCJR model may have the 
ability to analyze raw claims data, other hospitals may find it more 
useful to have a summary of these data. Given this, we are proposing to 
make beneficiary claims information available through two formats.
    First, for participant hospitals that lack the capacity to analyze 
raw claims data, we propose to provide summary beneficiary claims data 
reports on beneficiaries' use of health care services during the 
baseline and performance periods. These reports would allow participant 
hospitals to assess summary data on their relevant beneficiary 
population without requiring sophisticated analysis of raw claims data. 
Such summary reports will provide tools to monitor, understand, and 
manage utilization and expenditure patterns as well as to develop, 
target, and implement quality improvement programs and initiatives. For 
example, if the data provided by CMS to a particular hospital 
participant reflects that a certain post-acute care (PAC) provider 
admits beneficiaries who then

[[Page 41292]]

have significantly higher rates of inpatient readmissions than the 
rates experienced by other beneficiaries with similar care needs at 
similarly situated PAC providers, that may be evidence that the 
hospital could consider, among other things, the appropriateness of 
discharges to that provider, whether other alternatives might be more 
appropriate, and whether there exist certain care interventions that 
could be incorporated post-discharge to lower readmission rates.
    Therefore, for both the baseline period and on a quarterly basis 
during a participant hospital's performance period, we are proposing to 
provide participant hospitals with an opportunity to request summary 
claims data that would encompass the total expenditures and claims for 
an LEJR episode, including the procedure, inpatient stay, and all 
related care covered under Medicare Parts A and B within the 90 days 
after discharge, including hospital care, post-acute care, and 
physician services for the hospital's beneficiaries whose anchor 
diagnosis at discharge was either MS DRG 469 or 470. We propose that 
these summary claims aggregate data reports would also contain payment 
information, utilizing the categories listed for each episode triggered 
by a beneficiary as follows:
     Inpatient Hospital.
     Outpatient Hospital.
     Physician.
     Long-Term Care Hospitals (LTCH).
     Inpatient Rehabilitation Facilities (IRF).
     Skilled Nursing Facilities (SNF).
     Home Health Agencies (HHA).
     Hospice.
     Ambulatory Surgical Center.
     Part-B Drugs.
     Durable Medical Equipment (DME).
     Clinical Laboratories.
     Ambulance.
    These reports would likely include the following:
     Information such as admission and discharge date from the 
anchor hospitalization.
     The physician for the primary procedure, Medicare payments 
during the anchor hospitalization.
     Medicare payments during the post-acute care phase.
     Medicare payments for physician services would likely be 
included in these reports.

These summary claims data would reflect all Medicare Part A and Part B 
expenditures during the 90-day episodes, except for those claim types 
noted later in this section, as well as excluding expenditures related 
to those MS-DRGs that we are proposing to be specifically excluded from 
the episode of care, as set forth in section III.B.2. of this proposed 
rule.
    Alternatively, for hospitals with a capacity to analyze raw claims 
data, we would make- more detailed beneficiary-level information 
available in accordance with established privacy and security 
protections. These data would enable hospitals to better coordinate and 
target care strategies for beneficiaries included in CCJR episodes. For 
example, in the BPCI initiative, we provide participants with 
beneficiary-level claims data for all Part A and Part B services 
furnished to a beneficiary treated by that BPCI participant for all MS-
DRGs included in an episode that the participant has selected for 
participation (See ``Bundled Payments for Care Improvement Initiative 
(BPCI): Background on Model 2 for Prospective Participants, page 3 at 
http://innovation.cms.gov/Files/x/BPCI_Model2Background.pdf.)
    These data include services furnished by the participant, as well 
as services furnished by other entities during the 30, 60, or 90-day 
episode. For example, where the entity participating in BPCI is an 
acute care hospital, we provide beneficiary-level claims data for all 
Medicare Part A and B services and supplies furnished by the hospital 
during the inpatient admission, as well as all post-acute services 
furnished to the beneficiary by the hospital or any other providers or 
suppliers.
    The response from entities participating in BPCI has indicated that 
the availability of these data is necessary to monitor trends and 
pinpoint areas where care practice changes are appropriate, as well as 
assess the cost drivers during the acute and post-acute periods of the 
episode. Thus, for the baseline period and on a quarterly basis during 
a hospital's performance period, we propose to provide participant 
hospitals with an opportunity to request line-level claims data for 
each episode that is included in the relevant performance year, as 
described in section III.C. of this proposed rule.
    For both the proposed summary claims data and the more detailed 
claims data formats, we propose that the sets of these files would be 
packaged and sent to a portal in a ``flat'' or binary format for the 
individual participant hospitals to retrieve. Furthermore, the files 
would contain information on all claims triggered by a beneficiary in a 
participating CCJR hospital. Finally, we note that beneficiary 
information that is subject to the regulations governing the 
confidentiality of alcohol and drug abuse patient records (42 CFR part 
2) would not be included in any beneficiary identifiable claims data 
shared with a hospital under our proposal.
    We request comments on these proposals as well as the kinds of data 
and frequency of reports that would be most helpful to the hospitals' 
efforts in coordinating care, improving health, and producing 
efficiencies.
3. Aggregate Regional Data
    Additionally, because we are proposing to incorporate regional 
pricing data in the creation of prices for CCJR, as set forth in 
section III.C.4 of this proposed rule, we believe it will also be 
necessary to provide comparable aggregate expenditure data available 
for all claims associated with MS-DRGs 469 and 470 for the census 
region in which the participant hospital is located. As noted in 
section III.C, we are proposing that a hospital's target price will be 
determined based on a blend of its own historical expenditures as well 
regional pricing data of all other hospitals in its region. Thus, we 
are also proposing to provide CCJR hospitals with aggregate data on the 
total expenditures during an acute inpatient stay and 90-day post-
discharge period for all Medicare FFS beneficiaries whose anchor 
diagnosis at discharge was either MS-DRG 469 or 470 (and would have 
initiated a CCJR episode if discharged from a CCJR hospital) in their 
census region. These data would not include beneficiary-identifiable 
claims data, but would provide high-level information on the average 
episode spending for MS-DRGs 469 and 470 in the region in which the 
participant hospital is located. We request comments on these proposals 
as well as the kinds of aggregate data and frequency of data reports 
that would be most helpful to the hospitals' efforts in coordinating 
care, improving health, and producing efficiencies.
4. Timing and Period of Baseline Data
    We considered various options for the timing of providing baseline 
data, as described previously, to CCJR participant hospitals. We 
considered provision of data prior to the effective date of the model, 
January 1, 2016, as well as providing data to participants at the point 
of the first payment reconciliation (described in section III.C.6. of 
this proposed rule). We propose to make baseline data available to 
hospitals participating in CCJR no sooner than 60 days after January 1, 
2016, the effective date of the model. We recognize that these data are 
important to the abilities of CCJR participant hospitals to estimate 
costs,

[[Page 41293]]

coordinate care, and identify areas for practice transformation, and 
that early release of this data can facilitate their efforts to do so. 
We also anticipate that hospitals will view the CCJR effort as one 
involving continuous improvement. As a result, changes initially 
contemplated by a hospital could be subsequently revised based on 
updated information and experiences. While we would like to be able to 
make data available as soon as possible once the program begins, we do 
not believe that these baseline data must be immediately available upon 
its effective date as hospitals can begin considering improvements that 
would enhance their ability to better coordinate care and increase 
efficiencies in the absence of these data. Therefore, we propose to 
begin making baseline data available to CCJR hospitals within 60 days 
of CMS' receipt of the request by the participant hospital for such 
data, in a form, time, and manner of such requests to be determined by 
CMS and announced at a later date. Requests would not be accepted until 
the model has begun. We seek comments on this proposal.
    We have also considered which period of baseline data should be 
shared with hospitals, for example, whether the data should represent a 
single year, or some longer period such as a 3-year period or more. To 
be most useful, we believe the baseline information should be recent 
enough to reflect current practices yet of a sufficient duration to 
reflect trends in those recent practices. For example, 1 year of data 
would likely reflect a hospital's most current practices, but would not 
be helpful for purposes of identifying trends. In contrast, 3 years of 
data could both reflect a hospital's most recent performance and recent 
performance trends. Moreover, making data available for a 3-year period 
aligns with our proposal to set a target price based on a 3-year period 
of baseline data, which is a factor in assessing CCJR hospitals' 
performance (see section III.C). If a hospital has access to baseline 
data for the 3-year period used to set its target price, then it would 
be able to assess its practice patterns, identify cost drivers, and 
ultimately redesign its care practices to improve efficiency and 
quality.
    We alternatively considered making data available for an even 
longer historical period--for example, 4 or 5 years. However, we 
question the usefulness of information that is older than 3 years for 
purposes of changes contemplated for current operations. Accordingly, 
we are proposing to make available baseline data for up to a 3-year 
period. We will limit the content of this data set to the minimum data 
necessary for the participant hospital to conduct quality assessment 
and improvement activities and effectively coordinate care of its 
patient population. This period would encompass up to the 3 most recent 
years for which claims data are available for the hospital and would 
align with the baseline period we propose to utilize to establish 
target prices, as noted previously. We seek comments on our proposal 
and invite comments on alternative time periods that could better help 
hospitals evaluate their practice patterns and actively manage care 
delivery so that care is better coordinated, quality and efficiency are 
improved, and costs are better controlled.
5. Frequency and Period of Claims Data Updates for Sharing Beneficiary-
Identifiable Claims Data During the Performance Period
    The availability of periodically updated beneficiary-identifiable 
claims data would assist hospitals participating in CCJR to identify 
areas where they might wish to change their care practice patterns, as 
well as monitor the effects of any such changes. With respect to these 
purposes, we have considered what would be the most appropriate period 
for making updated claims information available to hospitals, while 
complying with the HIPAA Privacy Rule's ``minimum necessary'' 
provisions standard. We believe that quarterly claims data updates 
align with a 90-day episode window. Moreover, as a larger episode 
window would be included, the claims data would be more representative 
of total costs and hence more useful to hospitals as they consider 
long-term practice changes. Accordingly, we are proposing to make 
updated claims data available to hospitals upon receipt of a request 
for such information that meets CMS's requirements to ensure the 
applicable HIPAA conditions for disclosure have been met, as frequently 
as on a quarterly basis. We seek comments on this proposal.
    Related to this is the period of claims that would be represented 
in each update. For example, we considered limiting this period to 3 
months of data, which aligns with the frequency with which we would 
make updated claims data available. However, other than this alignment, 
we do not see additional reasons for artificially limiting the period 
to this extent. Alternatively, we considered providing an updated 
dataset as frequently as each quarter that would include data from up 
to the previous 6 quarters. We believe that this level of cumulative 
data would offer more complete information and allow better trend 
comparisons.
    Accordingly, we propose to make beneficiary-identifiable and 
aggregate claims data available that would represent up to 6 quarters 
of information upon receipt of a request for such information that 
meets the requirements of the HIPAA Privacy Rule. We would note that we 
intend for the data for this model to be consistent with the 
performance year (January 1 through December 31). To accomplish this 
for the first year of CCJR (2016), we would provide, upon request and 
in accordance with the HIPAA Privacy Rule, claims data from January 1, 
2016 to June 30, 2017 on as frequently as a running quarterly basis, as 
claims are available. For each quarter and extending through June 30, 
2017, participants would receive data for up to the current quarter and 
all of the previous quarters going back to January 1, 2016. These 
datasets would contain all claims for all potential episodes that were 
initiated in 2016 and capture a sufficient amount of time for relevant 
claims to have been processed. We will limit the content of this data 
set to the minimum data necessary for the participating hospital to 
conduct quality assessment and improvement activities and effectively 
coordinate care of its patient population. We seek comment on our 
proposal.
6. Legal Permission To Share Beneficiary-Identifiable Data
    We recognize that there are a number of issues and sensitivities 
surrounding the disclosure of beneficiary-identifiable health 
information, and note that a number of laws place constraints on 
sharing individually identifiable health information. For example, 
section 1106 of the Act bars the disclosure of information collected 
under the Act without consent unless a law (statute or regulation) 
permits for the disclosure. In this instance, the HIPAA Privacy Rule 
permits this proposed disclosure of individually identifiable health 
information by us.
    In this proposed rule, we are proposing to make participant 
hospitals financially responsible for services that may have occurred 
outside of the hospital during the 90-day post-discharge period. 
Although we expect hospitals to be actively engaged in post-discharge 
planning and other care during the 90-day post-discharge period for 
beneficiaries receiving LEJRs, as discussed in section III.A. of this 
proposed rule, we believe it is necessary for the purposes of the 
CCJR--JR model to provide participant hospitals with beneficiary-level 
claims data, either in

[[Page 41294]]

summary or line-level claim formats for a 3-year historical period as 
well as on a quarterly basis during the performance period. We believe 
that these data constitute the minimum information necessary to enable 
the participant hospital to understand spending patterns during the 
episode, appropriately coordinate care, and target care strategies 
toward individual beneficiaries furnished care by the participant 
hospital and other providers and suppliers.
    Under the HIPAA Privacy Rule, covered entities (defined as health 
care plans, providers that conduct covered transactions, including 
hospitals, and health care clearinghouses) are barred from using or 
disclosing individually identifiable health information (called 
``protected health information'' or PHI) in a manner that is not 
explicitly permitted or required under the HIPAA Privacy Rule.
    The Medicare FFS program, a ``health plan'' function of the 
Department, is subject to the HIPAA Privacy Rule limitations on the 
disclosure of PHI. The hospitals and other Medicare providers and 
suppliers are also covered entities, provided they are health care 
providers as defined by 45 CFR 160.103 and they conduct (or someone on 
their behalf conducts) one or more HIPAA standard transactions 
electronically, such as for claims transactions. In light of these 
relationships, we believe that the proposed disclosure of the 
beneficiary claims data for an acute inpatient stay plus 90-day post-
discharge episode where the anchor diagnosis at discharge was MS-DRG 
469 or 470 would be permitted by the HIPAA Privacy Rule under the 
provisions that permit disclosures of PHI for ``health care 
operations'' purposes. Under those provisions, a covered entity is 
permitted to disclose PHI to another covered entity for the recipient's 
health care operations purposes if both covered entities have or had a 
relationship with the subject of the PHI to be disclosed, the PHI 
pertains to that relationship, and the recipient will use the PHI for a 
``health care operations'' function that falls within the first two 
paragraphs of the definition of ``health care operations'' in the HIPAA 
Privacy Rule (45 CFR 164.506(c)(4)).
    The first paragraph of the definition of health care operations 
includes ``conducting quality assessment and improvement activities, 
including outcomes evaluation and development of clinical guidelines,'' 
and ``population-based activities relating to improving health or 
reducing health costs, protocol development, case management and care 
coordination'' (45 CFR 164.501). Under our proposal, hospitals would be 
using the data on their patients to evaluate the performance of the 
hospital and other providers and suppliers that furnished services to 
the patient, conduct quality assessment and improvement activities, and 
conduct population-based activities relating to improved health for 
their patients. When done by or on behalf of a covered entity, these 
are covered functions and activities that would qualify as ``health 
care operations'' under the first and second paragraphs of the 
definition of health care operations at 45 CFR 164.501. Hence, as 
previously discussed, we believe that this provision is extensive 
enough to cover the uses we would expect a participant hospital to make 
of the beneficiary-identifiable data and would be permissible under the 
HIPAA Privacy Rule. Moreover, our proposed disclosures would be made 
only to HIPAA covered entities that have (or had) a relationship with 
the subject of the information, the information we would disclose would 
pertain to such relationship, and those disclosures would be for 
purposes listed in the first two paragraphs of the definition of 
``health care operations.''
    When using or disclosing PHI, or when requesting this information 
from another covered entity, covered entities must make ``reasonable 
efforts to limit'' the information that is used, disclosed or requested 
the ``minimum necessary'' to accomplish the intended purpose of the 
use, disclosure or request (45 CFR 164.502(b)). We believe that the 
provision of the proposed data elements listed previously would 
constitute the minimum data necessary to accomplish the CCJR model 
goals of the participant hospital.
    The Privacy Act of 1974 also places limits on agency data 
disclosures. The Privacy Act applies when the federal government 
maintains a system of records by which information about individuals is 
retrieved by use of the individual's personal identifiers (names, 
Social Security numbers, or any other codes or identifiers that are 
assigned to the individual). The Privacy Act prohibits disclosure of 
information from a system of records to any third party without the 
prior written consent of the individual to whom the records apply (5 
U.S.C. 552a(b)).
    ``Routine uses'' are an exception to this general principle. A 
routine use is a disclosure outside of the agency that is compatible 
with the purpose for which the data was collected. Routine uses are 
established by means of a publication in the Federal Register about the 
applicable system of records describing to whom the disclosure will be 
made and the purpose for the disclosure. We believe that the proposed 
data disclosures are consistent with the purpose for which the data 
discussed in this proposed rule was collected and may be disclosed in 
accordance with the routine uses applicable to those records.
    Notwithstanding these exceptions, we believe it would be 
appropriate to provide some form of notice to Medicare beneficiaries 
about sharing these data. Based on our experiences with data sharing in 
other CMS programs and models, we propose a strategy for notifying 
beneficiaries of claims data sharing in this proposed rule, and in 
order to provide meaningful beneficiary choice over claims data sharing 
with the participant hospitals in CCJR. We considered both ``opt-in'' 
and ``opt-out'' options for beneficiaries with respect to data sharing 
in CCJR. An opt-in method has some advantages, particularly with regard 
to the fact that consumers have consistently expressed a desire that 
their consent should be sought before their health information may be 
shared (Schneider, S. et al. ``Consumer Engagement in Developing 
Electronic Health Information System.'' Prepared for: Agency for 
Healthcare Research and Quality, July 2009, at 16. Available at: http://healthit.ahrq.gov/ahrq-funded-projects/consumer-engagement-developing-electronic-health-information-systems).
    An opt-out method is used successfully in most systems of 
electronic exchange of information because it is significantly less 
burdensome on patients and providers while still providing an 
opportunity for patients to exercise control over their data. Thus, we 
propose to use an ``opt-out'' approach to provide beneficiaries with 
the opportunity to decline claims data sharing directly through 1-800-
Medicare, rather than through the participant hospital. We also propose 
to provide advance notification to all Medicare beneficiaries about the 
opportunity to decline claims data sharing with entities participating 
in CMS programs and models through CMS materials such as the Medicare & 
You Handbook. The Handbook would include information about the purpose 
of the model, describe the opportunity for participants to request 
beneficiary identifiable claims data for health care operations 
purposes, and provide instructions on how beneficiaries may decline 
claims data sharing by contacting CMS directly through 1-800-Medicare. 
The Handbook would also contain instructions on how a beneficiary may 
reverse his or her preference to decline claims data sharing by 
contacting 1-800-Medicare.

