[Federal Register Volume 81, Number 59 (Monday, March 28, 2016)]
[Notices]
[Pages 17159-17161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06859]


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

DEPARTMENT OF DEFENSE

Office of the Secretary


TRICARE Bundled Payment for Lower Extremity Joint Replacement or 
Reattachment (LEJR) Surgeries Based on Centers for Medicare and 
Medicaid Services (CMS) Comprehensive Care for Joint Replacement (CJR) 
Model

AGENCY: Department of Defense.

ACTION: Notice of demonstration.

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

SUMMARY: This notice is to advise interested parties of a Military 
Health System (MHS) demonstration project under the authority of Title 
10, United States Code, Section 1092, entitled TRICARE Bundled Payment 
for Lower Extremity Joint Replacement or Reattachment (LEJR) Surgeries 
that will test bundled payment and quality measurement on an ``episode 
of care'' basis to encourage hospitals, physicians, and post-acute care 
providers to work together to improve the quality and coordination of 
care from the initial hospitalization through recovery. This 
demonstration is being conducted in compliance with Section 726 of the 
National Defense Authorization Act (NDAA) for 2016. This particular 
TRICARE demonstration will be based on Centers for Medicare and 
Medicaid Services' (CMS) Comprehensive Care for Joint Replacement (CJR) 
Model, which will be implemented in 67 metropolitan statistical areas 
(MSAs) beginning April 1, 2016. CMS's CJR Model is designed to promote 
better and more efficient care for beneficiaries undergoing LEJR 
surgery (DRG 469 (major joint replacement or reattachment of lower 
extremity with major complications or comorbidities) or 470 (major 
joint replacement or reattachment of lower extremity without major 
complications or comorbidities)). Participant hospitals in the CMS 
model will be held financially accountable for the quality and cost of 
the entire episode of care, which begins with hospital admission of a 
beneficiary and ends 90 days post-discharge in order to cover all 
related costs for the complete recovery period. This ``bundled'' 
episode includes all related items and services paid under Medicare 
Part A and Part B for all Medicare fee-for-service beneficiaries. The 
TRICARE demonstration project will test this value-based payment model 
in the Tampa-St. Petersburg MSA for DRG 470 only (including 90 days of 
related post-operative care) to assess whether value-driven bundled 
payment incentives will result in a reduction in the rate of increase 
in health care spending and improvements in health care quality, 
patient experience of care, and overall health of TRICARE 
beneficiaries. All network and non-network hospitals with at least 20 
TRICARE admissions for DRG 470 over the three years of Fiscal Year (FY) 
2013, 2014, and 2015 shall be required to participate in the 
demonstration project (excluding admissions for beneficiaries with 
primary Other Health Insurance (OHI), Active Duty Service Members 
(ADSMs), and Medicare-TRICARE dual eligible beneficiaries). Once 
selected for participation, hospitals will remain in the project 
throughout the duration of this demonstration (regardless of actual 
TRICARE utilization) unless the Government directs otherwise.

DATES: Effective Date: This demonstration is mandated by Section 726 of 
the National Defense Authorization Act for Fiscal Year 2016, with an 
implementation deadline of May 23, 2016. This demonstration authority 
will remain in effect until December 31, 2019.

ADDRESSES: Defense Health Agency, Health Plan Execution and Operations, 
7700 Arlington Boulevard, Suite 5101, Falls Church, Virginia 22042.

FOR FURTHER INFORMATION CONTACT: For questions pertaining to this 
demonstration, please contact Ms. Debra Hatzel at (303) 676-3572.

SUPPLEMENTARY INFORMATION: 