[[Page 41295]]

    There are several advantages to these strategies. First, we note 
that 1-800-Medicare is a communication method to which beneficiaries 
have familiarity and broad exposure. It also has the capability for 
beneficiaries to use accessible alternative or appropriate assistive 
technology, if needed. While many procedures in MS-DRGs 469 and 470 are 
planned in advance, some are emergent or unplanned procedures. Thus, 
asking the participant hospital to provide advance notification to the 
beneficiary, prior to the provision of services, may be inappropriate 
or impossible in certain circumstances. We would continue to maintain a 
list of beneficiaries who have declined data sharing and ensure that 
their claims information is not included in the claims files shared 
with participants. Hospitals with patient portals or Blue 
Button[supreg] may have capability to garner patient input prior to 
discharge through a hospital intervention specific to patient and care-
giver education, while also aiding the hospital to meet reporting 
requirements for other CMS programs, such as Meaningful Use under the 
EHR Incentive Program for Medicare Hospitals.
    Finally, participant hospitals in CCJR will only be allowed to 
request beneficiary-identifiable claims data for beneficiaries who: (1) 
Have been furnished a billable service by the participant hospital 
corresponding to the episode definitions for CCJR; and (2) have not 
chosen to opt-out of claims data sharing. A beneficiary that chooses to 
opt-out of claims data sharing is only opting out of the data sharing 
portion of the model. The decision to opt-out does not otherwise limit 
CMS' use of the beneficiaries' data, whether the beneficiary can 
initiate an episode, inclusion in quality measures, or inclusion in 
reconciliation calculations. Where a beneficiary chooses to opt-out of 
claims data sharing, our data contractor would maintain a list of all 
HICNs that choose to opt-out of data sharing. We would monitor whether 
participant hospitals continue to request data on beneficiaries who 
have opted out of having their data shared and do not intend to make 
such data available in response to a CCJR such hospitals' requests.
    We request comments on our proposals related to the provision of 
both aggregate and beneficiary-identifiable data to participant 
hospitals in CCJR. We are particularly interested in comments on the 
kinds and frequency of data that would be useful to hospitals, 
potential privacy and security issues, the implications for sharing 
protected health information with hospitals, and the use of a 
beneficiary opt-out, as opposed to an opt-in, to obtain beneficiary 
consent to the sharing of their information. We also request comment on 
whether it would be helpful to provide any such system of notices, 
since Medicare claims information and other electronic information is 
already routinely shared for many other purposes among health care 
providers and insurers, and generally is subject to HIPAA protections. 
We also propose where available, the exchange of CMS beneficiary data 
with the local electronic health information exchange, a system that 
allows doctors, nurses, pharmacists, other health care providers and 
patients to appropriately access and securely share a patient's vital 
medical information electronically in order to facilitate the hospitals 
ability to share timely patient data supporting improved patient 
referral, access, and care coordination across varied service settings.

F. Monitoring and Beneficiary Protection

1. Introduction and Summary
    We are proposing the CCJR model as we believe it is an opportunity 
to improve the quality of care and that the policies of the model 
support making care more easily accessible to consumers when and where 
they need it, increasing consumer engagement and thereby informing 
consumer choices. For example, under this model we are proposing 
certain waivers which would offer participant hospitals additional 
flexibilities with respect to furnishing telehealth services, post-
discharge home visits, and care in skilled nursing facilities, as 
discussed in section III.C.11 of this proposed rule. We believe that 
this model will improve beneficiary access and outcomes. Conversely, we 
do note that these same opportunities could be used to try to steer 
beneficiaries into lower cost services without an appropriate emphasis 
on maintaining or increasing quality. We direct readers to sections 
III.C.5 and III.D. of this proposed rule for discussion of the 
methodology for incorporating quality into the payment structure and 
the measures utilized for this model.
    We believe that existing Medicare provisions can be effective in 
protecting beneficiary freedom of choice and access to appropriate care 
under the CCJR model. However, because the CCJR model is designed to 
promote efficiencies in the delivery of all care associated with lower 
extremity joint replacement procedures, providers may seek greater 
control over the continuum of care and, in some cases, could attempt to 
direct beneficiaries into care pathways that save money at the expense 
of beneficiary choice or even beneficiary outcomes. As such, we 
acknowledge that some additional safeguards may be necessary under the 
CCJR model as providers are simultaneously seeking opportunities to 
decrease costs and utilization. We believe that it is important to 
consider any possibility of adverse consequences to patients and to 
ensure that sufficient controls are in place to protect Medicare 
beneficiaries receiving lower extremity joint replacement related 
services under the CCJR model.
2. Beneficiary Choice and Beneficiary Notification
    Because we have proposed that hospitals in selected geographic 
areas will be required to participate in the model, individual 
beneficiaries will not be able to opt out of the CCJR model when they 
receive care from a participant hospital in the model. We do not 
believe that it is appropriate or consistent with other Medicare 
programs to allow patients to opt out of a payment system that is 
unique to a particular geographic area. For example, the state of 
Maryland has a unique payment system under Medicare, but that payment 
system does not create an alternative care delivery system, nor does it 
in any way impact beneficiary decisions. Moreover, we do not believe 
that an ability to opt out of a payment system is a factor in upholding 
beneficiary choice or is otherwise advantageous to beneficiaries or 
even germane to beneficiary decisions given that this model does not 
increase beneficiary cost-sharing. We also believe that full 
notification and disclosure of the payment model and its possible 
implications is critical for beneficiary understanding and protection. 
However, it is important to create safeguards for beneficiaries to 
ensure that care recommendations are based on clinical needs and not 
inappropriate cost savings. It is also important for beneficiaries to 
know that they can raise any concerns with their physicians, with 1-
800-Medicare, or with their local Quality Improvement Organizations.
    This proposed payment model does not limit the ability to choose 
among Medicare providers or the range of services available to the 
beneficiary. Beneficiaries may continue to choose any Medicare 
participating provider, or any provider who has opted out of Medicare, 
with the same costs, copayments and responsibilities as they

[[Page 41296]]

have with other Medicare services. Although the proposed model would 
allow participant hospitals to enter into CCJR Sharing Arrangements 
with certain providers and these preferred providers may be recommended 
to beneficiaries as long as those recommendations are made within the 
constraints of current law, hospitals may not restrict beneficiaries to 
any list of preferred or recommended providers that surpass any 
restrictions that already exist under current statutes and regulations. 
Moreover, hospitals may not charge any CCJR collaborator a fee to be 
included on any list of preferred providers or suppliers, nor may the 
hospital accept such payments, which would be considered to be outside 
the realm of risk-sharing agreements. Thus, this proposed payment model 
does not create any restriction of beneficiary freedom to choose 
providers, including surgeons, hospitals, post-acute care or any other 
providers or suppliers.
    Moreover, as participant hospitals redesign care pathways, it may 
be difficult for providers to sort individuals based on health care 
insurance and to treat them differently. We anticipate that care 
pathway redesign occurring in response to the model will increase 
coordination of care, improve the quality of care, and decrease cost 
for all patients, not just for Medicare beneficiaries. This anticipated 
change in the delivery of care to all patients may further promote 
consistent treatment of all beneficiaries.
    We believe that beneficiary notification and engagement is 
essential because there will be a change in the way participating 
hospitals are paid. We believe that appropriate beneficiary 
notification should explain the model, advise patients of both their 
clinical needs and their care delivery choices, and should clearly 
specify that any non-hospital provider holding a risk-sharing agreement 
with the hospital should be identified to the beneficiary as a 
``financial partner of the hospital for the purposes of LEJR 
services.'' These policies seek to enhance beneficiaries' understanding 
of their care, improve their ability to share in the decision-making, 
and ensure that they have the opportunity to consider competing 
benefits even as they are presented with cost-saving recommendations. 
We believe that appropriate beneficiary notification should do all of 
the following:
     Explain the model and how it will or will not impact their 
care.
     Inform patients that they retain freedom of choice to 
choose providers and services.
     Explain how patients can access care records and claims 
data through an available patient portal and through sharing access to 
care-givers to their Blue Button[supreg] electronic health information.
     Advise patients that all standard Medicare beneficiary 
protections remain in place.

These include the ability to report concerns of substandard care to 
Quality Improvement Organizations (QIO) and 1-800-MEDICARE.
    After carefully considering the appropriate timing and 
circumstances for the necessary beneficiary notification, we are 
proposing that participating hospitals must require all providers and 
suppliers who execute a CCJR Sharing Arrangement with a participant 
hospital to share certain notification materials, to be developed or 
approved by CMS, that detail this proposed payment model before they 
order an admission for joint replacement for a Medicare FFS patient who 
would be included under the model. Participant hospitals must require 
this notification as a condition of any CCJR Sharing Arrangement. Where 
a participant hospital does not have CCJR Sharing Arrangements with 
providers or suppliers that furnish services to beneficiaries during a 
CCJR episode of care, or where the admission for joint replacement for 
a Medicare FFS patient who would be included under the model was 
ordered by a physician who does not have a CCJR Sharing Arrangement, 
the beneficiary notification materials must be provided to the 
beneficiary by the participant hospital. The purpose of this proposed 
policy is to ensure that all beneficiaries that initiate a CCJR episode 
receive the beneficiary notification materials, and that they receive 
such materials as early as possible. We believe that this proposal 
targets beneficiaries for whom information is relevant, and increases 
the likelihood that patients will become engaged and seek to understand 
the model and its potential impact on their care.
    We note that beneficiaries are accustomed to receiving similar 
notices of rights and obligations from healthcare providers prior to 
the start of inpatient care. However, we also considered that this 
information might be best provided by hospitals at the point of 
admission for all beneficiaries, as hospitals provide other information 
concerning patient rights and responsibilities at that time. We invite 
comment on ways in which the timing and source of beneficiary 
notification could best serve the needs of beneficiaries without 
creating unnecessary administrative work for providers. We believe that 
this notification is an important safeguard to help ensure that 
beneficiaries in the model receive all medically necessary services, 
but it is also an important clinical opportunity to better engage 
beneficiaries in defining their goals and preferences as they share in 
the planning of their care.
3. Monitoring for Access to Care
    Given that participant hospitals would receive a reconciliation 
payment when they are able to reduce average costs per case and meet 
quality thresholds, they could have an incentive to avoid complex, high 
cost cases by referring them to nearby facilities or specialty referral 
centers. We intend to monitor the claims data from participant 
hospitals--for example, to compare a hospital's case mix relative to a 
pre-model historical baseline to determine whether complex patients are 
being systematically excluded. We will publish these data as part of 
the model evaluation to promote transparency and an understanding of 
the model's effects. We also propose to continue to review and audit 
hospitals if we have reason to believe that they are compromising 
beneficiary access to care. For example, where claims analysis 
indicates an unusual pattern of referral to regional hospitals located 
outside of the model catchment area or a clinically unexplained 
increase or decrease in joint replacement surgery rates.
4. Monitoring for Quality of Care
    As we noted previously, in any payment system that promotes 
efficiencies of care delivery, there may be opportunities to direct 
patients away from more expensive services at the expense of outcomes 
and quality. We believe that professionalism, the quality measures in 
the model, and clinical standards can be effective in preventing 
beneficiaries from being denied medically necessary care in the 
inpatient setting and in post-acute care settings during the 90 days 
post-discharge. Accordingly, the potential for the denial of medically 
necessary care within the CCJR model will not be greater than that 
which currently exists under IPPS. However, we also believe that we 
have the authority and responsibility to audit the medical records and 
claims of participating hospitals and their CCJR collaborators in order 
to ensure that beneficiaries receive medically necessary services. We 
may also monitor arrangements between participant hospitals and their 
CCJR collaborators to ensure that such arrangements do not result in 
the denial

[[Page 41297]]

of medically necessary care or other program or patient abuse. We 
invite public comment on whether there are elements of the CCJR model 
that would require additional beneficiary protection for the 
appropriate delivery of inpatient care, and if so, what types of 
monitoring or safeguards would be most appropriate.
    With respect to post-acute care, we believe that requiring 
participating hospitals to engage patients in shared decision making is 
the most important safeguard to prevent inappropriate recommendations 
of lower cost care, and that such a requirement can be best effected by 
requiring hospitals to make this a condition of any CCJR Sharing 
Arrangements with practitioners who perform these procedures. 
Additional deterrents are created by the financial accountability of 
the 90-day bundle, which is sufficiently long that it encourages the 
provision of high-quality care to avoid the risk of complications and 
readmissions, which would typically occur within that time period. 
Physician patterns of practice are also constrained by clinical 
standards of care, and we believe that the risk associated with 
deviations from those standards provides further deterrence to 
compromising care.
    We believe that these safeguards are all enhanced by beneficiary 
knowledge and engagement. Therefore, we are proposing to require that 
participant hospitals must, as part of discharge planning, account for 
potential financial bias by providing patients with a complete list of 
all available post-acute care options in the service area consistent 
with medical need, including beneficiary cost-sharing and quality 
information (where available and when applicable). We expect that the 
treating surgeons or other treating practitioners, such as 
physiatrists, will continue to identify and discuss all medically 
appropriate options with the beneficiary, and that hospitals will 
discuss the various facilities and providers who are available to meet 
the clinically identified needs. These proposed requirements for CCJR 
participant hospitals would supplement the existing discharge planning 
requirements under the hospital Conditions of Participation. We also 
specifically note that neither the Conditions of Participation nor this 
proposed transparency requirement preclude hospitals from recommending 
preferred providers within the constraints created by current law, as 
coordination of care and optimization of care are important factors for 
successful participation in this model. We invite comment on this 
proposal, including additional opportunities to ensure high quality 
care.
5. Monitoring for Delayed Care
    This model is based in part on an incentive for hospitals to create 
efficiencies in the delivery of care within a 90-day episode following 
the joint replacement surgery. Theoretically this basis could create 
incentives for hospitals and other CCJR collaborators involved in any 
CCJR Sharing Arrangements to delay services until after that window has 
closed.
    We believe that existing Medicare safeguards are sufficient to 
protect beneficiaries. First, our experience with other bundled 
payments such as the BPCI initiative has shown that providers focus on 
appropriate care first and efficiencies only when those efficiencies 
can be obtained in the setting of appropriate care. We believe that a 
90-day post-discharge episode will sufficiently minimize the risk that 
services furnished in relation to the beneficiary's lower extremity 
joint replacement procedure will be necessary beyond the end of the 
episode duration. To ensure that the length of the episode duration 
sufficiently minimizes the risk that any lower extremity joint 
replacement related care will not exceed the time established for the 
episode, we proposed to establish a 90-day post-discharge duration. We 
believe that participant hospitals would be unlikely to postpone 
services beyond a 90-day period because the consequences of delaying 
care beyond this long episode duration would be contrary to usual 
standards of care.
    However, we also note that additional monitoring would occur as a 
function of the payment model. We have proposed as part of the payment 
definition (see section III.C of this proposed rule) that certain post-
episode payments occurring in the 30-day window subsequent to the end 
of the 90-day episode would be counted as an adjustment against 
savings. We believe that the inclusion of this payment adjustment would 
create an additional deterrent to delaying care beyond the episode 
duration. In addition, the data collection and calculations used to 
determine this adjustment provide a mechanism to check if providers are 
inappropriately delaying care. Finally, we note that the proposed 
quality measures create additional safeguards as they are used to 
monitor and influence hospital clinical care at the institutional 
level.
    In accordance with section 1115A of the Act, we are proposing to 
codify these proposals in regulation in the new proposed Part 510. We 
invite public comment on our proposed requirements for notification of 
beneficiaries and our proposed methods for monitoring participants' 
actions and ensuring compliance as well as on other methods to ensure 
that beneficiaries receive high quality, clinically appropriate care.