A. Background

    Section 726 of the National Defense Authorization Act (NDAA) for 
Fiscal Year 2016 directed the Department of Defense to conduct a 
demonstration project on incentives to improve health care provided 
under the TRICARE program, also known as paying for value rather than 
for volume or value-based reimbursement. Innovative health care payment 
models are being tested and implemented by the CMS and a variety of 
commercial health care programs and insurers. This demonstration will 
assess whether value-driven incentives will result in a reduction in 
the rate of increase in health care spending and improvements in health 
care quality, patient experience of care, and overall health of TRICARE 
beneficiaries.
    This demonstration program is based on the Medicare Program for 
Comprehensive Care for Joint Replacement (CJR) Payment Model for Acute 
Care Hospitals Furnishing Lower Extremity Joint Replacement Services, 
under the authority of the Center for Medicare and Medicaid Innovation 
(CMMI) pursuant to section 1115A of the Social Security Act, and as 
implemented by CMS. A copy of the Final Rule published by CMS on 
November 24, 2015, may be found at https://www.federalregister.gov/articles/2015/11/24/2015-29438/medicare-program-comprehensive-care-for-joint-replacement-payment-model-for-acute-care-hospitals. In general, 
CMS sought to target high expenditure, high utilization procedures for 
which there were significant regional variation in spending. Acute care 
hospitals, as the site of surgery, will be held accountable for 
spending during the entire episode of care. This model seeks to promote 
the alignment of financial and other incentives for all health care 
providers and suppliers caring for a beneficiary during an LEJR 
episode, thereby improving quality and increasing efficiency in the 
provision of care. It is also anticipated the CJR model will benefit 
Medicare beneficiaries by improving coordination and transition of care 
by incentivizing more efficient service delivery and higher value care 
across the inpatient and post-acute care spectrum spanning the episode 
of care. The CMS CJR model will be implemented in 67 metropolitan 
statistical areas (MSAs) beginning April 1, 2016. Under Medicare, this 
episode-based payment model is mandatory for all hospitals in the 
designated MSAs.
    The Department of Defense elected to conduct a demonstration 
project to adapt, in general, and test this value-based incentive 
program to assess whether a reduction in the rate of increase in health 
care spending can be achieved while simultaneously improving the 
experience and quality of health care provided to our beneficiaries by 
providing financial incentives for high-quality, efficient care. 
Consistent with the CJR model, TRICARE demonstration hospitals will be 
held accountable for the costs and quality of the entire episode of 
care and will be afforded the opportunity to earn performance-based 
payments by appropriately reducing expenditures and meeting certain 
quality metrics.
    An analysis of LEJR surgeries in the TRICARE beneficiary population 
was conducted. This analysis revealed some of the Metropolitan Service 
Areas (MSAs) participating in the CMS Comprehensive Care for Joint 
Replacement (CJR) model have a substantial number of TRICARE-eligible 
beneficiaries. These locations include the Killeen-Temple TX MSA, the 
Seattle-Tacoma WA MSA, and the Tampa-St. Petersburg FL MSA. Both the 
Killeen-Temple MSA and the Seattle-Tacoma MSA are associated with large 
inpatient military treatment facilities

[[Page 17160]]

(MTFs); however, there are not any inpatient MTFs associated with the 
Tampa-St. Petersburg MSA. Based on FY 2015 data, there are 74,133 
TRICARE eligibles residing in the Tampa-St. Petersburg area, and 128 
joint replacement or reattachment surgeries for TRICARE beneficiaries 
were performed in FY 2015. Due to co-location with CMS's MSA (which 
makes hospital participation mandatory), the significant number of 
TRICARE eligible beneficiaries receiving joint replacement or 
reattachment surgeries, and the lack of MTF inpatient resources, Tampa-
St. Petersburg was selected for this demonstration project. 
Additionally, it was determined only one to two percent of all TRICARE 
LEJR patients are in DRG 469 (major joint replacement or reattachment 
of lower extremity with major complications or comorbidities). As a 
result, the TRICARE demonstration project will exclude DRG 469 
admissions since there are insufficient volumes for setting target 
episode prices for these procedures.