G. Coordination With Other Agencies

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

IV. Evaluation Approach

A. Background

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

B. Design and Evaluation Methods

    Our evaluation approach for the CCJR model will have elements in 
common with the standard Innovation Center evaluation approaches we 
have taken in other projects such as the BPCI initiative, Acute Care 
Episode (ACE) Demonstration, Pioneer ACO model, and other Innovation 
Center models. Specifically, the evaluation design and methodology for 
the proposed CCJR model would be designed to allow for a comparison of 
historic patterns of care among the CCJR providers to any changes made 
in these patterns in response to the CCJR model.
    Our evaluation methodology for this model builds upon the fact that 
MSAs will be selected for participation in the model by stratified 
random assignment. Due to the random assignment, we can evaluate the 
effects of the model on outcomes of interest by directly

[[Page 41298]]

comparing MSAs that are randomly selected to participate in the model 
to a comparison group of MSAs that were not randomly selected for the 
model (but could have been). Randomized evaluation designs of this kind 
are widely considered the ``gold standard'' for social science and 
medical research because they ensure that the systematic differences 
are reduced between units that do and do not experience an 
intervention, which ensures that (on average) differences in outcomes 
between participating and non-participating units reflect the effect of 
the intervention. In constructing the comparison group, we are 
considering whether to use a simple comparison group that consists of 
all non-selected MSAs or to instead select a comparison group from 
among the non-selected providers based on how well they match the 
providers along a variety of measurable dimensions, such as hospital 
size, LEJR expenditures, provider characteristics and market 
characteristics. The latter approach is sometimes referred to as 
``post-stratification'' in the literature on the analysis of randomized 
experiments.
    We plan to use a range of analytic methods, including regression 
and other multivariate methods appropriate to the analysis of 
stratified randomized experiments to examine each of our measures of 
interest. Measures of interest could include, for example, quality of 
and access to care, utilization patterns, expenditures, and beneficiary 
experience. The evaluation would also include rigorous qualitative 
analyses in order to capture the evolving nature of the care model 
interventions.
    In our design, we plan to take into account the impact of the CCJR 
model at the geographic unit level, the hospital level, and at the 
patient level. We are also considering various statistical methods to 
address factors that could confound or bias our results. For example, 
we would use statistical techniques to account for clustering of 
patients within hospitals and markets. Clustering allows our evaluation 
to compensate for commonalities in beneficiary outcomes by hospitals 
and by markets. Thus, in our analysis, if a large hospital consistently 
has poor performance, clustering would allow us to still be able to 
detect improved performance in the other, smaller hospitals in a market 
rather than place too much weight on the results of one hospital and 
potentially lead to biased estimates and mistaken inferences. Finally, 
we plan to use various statistical techniques to examine the effects of 
the CCJR model while also taking into account the effects of other 
ongoing interventions such as BPCI, Pioneer ACOs, and Medicare Shared 
Savings Program. For example, we are considering additional regression 
techniques to help identify and evaluate the incremental effects of 
adding the CCJR model in areas where patients and market areas are 
already subject to these other interventions as well as potential 
interactions among these efforts.

C. Data Collection Methods

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

D. Key Evaluation Research Questions

    Our evaluation would assess the impact of the CCJR model on the 
aims of improved care quality and efficiency as well as reduced health 
care costs. This would include assessments of patient experience of 
care, utilization, outcomes, Medicare expenditures, provider costs, 
quality, and access. Our key evaluation questions would include, but 
are not limited to, the following:
     PAYMENT. Is there a reduction in total Medicare 
expenditures in absolute terms or for subcategories of providers (for 
example, acute vs post-acute providers, providers in certain geographic 
areas, providers within concentrated vs non-concentrated market areas 
or in urban vs rural areas)? Do the participants reduce or eliminate 
variations in utilization and expenditures or both that are not 
attributable to differences in health status? If so, how have they 
accomplished these changes?
     UTILIZATION. Are there changes in Medicare utilization 
patterns overall or for specific types of providers or services? How do 
these patterns compare to historic patterns, regional variations, and 
national patterns of care? How are these patterns of changing 
utilization associated with Medicare payments, patient outcomes and 
general clinical judgment of appropriate care?
     OUTCOMES/QUALITY. Is there either a negative or positive 
impact on quality of care and patient experiences of care or both? Did 
the incidence of complications remain constant or

[[Page 41299]]

decrease? Was there a change in beneficiaries' level of pain reduction, 
functional outcomes or return to independence under the model than 
relative to appropriate comparison groups? If so, how and for which 
beneficiaries?
     REFERRAL PATTERNS AND MARKET IMPACT. How, if at all, has 
the behavior in the selected geographic areas changed under the model? 
How have the referral patterns changed and for which type(s) of 
providers? Similarly, does the model have an impact on the number of 
patients with LEJR procedures and what types of patients are undergoing 
the procedure? To what extent, if any, is this related to gainsharing 
activities?
     UNINTENDED CONSEQUENCES. Did the CCJR model result in any 
unintended consequences, including adverse selection of patients, 
access problems, cost shifting beyond the agreed upon episode, evidence 
of stinting on appropriate care, anti-competitive effects on local 
health care markets, evidence of inappropriate referrals practices? Is 
so, how, to what extent, and for which beneficiaries or providers?
     POTENTIAL FOR EXTRAPOLATION OF RESULTS. What was the 
typical patient case mix in the participating practices and how did 
this compare to regional and national patient populations? What were 
the characteristics of participating practices and to what extent were 
they representative of practices treating Medicare FFS beneficiaries? 
Was the model more successful in certain types of markets? To what 
extent would the results be able to be extrapolated to similar markets 
and nationally or both?
     EXPLANATIONS FOR VARIATIONS IN IMPACT. What factors are 
associated with the patterns of results? Specifically, are the results 
related to the following?
    ++ Characteristics of the models including variations by year and 
factors such as presence of downside risk?
    ++ The participating hospital's specific features and ability to 
carry out their proposed intervention?
    ++ Characteristics and nature of interaction with partner providers 
including orthopedic surgeons and PAC provider community?
    ++ Characteristics of the geographic area, such as market 
concentration or size of city and availability of PAC providers?
    ++ Characteristics associated with the patient populations served?

E. Evaluation Period and Anticipated Reports

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

V. Collection of Information Requirements

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

VI. Response to Comments

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

VII. Regulatory Impact Analysis

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

A. Statement of Need

    This proposed rule is necessary in order to create and test a new 
payment model under the authority of section 1115A of the Act that 
allows the Innovation Center to test innovative payment and service 
delivery models in order to ``reduce program expenditures while 
preserving or enhancing the quality of care furnished to individuals.'' 
The underlying issue addressed by the proposed model is that under FFS, 
Medicare makes separate payments to providers and suppliers for items 
and services furnished to a beneficiary over the course of a treatment 
(an episode of care). Because the amount of payment is dependent on the 
volume of services delivered, this creates incentives for care that are 
fragmented, unnecessary or duplicative, while impeding the investment 
in quality improvement or care coordination that would maximize patient 
benefit. We anticipate the proposed model may reduce costs while 
maintaining or improving quality where the provision of ``bundled 
services'' in which all the services needed for a given episode of care 
are included in a single payment arrangement that provides incentives 
to promote high quality and efficient care.
    This proposed rule would create and test the first bundled care 
model under the Innovation Center authority in which providers would be 
required to participate, building on the experience of the current 
voluntary BPCI and ACE efforts. Testing the model in this manner would 
also allow us to learn more about patterns of inefficient utilization 
of health care services and how to incentivize the improvement quality 
for common LEJR procedure episodes. This learning could inform future 
Medicare payment policy.
    Under the proposed CCJR model, acute care hospitals in certain 
selected counties will receive retrospective bundled payments for 
episodes of care for lower extremity joint replacement or reattachment 
of a lower extremity. This proposed rule was developed based on the 
experiences we gained from the implementation of the Bundled Payments 
and Care Improvement Initiative and the Medicare Acute Care Episode 
(ACE) Demonstration to test bundled payments. We believe the model may 
benefit Medicare beneficiaries through improving the coordination and 
transition of care, improving the coordination of items and services 
paid for through Medicare FFS payments, encouraging provider investment 
in infrastructure and redesigned care processes for high

[[Page 41300]]

quality and efficient service delivery, and incentivizing higher value 
care across the inpatient and post-acute care spectrum spanning the 
episode of care. It will also provide an opportunity to evaluate the 
nature and extent of reductions in the cost of treatment by providing 
financial incentives for providers to coordinate their efforts to 
provide services to meet patient needs and prevent future costs.
    As detailed in Table 18, we estimate a total aggregate impact of 
$153 million in net Medicare savings over the proposed duration of the 
model, CYs 2016 through 2020, from the proposed implementation of the 
CCJR model. These estimated impacts represent the net effect of federal 
transfers that reward or penalize hospitals for improving care while 
making it more efficient. Furthermore, the proposed CCJR model may 
benefit beneficiaries since the model requires participant hospitals to 
be accountable for 90-day episodes of care for Medicare beneficiaries 
with a lower extremity joint replacement, improve the coordination of 
FFS items and services, and encourage investment in infrastructure and 
redesigned care processes for high quality and efficient service 
delivery that demonstrate a dedication and focus toward patient-
centered care.
    Our analysis of the model's effects shows that this proposed rule 
would trigger the threshold of ``an annual effect on the economy of 
$100 million or more'' or any of the other criteria for significant 
economic effects under E.O. 12866. Accordingly it would also be a major 
rule under the Congressional Review Act, and we are required to prepare 
an analysis that presents the costs and benefits of this proposed rule. 
We have prepared an analysis that address benefits and costs that 
applies to ``economically significant'' or ``major'' rules. We solicit 
comment on the assumptions and analysis presented throughout this 
regulatory impact section.

B. Overall Impact

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

C. Anticipated Effects

1. Overall Magnitude of the Model and Its Effects on the Market
    According to Medicare FFS claims data in FY 2014 (October 1, 2013 
through September 30, 2014), there were approximately 21,000 discharges 
for MS-DRG 469 and 406,000 discharges for MS-DRG 470 (these DRG's cover 
knee and hip replacements, respectively with and without complications) 
nationally. Based on the same data, we estimate that the participant 
hospitals cover approximately 111,000 LEJR episodes in this model or 
about 25 percent of LEJR discharges nationally. The number of such 
procedures has grown in recent years, due both to the aging of the 
American population and to advances in medical technology and care that 
have made these operations less physically burdensome on patients and 
led to faster recovery times.
    More uncertain are the total costs of these procedures. The mean 
estimated 90-day episode payment for lower extremity joint replacement 
procedures (defined as discharges for MS-DRG 469 and MS-DRG 470) is 
about $26,000 based on Medicare claims data for FY 2014 where 
approximately 55 percent of the spending is attributed to hospital 
inpatient services, 25 percent of spending is attributed to post-acute 
services such as physical therapy (either ambulatory and in a facility) 
and 20 percent to physician, outpatient hospital and other spending.
    We have proposed to apply the model in 75 MSAs out of 196 MSAs 
eligible for selection, as described previously in this proposed rule. 
Based on this proposed selection methodology, we estimate that the 
model will cover about 25 percent of all lower extremity joint 
replacement procedures nationally. We estimate the model will cover 
about $2.261 billion in episode spending in 2016 and $2.713 billion in 
episode spending in 2020 as displayed in Table 18 later in this 
section. As discussed subsequently in this analysis, this is likely to 
generate approximately a net amount of $153 million in savings to 
Medicare over the entire duration of the model. Annual reconciliation 
payments for each performance year may be greater than or less than the 
net change as detailed in Table 18 later in this section. In years 2019 
and 2020 of the proposed model, we estimate a net change that is less 
than $100 million, but with repayments that may be greater than $100 
million, which exceed the $100 million dollar threshold for economic 
significance.
    There may also be spillover effects in the non-Medicare market, or 
even in the Medicare market in other areas as a result of this model. 
We believe these are likely to be small, but cannot be certain. These 
issues are discussed later in the analysis. We welcome comments on our 
assumptions and calculations.
2. Effects on the Medicare Program
    The proposed CCJR model is a model involving an innovative mix of 
financial incentives for quality of care and efficiency gains within 
FFS Medicare for lower extremity joint replacement episodes. This model 
represents a new approach for the Medicare FFS program because it 
applies bundled payments to hospitals that might not otherwise

[[Page 41301]]

participate in Innovation Center models or Medicare demonstrations and 
tests bundled payment models for episodes of care for LEJR procedures 
in multiple geographic areas. As such, we are interested in testing and 
evaluating the impact of a bundled payment approach for LEJR procedures 
in a variety of circumstances, especially among those providers that 
may not have decided to engage in programs or models in which Medicare 
makes payments differently than Medicare FFS.
    As described earlier in this proposed rule, episodes would begin 
with admission to an acute care hospital for an LEJR procedure that is 
paid under the IPPS through MS-DRG 469 or 470 and extend 90 days 
following discharge from the acute care hospital. The episode would 
include the LEJR procedure, inpatient stay, and all related care 
covered under Medicare Parts A and B within the 90 days after 
discharge, including hospital care, post-acute care, and physician 
services. Furthermore, we have proposed to designate participant 
hospitals as the episode initiators and to be financially responsible 
for episode cost under the proposed CCJR model. We propose to require 
all hospitals paid under the IPPS and physically located in selected 
geographic areas to participate in the CCJR model, with limited 
exceptions. Eligible beneficiaries who receive care at these hospitals 
will automatically be included in the model. Geographic areas, based on 
MSAs, are proposed to be selected through a stratified random sampling 
methodology based on the following criteria: Historical episode wage-
adjusted payment quartiles and population size halves. We anticipate 
the proposed model may have financial and quality of care effects on 
non-hospital providers that are involved in the care of Medicare 
beneficiaries with an LEJR episode, improving the coordination of items 
and services paid for through Medicare FFS, encouraging more provider 
investment in infrastructure and redesigned care processes for higher 
quality and more efficient service delivery, and incentivizing higher 
value care across the inpatient and post-acute care spectrum spanning 
the episode of care. However, the proposed model attributes episode 
spending and makes the retrospective reconciliation payment to or 
repayment from the participant hospital. Accordingly, our analysis 
examines the proposed effects on participant hospitals, as they are the 
providers accountable for the episode payment under this model. 
Additionally, we have proposed to test CCJR for a 5-year period, 
beginning January 1, 2016, and ending December 31, 2020 and our 
estimates cover the 5 years of the model.
    As described earlier in this proposed rule, we propose to continue 
paying hospitals and other providers according to the usual Medicare 
FFS payment systems during all performance years. After the completion 
of a performance year, the Medicare claims payments for services 
furnished to the beneficiary during the episode, based on claims data, 
would be combined to calculate an actual episode payment. The actual 
episode payment is the sum of Medicare claims payments furnished to a 
beneficiary during a CCJR episode. The actual episode payment would 
then be reconciled against an established CCJR target price, with 
consideration of additional payment adjustments based on quality 
performance and post episode spending. The amount of this calculation, 
if positive, would be paid to the participant hospital if the hospital 
has met the quality thresholds proposed in this rule. This payment is 
the reconciliation payment. If negative, the participant hospital would 
be required to make repayment to Medicare. We also proposed to phase in 
the requirement that hospitals whose actual episode payments exceed 
their CCJR target price to pay the difference back to Medicare 
beginning in performance year 2. Under this proposal, Medicare will not 
require repayment from hospitals for CCJR episode cost performance 
above their target price in performance year 1. Lastly, we propose to 
limit how much a hospital can gain or lose based on its reconciliation 
calculation with additional policies to further limit the risk of high 
payment cases for all participant hospitals and for special categories 
of hospitals.
    Based on the mix of financial and quality incentives, the proposed 
CCJR model could result in a range of possible outcomes for participant 
hospitals. The effects on hospitals of potential savings and 
liabilities will have varying degrees.
    Table 18 summarizes the estimated impact for the CCJR model. Our 
model estimates that the Medicare program will save $153 million 
dollars over the 5 performance years (2016 through 2020). Savings to 
the Medicare program may be greater if providers are able to improve 
the coordination of care, invest in infrastructure, and redesign care 
processes to promote high quality and efficient service delivery. Costs 
to the Medicare program may increase if providers are able to use 
waivers provided under the model to increase episode volume among 
beneficiaries that are expected to be less costly than the hospitals 
target price without the need for improving the coordination of care. 
Our analysis to the best of our ability presents the cost and transfer 
payment effects of this proposed rule. We solicit comment on the 
assumptions and analysis presented.
a. Assumptions and Uncertainties
    We used final action Medicare claims data from January 1, 2012 
through December 31, 2014 to simulate the impact that this model would 
have on Medicare spending for joint replacement episodes. This time 
period is consistent with the historical period that are proposing to 
use to calculate target prices for performance years 1 and 2 of the 
model as described in section III.C of this proposed rule (we note that 
for performance year 3 through 5, target prices would be calculated 
based on episodes that start between in the proposed period of January 
1, 2014 to December 31, 2016). Specifically we applied the methodology 
provided in this proposed rule for calculating target prices for all 
hospitals that would be required to participate in the model, as 
discussed in section III.A. of this proposed rule, based on their 
performance from calendar years 2012 through 2014. Specifically, all 
IPPS hospitals in the selected MSAs not currently participating in 
Model 1 or Phase II of BPCI Models 2 or 4 for the LEJR clinical episode 
were included in this analysis. We identified the anchor 
hospitalizations based on claims with MS-DRG 469 and MS-DRG 470 and 
included the related spending that occurred 90 days after discharge. We 
removed payments excluded from the episode as not being associated with 
joint replacement care, as well as removing the IPPS add-on payments 
including disproportionate share hospital and indirect medical 
educational payments, and new technology payments associated with the 
anchor hospitalization. We note that we have proposed other payment 
exclusions in the calculation of the episode target price, in comparing 
actual episode payments with target prices, and in determining whether 
a reconciliation payment should be made to the hospital or repayment 
from the hospital should be made as described in section III.C of this 
proposed rule. For the purpose of this impact analysis, we have only 
limited our calculations to remove the IPPS add-on payments for 
disproportionate share hospital and indirect medical educational 
payments, and new technology payments in calculating estimated target 
prices and in comparing the target price to actual episode payments. We 
then excluded

[[Page 41302]]

episodes where the anchor hospitalization occurred in hospitals that 
are not paid under the IPPS. With the remaining episodes, we 
standardized episode payments to remove the variation in spending due 
to differences in the hospital's wage index. We trended utilization and 
prices in 2012 and 2013 to match 2014 national performance, and we 
incorporated the proposed outlier policy to cap spending for high cost 
outlier episodes such that payments are capped at the MS-DRG anchor 
value that is two standard deviations above the mean as described in 
section III.C of this proposed rule. After we pooled episodes for MS-
DRGs 469 and 470, we calculated average episode prices for each 
hospital and census region, as well as a hospital-specific weight 
representing a case mix value for each hospital that is dependent only 
on episode volume for MS-DRGs 469 and 470, and the national anchor 
factor. We then calculated blended prices for each hospital, with 
prices set at two-thirds of the hospital's experience and one-third of 
the region's average experience for performance years 1 and 2 of the 
model, as one-third of the hospital's experience and two-thirds of the 
region's experience as used for performance year 3 of the model, and as 
the region's average experience for performance years 4 and 5 of the 
model. We made an exception for hospitals with low historical CCJR 
episode volume defined in this proposed rule as those with fewer than 
20 CCJR episodes in total across the 3 historical years, by setting 
their target price as the region's experience. These average prices 
were then disaggregated based on the national anchor factor of average 
episode spending for MS-DRG 470 relative to MS-DRG 469, the computed 
hospital-specific weight, the hospital's wage index was then applied 
back to the price, and a 2 percent discount was applied.
    After calculating target prices for MS-DRG 469 and 470 for each 
hospital appropriate for each performance year, we compared these 
target prices against actual performance in the 2014 calendar year. We 
capped actual spending for individual episodes based on the methodology 
in this proposed rule for high cost outlier spending episodes. After 
incorporating the proposed outlier policy, total Medicare FFS spending 
in the 2014 calendar year for each hospital was reconciled against the 
target price and total number of episodes for the hospital. The 
aggregate impacts were then determined by multiplying by the total 
episodes for each MS-DRG.
    We have proposed that the difference between each CCJR episode's 
actual payment and the relevant target price (calculated as target 
price subtracted by CCJR episode actual episode payment) would be 
aggregated for all episodes for a participant hospital within the 
performance year, creating the NPRA. Any positive NPRA amount greater 
than the proposed stop-gain limit would be capped at the stop-gain 
limit of 20 percent for each performance year of the model, and any 
negative NPRA amount exceeding the proposed stop-loss limit would be 
capped at the stop-loss limit as described in section III.C.8.b of this 
proposed rule. To limit a hospital's overall repayment responsibility 
under this model, we have proposed a 10 percent repayment limit in 
performance year 2 and a 20 percent repayment limit in performance year 
3 and subsequent years. For rural hospitals, MDHS, SCHs and RRCs, we 
have proposed a 3 percent repayment limit in performance year 2 and a 5 
percent repayment limit in performance year 3 and subsequent years. 
Furthermore, as described earlier in this proposed rule, in order for a 
participant hospital to qualify for a reconciliation payment, a 
hospital must meet or exceed the 30th percentile benchmark for each of 
the three proposed quality measures in performance years 1 through 3:
     Hospital-level risk-standardized complication rate 
following elective primary total hip arthroplasty (THA) and/or total 
knee arthroplasty (TKA) (NQF #1550)
     Hospital-level 30-day, all-cause risk-standardized 
readmission rate following elective primary total hip arthroplasty 
(THA) and/or total knee arthroplasty (TKA) (NQF #1551)
     HCAHPS Survey (NQF #0166).
    In performance years 4 through 5, a hospital must meet or exceed 
the 40th percentile benchmark for those proposed quality measures.
    To simulate the impact for performance year 1 or 2016, we 
calculated the NPRA assuming no downside risk to hospitals as proposed, 
and using the target price calculated for performance year 1, that is 
two-thirds hospital experience and one-third region experience. If the 
estimated NPRA is negative (that is, in the aggregate, the actual 
episode payments for all episodes is greater than the target price 
multiplied by the number of episodes) for performance year 1, Medicare 
would not require repayment of the NRPA from the hospital because we 
have proposed no hospital responsibility for repayment for the first 
performance year. Additionally, as part of this estimate, we accounted 
for whether a hospital met the quality benchmarks to be eligible for a 
reconciliation payment. Lastly, we have applied the proposed 20 percent 
stop-gain limit on the estimated reconciliation payments made to 
participant hospitals total reconciliation payments reflect what we 
would expect Medicare to pay hospitals due to normal claims variation, 
and due to a blended target price which rewards hospitals that already 
perform better than their regional average.
    To simulate the impact in performance year 2, we calculated the 
NPRA assuming full risk as proposed for this model, rewarding hospitals 
that perform better than their 2 percent discount that met the 30th 
percentile threshold for the complications, readmissions and HCAHPs 
quality metrics, but only requiring repayments from hospitals for total 
spending that is above a 1 percent discount. For the simulation in 
performance year 2, we used the target price calculated for performance 
year 2 that is two-thirds hospital experience and one-third regional 
experience. A 10 percent stop-loss limit was applied to repayments, and 
3 percent stop-loss limit was applied for rural hospitals, sole 
community hospitals, Medicare dependent hospitals, and rural referral 
centers, as proposed, and a 20 percent stop-gain limit was applied.
    To simulate the impact in performance year 3, we calculated the 
NPRA assuming full risk as proposed in the model and rewarding 
hospitals that perform better than their 2 percent discount and met the 
30th percentile thresholds for all three of the quality metrics, and 
requiring repayments from hospitals for total spending that is above 
the 2 percent discount. For the simulation in year 3, we used the 
target price calculated as one-third of the hospital's experience and 
two-thirds of the regional experience. We included a 20 percent stop-
gain limit for all hospitals, a 20 percent stop-loss limit on 
repayments from acute care hospitals included in this analysis, but 
used a 5 percent stop-loss limit on reconciliation repayments from 
rural hospitals, sole community hospitals, Medicare dependent 
hospitals, and rural referral centers, as proposed.
    For performance years 4 and 5, the impact estimates were calculated 
in the same way except that the episode target prices are based on 100 
percent of the regional experience, as proposed. Additionally, the 
impact estimates accounted for the proposal that a hospital must meet 
or exceed the 40th percentile benchmark for those proposed quality 
measures in order to be eligible for a reconciliation payment.

[[Page 41303]]

    In this proposed model, we are selecting a total of 75 MSAs from 8 
MSA groupings. IPPS hospitals located within the selected MSAs will be 
required to participate in this model unless they participate in BPCI 
as discussed earlier in this proposed rule in section III.A.
    Additionally, as described earlier in this proposed rule in section 
III.C.5, hospitals can qualify for a lower discount applied to their 
target episode price if they voluntarily submit patient-reported 
outcome measures data. More specifically, for hospitals that 
successfully submit patient-reported outcome measures data for episodes 
beginning in performance year 2, the discount percentage is reduced 
from 2 percent to 1.7 percent for purposes of determining the 
hospital's opportunity to receive reconciliation payment for actual 
episode spending below the target price, and reduce the discount 
percentage from 1 percent to 0.7 percent for purposes of determining 
the amount Medicare would require the hospital to repay. We modeled the 
effects of this proposal by re-running the simulation using a 1.7 
percent discount for all hospitals in performance years 2 through 5, 
and in performance year 2 only requiring repayments that are beyond a 
0.7 percent discount. We combined the simulations with a 2 percent 
discount and 1.7 percent discount by assuming that 33 percent of 
hospitals would submit the patient-reported outcome measures data.
    Additionally, we note for these estimates, we did not make 
assumptions for changes in efficiency or utilization over the course of 
the model. Over the 5 years of the model, we estimate $153 million 
dollars in savings to the Medicare program, out of $12.321 billion in 
total episode spending.

                                                Table 18: Proposed Estimates of Reconciliation Payments *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Year of proposed model                               Across all 5
                                                         --------------------------------------------------------------------------------  years of the
                                                               2016            2017            2018            2019            2020       proposed model
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total episode spending..................................          $2,261          $2,332          $2,447          $2,568          $2,713         $12,321
Net reconciliation payments**...........................              23            (29)            (43)            (50)            (53)           (153)
Reconciliation amounts..................................              23              24              47              63              66             223
Repayment amounts.......................................               0            (53)            (90)           (113)           (120)           (376)
Net reconciliation as a percentage of total episode                 1.0%          (1.3%)          (1.7%)          (2.0%)          (2.0%)          (1.2%)
 spend..................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Impact for 75 selected MSAs. All numbers rounded to closest million.
** Sum of reconciliation amount and repayment amount may not add to net reconciliation payment due to rounding.

    These estimates contain a significant amount of uncertainty. As a 
result, this proposed model could produce more significant Medicare 
savings or could result in additional costs to the Medicare program. 
The primary source of uncertainty stems from the normal variation in 
claim cost trends each year coupled with the proposed cap on the 
repayment made at reconciliation. In addition, this analysis assumes no 
change in utilization both for the use of services within the bundled 
episode, as well as no change in total episodes among hospitals. The 
prospective prices for the proposed CCJR model incorporate price 
updates from the FFS payment systems, but assume no change in 
utilization for the performance years. If there is a national increase 
in utilization within each bundle that is independent of this model, 
then savings to the Medicare program may increase due to greater 
repayments paid back to Medicare. If there is a national decrease in 
utilization within each bundle that is independent of this model then 
costs to the Medicare program may increase due to greater 
reconciliation payments paid by Medicare to hospitals. The results will 
also depend on the cumulative effects over time and across providers on 
whether and how to change either actual medical procedures or the 
allocations of payments among service providers. We would expect 
significant variation among hospitals and among metropolitan areas, but 
are unable to predict these.
    Additionally, although we project savings to Medicare under this 
proposed model, as stated earlier, we note that under section 
1115A(b)(3)(B) of the Act, the Secretary is required to terminate or 
modify a model unless certain findings can be made with respect to 
savings and quality after the model has begun. If during the course of 
testing the model it is determined that termination or modification is 
necessary, such actions would be undertaken through rulemaking.
b. Analyses
    The first performance year of the model is expected to cost the 
Medicare program $23 million in reconciliation payments made by CMS to 
hospitals. We have proposed that no repayments from hospitals will be 
assessed because hospitals are not subject to downside risk in 
performance year 1. Hospitals that would receive reconciliation 
payments are the hospitals that provide lower cost care relative to 
their regional average.
    In the second performance year of the model, participant hospitals 
on net are expected to pay $29 million to CMS. We have proposed a 10 
percent stop-loss limit for acute care hospitals, with exception for 
rural hospitals, sole community hospitals, Medicare dependent 
hospitals, and rural referral center hospitals which would be subject 
to a 3 percent stop-loss limit. These limits would cap the total amount 
of repayments paid by hospitals to CMS.
    In the third performance year of the model, net reconciliation 
payments are expected to be $43 million in savings to the Medicare 
program. The additional savings in performance year 3 compared to 
performance year 2 can be attributed to receiving repayments from 
hospitals for total spending that is above a 1 percent discount in 
performance year 2, while in performance year 3, we would require 
repayments from hospitals for total spending that is above a 2 percent 
discount.
    For performance years 4 and 5 of the model, the proposed episode 
target price will be based on full regional pricing. This creates great 
variation between the target price and hospital's own experience. 
Therefore, the stop-gain and stop-loss limits on reconciliation 
payments are estimated to have a larger impact. As a result, net 
payments are expected to be $50 million dollars from hospitals to the 
Medicare program in the fourth year and $53 million in the fifth year. 
Savings to the Medicare program increases as a higher proportion of 
hospitals that provide care more efficiently than their regional 
average will forego reconciliation