B. Description of the Demonstration Project

    All network and non-network hospitals in the Tampa-St. Petersburg 
area will be required to participate in the demonstration if they had 
at least 20 TRICARE admissions for DRG 470 over the three years of FY 
2013, FY 2014, and FY 2015 (excluding admissions for beneficiaries with 
Other Health Insurance (OHI), Active Duty Service Members (ADSMs), and 
Medicare-TRICARE dual eligible beneficiaries). Once selected for 
participation, demonstration hospitals will remain in the program 
throughout the duration of this NDAA demonstration (regardless of 
actual TRICARE utilization) unless the Government directs otherwise. 
Demonstration hospitals will be accountable for quality and cost of 
care for an inpatient stay that results in DRG 470, along with all 
related care provided during the 90-day period following discharge.
    The Defense Health Agency (DHA) will prospectively establish target 
episode prices for each demonstration hospital at least 30 days prior 
to the start of each demonstration year. This target episode price 
shall be based on TRICARE claims for DRG 470 admissions and associated 
post-operative care for FY 2013, FY 2014, and FY 2015, and shall be a 
blend of hospital-specific and market-wide historical episode costs. 
This historical data period shall be used for the duration of the 
demonstration, with annual adjustments for inflation. In Demonstration 
Years one and two, the blended rate for the target episode price shall 
be developed with two-thirds hospital-specific data and one-third 
market-wide data; in Demonstration Year three, the target episode price 
shall be developed with one-third hospital-specific data and two-thirds 
market-wide data.
    Although the CMS CJR Model incorporates an automatic cost savings 
of 3percent into their target episode prices, DHA will not deduct an 
automatic cost savings amount when developing TRICARE target episode 
prices. Instead, target episode pricing will take historical network 
discounts, DRG and CPT pricing adjustments, and annual inflation 
factors into consideration. Additionally, the value of any care 
provided in the direct care system will not be considered in developing 
target prices. This will permit local military treatment facilities to 
recapture, where appropriate, post-surgery outpatient care under 
existing TRICARE procedures based on the MTF's capability and capacity 
without affecting incentive calculations. The target episode price will 
clearly indicate the cost build-up calculations for each component of 
care within the episode. These target episode prices will become the 
basis for calculating any incentive payments or penalties.
    For purposes of this demonstration, Demonstration Year one will 
commence for admissions on May 23, 2016, and will include all completed 
episodes with an end date continuing through September 30, 2017 
(including the full 90 days post-discharge period). Subsequent 
demonstration years will be conducted on a fiscal year basis (i.e., for 
episodes ending October 1st through September 30th). The target episode 
price in effect on the date of hospital admission shall be used for 
incentive calculation purposes, even if a portion of post-discharge 
care is delivered in the subsequent demonstration year.
    During each demonstration year, all hospital, physician, and post-
acute care claims will be paid under the normal TRICARE reimbursement 
methodologies. At the end of each demonstration year, the total costs 
of all completed episodes for the year will be compared to the 
aggregate target episode price for each demonstration hospital to 
determine whether actual costs were less than, equal to, or greater 
than the target episode price. In order to ensure all costs are 
properly attributed to each demonstration hospital, actual cost 
calculations shall occur no sooner than 90 calendar days following the 
end of the demonstration year to allow adequate time for claims 
processing. In order to encourage use of the direct care system and 
because the managed care support contractor processing the episode 
calculations will not have access to direct care cost data, costs for 
direct care shall be excluded (consistent with the target cost 
development).
    In addition to performing these cost calculations, DHA will utilize 
the composite quality score (as determined by CMS) for each 
demonstration hospital as the basis for determining eligibility for 
gain-sharing. This composite quality score is a hospital-level summary 
quality score reflecting performance and improvement on the quality 
measures adopted for the Medicare CJR model (Total Hip Arthroplasty 
(THA)/Total Knee Arthroplasty (TKA)) complications measure and the 
Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) patient experience survey measure. TRICARE will use Hospital 
Compare as the source for these data. Hospitals that do not achieve and 
maintain a favorable CJR composite quality score for the full 
demonstration year are not eligible for incentive payments, regardless 
of whether cost savings are achieved. TRICARE is following the same 
approach as Medicare in order to ensure hospitals are not reducing the 
quality of care offered to beneficiaries or reducing patients' overall 
perception of their hospital experience.
    Incentive payments will be calculated using the CMS gain/loss 
sharing model; beginning in Demonstration Year one, positive incentive 
payments will be made to hospitals who achieve and maintain a favorable 
CJR composite quality score for the full demonstration year and who 
demonstrate cost savings as compared to the target episode price. 
``Downside'' risk (negative financial incentives) will not be phased 
into the payment model until the second demonstration year. Gain/Loss 
sharing will increase over time, from no loss sharing in Demonstration 
Year one (only gain sharing), to higher levels in later years (gain 
sharing of 5 percent in Demonstration Years one and two, and 10 percent 
in Demonstration Year three). Loss sharing is 0 in Demonstration Year 
one, 5 percent in Demonstration Year two, and 10 percent in 
Demonstration Year three.
    On a quarterly basis, demonstration hospitals will receive feedback 
from the MCSCs on their current quality performance (as identified in 
Hospital Compare), episode of care costs to date, and projected 
eligibility for incentives (based on TRICARE claims and Medicare's 
composite quality scores for each hospital). To facilitate effective 
communication with demonstration

[[Page 17161]]

hospitals, these quarterly reports shall mirror the format and detail 
of CMS's feedback reports to the extent feasible. Active Duty Service 
Members (ADSMs), Medicare-TRICARE Dual Eligible (TDEFIC) beneficiaries, 
and beneficiaries with Other Health Insurance (OHI) are excluded from 
this demonstration.

C. Communications

    The DHA will proactively educate beneficiaries, providers, and 
other stakeholders about this change.

D. Evaluation

    This demonstration project will assist the Department in evaluating 
whether value-driven incentives will result in a reduction in the rate 
of increase in health care spending and improvements in health care 
quality, patient experience of care, and overall health of TRICARE 
beneficiaries. Regular status reports and a full analysis of 
demonstration outcomes will be conducted consistent with the 
requirements in Section 726 of the 2016 NDAA. Future expansions of the 
demonstration project to additional locations may be considered based 
on DHA data analysis for the Tampa-St. Petersburg market. Details of 
any future expansions will be announced via Federal Register notice 
prior to implementation.

    Dated: March 22, 2016.
Aaron Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2016-06859 Filed 3-25-16; 8:45 am]
 BILLING CODE 5001-06-P