[[Page 41304]]

payments due to failure to meet the proposed thresholds on all three of 
the quality of care measures. These estimated savings in years 4 and 5 
represent 2.0 percent of total episode spending in those years. The 
proposed total savings to the Medicare program after 5 years of the 
model are expected to be $153 million dollars out of $12.321 billion 
dollars or 1.2 percent in total episode spending. Due to the 
uncertainty of estimating this model, actual results could be 
significantly higher or lower than this estimate.
c. Further Consideration
    We can use our experience in previous implementation of bundled 
payment models to help inform our impact analyses. We have previously 
used our statutory authority to create payment models such as the BPCI 
initiative and the ACE Demonstration to test bundled payments. Under 
the authority of section 1866C of the Act, CMS funded a 3-year 
demonstration, the ACE Demonstration. The demonstration used a 
prospective global payment for a single episode of care as an 
alternative approach to payment for service delivery under traditional 
Medicare FFS. The episode of care was defined as a combination of Parts 
A and B services furnished to Medicare FFS beneficiaries during an 
inpatient hospital stay for any one of a specified set of cardiac and 
orthopedic MS DRGs. The MS DRGs tested included 469 and 470, those 
proposed for inclusion in the CCJR model. The discounted bundled 
payments generated an average gross savings to Medicare of $585 per 
episode for a total of $7.3 million across all episodes (12,501 
episodes) or 3.1 percent of the total expected costs for these 
episodes. After netting out the savings produced by the Medicare Parts 
A and B discounted payments and some increased post-acute care costs 
that were observed at two sites, Medicare saved approximately $4 
million, or 1.72 percent of the total expected Medicare spending. 
Additionally, we are currently testing the BPCI initiative. Under the 
initiative, entities enter into payment arrangements with CMS that 
include financial and performance accountability for episodes of care. 
Episodes of care under the BPCI initiative begin with either an--(1) 
inpatient hospital stay; or (2) post-acute care services following a 
qualifying inpatient hospital stay and include tests of LEJR episodes. 
The BPCI initiative is evaluating the effects of episode based payment 
approaches on patient experience of care, outcomes, and cost of care 
for Medicare FFS beneficiaries. Although there is limited evidence from 
BPCI and ACE suggesting that providers may improve their performance, 
both of these demonstrations were voluntary, and the participants that 
volunteered for these demonstrations may be in a better position to 
reduce episode spending relative to the average provider. We believe 
that our experiences with BPCI support the proposed design of the CCJR 
Model.
3. Effects on Beneficiaries
    In 2014, approximately 430,000 Medicare beneficiaries had 
discharges for lower extremity joint replacements (MS-DRG 469 and MS-
DRG 470) nationally. We anticipate that the CCJR model may benefit 
beneficiaries receiving lower extremity joint replacements because the 
intent of the model is to test whether providers under this bundled 
payment system are able to improve the coordination and transition of 
care, invest in infrastructure and redesigned care processes for high 
quality and efficient service delivery, and incentivize higher value 
care across the inpatient and post-acute care spectrum spanning the 
episode of care. We believe the model has a patient-centered focus such 
that healthcare delivery and communication on the patient and those who 
are close to the patient and bases the care and communication delivered 
around the needs of the beneficiary, thus benefitting the beneficiary 
community.
    We have proposed several quality of care and patient experience 
measures to evaluate participant hospitals in the CCJR model with the 
intent that it will encourage the provider community to focus on and 
deliver improved quality care for the Medicare beneficiary. We are 
proposing to adopt and publicly report three hospital level quality of 
care measures for the CCJR model. Those measures include a complication 
measure, readmission measure, and a patient experience survey measure. 
In addition, we are proposing to voluntarily collect data to develop a 
hospital-level measure of patient reported outcomes following an 
elective primary total hip or total knee arthroplasty. We propose to 
use these measures to test the success of the model and to monitor for 
beneficiary safety. Additionally, participant hospitals must meet the 
proposed quality performance standards in order to qualify to receive a 
reconciliation payment. The accountability of participant hospitals for 
both quality and cost of care provided for Medicare beneficiaries with 
an LEJR episode provides the hospitals with new incentives to improve 
the health and well-being of the Medicare beneficiaries they treat.
    Additionally, the model does not affect the beneficiary's freedom 
of choice to obtain health services from any individual or organization 
qualified to participate in the Medicare program guaranteed under 
section 1802 of the Act. Under the CCJR model, eligible beneficiaries 
who choose to receive services from a participant hospital would not 
have the option to opt out of inclusion in the model. Although the 
proposed model allows hospitals to enter into risk-sharing arrangements 
with certain other providers and these hospitals may recommended those 
providers to the beneficiary, hospitals may not prevent or restrict 
beneficiaries to any list of preferred or recommended providers.
    Many controls exist under Medicare to ensure beneficiary access and 
quality and we have proposed to use our existing authority, if 
necessary, to audit participant hospitals if claims analysis indicates 
an inappropriate change in delivered services. As described earlier in 
this proposed rule, given that participant hospitals would receive a 
reconciliation payment when they are able to reduce average costs per 
case and meet quality thresholds, they could have an incentive to avoid 
complex, high cost cases by referring them to nearby facilities or 
specialty referral centers. We intend to monitor the claims data from 
participant hospitals--for example, to compare a hospital's case mix 
relative to a pre-model historical baseline to determine whether 
complex patients are being systematically excluded. Furthermore, we 
also proposed to require providers to supply beneficiaries with written 
information regarding the design and implications of this model as well 
as their rights under Medicare, including their right to use their 
provider of choice.
    We have proposed to implement several safeguards to ensure that 
Medicare beneficiaries do not experience a delay in services. We 
believe that the longer the episode duration, the lower the risk of 
delaying care beyond the episode duration, and we believe that a 90 day 
episode is sufficiently long to minimize the risk that any lower 
extremity joint replacement related care will be delayed beyond the end 
of the episode. Moreover, we have proposed as part of the payment 
definition (see section III.C of this proposed rule) that certain 
outlier costs post-episode payments occurring in the 30 day window 
subsequent to the end of the 90-day episode will be counted as an

[[Page 41305]]

adjustment against savings. Importantly, approaches to saving costs 
will include taking steps that facilitate patient recovery, that 
shorten recovery duration, and that minimize post-operative problems 
that might lead to readmissions. Thus, the model itself rewards better 
patient care.
    Lastly, we note that Medicare payments for services will continue 
to be made for each Medicare FFS payment system under this model, and 
will include normal beneficiary copayments, deductibles, and 
coinsurance. We expect and assume that beneficiary payments will not be 
affected, as only the hospital will be subject to the reconciliation 
process. Beneficiaries may benefit if providers are able to 
systematically improve the quality of care while reducing costs. We 
welcome public comments on our estimates of the impact of our proposals 
on Medicare beneficiaries.
4. Effects on Small Entities
    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities, either by virtue of 
their nonprofit status or by qualifying as small businesses under the 
Small Business Administration's size standards (revenues of less than 
$7.5 to $38.5 million in any 1 year; NAIC Sector-62 series). States and 
individuals are not included in the definition of a small entity. For 
details, see the Small Business Administration's Web site at http://www.sba.gov/content/small-business-size-standards.
    For purposes of the RFA, we generally consider all hospitals and 
other providers and suppliers to be small entities. We believe that the 
provisions of this proposed rule relating to acute care hospitals would 
have some effects on a substantial number of other providers involved 
in these episodes of care including surgeons and other physicians, 
skilled nursing facilities, physical therapists, and other providers.
    Although we acknowledge that many of the affected entities are 
small entities, and the analysis discussed throughout this proposed 
rule discusses aspects of the model that may or will affect them, we 
have no reason to assume that these effects will reach the threshold 
level of 5 percent of revenues used by HHS to identify what are likely 
to be ``significant'' impacts. Although lower extremity joint 
replacement procedures (MS-DRGs 469 and 470) are among the most common 
surgical procedures undergone by Medicare beneficiaries, they are only 
about 5 percent of all acute hospital discharges.\81\ We assume that 
all or almost all of these entities will continue to serve these 
patients, and to receive payments commensurate with their cost of care. 
Such changes occur frequently already (for example, as both hospital 
affiliations and preferred provider networks change), and we have no 
reason to assume that this will change significantly under the model.
---------------------------------------------------------------------------

    \81\ Medicare Inpatient Claims data from January-December 2014, 
Chronic Conditions Warehouse.
---------------------------------------------------------------------------

    Accordingly, we have determined that this proposed rule will not 
have a significant impact on a substantial number of small entities. We 
solicit public comments on our estimates and analysis of the impact of 
our proposals on those small entities.
5. Effects on Small Rural Hospitals
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis if a proposed rule or final rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Act, a 
small rural hospital is defined as a hospital that is located outside 
of an MSA and has fewer than 100 beds. We note that, according to this 
definition, the CCJR model would not include any rural hospitals given 
that the CCJR model would only include hospitals located in MSAs, as 
proposed in section III.A. However, we also note that as discussed in 
section III.C.8., for purposes of our proposal to include a more 
protective stop-loss policy for certain hospitals, we are proposing to 
define a rural hospital as an IPPS hospital that is either located in a 
rural area in accordance with Sec.  412.64(b) or in a rural census 
tract within an MSA defined at Sec.  412.103(a)(1) or has reclassified 
to rural in accordance with Sec.  412.103. Thus, the proposed model 
will affect some rural hospitals, as discussed previously in section 
III.C.8 of this proposed rule.
    Because of our concerns that rural hospitals may have lower risk 
tolerance and less infrastructure and support to achieve efficiencies 
for high payment episodes, we have proposed additional financial 
protections for certain categories of hospitals, including rural 
hospitals. In performance year 2, a hospital could owe Medicare no more 
than 10 percent of the target price multiplied by the number of the 
hospital's LEJR episodes in CCJR as we phase in repayment 
responsibility under the model. In performance year 3 and beyond when 
full repayment responsibility is in place, no more than 20 percent of 
the target price multiplied by the number of the hospital's LEJR 
episodes in CCJR could be owed by a hospital to Medicare. However, for 
rural hospitals, Medicare Dependent Hospitals, Rural Referral Centers 
and Sole Community, we proposed a stop loss limit policy of 3 percent 
of episode payments for these categories of hospitals. More 
specifically, in performance year 2, a hospital could owe Medicare no 
more than 3 percent of the target price multiplied by the number of the 
hospital's episodes in CCJR. In performance years 3 through 5, a 
hospital could owe Medicare no more than 5 percent of the target price 
multiplied by the number of the hospital's episodes. Although we 
propose these additional protections, we believe that few rural 
hospitals will be included in the model, and therefore that few will 
need those protections.
    Because lower extremity joint replacement procedures (MS-DRGs 469 
and 470) account for only about 5 percent of all discharges, because 
relatively few of these procedures are performed at small rural 
hospitals, and because our model is designed to minimize adverse 
effects on rural hospitals, we do not believe that rural hospitals will 
experience significant adverse economic impacts. Accordingly, we 
conclude that this proposed rule would not have a significant impact on 
the operations of a substantial number of small rural hospitals.
    We are soliciting public comments on our estimates and analysis of 
the impact of our proposals on those small rural hospitals.
6. Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2015, that 
is approximately $144 million. This proposed rule does not include any 
mandate that would result in spending by state, local or tribal 
governments, in the aggregate, or by the private sector in the amount 
of $144 million in any 1 year.

[[Page 41306]]

D. Alternatives

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

E. Accounting Statement

    As required by OMB Circular A-4 under Executive Order 12866 
(available at http://www.whitehouse.gov/omb/circulars_a004_a-4) in 
Table 19, we have prepared an accounting statement showing the 
classification of transfers, benefits, and costs associated with the 
provisions in this proposed rule. The accounting statement is based on 
estimates provided in this regulatory impact analysis. Because of the 
uncertainties identified in establishing the economic impact estimates, 
we intend to update the estimates in the final rule. As described in 
Table 18, we estimate this proposed model will result in savings to the 
federal government of $153 million over the 5years of the model from 
2016 to 2020. The following Table 19 shows the annualized change in (A) 
net federal monetary transfers, and (B) potential reconciliation 
payments to participating hospitals net of repayments from participant 
hospitals that is associated with the provisions of this proposed rule 
as compared to baseline. In Table 19, the annualized change in payments 
based on a 7 percent and 3 percent discount rate, results in net 
federal monetary transfer from the participant IPPS hospitals to the 
federal government of $28 million and $30 million respectively.

            Table 19--Accounting Statement Estimated Impacts
------------------------------------------------------------------------
                                                        Source citation
            Category               Primary estimate     (RIA, preamble,
                                                             etc.)
------------------------------------------------------------------------
BENEFITS:
    Annualized monetized          $28 million.......  Change from
     transfers: Discount rate:                         baseline to
     7%.                                               proposed changes
                                                       (Table 18).
    Annualized monetized          $30 million.......
     transfers: Discount rate:
     3%.
                                 ---------------------------------------
    From whom to whom?..........  From Participant IPPS Hospitals to
                                   Federal Government.
------------------------------------------------------------------------

F. Conclusion

    The preceding analysis, together with the remainder of this 
preamble, provides the Regulatory Impact Analysis of a rule with a 
significant economic effect. As a result of this proposed rule, we 
estimate of the financial impact of the CCJR model for CYs 2016 through 
2020 would be net federal savings of $153 million over a 5 year period. 
The annualized change in payments based on a 7 percent and 3 percent 
discount rate, results in net federal monetary transfer from the 
participant IPPS hospitals to the federal government of $28 million and 
$30 million respectively.
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the Office of Management and Budget.

List of Subjects for 42 CFR Part 510

    Administrative practice and procedure, Health facilities, Medicare, 
Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, under the authority at 
section 1115A of the Social Security Act, the Centers for Medicare & 
Medicaid Services proposes to amend 42 CFR Chapter IV as follows:

0
1. Revise the heading of Subchapter H to read as follows:

SUBCHAPTER H--HEALTH CARE INFRASTRUCTURE AND MODEL PROGRAMS

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

PART 510--COMPREHENSIVE CARE FOR JOINT REPLACEMENT MODEL

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


[[Page 41307]]


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

Subpart A--General Provisions


Sec.  510.1  Basis and scope.

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


Sec.  510.2  Definitions.

    For the purposes of this part, the following definitions are 
applicable:
    ACO stands for Accountable Care Organization.
    Actual episode payment means the sum of Medicare claims payments 
for items and services that are included in the episode in accordance 
with Sec.  510.200(b), excluding the items and services described in 
Sec.  510.200(d) and the incentive programs and add-on payments 
specified in Sec.  510.320, and subject to the cap described in Sec.  
510.300(b)(4).
    Alignment payment means a payment from a Comprehensive Care for 
Joint Replacement collaborator to a participant hospital under a 
Comprehensive Care for Joint Replacement sharing arrangement.
    Anchor hospitalization means the initial hospital stay upon 
admission for a lower extremity joint replacement.
    BPCI stands for the Bundled Payments for Care Improvement 
initiative.
    CCJR stands for Comprehensive Care for Joint Replacement.
    CCJR collaborator means one of the following persons or entities 
that enter into a CCJR sharing arrangement:
    (1) Skilled nursing facility.
    (2) Home health agency.
    (3) Long-term care hospital.
    (4) Inpatient rehabilitation facility.
    (5) Physician.
    (6) Nonphysician practitioner.
    (7) Outpatient therapy provider.
    (8) Physician group practice.
    CCJR-eligible hospital means a hospital that is paid under IPPS and 
not a participant in BPCI Model 1 or in the risk-bearing period of 
Models 2 or 4 for LEJR episodes, regardless of whether or not the 
metropolitan statistical area in which the hospital is located is 
selected for inclusion in the CCJR model.
    CCJR reconciliation report means the report prepared after each 
reconciliation that CMS provides to each participant hospital notifying 
the participant hospital of the outcome of the reconciliation.
    CCJR sharing arrangement means a financial arrangement between a 
participant hospital and a CCJR collaborator for the sole purpose of 
sharing the following:
    (1) CCJR reconciliation payments.
    (2) The participant hospital's internal cost savings.
    (3) The participant hospital's responsibility for repayment to 
Medicare.
    Core-based statistical area (CBSA) means a statistical geographic 
entity consisting of the county or counties associated with at least 
one core (urbanized area or urban cluster) of at least 10,000 
population, plus adjacent counties having a high degree of social and 
economic integration with the core as measured through commuting ties 
with the counties containing the core.
    Critical access hospital (CAH) means a hospital designated under 
subpart F of part 485 of this chapter.
    Episode of care (Episode) means all Medicare Part A and B items and 
services described in Sec.  510.200(b) (and excluding the items and 
services described in Sec.  510.200(d)) that are furnished to a 
beneficiary described in Sec.  510.205 during the time period that 
begins with such beneficiary's admission to an anchor hospitalization 
and ends 90 days after discharge from the anchor hospitalization.
    Episode target price means the amount determined in accordance with 
Sec.  510.300 and applied to an episode in determining a net payment 
reconciliation amount.
    Gainsharing payment means a payment from a participant hospital to 
a CCJR collaborator, under a CCJR sharing arrangement, composed of only 
reconciliation payments or internal cost savings or both.
    Historical episode payment means the most recent 3 years of 
expenditures for an episode in a given participant hospital.
    Hospital means a hospital subject to the prospective payment system 
specified in Sec.  412.1(a)(1) of this chapter.
    ICD-CM stands for International Classification of Diseases, 
Clinical Modification.
    Inpatient prospective payment systems (IPPS) means the payment 
systems for subsection (d) hospitals as defined in section 
1886(d)(1)(B) of the Act.
    Internal cost savings means the measurable, actual, and verifiable 
cost savings realized by the participant hospital resulting from care 
redesign undertaken by the participant hospital in connection with 
providing items and services to beneficiaries within specific CCJR 
episodes of care. Internal cost savings does not include savings 
realized by any individual or entity that is not the participant 
hospital.
    Lower-extremity joint replacement (LEJR) means any procedure that 
is within MS-DRG 469 or 470, including lower-extremity joint 
replacement procedures or reattachment of a lower extremity.
    Medicare severity diagnosis-related group (MS-DRG) means a patient 
classification system for inpatient discharges and adjusting payments 
under the IPPS.
    Medicare-dependent, small rural hospital (MDH) means a specific 
type of hospital that meets the classification criteria specified under 
Sec.  412.108 of this chapter.
    Metropolitan Statistical Area (MSA) means a core-based statistical 
area associated with at least one urbanized area that has a population 
of at least 50,000.
    Net payment reconciliation amount (NPRA) means the amount 
determined in accordance with Sec.  510.305(e).
    NPI stands for National Provider Identifier.
    OIG stands for the Department of Health and Human Services', Office 
of the Inspector General.
    Participant hospital means an IPPS hospital (other than those 
hospitals specifically excepted under Sec.  510.100(b)) that is 
physically located in one of the geographic areas selected for 
participation in the CCJR model in accordance with Sec.  510.105, as of 
the date of selection or any time thereafter during any performance 
period.
    Participation agreement means a written, signed agreement between a 
CCJR collaborator and a participant hospital that meets the 
requirements of Sec.  510.500(c).
    PBPM stands for per-beneficiary-per-month.

[[Page 41308]]

    Performance year means one of the calendar years in which the CCJR 
model will be tested.
    Post-episode spending amount means the sum of Medicare Parts A and 
B payments for items and services that are furnished within 30 days 
after the end of the episode.
    Reconciliation payment means a payment of the NPRA made to a CCJR 
participant hospital.
    Region means one of the nine U.S. census divisions, as defined by 
the U.S. Census Bureau.
    Rural hospital means a hospital that meets one of the following 
definitions:
    (1) Is located in a rural area as defined under Sec.  412.64 of 
this chapter.
    (2) Is located in a rural census tract defined under Sec.  
412.103(1) of this chapter.
    (3) Has reclassified as a rural hospital under Sec.  412.103 of 
this chapter.
    Rural referral center (RRC) has the same meaning given this term 
under Sec.  412.96 of this chapter.
    Sole community hospital (SCH) means a certain type of hospital that 
meets the classification criteria specified in Sec.  412.92 of this 
chapter.
    TIN stands for Taxpayer Identification Number.
    Total episode payments means the total Medicare FFS Parts A and B 
claims for an episode.

Subpart B--Comprehensive Care for Joint Replacement Program 
Participants


Sec.  510.100  Episodes being tested.

    (a) Initiation of an episode. An episode is initiated when a 
participant hospital admits a Medicare beneficiary described in Sec.  
510.205 for an anchor hospitalization.
    (b) Exclusions. A hospital is excluded from being a participant 
hospital if any of the following conditions apply on or after July 1, 
2015:
    (1) The hospital is an episode initiator for an LEJR episode in the 
risk-bearing period of Models 2 or 4 of the BPCI. This exclusion ceases 
to apply to the hospital upon any termination of its participation as 
an episode initiator for a lower-extremity joint replacement episode.
    (2) The hospital is participating in Model 1 of the BPCI. This 
exclusion ceases to apply to the hospital upon any termination of its 
participation in BPCI in Model 1.


Sec.  510.105  Geographic areas.

    (a) General. The geographic areas for inclusion in the CCJR model 
are obtained using a stratified random sampling of certain MSAs in the 
United States. All counties within each of the selected MSAs are 
selected for inclusion in the CCJR model.
    (b) Stratification criteria. Geographic areas in the United States 
are stratified according to the characteristics that CMS determines are 
necessary to ensure that the model is tested on a broad range of 
different types of hospitals that may face different obstacles and 
incentives for improving quality and controlling costs.
    (c) Exclusions. CMS excludes from the selection of geographic areas 
MSAs that met the following criteria between July 1, 2013 and June 30, 
2014:
    (1) Had fewer than 400 episodes;
    (2) Had fewer than 400 non-BPCI episodes;
    (3) Had at least 400 non-BPCI episodes, but--
    (i) Had more than 50 percent of otherwise qualifying (BPCI or non 
BPCI) episodes in Phase 2 of BPCI Model 2 or 4 with hospital episode 
initiators; or
    (ii) Had more than 50 percent of otherwise qualifying (BPCI or non-
BPCI) episodes treated in a SNF or HHA that were treated in a BPCI 
Model 3 initiating provider;
    (4) Had more than 50 percent of episodes that were paid under the 
Maryland State Waiver System, if any part of the MSA was located in 
Maryland.

Subpart C--Scope of Episodes


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

    (a) Time periods. All episodes being tested in the CCJR model begin 
on or after January 1, 2016 and end on or before December 31, 2020.
    (b) Included services. All Medicare Parts A and B items and 
services are included in the episode, except as specified in paragraph 
(d) of this section. These services include, but are not limited to, 
the following:
    (1) Physicians' services.
    (2) Inpatient hospital services (including hospital readmissions).
    (3) Inpatient hospital readmission services.
    (4) Inpatient psychiatric facility (IPF) services.
    (5) Long-term hospital care (LTCH) services.
    (6) Inpatient rehabilitation facility (IRF) services.
    (7) Skilled nursing facility (SNF) services.
    (8) Home health agency (HHA) services.
    (9) Hospital outpatient services.
    (10) Independent outpatient therapy services.
    (11) Clinical laboratory services.
    (12) Durable medical equipment (DME).
    (13) Part B drugs and biologicals.
    (14) Hospice services.
    (15) PBPM payments under models tested under section 1115A of the 
Act.
    (c) Episode attribution. All items and services included in the 
episode (as described in paragraph (b) of this section) are attributed 
to the participant hospital at which the anchor hospitalization occurs.
    (d) Excluded services. The following items, services, and payments 
are excluded from the episode:
    (1) Hemophilia clotting factors provided in accordance with Sec.  
412.115 of this chapter.
    (2) New technology add-on payments, as defined in part 412, subpart 
F of this chapter.
    (3) Items and services unrelated to the anchor hospitalization, as 
determined by CMS. Such excluded services include, but are not limited 
to, the following:
    (i) Inpatient hospital admissions for MS-DRGs that group to the 
following categories of diagnoses:
    (A) Oncology.
    (B) Trauma medical.
    (C) Chronic disease surgical, such as prostatectomy.
    (D) Acute disease surgical, such as appendectomy.
    (ii) Medicare Part B services as identified by the principal ICD-CM 
diagnosis code, based on the ICD-CM version in use during the 
performance year, on the claim that group to the following categories 
of diagnoses:
    (A) Acute disease diagnoses, such as severe head injury.
    (B) Certain chronic disease diagnoses, as specified by CMS on a 
diagnosis-by-diagnosis--basis depending on whether the condition was 
likely to have been affected by the lower-extremity joint replacement 
procedure and recovery period or whether substantial services were 
likely to be provided for the chronic condition during the episode. 
Such chronic disease diagnoses are posted on the CMS Web site and may 
be revised in accordance with paragraph (e) of this section.
    (C) Certain PBPM payments under models tested under section 1115A 
of the Act. PBPM model payments are excluded if they are determined to 
be primarily used for care coordination or care management services for 
clinical conditions in excluded categories of diagnoses, as described 
in this paragraph. The list of excluded PBPM payments is posted on the 
CMS Web site and is updated consistent with the following. 
Notwithstanding the foregoing, all PBPM model payments

[[Page 41309]]

funded from CMMI's appropriation are excluded from the episode.
    (1) The list of excluded PBPM payments will be posted on the CMS 
Web site.
    (2) On an annual basis, or more frequently as needed, CMS updates 
the list of excluded PBPM payments.
    (3) Criteria for exclusion of PBPM payments under certain models 
tested under section 1115A of the Act. Model PBPM payments are excluded 
from episode target price and actual episode payments if determined to 
be primarily used for care coordination or care management services for 
clinical conditions in excluded categories of diagnoses, as described 
in paragraph (d) of this section.
    (4) Updating the list of excluded PBPM payments to account for new 
models.
    CMS posts potential new exclusions of PBPM payments to the CMS Web 
site to allow for public comment and finalize and post to the CMS Web 
site the updated exclusions list after consideration of public input.
    (D) Previous years' reconciliation or repayment amounts are not 
included in the episode for purposes of calculating episode target 
prices (Sec.  510.300) or total episode payments during a performance 
period.
    (e) Updating the lists of excluded services. (1) The list of 
excluded MS-DRGs and ICD-CM diagnosis codes are posted on the CMS Web 
site.
    (2) On an annual basis, or more frequently as needed, CMS updates 
the list of excluded services to reflect annual coding changes or other 
issues brought to CMS's attention.
    (3) CMS applies the following standards when revising the list of 
excluded services for reasons other than to reflect annual coding 
changes:
    (i) Items or services that are directly related to the LEJR 
procedure or the quality or safety of LEJR care would be included in 
the episode.
    (ii) Items or services for chronic conditions that may be affected 
by the LEJR procedure or post-surgical care would be related and 
included in the episode.
    (iii) Items and services for chronic conditions that are generally 
not affected by the LEJR procedure or post-surgical care would be 
excluded from the episode.
    (iv) Items and services for acute clinical conditions not arising 
from existing, episode-related chronic clinical conditions or 
complications of LEJR surgery would be excluded from the episode.
    (4) CMS posts the following to the CMS Web site:
    (i) Potential revisions to the exclusion to allow for public 
comment; and
    (ii) An updated exclusions list after consideration of public 
comment.


Sec.  510.205  Beneficiary inclusion criteria.

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


Sec.  510.210  Determination of the episode.

    (a) General. The episode begins with the admission of a Medicare 
beneficiary described in Sec.  510.205 to a participant hospital for an 
anchor hospitalization and ends 90 calendar days after discharge from 
the anchor hospitalization.
    (b) Cancellation of an episode. The episode is cancelled and is not 
included in the determination of NPRA as specified in Sec.  510.305 if 
the beneficiary does any of the following:
    (1) Ceases to meet any criterion listed in Sec.  510.205 at any 
time during the episode.
    (2) Is readmitted to any participant hospital during the episode 
for another anchor hospitalization;
    (3) Initiates an LEJR episode under BPCI
    (4) Dies during the anchor hospitalization.

Subpart D--Pricing and Payment


Sec.  510.300  Determination of episode target prices.

    (a) General. CMS establishes episode target prices for participant 
hospitals for each performance year the model as specified in this 
section. Episode target prices are established according to the 
following:
    (1) MS-DRG assigned at discharge for anchor hospitalization--
    (i) MS-DRG 469; or
    (ii) MS-DRG 470.
    (2) Applicable time period for performance period episode target 
prices. Episode target prices are be updated to account for midyear 
payment updates no less than twice per year, for updated episode target 
prices effective October 1 and January 1, and at other intervals if 
necessary.
    (3) Episodes that straddle performance years or midyear payment 
updates. Episode target prices apply for the time period in which the 
date of the anchor hospitalization admission occurs.
    (4) Adjustments for quality reporting, as discussed in Sec.  
510.305(g).
    (b) Episode target price. (1) CMS calculates episode target prices 
based on a blend of each participant hospital's most recent 3 years of 
expenditures for an episode and the most recent 3 years of expenditures 
for an episode in the region in which the participant hospital is 
physically located. Specifically, the blend consists of the following:
    (i) Two-thirds of the participant hospital's own historical episode 
payments and one-third of the regional historical episode payments for 
performance years 1 and 2.
    (ii) One-third of the hospital's own historical episode payments 
and two-thirds of the regional historical episode payments for 
performance year 3.
    (iii) Regional historical episode payments for performance years 4 
and 5.
    (2) Exception for low-volume hospitals. Episode target prices for 
participant hospitals with fewer than 20 CCJR episodes in total across 
the 3 historical years of data used to calculate the episode target 
price are based on 100 percent regional historical episode payments.
    (3) Exception for recently merged or split or altogether new 
hospitals. (i) Hospital-specific historical payments for recently 
merged or split hospitals would incorporate the historical episodes 
attributed to their previous entities.
    (ii) New hospitals (with new CMS provider agreements) would receive 
target prices using the same blended approach and low-volume policy for 
existing hospitals as described in in this section.
    (4) Exception for high episode spending in baseline period. 
Historical episode payments are capped at 2 standard deviations above 
the mean episode payment for purposes of calculating the episode target 
prices.
    (5) Exclusion of incentive programs and add-on payments under 
existing Medicare payment systems. Certain incentive programs and add-
on payments are excluded, as applicable, from target price and total 
episode payment calculations by using the CMS

[[Page 41310]]

Price Standardization methodology used for the Medicare spending per 
beneficiary measure in the Hospital Value-Based Purchasing Program.
    (6) Communication of episode target prices. CMS communicates 
episode target prices to participant hospitals before the performance 
period in which they apply for performance years 2 through 5, and 
before or shortly after the start of performance year 1.
    (c) Discount factor. A participant hospital's episode target prices 
incorporate applicable discount factors to reflect Medicare's portion 
of reduced expenditures from the CCJR model as described in this 
section.
    (1) Except as provided in paragraph (c)(2) of this section, the 
applicable discount factor is for a participant hospital that--
    (i) Does not successfully submit voluntary patient-reported outcome 
data for that performance year as provided in Sec.  510.400(b) is 2.0 
percent.
    (ii) Successfully submits voluntary patient-reported outcome data 
for that performance year as provided in Sec.  510.400(b) is 1.7 
percent.
    (2) For performance year 2 only, if the participant hospital's NPRA 
(defined in section Sec.  510.305(e)) would be negative using the 
applicable discount factor under paragraph (c)(1) of this section, then 
for purposes of determining the participant hospital's NPRA, the 
discount factor is applied in lieu of the applicable discount factor 
under paragraph (c)(1) of this section for a participant hospital 
that--
    (i) Successfully submits the voluntary patient-reported outcomes 
data for performance year 2 as provided in Sec.  510.400(b) is 0.7 
percent.
    (ii) Does not successfully submit the voluntary patient-reported 
outcomes data for performance year 2 as provided in Sec.  510.400(b), 
is 1 percent.
    (d) Data sharing. (1) CMS makes available to participant hospitals, 
through the most appropriate means, data that CMS determines may be 
useful to participant hospitals to do the following:
    (i) Determine appropriate ways to increase the coordination of 
care.
    (ii) Improve quality.
    (iii) Enhance efficiencies in the delivery of care.
    (iv) Otherwise achieve the goals of the CCJR model described in 
this section.
    (2) Beneficiary-identifiable data. (i) CMS makes beneficiary-
identifiable data available to a participant hospital in accordance 
with applicable privacy laws and only in response to the hospital's 
request for such data for a beneficiary who has been furnished a 
billable service by the participant hospital corresponding to the 
episode definitions for CCJR and has not chosen to opt out of claims 
data sharing.
    (ii) The minimum data necessary to achieve the goals of the CCJR 
model, as determined by CMS, may be provided under this section for a 
participant hospital's baseline period and as frequently as on a 
quarterly basis throughout the hospital's participation in the CCJR 
model.


Sec.  510.305  Determination of the NPRA and reconciliation process.

    (a) General. Providers and suppliers furnishing items and services 
included in the episode bill for such items and services in accordance 
with existing rules and as if this part were not in effect.
    (b) Reconciliation. Medicare uses a series of reconciliation 
processes, which CMS performs as described in paragraphs (d) and (f) of 
this section after the end of each performance year, to establish final 
payment amounts to participant hospitals for CCJR episodes for a given 
performance year. Following the end of each performance year, CMS 
determines actual episode payments for each episode for the performance 
year (other than episodes that have been canceled in accordance with 
Sec.  510.210(b)) and determines the amount of a reconciliation or 
repayment amount.
    (c) Data used. CMS uses the most recent claims data available to 
perform each reconciliation calculation.
    (d) Annual reconciliation. (1) Two months after the end of each 
performance year, CMS performs a reconciliation calculation to 
establish an NPRA for each participant hospital.
    (2) CMS--
    (i) Calculates the NPRA for each participant hospital in accordance 
with Sec.  510.305(e) including the adjustments provided for in Sec.  
510.305(e)(5); and
    (ii) Assesses whether hospitals meet specified quality requirements 
under Sec.  510.315.
    (e) Calculation of the NPRA. By comparing the episode target prices 
described in Sec.  510.300 and the participant hospital's actual 
episode spending for the performance year and applying the adjustments 
in paragraph (e)(1)(v) of this section, CMS establishes an NPRA for 
each participant hospital for each performance year.
    (1) Initial calculation. In calculating the NPRA for each 
participant hospital for each performance year, CMS does the following:
    (i) Determines actual episode payments for each episode included in 
the performance year (other than episodes that have been cancelled in 
accordance with Sec.  510.210(b)) using claims data that is available 2 
months after the end of the performance year, in accordance with the 
adjustments in Sec.  510.300(b)(5).
    (ii) Multiplies the participant hospital's applicable episode 
target price, including necessary adjustments for voluntary reporting 
of outcome data (Sec.  510.400(b)) for each type of episode being 
tested and time period (as determined in accordance with Sec.  510.300) 
by the number of episodes being tested in the performance year to which 
that episode target price applies.
    (iii) Aggregates the amounts computed in paragraph (e)(1) of this 
section across all episodes being tested for that participant hospital 
in that performance year.
    (iv) Subtracts the aggregate actual episode payments for all of the 
participant hospital's episodes being tested in that performance year 
from the calculated amount from paragraph (e)(2) of this section.
    (v) Makes the following adjustments:
    (A) Increases in post-episode spending. If the average post-episode 
spending for a participant hospital in any given performance year is 
greater than 3 standard deviations above the regional average post-
episode spending for the same performance year, then this amount would 
be applied to the NPRA.
    (B) Limit on financial responsibility for high episode payment 
cases. Actual episode payments for an episode are capped at 2 standard 
deviations above the mean episode payment for purposes of calculating 
the episode target prices (Sec.  510.300) and for purposes of comparing 
the actual episode payments with the applicable episode target price to 
calculate the NPRA.
    (C) Limitation on loss. The total amount any participant hospital 
is responsible for repaying to Medicare for a performance year cannot 
exceed the following:
    (1) For performance year 2 only, 10 percent of the amount 
calculated in paragraph (e)(1)(ii) of this section for the performance 
year.
    (2) For performance years 3, 4, and 5, 20 percent of the amount 
calculated in paragraph (e)(1)(ii) of this section for the performance 
year.
    (D) Limitation on gain. The total amount of any reconciliation 
payment Medicare would make to a participant hospital for a performance 
year cannot exceed 20 percent of the amount calculated in paragraph 
(e)(1)(ii) of this section for the performance year.
    (E) Financial loss limits for SCHs, MDHs, and RRCs. If a 
participant hospital is an SCH, an MDH or RRC, then for--

[[Page 41311]]

    (1) Performance year 2, the total repayment amount for which the 
participant hospital is responsible cannot exceed 3 percent of amount 
calculated in paragraph (e)(1)(ii) of this section; and
    (2) Performance years 3 through 5, the total repayment amount 
cannot exceed 5 percent of the amount calculated in paragraph 
(e)(1)(ii) of this section.
    (f) Determination of reconciliation or repayment amount--(1) 
Determination of the reconciliation or repayment amount. (i) For 
performance year 1, the reconciliation or repayment amount is equal to 
the NPRA.
    (ii) For performance years 2 through 5, results from the subsequent 
reconciliation calculation for a prior year's reconciliation, as 
described in paragraph (i)(3) of this section, are applied to the 
current year's NPRA in order to determine the reconciliation or 
repayment amount.
    (2) Reconciliation payment. If the amount from paragraph (f)(1) of 
this section is positive and the participant hospital meets or exceeds 
all of the quality thresholds described in Sec.  510.400, Medicare pays 
the participant hospital a reconciliation payment an amount equal to 
the calculation described in paragraph (f)(1) of this section.
    (3) Repayment amount. If the amount from paragraph (f)(1) of this 
section is negative, the participant hospital pays to Medicare an 
amount equal to the calculation described in paragraph (f)(1) of this 
section. CMS waives this requirement for performance year 1.
    (g) Determination of eligibility for reconciliation based on 
quality. (1) CMS assesses each participant hospital's performance on 
quality metrics, as described in Sec.  510.400, to determine whether 
the participant hospital is eligible to receive a reconciliation 
payment for a performance year.
    (2) If the hospital meets the quality thresholds as specified in 
Sec.  510.400, and is determined to have positive NPRA under paragraph 
(e) of this section, the hospital is eligible for a reconciliation 
payment.
    (3) If the hospital does not meet the thresholds as specified in 
Sec.  510.400 for a performance year, the hospital is not eligible for 
a reconciliation payment.
    (h) Reconciliation report. CMS issues each participant hospital a 
CCJR reconciliation report for the performance year. Each CCJR 
reconciliation report contains the following:
    (1) Information on whether the participant hospital met or exceeded 
the quality thresholds specified in Sec.  510.400.
    (2) The total actual episode payments for the participant hospital.
    (3) The NPRA.
    (4) Whether the participant hospital is eligible for a 
reconciliation payment or must make a repayment to Medicare.
    (5) The NPRA and subsequent reconciliation calculation amount for 
the previous performance year, as applicable.
    (6) The reconciliation payment or repayment amount.
    (i) Subsequent reconciliation calculation. (1) Fourteen months 
after the end of each performance year, CMS performs an additional 
calculation, using claims data available at that time, to account for 
final claims run-out and any additional overlap between the CCJR model 
and other CMS models and programs as described in paragraph (i)(2) of 
this section.
    (2) The subsequent reconciliation calculation accounts for CCJR 
episodes that overlap with the following shared savings programs and 
models in cases where the participant hospital is a participant in the 
ACO and the beneficiary in the episode is assigned to the ACO:
    (i) The Pioneer ACO model.
    (ii) The Medicare Shared Savings Program.
    (iii) The Next Generation ACO model.
    (iv) The Comprehensive ESRD Care Initiative (CEC).
    (3) The additional calculation occurs concurrently with the 
reconciliation process for the most recent performance year. If the 
result of the subsequent calculation is different than zero, CMS 
applies the stop-loss and stop-gain limits in paragraph (e) of this 
section to the calculations in aggregate for that performance year (the 
initial reconciliation and the subsequent calculation) to ensure the 
amount does not exceed the stop-loss or stop-gain limits. CMS then 
applies this amount to the NPRA for the most recent performance year in 
order to determine the reconciliation amount or repayment amount for 
the most recent performance year. For the performance year 2 
reconciliation report only, the subsequent calculation amount (for 
performance year 1) is applied to the performance year 1 NPRA to ensure 
that the combined amount is not less than 0. If the combined amount is 
less than zero, the subsequent calculation amount would be capped at 
the amount that would result in a net amount of zero for the 
combination of the performance year 1 NPRA and subsequent calculation 
amount.


Sec.  510.310  Appeals process.

    (a) General. If a participant hospital believes that there is an 
error in a calculation that involves a matter in any way related to 
payment, reconciliation amounts, repayment amounts, or determinations 
associated with quality measures impacting payment, the hospital is 
required to provide written notice of the error, in a form and manner 
specified by CMS.
    (1) Unless the participant hospital provides such notice, the CCJR 
reconciliation report is deemed final 30 calendar days after it is 
issued.
    (2) If CMS receives a timely notice of a calculation error as 
provided in paragraph (d) of this section, CMS responds in writing 
within 30 calendar days to either confirm or refute the calculation 
error, although CMS reserves the right to an extension upon written 
notice to the participant hospital.
    (3) If a participant hospital does not submit timely notice of a 
calculation error in accordance with the timelines and processes 
specified by CMS, then CMS deems final the CCJR reconciliation report 
and proceeds with the payment or repayment processes, as applicable, as 
determined by the NPRA reflected in the CCJR reconciliation report.
    (b) Participant hospitals may appeal the NPRA or any calculations 
impacting NPRA, reconciliation amounts or repayment amounts on the 
grounds that CMS or its representative made an error in calculating 
such amounts using the dispute resolution process defined in paragraph 
(e) of this section.
    (c) Only participant hospitals may utilize the dispute resolution 
process.
    (d) To begin the dispute resolution process, a participant hospital 
must submit a notice of calculation error in a timely manner, as 
specified by CMS.
    (e) Dispute resolution process. (1) If the participant hospital is 
dissatisfied with CMS's response to the notice of a calculation error, 
the participant hospital may request a reconsideration review in a form 
and manner as specified by CMS.
    (i) The reconsideration review request must provide a detailed 
explanation of the basis for the dispute and include supporting 
documentation for the participant hospital's assertion that CMS or its 
representatives did not accurately calculate the NPRA in accordance 
with Sec.  510.305.
    (ii) If CMS does not receive a request for reconsideration from the 
participant hospital within 10 calendar days of the issue date of CMS's 
response to the participant hospital's notice of calculation error, 
then CMS's response

[[Page 41312]]

to the calculation error is deemed final and CMS proceeds with 
reconciliation payment or repayment processes, as applicable, as 
described in Sec.  510.305.
    (iii) Where the participant hospital contests a matter that does 
not involve an issue contained in, or a calculation which contributes 
to, a CCJR reconciliation report, a calculation error form is not 
required. An example of such a matter is termination of the participant 
hospital from the model. In those instances, if CMS does not receive a 
request for reconsideration from the participant hospital within 10 
calendar days of the notice of the initial determination, the initial 
determination is deemed final and CMS proceeds with action indicated in 
the initial determination.
    (2)(i) A CMS reconsideration official notifies the participant 
hospital in writing within 15 calendar days of receiving the 
participant hospital's review request of the following:
    (A) The date, time, and location of the review.
    (B) The issues in dispute.
    (C) The review procedures.
    (D) The procedures (including format and deadlines) for submission 
of evidence.
    (ii) The CMS reconsideration official takes all reasonable efforts 
to schedule the review to occur no later than 30 days after the date of 
receipt of the notification.
    (iii) The provisions at Sec.  425.804(b), (c), and (e) of this 
chapter are applicable to reviews conducted in accordance with the 
reconsideration review process for CCJR.
    (iv) The CMS reconsideration official issues a written 
determination within 30 days of the review. The determination is final 
and binding.
    (3) Limitations on review. In accordance with section 1115A(d)(2) 
of the Act, there is no administrative or judicial review under 
sections 1869 or 1878 of the Act or otherwise for the following:
    (i) The selection of models for testing or expansion under section 
1115A of the Act.
    (ii) The selection of organizations, sites, or participants to test 
those models selected.
    (iii) The elements, parameters, scope, and duration of such models 
for testing or dissemination.
    (iv) Determinations regarding budget neutrality under section 
1115A(b)(3) of Act.
    (v) The termination or modification of the design and 
implementation of a model under section 1115A(b)(3)(B) of Act.
    (vi) Decisions about expansion of the duration and scope of a model 
under section 1115A(c) of the Act, including the determination that a 
model is not expected to meet criteria described in paragraph (e)(1) or 
(2) of this section.


Sec.  510.315  Quality thresholds for reconciliation payment 
eligibility.

    (a) General. Participant hospitals are eligible for a 
reconciliation payment for a performance year only if they meet or 
exceed the minimum quality thresholds specified in paragraph (b) of 
this section for the performance year.
    (b) Quality measure thresholds. A participant hospital's measure 
result must be at or above the thresholds in paragraphs (b)(1) and (2) 
of this section for all three quality measures for each performance 
year of this model to be eligible for additional payments under the 
CCJR model.
    (1) The 30th percentile of the national hospital measure results 
calculated for all HIQR-participant hospitals for performance years 1, 
2, and 3.
    (2) The 40th percentile for performance years 4 and 5.
    (c) Low-volume hospital exception. A participant hospital with an 
insufficient volume of episodes on which to determine performance on an 
individual measure, as determined by CMS, is considered to have met the 
performance threshold for that quality measure.


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

    The CCJR model does not replace any existing Medicare incentive 
programs or add-on payments. The target price and NPRA for a 
participant hospital is independent of, and does not affect, any 
incentive programs or add-on payments under existing Medicare payment 
systems (as described in Sec.  510.300(b)(5)).


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

    (a) General. Services included in the episode as provided in Sec.  
510.200(b) that straddle the episode are prorated so that only the 
portion attributable to care furnished during the episode are 
attributed to the calculation of actual episode payments.
    (b) Proration of services. Payments for services that straddle the 
episode are prorated using the following methodology:
    (1) Non-IPPS inpatient services and other inpatient services. Non-
IPPS inpatient services, and services furnished by other inpatient 
providers that extend beyond the end of the episode are prorated 
according to the percentage of the actual length of stay (in days) that 
falls within the episode window.
    (2) Home health agency services. Home health services paid under 
the prospective payment system in part 484, subpart E of this chapter 
are prorated according to the percentage of days, starting with the 
first billable service date (``start of care date'') and through and 
including the last billable service date, that occur during the fixed 
duration of the episode. This methodology is applied in the same way if 
the home health services begin (the start of care date) prior to the 
start of the episode.
    (3) IPPS services. IPPS claim amounts that extend beyond the end of 
the episode are prorated according to the geometric mean length of 
stay, using the following methodology:
    (i) The first day of the IPPS stay is counted as 2 days.
    (ii) If the actual length of stay that occurred during the episode 
is equal to or greater than the MS-DRG geometric mean, the normal MS-
DRG payment would be fully allocated to the episode.
    (iii) If the actual length of stay that occurred during the episode 
is less than the geometric mean, the normal MS-DRG payment amount would 
be allocated to the episode based on the number of inpatient days that 
fall within the episode.
    (iv) If the full amount is not allocated to the episode, any 
remainder amount is allocated to the post-episode spending calculation 
(defined in Sec.  510.2).

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


Sec.  510.400  Quality measures and reporting.

    (a) Reporting of quality measures. The following quality measures 
are used for public reporting and for determining whether a participant 
hospital is eligible for additional payments under the CCJR model, as 
described in Sec.  510.305:
    (1) Hospital-level risk-standardized complication rate following 
elective primary total hip arthroplasty and/or total knee arthroplasty.
    (2) Hospital-level 30-day, all-cause risk-standardized readmission 
rate following elective primary total hip arthroplasty and/or total 
knee arthroplasty.
    (3) Hospital Consumer Assessment of Healthcare Providers and 
Systems Survey.
    (b) Requirements for successful data submission of patient reported 
outcomes. To be eligible for the discount factors that apply to 
participant hospitals that successfully submit the voluntary patient 
reported outcomes data described in Sec.  510.300(c), participant 
hospitals must submit data

[[Page 41313]]

on the hospital-level performance measure(s) of patient-reported 
outcomes following elective primary total hip and/or total knee 
arthroplasty, including but not limited to the pre-operative and post-
operative data elements, for at least 80 percent of the eligible 
elective primary total hip and/or total knee arthroplasty beneficiaries 
within 60 days of the end of the most recent performance period.
    (c) Public reporting. CMS--
    (1) Makes the quality measurement results calculated for the 
readmission, complication, and patient survey quality measures for each 
participant hospital in each performance year publicly available on the 
CMS Web site in a form and manner as determined by CMS.
    (2) Shares each participant hospital's quality metrics with the 
hospital prior to display on the Web site.
    (3) Does not publicly report the voluntary patient reported outcome 
data during this 5 year model.


Sec.  510.405  Beneficiary choice and beneficiary notification.

    (a) Beneficiary choice. The CCJR model does not restrict Medicare 
beneficiaries' ability to choose any Medicare participating provider or 
supplier, or any provider or supplier who has opted out of Medicare.
    (b) Required beneficiary notification. (1) Each participant 
hospital must provide written notice to any Medicare beneficiary that 
meets the criteria in Sec.  510.205 of his or her inclusion in the CCJR 
model. The beneficiary notification must contain all of the following:
    (i) A detailed explanation of the model and how it might be 
expected to affect the beneficiary's care.
    (ii) Notification that the beneficiary retains freedom of choice to 
choose providers and services.
    (iii) Explanation of how patients can access care records and 
claims data through an available patient portal, and how they can share 
access to their Blue Button[supreg] electronic health information with 
caregivers.
    (iv) A statement that all existing Medicare beneficiary protections 
continue to be available to the beneficiary. These include the ability 
to report concerns of substandard care to Quality Improvement 
Organizations (QIO) and 1-800-MEDICARE.
    (2) A participant hospital must require any physician with whom it 
has a CCJR sharing arrangement to provide written notice of the 
existence of such an arrangement to any Medicare beneficiary that meets 
the criteria for inclusion in the model specified in Sec.  510.205.
    (c) Timing of the required beneficiary notification. The 
participant hospital provides the written notice described in paragraph 
(b) of this section upon the beneficiary's admission for an anchor 
hospitalization.


Sec.  510.410  Compliance enforcement.

    (a) General. Participant hospitals must comply with all of the 
requirements outlined in this part.
    (b) Failure to comply. CMS may do one or more of the following if a 
participant hospital fails to comply with any of the requirements 
outlined in this part:
    (1) Issue a warning letter to the participant hospital.
    (2) Require the participant hospital to develop a corrective action 
plan.
    (3) Reduce or eliminate a participant hospital's positive NPRA.
    (4) Terminate the participant hospital's participation in the CCJR 
model, if the participant hospital, or an individual or entity with 
which the participant hospital has a participation agreement, does any 
of the following:
    (i) Takes any action that threatens the health or safety of 
patients.
    (ii) Avoids at-risk Medicare beneficiaries, as this term is defined 
in Sec.  425.20 of this chapter.
    (iii) Avoids patients on the basis of payer status.
    (iv) Is subject to sanctions or final actions of an accrediting 
organization or federal, state, or local government agency that could 
lead to the inability to comply with the requirements and provisions of 
this part.
    (v) Takes or fails to take any action that CMS determines for 
program integrity reasons is not in the best interests of the CCJR 
model.
    (vi) Is subject to action by the Secretary to redress an allegation 
of fraud or significant misconduct, including intervening in a False 
Claims Act qui tam matter, issuing a pre-demand or demand letter under 
a civil sanction authority or similar actions.

Subpart F--Financial Arrangements and Beneficiary Incentives


Sec.  510.500  Financial arrangements under the CCJR model.

    (a) General. To assist participant hospitals in aligning the 
financial incentives of other providers and suppliers caring for 
beneficiaries in CCJR episodes with the quality and efficiency goals of 
the CCJR model, participant hospitals may, consistent with applicable 
law, elect to enter into financial arrangements that contain CCJR 
sharing arrangements with CCJR collaborators, as defined in this 
section.
    (1) All such financial arrangements must comply with all relevant 
laws and regulations, including the fraud and abuse laws and all 
applicable payment and coverage requirements.
    (2) CMS reserves the right to review any CCJR sharing arrangement 
to ensure that it does not pose a risk to beneficiary access, 
beneficiary freedom of choice, or quality of care.
    (b) Required records. When a participant hospital enters into a 
CCJR sharing arrangement with a CCJR collaborator, the participant 
hospital, and all of its CCJR collaborators must maintain copies of the 
following records:
    (1) All original copies of CCJR sharing arrangements that the 
participant hospital signs with a CCJR collaborator in connection with 
the hospital's participation in CCJR. Each CCJR sharing arrangement 
must include, but is not limited to the following:
    (i) A specific methodology and accounting formula for calculating 
and verifying the internal cost savings generated by the participant 
hospital entering into a CCJR sharing arrangement with a CCJR 
collaborator based on the care redesign elements specifically 
associated with the particular CCJR collaborator.
    (ii) Specific methodologies for accruing and calculating internal 
cost savings from the participant hospital, where the hospital intends 
to share internal cost savings through a CCJR sharing arrangement with 
a CCJR collaborator. The specific methodologies for accruing and 
calculating internal cost savings must be transparent, measurable, and 
verifiable in accordance with generally accepted accounting principles 
and Government Auditing Standards (The Yellow Book). The methodology 
must set out the specific care redesign elements to be undertaken by 
the participant hospital or the CCJR collaborator or both.
    (iii) A description of the methodology and accounting formula for 
calculating the percentage or dollar amount of a reconciliation payment 
that will be paid from the participant hospital to the CCJR 
collaborator.
    (iv) A description of the methodology, frequency of distribution, 
and accounting formula for distributing and verifying any and all 
gainsharing payments.
    (v) A description of the arrangement between the participant 
hospital and the CCJR collaborator regarding gainsharing payments and 
alignment payments, including safeguards to ensure that such alignment 
payments are made solely for purposes related to sharing responsibility 
for funds need to repay

[[Page 41314]]

Medicare in the CCJR model. This description must include the 
following:
    (A) A methodology.
    (B) Frequency of payment.
    (C) Accounting formula for payment.
    (D) Receipt of any and all alignment payments.
    (E) Plans regarding care redesign.
    (F) Changes in care coordination or delivery that is applied to the 
participant hospital or CCJR collaborators or both.
    (G) Any description of how success will be measured.
    (vi) Management and staffing information, including type of 
personnel or contractors that will be primarily responsible for 
carrying out changes to care under the model.
    (2) The participant hospital must keep records of the following:
    (i) All CCJR collaborators.
    (ii) Its process for determining and verifying the eligibility of 
CCJR collaborators to participate in Medicare.
    (iii) Information confirming the organizational readiness of the 
participant hospital to measure and track internal cost savings.
    (iv) Plan to track internal cost savings.
    (v) Information on the accounting systems used to track internal 
cost savings.
    (vi) A description of current health information technology, 
including systems to track reconciliation payments and internal cost 
savings.
    (c) Participant agreement. The participant agreement must obligate 
the parties to comply, and must obligate the CCJR collaborator to 
require any of its employees, contractors or designees to comply, 
without limitation, to the following:
    (1) An individual or entity's participation in the CCJR sharing 
arrangement is voluntary, and there is no penalty for nonparticipation.
    (2) Any gainsharing payments made under the CCJR sharing 
arrangement may be made only from the participant hospital to the 
entity or individual with whom the participant hospital has a signed 
CCJR sharing arrangement.
    (3) Any alignment payments made in accordance with a CCJR sharing 
arrangement may be made only to the participant hospital from the 
entity or individual with whom the participant hospital has signed a 
participation agreement containing a CCJR sharing arrangement. A CCJR 
collaborator entering into a CCJR sharing arrangement must be in 
compliance with all Medicare provider enrollment requirements at Sec.  
424.500 of this chapter, including having a valid and active TIN or 
NPI.
    (4) Any internal cost savings or reconciliation payments that the 
participant hospital seeks to share through CCJR sharing arrangements 
must meet the requirements set forth in this part and must be 
administered by the participant hospital in accordance with generally 
accepted accounting principles.
    (i) The participant hospital may not distribute any amounts that 
are not comprised of dollars that are either internal cost savings or a 
reconciliation payment, as those terms are defined in this part.
    (ii) All amounts deemed internal cost savings by the participant 
hospital must reflect actual, internal cost savings achieved by the 
participant hospital through implementation of care redesign elements 
identified and documented by the participant hospital in the manner 
described in this section.
    (iii) Internal cost savings may not reflect ``paper'' savings from 
accounting conventions or past investment in fixed costs.
    (5) Any alignment payments that the participant hospital receives 
through a CCJR sharing arrangement must meet the requirements set forth 
in this section and be administered by the participant hospital in 
accordance with generally accepted accounting principles. In no event 
may the participant hospital receive any amounts from a CCJR 
collaborator under a CCJR sharing arrangement that are not alignment 
payments.
    (6) Provisions that require CCJR collaborators to share all records 
related to a CCJR Sharing Arrangement, including at a minimum the 
following:
    (i) Each participation agreement between the participant hospital 
and a CCJR collaborator must obligate the CCJR collaborator to provide 
the participant hospital and CMS with access to the CCJR collaborator's 
records, information, and data for purposes of monitoring and reporting 
and any other lawful purpose.
    (ii) Records, information, and data demonstrating compliance with 
the gainsharing payment must--
    (A) Have sufficient detail to verify compliance with all material 
terms of the CCJR sharing arrangement; and
    (B) Be fully substantiated and documented, as to both statements 
and numbers.
    (7) Participation agreements must require all CCJR collaborators to 
comply with any evaluation, monitoring, compliance, and enforcement 
activities performed by CMS or its designees for the purposes of 
operating the CCJR model.
    (d) Gainsharing payment and alignment payment conditions and 
restrictions. Participant hospitals must adhere to the following 
conditions and restrictions concerning gainsharing payments and 
alignment payments made under a CCJR sharing arrangement:
    (1) No entity or individual, as a party to a participation 
agreement or not, may condition the opportunity to receive gainsharing 
payments in CCJR on the volume or value of past or anticipated 
referrals or other business generated to, from, or among the 
participant hospital and any CCJR collaborators.
    (2) Participant hospitals are not required to share reconciliation 
payments, internal cost savings, or responsibility for repayment to CMS 
with other providers and suppliers.
    (i) If a participant hospital elects to engage in those activities, 
such activities are limited to the terms of this section.
    (ii) Gainsharing payments, if distributed, must be distributed on 
an annual basis.
    (iii) Alignment payments from a CCJR collaborator to a participant 
hospital may be made at any interval that is agreed upon by both 
parties, and must--
    (A) Be clearly identified;
    (B) Comply with all provisions in this section;
    (C) Comply with all applicable laws, statutes, and rules.
    (3) No entity or individual, as a party to a participation 
agreement or not, may condition the opportunity to send or receive 
alignment payments in CCJR on the volume or value of past or 
anticipated referrals or other business generated to, from, or among 
the participant hospital and any CCJR collaborators.
    (4) In a calendar year, the aggregate amount of the total 
gainsharing payments distributed by a participant hospital that are 
derived from a CCJR reconciliation payment may not exceed the amount of 
the reconciliation payment the participant hospital receives from CMS.
    (5) In a calendar year, the aggregate amount of the total alignment 
payments received by the participant hospital may not exceed 50 percent 
of the participant hospital's repayment amount due to CMS. If no 
repayment amount is due, then no alignment payments may be received by 
the participant hospital.
    (6) The participant hospital must retain at least 50 percent of its 
responsibility for repayment, pursuant to the repayment amount 
reflected in a reconciliation report, under the CCJR model to CMS.
    (7) A single CCJR collaborator may not make an alignment payment to 
a participant hospital that represents an amount greater than 25 
percent of the

[[Page 41315]]

repayment amount reflected on a reconciliation report.
    (8) Gainsharing payments and alignment payments must not induce any 
of the following parties to reduce or limit medically necessary 
services to any Medicare beneficiary:
    (i) The participant hospital.
    (ii) CCJR collaborators.
    (iii) Employees, contractors, or designees of the participant 
hospital or CCJR collaborators.
    (9) Individual physician and nonphysician practitioners must retain 
their ability to make decisions in the best interests of the patient, 
including the selection of devices, supplies, and treatments.
    (10) Methodologies for calculating gainsharing payments and 
alignment payments must not directly account for volume or value of 
referrals, or business otherwise generated, between or among the 
participant hospital and CCJR collaborators.
    (11) Gainsharing payments must be derived solely from 
reconciliation payments or internal cost savings or both.
    (12) The total amount of gainsharing payments for a calendar year 
paid to an individual physician or nonphysician practitioner who is a 
CCJR collaborator must not exceed 50 percent of the total Medicare 
approved amounts under the Physician Fee Schedule (PFS) for services 
furnished to the participant hospital's CCJR beneficiaries during a 
CCJR episode by that physician or nonphysician practitioner.
    (e) Documentation and maintenance of records. All participant 
hospitals and CCJR collaborators who enter into CCJR sharing 
arrangements must:
    (1) Provide to CMS, the OIG, and the Comptroller General or their 
designee(s) scheduled and unscheduled access to all books, contracts, 
records, documents, and other evidence (including data related to 
utilization and payments, quality performance measures, billings, and 
CCJR sharing arrangements related to CCJR) sufficient to enable the 
audit, evaluation, inspection, or investigation of the participant 
hospital's compliance, as well as the compliance of any CCJR 
collaborator that has a CCJR sharing arrangement with the participant 
hospital, with CCJR requirements, the participation agreement, the 
quality of services furnished, the obligation to repay any 
reconciliation payments owed to CMS, or the calculation or both, 
distribution, receipt, or recoupment of gainsharing payments or 
alignment payments.
    (2) Maintain all such books, contracts, records, documents, and 
other evidence for a period of 10 years from the last day of the 
participant hospital's participation in the CCJR model or from the date 
of completion of any audit, evaluation, inspection, or investigation, 
whichever is later, unless--
    (i) CMS determines that there is a special need to retain a 
particular record or group of records for a longer period and notifies 
the participant hospital at least 30 calendar days before the normal 
disposition date; or
    (ii) There has been a dispute or allegation of fraud or similar 
fault against the participant hospital or any CCJR collaborator, in 
which case the records must be maintained for an additional 6 years 
from the date of any resulting final resolution of the dispute or 
allegation of fraud or similar fault.
    (f) Compliance responsibility. Notwithstanding any CCJR sharing 
arrangements between the participant hospital and CCJR collaborators, 
the participant hospital must have ultimate responsibility for adhering 
to and otherwise fully complying with all provisions of the CCJR model.
    (g) OIG authority. OIG authority is not limited or restricted by 
the provisions of the CCJR model, including the authority to audit, 
evaluate, investigate, or inspect the participant hospital, CCJR 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.
    (h) Other authorities. None of the provisions of the CCJR model 
limits or restricts any other government authority permitted by law to 
audit, evaluate, investigate, or inspect the participant hospital, CCJR 
collaborators, or any other person or entity or their records, data, or 
information, without limitation.


Sec.  510.505  Beneficiary incentives under the CCJR model.

    (a) General. Participant hospitals may choose to provide in-kind 
patient engagement incentives to beneficiaries in CCJR episodes for 
free or below fair market value, subject to the following conditions:
    (1) The incentive must be provided to the beneficiary during a CCJR 
episode of care.
    (2) The item or service provided must be reasonably connected to 
the beneficiary's medical care, as well as be a preventive care item or 
service or an item or service that advances a clinical goal, as listed 
in paragraph (b) of this section, for a beneficiary in a CCJR episode 
by engaging the beneficiary in better managing his or her own health.
    (b) Goals of the CCJR model. The following are the particular 
clinical goals of the CCJR model, which may be advanced through 
beneficiary incentives:
    (1) Beneficiary adherence to drug regimens.
    (2) Beneficiary adherence to follow up care plan or care.
    (3) Reduction of readmissions and complications resulting from 
lower-extremity joint replacement procedures.
    (4) Management of chronic diseases and conditions that may be 
affected by the lower-extremity joint replacement procedure.
    (c) Beneficiary incentives. Participant hospitals are required to 
maintain a list of items and services furnished as beneficiary 
incentives that exceed $10, including the following:
    (1) The date the incentive is provided.
    (2) The identity of the beneficiary to whom the item or service was 
provided.
    (d) Technology provided to a beneficiary. (1) Items or services 
involving technology provided to a beneficiary may not exceed $1,000 in 
value for any one beneficiary in any one CCJR episode.
    (2) Items of technology exceeding $50 must--
    (i) Remain the property of the participant hospital; and
    (ii) Be retrieved from the beneficiary at the end of the CCJR 
episode. The participant hospital must maintain documentation of the 
date of retrieval.

Subpart G--Waivers


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

    (a) General. CMS waives the requirement in Sec.  410.26(b)(5) of 
this chapter that services and supplies furnished incident to a 
physician's service must be furnished under the direct supervision of 
the physician (or other practitioner) to permit home visits as 
specified in this section. The services furnished under this waiver are 
not be considered to be ``hospital services,'' even when furnished by 
the clinical staff of the hospital.
    (b) General supervision of qualified personnel. The waiver of the 
direct supervision requirement in Sec.  410.26(b)(5) of this chapter 
applies only in the following circumstances:
    (1) The home visit is furnished during the episode to a beneficiary 
who has been discharged from an anchor hospitalization.
    (2) The home visit is furnished at the beneficiary's home or place 
or residence.
    (3) The beneficiary does not qualify for home health services under 
sections 1835(a) and 1814(a) of the Act at the time of any such home 
visit.
    (4) The visit is furnished by a licensed clinician, either employed 
by a hospital

[[Page 41316]]

or not, under the general supervision of a physician employee or a 
contractor of the participant hospital.
    (5) No more than 9 visits are furnished to the beneficiary during 
the episode.
    (c) Payment. Up to 9 post-discharge home visits per CCJR episode 
may be billed under Part B by the physician or nonphysician 
practitioner or by the participant hospital to which the supervising 
physician has reassigned his or her billing rights.
    (d) Other requirements. All other Medicare rules for coverage and 
payment of services incident to a physician's service continue to 
apply.


Sec.  510.605  Waiver of certain telehealth requirements.

    (a) Waiver of the geographic site requirements. CMS waives the 
geographic site requirements of section 1834(m)(4)(C)(i)(I) through 
(III) of the Act for all episodes being tested in the CCJR model, but 
only for services that--
    (1) May be furnished via telehealth under existing requirements; 
and
    (2) Are included in the episode in accordance with Sec.  
510.200(b).
    (b) Waiver of the originating site requirements. CMS waives 
originating site requirements under section 1834(m)(4)(C)(ii)(I) 
through (VIII) of the Act for all episodes being tested in the CCJR 
model to permit a telehealth visit to originate in the beneficiary's 
home or place of residence, but only for services that--
    (1) May be furnished via telehealth under existing requirements; 
and
    (2) Are included in the CCJR episode in accordance with Sec.  
510.200(b). The facility fee normally paid by Medicare to an 
originating site for a telehealth service is not paid if the service is 
originated in the beneficiary's home.
    (c) Other requirements. All other requirements for Medicare 
coverage and payment of telehealth services continue to apply, 
including the list of specific services approved to be furnished by 
telehealth.


Sec.  510.610  Waiver of SNF 3-day rule.

    (a) Waiver of the SNF 3-day rule. For all episodes being tested in 
the CCJR model in performance years 2 through 5, CMS waives the SNF 3-
day rule for coverage of a SNF stay for a beneficiary following the 
anchor hospitalization, but only if the SNF is rated an overall of 3 
stars or better in the Five-Star Quality Rating System for SNFs on the 
Nursing Home Compare Web site (www.medicare.gov/NursingHomeCompare/).
    (b) Other requirements. All other Medicare rules for coverage and 
payment of Part A-covered SNF services continue to apply.


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

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

    Dated: July 1, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Dated: July 6, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-17190 Filed 7-9-15; 4:15 pm]
 BILLING CODE 4120-01-P